McCutcheon’s Wild Hypotheticals

Two months ago, the Supreme Court heard oral argument in the case of McCutcheon v. FEC. If the plaintiffs win their appeal, the overall giving cap that Congress has imposed on individuals, parties, and PACs will be dissolved—effectively removing one of the most stringent, and arbitrary, limits on associational freedom.

While we wait for the Court’s decision and reflect on the argument two months later, it is astonishing what was and what was not said. The phrase “Colorado Republican II” was never uttered at argument—despite that case’s importance in analyzing the role of political parties as contribution limit circumventors. Indeed, precious little time was spent on the party question generally, even though the RNC filed a separate brief focusing on the merits of uncapping a person’s ability to give to parties.

Instead, oral argument largely focused on a series of hypotheticals that Justice Samuel Alito characterized as “wild.”

The government’s case rests largely on the view that preserving the aggregate contribution limits is really just a means of preventing illegal circumvention of the base contribution limits (the amount that can be given to any particular candidate or political committee). This so-called “anti-circumvention” interest has been previously accepted by the High Court as a legitimate reason to restrict a contributor’s First Amendment rights.

That interest was on full display at argument, as the government’s lawyers misunderstood joint fundraisers, claiming that they can be used as a form of soft money allowing donors to make larger contributions to a candidate than they otherwise could. (Actually, JFCs are merely an administrative convenience to fairly split the cost of fundraisers and the amounts raised—one of their intentions is to prevent circumvention).

Then there was Justice Breyer’s fanciful suggestion that 4,000 PACs (or, to give him the benefit of the transcript, he may have said “40”) could be secretly controlled by one person as a means of circumventing the law. (But existing anti-proliferation rules prohibit the creation of “shell” PACs controlled by the same individual or entity).

And at another point, Justice Breyer suggested that a person could implicitly coordinate a circumvention of the base limits by naming a PAC after the candidate it planned to give to, despite the fact that 2 U.S.C. § 432(e)(4) and its implementing regulation at 11 C.F.R. 102.14 prohibit any committee not authorized by a political candidate from “include[ing] the name of the candidate in its name.” The FEC is enforcing this rule. See Letter from FEC to Bill Willenbrock, Treasurer of the “Stand With Rand PAC”, August 15, 2013, (available at: http://images.nictusa.com/pdf/890/13330035890/13330035890.pdf).

But one hypothetical, raised by Justice Elena Kagan, did have a ring of novelty to it. Justice Kagan proposed a different, plausible sounding scenario. She supposed that a group of 100 PACs could form and each PAC independently declare it would only support “five candidates in the most contested Senate races…[if] a donor gives $5,000 to each of those PACs…[and] the PAC divides up the money $1,000 goes to each candidate.” And thus, a donor could give $100,000, indirectly, to these five candidates.

Certainly sounds like something PACs might want to do, and if that were legal in a post-McCutcheon win world, it would raise serious circumvention questions. But Justice Kagan’s hypothetical has actually happened before, and it was disallowed by the FEC.

In September 1986, the National Republican Senatorial Committee sent out a mass mailing to 600,000 potential contributors, “list[ing] four states with close Senate races, and informed the recipient that if the Republican candidate in those races did not receive a certain amount of money in a certain amount of time, the vital races would be lost.” FEC v. Nat’l Republican Senatorial Comm., 966 F.2d 1471, 1473 (D.C. Cir. 1992) (“NRSC”). “The letters concluded by suggesting a contribution amount…and by stating that any contribution made would be divided equally among the candidates in the four states listed.” NRSC at 1473.

Common Cause filed a complaint with the Commission, asserting that the NRSC had actually “exercised direction or control over the contributions”, and thus, the earmarked donations were not earmarked at all, and the NRSC had violated contribution limits applicable to national senatorial committees. The Commission deadlocked on this question, dismissing the charge; essentially stating that, in fact, Justice Kagan’s hypothetical was earmarking. Nevertheless, Common Cause successfully sued “to compel the Commission to act on the…charge.” Id. at 1474.

Ultimately, the Court of Appeals for the D.C. Circuit vindicated the Commission’s earlier decision. The NRSC’s “give to four competitive candidates in four states, and we’ll divide the money equally” fundraising effort was simply a means of soliciting earmarked contributions…contributions which would be attributed to the solicited individuals, not the NRSC itself. And, under the precedent of NRSC, “any FEC” could certainly go after Justice Kagan scheme, if designed to evade the base limits.

Indeed, Justice Kagan’s hypo is presently prohibited by 11 C.F.R. 110.1 (h).  That regulation states:

(h) Contributions to committees supporting the same candidate. A person may contribute to a candidate or his or her authorized committee with respect to a particular election and also contribute to a political committee which has supported, or anticipates supporting, the same candidate in the same election, as long as—

(1) The political committee is not the candidate’s principal campaign committee or other authorized political committee or a single candidate committee;

(2) The contributor does not give with the knowledge that a substantial portion will be contributed to, or expended on behalf of, that candidate for the same election; and

(3) The contributor does not retain control over the funds.

If a PAC says that it would support the “five candidates in the most contested Senate races,” and the contributor “g[a]ve with the knowledge that a substantial portion will be contributed to, or expended on behalf of, that candidate for the same election,” then under 11 C.F.R. 110.1 (h)(2) such contributions would count against the maximum amount he is permitted to give to the candidate.

Furthermore, using a PAC to evade the contribution limits appears to violate 11 CFR 110.4(b) that states “No person shall make a contribution in the name of another.” That regulation covers PACs as well as individuals.

The Department of Justice has a strong record of prosecutions in high profile cases involving giving in the name of another. Such evasions – working out deals with PACs to give to a candidate – would appear to trigger a violation. It is difficult to see the various hypotheticals ever coming to pass, as the downside for not successfully navigating the minefield is devastating. People can go to jail for this.

Thus, to the best of our knowledge, nothing like Justice Kagan’s hypothetical has been tried in an attempt to circumvent the base limits. So it’s worth noting that if the regulation is ineffective, such evasion could happen now, under the present aggregate limits.  Even under the current aggregate limits, an individual could give the maximum $74,600 to 15 PACs ($5,000 to 14 PACs plus $4,600 to the 15th PAC) all purporting to support the same five candidates, in addition to the individual’s $2,600 per-election direct contribution limit.  Under Justice Kagan’s logic, this donor could purportedly funnel nearly $15,000 to each of five different candidates.  Yet, the FEC seems unperturbed by such conspiracies—as they do not appear to happen.

As we wait for McCutcheon to be handed down, we must remember that even Supreme Court litigants, clerks, and justices can miss things. As much as oral argument captures media attention, this is why so much effort ought to be spent on building a record in the courts below and why extensive briefing from the parties and amici are vital. And even then, some things still get missed or misunderstood.

Fortunately, the justices are taking proper care to discuss, draft, and issue their opinion. We at CCP are hopeful that it will be well worth this necessary wait.