Austin v. Michigan Chamber of Commerce

• Decision Date: 27 March 1990
• Docket Number: No. 88-1569,88-1569
• Parties: Richard H. AUSTIN, Michigan Secretary of State and Frank J. Kelley, Michigan Attorney General, Appellants v. MICHIGAN CHAMBER OF COMMERCE
• Court: U.S. Supreme Court

494 U.S. 652

110 S.Ct. 1391

108 L.Ed.2d 652

Richard H. AUSTIN, Michigan Secretary of State and Frank J. Kelley, Michigan Attorney General, Appellants

v MICHIGAN CHAMBER OF COMMERCE.

No. 88-1569.

Argued Oct. 31, 1989.

Decided March 27, 1990.

Syllabus

Appellee Michigan State Chamber of Commerce (Chamber) is a nonprofit corporation, whose bylaws set forth both political and nonpolitical purposes. Its general treasury is funded through annual dues required of all members, three-quarters of whom are for-profit corporations. Section 54(1) of the Michigan Campaign Finance Act prohibits corporations, excluding media corporations, from using general treasury funds for, inter alia, independent expenditures in connection with state candidate elections. However, they may make such expenditures from segregated funds used solely for political purposes. Because the Chamber wished to use general treasury funds to place a local newspaper advertisement in support of a specific candidate for state office, it brought suit in the Federal District Court for injunctive relief against § 54(1)'s enforcement, arguing that the expenditure restriction is unconstitutional under the First and Fourteenth Amendments. The court upheld the section, but the Court of Appeals reversed, reasoning that, as applied to the Chamber, § 54(1) violated the First Amendment.

Held:

1. Section 54(1) does not violate the First Amendment. Pp. 657-666.

(a) Although § 54(1)'s requirements burden the Chamber's exercise of political expression, see FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, 252, 107 S.Ct. 616, 624, 93 L.Ed.2d 539 (MCFL ), they are justified by a compelling state interest: preventing corruption or the appearance of corruption in the political arena by reducing the threat that huge corporate treasuries, which are amassed with the aid of favorable state laws and have little or no correlation to the public's support for the corporation's political ideas, will be used to influence unfairly election outcomes. Pp. 657-660.

(b) Section 54(1) is sufficiently narrowly tailored to achieve its goal, because it is precisely targeted to eliminate the distortion caused by corporate spending while also allowing corporations to express their political views by making expenditures through separate segregated funds. Because persons who contribute to segregated funds understand that their money will be used solely for political purposes, the speech generated accurately reflects contributors' support for the corporation's political views. The fact that § 54(1) covers closely held corporations that do not possess vast reservoirs of capital does not make it substantially overinclusive, because all corporations receive the special benefits conferred by the corporate form and thus present the potential for distorting the political process. Cf. FEC v. National Right to Work Committee, 459 U.S. 197, 209-210, 103 S.Ct. 552, 555-556, 74 L.Ed.2d 364. Pp 660-661.

(c) There is no merit to the Chamber's argument that even if § 54(1) is constitutional with respect to for-profit corporations, it cannot be applied to a nonprofit ideological corporation such as itself. The Chamber does not exhibit the crucial features identified in MCFL, supra, that would require the State to exempt it from independent spending burdens as a nonprofit corporation more akin to a voluntary political association than a business firm. MCFL's narrow focus on the promotion of political ideas ensured that its resources reflected political support, while the Chamber's more varied bylaws do not. Additionally, unlike MCFL members, the Chamber's members are similar to shareholders—who have an economic disincentive for disassociating with a corporation even if they disagree with its political activity—in that they may be reluctant to withdraw from the Chamber because they wish to benefit from its nonpolitical programs and to establish contacts with other members of the business community. Also in contrast to MCFL, which took no contributions from business corporations, more than three-quarters of the Chamber's members are business corporations, whose political contributions and expenditures can constitutionally be regulated by the State, and who thus could circumvent § 54(1)'s restriction by funneling money through the Chamber's general treasury. Pp. 661-665.

(d) Section 54(1) is not rendered underinclusive by its failure to regulate the independent expenditures of unincorporated labor unions that also have the capacity to accumulate wealth, because the exclusion does not undermine the State's compelling interest in regulating corporations whose unique form enhances such capacity. Moreover, because members who disagree with a union's political activities can decline to contribute to them without giving up other membership benefits, a union's political funds more accurately reflect members' support for the organization's political views than does a corporation's general treasury. Pp. 665-666.

