Michigan State Chamber of Commerce v. Austin

• Decision Date: 14 December 1988
• Docket Number: No. 86-1867,86-1867
• Citation: 856 F.2d 783
• Parties: MICHIGAN STATE CHAMBER OF COMMERCE, a non-profit Michigan corporation, Plaintiff-Appellant, v. Richard H. AUSTIN, Michigan Secretary of State; and Frank J. Kelley, Michigan Attorney General, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 783

856 F.2d 783

MICHIGAN STATE CHAMBER OF COMMERCE, a non-profit Michigan corporation, Plaintiff-Appellant, v. Richard H. AUSTIN, Michigan Secretary of State; and Frank J. Kelley, Michigan Attorney General, Defendants-Appellees.

No. 86-1867.

United States Court of Appeals Sixth Circuit.

Argued Sept. 14, 1987.

Decided Sept. 15, 1988.

Rehearing and Rehearing En Banc Denied Dec. 14, 1988.

Richard D. McLellan, William J. Perrone, Dykema, Gossett, Spencer, Goodnow & Trigg, Lansing, Mich., Joel M. Boyden (argued), Dykema, Gossett Spencer Goodnow & Trigg, Grand Rapids, Mich., for plaintiff-appellant.

Frank J. Kelley, Atty. Gen., Richard P. Gartner, Asst. Atty. Gen. (argued), Lansing, Mich., for defendants-appellees.

Michael Corcoran, Lansing, Mich., for Michigan Citizens Lobby.

Theodore Sachs, Mark Brewer, Sachs, Nunn, Kates, Kadushin, O'Hare, Helveston & Waldman, P.C., Detroit, Mich., for Michigan Democratic Party.

Before ENGEL, Chief Judge ^*, RYAN, Circuit Judge, and PECK, Senior Circuit Judge.

RYAN, Circuit Judge.

This appeal concerns the constitutionality of Sec. 54(1) of the Michigan Campaign Finance Act under the first and fourteenth amendments to the United States Constitution, and article I of the Michigan Constitution. Section 54(1) severely restricts the ability of corporations to make indirect expenditures in support of or in opposition to the election of a candidate for Michigan office. Although directly infringing upon the first amendment free speech guarantees of corporations, Sec. 54(1) was upheld by the district court as a narrowly drawn regulation that serves the compelling state interest of preventing the threat or appearance of corruption. We conclude that indirect expenditures made by a nontraditional corporation, like the Michigan State Chamber of Commerce, formed for essentially ideological purposes and to disseminate economic and political ideas and not to amass capital, do not pose the threat or appearance of corruption. We hold that Sec. 54(1), as applied to the Chamber, is unconstitutional under the first amendment.

I.

Plaintiff-appellant, the Michigan State Chamber of Commerce (the Chamber), is a nonprofit Michigan corporation funded by the annual dues which its corporate and noncorporate members are required to pay. The defendants-appellees are Richard H. Austin, the Michigan Secretary of State, and Frank J. Kelley, the Michigan Attorney General.

The Chamber is comprised of about eight thousand voluntary members, approximately seventy-five percent of whom are corporations. The Chamber characterizes itself as an ideological corporation formed to promote the common good and interests of the Michigan business community. The Chamber's objectives and purposes, as stated in its bylaws, include promoting conditions conducive to economic development, training and educating its members, encouraging the maintenance and observance of ethical business practices, and receiving expenditures and making contributions for political purposes.

In June of 1985, the Chamber sought to place a paid advertisement in the Grand Rapids Press in support of Richard Bandstra, the Republican nominee for the 93rd Legislative District for the Michigan House of Representatives. However, because Sec. 54(1) of the Michigan Campaign Finance Act (the Act), Mich.Comp.Laws Ann. (M.C.L.A.) Sec. 169.254(1) (1987 Supp.), appeared to prohibit the ad, the Chamber brought suit seeking declaratory and permanent injunctive relief allowing it to support political candidates through advertisements and other independent expenditures. ¹

Section 54(1) of the Act provides that:

Except with respect to the exceptions and conditions in subsections (2) and (3) and section 55, and to loans made in the ordinary course of business, a corporation may not make a contribution or expenditure or provide volunteer personal services which services are excluded from the definition of a contribution pursuant to section 4(3)(a).

M.C.L.A. Sec. 169.254(1). The Act defines an "expenditure" as including:

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, or the qualification, passage, or defeat of a ballot question. An offer or tender of an expenditure is not an expenditure if expressly and unconditionally rejected or returned.

M.C.L.A. Sec. 169.206(1). An "independent expenditure" is defined as an expenditure:

[B]y a person if the expenditure 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.

M.C.L.A. Sec. 169.209(1).

