Corporations may contribute to independent expenditure PACs
In a First Amendment pre-enforcement challenge to Indiana campaign-finance restrictions that prohibit corporations from making contributions to independent-expenditure political action committees (commonly known as super PACs), a U.S. Court of Appeals for the Seventh Circuit panel finds that corporate contributions to such entities cannot be restricted by state law.
The intermediate appellate court vacates a March 2022 order from Senior Judge Sarah Evans Barker of the U.S. District Court for the Southern District of Indiana the decision of the district court denying Indiana Right to Life Victory Fund and Sarkes Tarzian, Inc.’s request for a preliminary injunction against two provisions of Indiana law (Ind. Code §§ 3-9- 2-4 & 3-9-2-5). Indiana Right to Life Victory Fund v. Morales, No. 22-1562.
These two sections of the law prohibit corporate contributions earmarked for independent expenditures as confirmed by the Indiana Supreme Court after accepting certification of the question from the federal appellate panel. The problem: As contended by attorney Jim Bopp on behalf of clients who sought to make such contributions, “the statutory provisions in question cannot be applied to super PACs consistent with the First Amendment,” as the Seventh Circuit notes. “So we return the case to the district court with instructions to enter the preliminary injunction sought by the corporation and super PAC that brought this challenge.”
This unanimous appellate panel ruling comes despite such PACs frequently being focused on state and local elections in Indiana, as the Indiana Democratic Party notes.
“No one should be able to buy elections in our country, but that’s exactly what Jim Bopp, Todd Rokita, Diego Morales, and Indiana Republicans believe should be allowed. By bringing the Citizens United doctrine to Indiana, they are opening the floodgates for millions of dollars by special interest groups and large corporations to influence our elections for governor down to your local school board,” laments Indiana Democratic Party Chair Mike Schmuhl . . . though his argument should really be lodged against the Supreme Court of the United States, circa 2010.
We were first to tell you about the Bopp challenge to the law back in 2021 when the top campaign finance attorney questioned the law.
Bopp Law Firm attorney Courtney Turner Milbank, the daughter of a former state lawmaker, explained to Judge Barker that Sarkes Tarzian, Inc., an Indiana corporation, wanted to make a $10,000 contribution to IRTL Victory Fund, earmarked for the purpose of independent expenditures, and that the PAC established a bank account into which contributions for the designated purpose of making independent expenditures would be deposited.
“However, Sarkes Tarzian, Inc. will only make such contribution and IRTL Victory Fund will only accept it so long as neither is subject to the prohibition on corporate contributions to PACs for independent expenditures and the penalties under the Election Code.”
Bopp told the court that in addition to the Tarzan transaction, the PAC intended “to do materially similar future activity,” and thus “are irreparably harmed by Indiana’s prohibition on corporate contributions to PACs for independent expenditures.”
In February 2022, the Office of the Attorney General filed a response to the original complaint contending that the plaintiffs’ claims are not justiciable; the Indiana Election Commission is not a “person” under § 1983 and thus was entitled to Eleventh Amendment sovereign immunity. OAG contended that Judge Barker should abstain from adjudicating this case under a doctrine that favors state courts deciding substantial constitutional issues that touch upon certain state policies, or just certify the question of state law to the Indiana Supreme Court. The latter course of action was ultimately taken by the federal appellate panel.
Judge Barker concluded that IRTL had not alleged a credible threat, and, according to the intermediate appellate court, “observed that every Indiana election official on the record has stated that the Election Code does not regulate independent expenditures or prohibit corporate contributions to independent-expenditure PACs – and indeed has disavowed any intent to enforce the statute in any way inconsistent with that interpretation. Crediting the state officials’ position, the district court dismissed the lawsuit for lack of standing.”
The panel certified questions about interpretation of the statute to the Indiana Supreme Court, whose 4-1 answer we detailed for you in some depth given questions that were raised about the judicial role in statutory interpretation.
“Here, both sides agree that none of the relevant statutes say anything about corporate contributions to Super PACs for independent expenditures, but the parties disagree about what conclusion follows from that silence,” the Supremes noted in framing the issue. “The plaintiffs argue that silence means the contributions are prohibited, and the election officials argue that silence means the contributions are permitted. We agree with the plaintiffs that the plain, unambiguous meaning of the text is that the contributions are prohibited.”
As a result, we told you last September, “you should expect the Seventh Circuit to short-circuit the law,” as ultimately occurred.
Indeed, the author of the Indiana majority opinion, Justice Derek Molter, wrote last fall that “We are mindful that the parties expect this holding will lead the federal courts to enjoin the election officials’ enforcement of those statutes. But we must leave it to the General Assembly to update its statutes to remedy any such constitutional defect, as statutory revision is beyond our authority.”
Unsurprisingly, given its lack of action with respect to other statutes found unconstitutional over the years by federal and state courts, the legislature took no such steps. That led Judge Michael Scudder, Jr. of the appellate court, a Hoosier who authored the 3-0 opinion for the panel to reference both the Indiana Supreme Court finding and the subsequent legislative punt in his decision to remand the matter to Judge Barker for an injunction against its enforcement.
In case you’re keeping score at home, the appellate ruling comes from a panel comprised of judges appointed during three different presidential administrations, two Republican (Reagan and Trump) and one Democrat (Biden).
The federal panel did, however, have some interesting things to say about the OAG’s defense.
On the State contention that the original plaintiffs led by Bopp and his law firm, later an OAG contract counsel, lacked standing, “The state officials have the analysis backward. They implore us to find subject matter jurisdiction missing because the answer to the underlying merits questions is beyond debate …. We have zero difficulty concluding that Sarkes Tarzian and the Fund have standing.”
As to the Bopp client concerns about enforcement which OAG sought to play down, the intermediate appellate panel writes (and we’ve omitted some citations here)that “The Fund has credibly alleged that the statute poses a threat of enforcement latent in the statute’s existence and traceable to its enforcement …. That chilling effect can be remediated, however, by a preliminary injunction against the named defendants blocking any enforcement …. All the defendant election officials offer in response is an invitation to trust their word that they do not intend to enforce unconstitutional statutes …. But the necessary promises fall well short here. Indeed, not every defendant – most especially the State’s Attorney General – has filed an affidavit or taken any official action purporting to disavow any intent to enforce the challenged provisions against a company like Sarkes Tarzian and a super PAC like the Fund. In Trustees of Indiana University v. Curry, 918 F.3d 537 (7thCir. 2019), we rejected these kinds of just-trust-us arguments. Prosecutors cannot bind their successors.”
“Compare the absence of any concrete harm to the defendants with the chill that the risk of enforcement might place on the political activities of the Fund and its donors were an injunction not issued. In the end, all factors point in favor of issuing the injunction sought by the Fund,” the panel notes in instructing Judge Barker to enjoin “enforcement of Indiana’s campaign-finance restrictions against either the Fund or Sarkes Tarzian.”
The bottom line: under Indiana law, an otherwise unrestricted entity may make unlimited contributions to independent-expenditure political action committees.