2. Section 54(1) does not violate the Equal Protection Clause of the Fourteenth Amendment. Even under strict scrutiny, its classifications pass muster. The State's decision to regulate corporations and not unincorporated associations is precisely tailored to serve its compelling interest. Similarly, the exemption of media corporations does not render the section unconstitutional. Restrictions on the expenditures of corporations whose resources are devoted to the collection and dissemination of information to the public might discourage news broadcasters or publishers from serving their crucial societal role of reporting on and publishing editorials about newsworthy events; thus, their exemption from the section's restriction is justified. Pp. 666-668.

856 F.2d 783 (CA6 1988), reversed.

MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, BLACKMUN, and STEVENS, JJ., joined. BRENNAN, J., post, p. 669, and STEVENS, J., post, p. 678, filed concurring opinions. SCALIA, J., filed a dissenting opinion, post, p. 679. KENNEDY, J., filed a dissenting opinion, in which O'CONNOR and SCALIA, JJ., joined, post, p. 695.

Louis J. Caruso, Lansing, Mich., for appellants.

Richard D. McLellan, Lansing, Mich., for appellee.

Justice MARSHALL delivered the opinion of the Court.

In this appeal, we must determine whether § 54(1) of the Michigan Campaign Finance Act, 1976 Mich.Pub. Acts 388, violates either the First or the Fourteenth Amendment to the Constitution. Section 54(1) prohibits corporations from using corporate treasury funds for independent expenditures in support of, or in opposition to, any candidate in elections for state office. Mich.Comp. Laws § 169.254(1) (1979). Cor- porations are allowed, however, to make such expenditures from segregated funds used solely for political purposes. § 169.255(1). In response to a challenge brought by the Michigan State Chamber of Commerce (Chamber), the Sixth Circuit held that § 54(1) could not be applied to the Chamber, a Michigan nonprofit corporation, without violating the First Amendment. 856 F.2d 783 (1988). Although we agree that expressive rights are implicated in this case, we hold that application of § 54(1) to the Chamber is constitutional because the provision is narrowly tailored to serve a compelling state interest. Accordingly, we reverse the judgment of the Court of Appeals.

I

Section 54(1) of the Michigan Campaign Finance Act prohibits corporations from making contributions and independent expenditures in connection with state candidate elections.¹ The issue before us is only the constitutionality of the State's ban on independent expenditures. The Act defines "expenditure" as "a payment, donation, loan, pledge, or promise of payment of money or anything of ascertainable monetary value for goods, materials, services, or facilities in assistance of, or in opposition to, the nomination or election of a candidate." § 169.206(1). An expenditure is considered independent if it is "not made at the direction of, or under the control of, another person and if the expenditure is not a contribution to a committee." § 169.209(1); see § 169.203(4) (defining "committee" as a group that "receives contributions or makes expenditures for the purpose of influencing or attempting to influence the action of the voters for or against the nomination or election of a candidate"). The Act exempts from this general prohibition against corporate political spending any expenditure made from a segregated fund. § 169.255(1). A corporation may solicit contributions to its political fund only from an enumerated list of persons associated with the corporation. See §§ 169.255(2), (3).

The Chamber, a nonprofit Michigan corporation, challenges the constitutionality of this statutory scheme. The Chamber comprises more than 8,000 members, three-quarters of whom are for-profit corporations. The Chamber's general treasury is funded through annual dues required of all members. Its purposes, as set out in the bylaws, are to promote economic conditions favorable to private enterprise; to analyze, compile, and disseminate information about laws of interest to the business community and to publicize to the government the views of the business community on such matters; to train and educate its members; to foster ethical business practices; to collect data on, and investigate matters of, social, civic, and economic importance to the State; to receive contributions and to make expenditures for political purposes and to perform any other lawful political activity; and to coordinate activities with other similar organizations.

In June 1985 Michigan scheduled a special election to fill a vacancy in the Michigan House of Representatives. Although the Chamber had established and funded a separate political fund, it sought to use its general treasury funds to place in a local newspaper an advertisement supporting a specific candidate. As the Act made...