On January 21, 2010, the U.S. Supreme Court issued its decision in Citizens United v. FEC, a case examining the legality of a documentary film released in 2008 about Hillary Clinton’s candidacy for President. In a 5-4 ruling, the court struck down laws banning independent electoral and issue advocacy sponsored by nonprofit and for-profit corporations.  The decision makes it legal for the first time in decades for corporations, including nonprofits, trade associations and for-profit corporations, to use their treasury funds to pay for advertising that explicitly encourages the audience to vote for, or against, a particular candidate.

Broad Constitutional Questions Examined

When the case was first heard in March 2009, it centered on whether certain restrictions on corporate spending found in the federal campaign finance laws could be applied to films—in this case, the documentary Hillary: The Movie, which was produced by the conservative nonprofit advocacy corporation Citizens United.  However, in an unusual request for reargument, the court asked the parties to address the much broader question of the constitutionality of limiting corporations' independent spending during federal election campaigns.

Decision Strikes Down Portions of Prior Law

In its opinion, the court overturned earlier precedent and struck down a federal law banning corporations from making independent expenditures (i.e., advertisements that tell the listener to vote for or against a particular candidate that are not coordinated with a candidate) in connection with federal elections.  It also invalidated the provisions that prohibited corporations from sponsoring issue communications referring to candidates during the 30-day period before a primary election or the 60–day period before a general election. 

The court upheld sections of the law that require sponsors of these kinds of issue advertisements to file disclosure reports with the Federal Election Commission, and to identify themselves as sponsors in the communication.

Decision's Applicability May Be Expansive

While the court's ruling was limited to federal campaign finance law, its reasoning makes it clear that state and local laws banning independent corporate issue and electoral advocacy are also unconstitutional.  While not an explicit subject of the underlying case, the court also clarified that the ruling applies to restrictions on independent activity by labor organizations. 

As a result of the opinion, labor unions and incorporated entities may now use treasury funds to sponsor advertisements that support or oppose candidates and issues, as long as those expenditures are undertaken independently of a candidate.  The case also calls into question laws in many states that prohibit similar communications by corporations in connection with state or local elections (such as gubernatorial or judicial elections).  The general view is that the decision will also result in additional lawsuits challenging other aspects of the campaign finance laws, and will likely encourage legislative efforts to try to minimize the effects of the decision.

Rules Relating to Contributions and Coordinated Expenditures Remain Intact

The opinion did not disturb rules prohibiting corporations and unions from making contributions to candidates and political parties, or from making expenditures that are "coordinated" with candidates and parties as defined by applicable law.  Other provisions of the law not addressed in the opinion define the circumstances under which a particular advertisement will be considered “independent” for purposes of these rules.

Advertising Should Increase Post-Citizens United

We anticipate an increase in television, radio and other paid advertising in the 2010 election year.  Nonprofits, including unions, trade associations and issue-based organizations, are likely to raise more money and buy more air time than ever before in federal and state elections. 

Additional Information

Click here to read a copy of the full text of the Citizens United v. FEC decision. 

© 2010 Perkins Coie LLP