The Act provides an exception to Sec. 54(1)'s ban on corporate independent expenditures through Sec. 55. M.C.L.A. Sec. 169.255 (1987 Supp.). This exception allows a corporation to make independent political expenditures if it establishes a separate segregated fund to be used solely for political purposes, a so-called "PAC." M.C.L.A. Sec. 169.255(1). Corporate solicitation of contributions to a segregated fund of this type is limited to statutorily specified persons. ² The Chamber's proposed ad in the Grand Rapids Press falls squarely within the Act's definition of an "indirect expenditure." See M.C.L.A. Sec. 169.209(1), supra. The Chamber has established a segregated fund under the Sec. 55 exception, the Michigan State Chamber of Commerce Political Action Committee. However, it sought to make its indirect expenditure in support of Bandstra through the Chamber's general treasury funds.

The Chamber challenges the limitations Sec. 54(1) places on a corporation's freedom to make independent political expenditures as violative of the first and fourteenth amendments to the Constitution and article I, Secs. 2, 3, and 5 of the Michigan Constitution. First, the Chamber argues that Sec. 54(1) violates its freedom of speech as guaranteed by the first amendment and article I, Secs. 3 and 5 of the Michigan Constitution. Second, the Chamber argues that Sec. 54(1) violates the equal protection clauses of the fourteenth amendment and article I, Sec. 2 of the Michigan Constitution by distinguishing between corporate and noncorporate business entities. Third, the Chamber argues that the Act violates its equal protection guarantees by exempting members of the print and broadcast media from the limitations of Sec. 54(1). See M.C.L.A. Sec. 169.206(3)(d) (1987 Supp.).

II.

Our analysis, like that of the district court, focuses only upon the Chamber's guarantees under the United States Constitution. The Michigan Supreme Court interprets the protections of article I, Secs. 2, 3, and 5 of the Michigan Constitution identically with the United States Constitution in the context of legislative restraints upon electoral activities. See Advisory Opinion on Constitutionality of 1975 P.A. 227, 396 Mich. 465, 484-85, 492-93, 242 N.W.2d 3, 9-10, 14 (1976).

We first examine the Chamber's first amendment challenge to Sec. 54(1). Where a government restricts the speech of a private person, including a corporation, the state action may be sustained only if the government can show that the regulation is a precisely drawn means of serving a compelling state interest. See Consolidated Edison Company v. Public Service Comm'n, 447 U.S. 530, 540, 100 S.Ct. 2326, 2334, 65 L.Ed.2d 319 (1980); First National Bank of Boston v. Bellotti, 435 U.S. 765, 786, 98 S.Ct. 1407, 1421, 55 L.Ed.2d 707 (1978); Buckley v. Valeo, 424 U.S. 1, 25, 96 S.Ct. 612, 637, 46 L.Ed.2d 659 (1976) (per curiam).

Citing the Supreme Court's holding in Buckley v. Valeo, supra, and Federal Election Comm'n v. National Conservative Political Action Committee, 470 U.S. 480, 496-97, 105 S.Ct. 1459, 1468-69, 84 L.Ed.2d 455 (1985), that "preventing corruption or the appearance of corruption are the only legitimate and compelling government interests thus far identified for restricting campaign finances," the district court upheld Sec. 54(1) based upon its determination that:

Section 54(1)'s prohibition of corporate independent expenditures in political elections serves the state's compelling interest in preventing corruption or the appearance of corruption in the electoral process.

Michigan State Chamber of Commerce v. Austin, 643 F.Supp. 397, 402 (W.D.Mich.1986). The court held that although there had been no finding of actual corruption, a finding of the threat or appearance of corruption was sufficient. Id. at 404. The court reasoned that a showing of the threat of corruption alone sufficed given the "great aggregations of capital and influence" and "faceless nature" of corporations, id. at 403, as well as the need for courts to not "second-guess a legislative determination as to the need for prophylactic measures where corruption is the evil feared." Id. at 404 (citing Federal Election Comm'n v. National Right to Work Comm., 459 U.S. 197, 210, 103 S.Ct. 552, 561, 74 L.Ed.2d 364 (1982)).

In light of the Supreme Court's intervening decision in Federal Election Comm'n v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, 107 S.Ct. 616, 93 L.Ed.2d 539 (1986), it now appears that the district court defined the issue in this case too broadly. The district court held that the case presented the issue of whether a state "may prohibit corporations from making independent expenditures to influence elections for public office." Michigan State Chamber of Commerce, 642 F.Supp. at 403 (emphasis added). The Supreme Court has yet to specifically address the issue as stated by the district court. See Massachusetts Citizens for Life, 479 U.S. at 264, 107 S.Ct. at 631, 93 L.Ed.2d at 560; National Conservative Political Action Comm., 470 U.S. at 496, 105 S.Ct. at 1468; Bellotti, 435 U.S. at 788, n. 26, 98 S.Ct. at 1422, n. 26.

In Massachusetts Citizens for Life, the Court addressed a nonprofit corporation's first amendment challenge to the...