Corporate Contribution Ban Upheld

Amid the excitement over last week’s health care decision, the Fourth Circuit’s major campaign finance decision in a case called United States v. Danielczyk received relatively little attention. However, Danielczyk is a crucially important case, affirming the constitutionality of a longstanding federal law banning corporations from giving campaign donations directly to candidates. The opinion overturned a flawed lower court decision — and limited the reach of Citizens United.

The federal ban on corporate contributions, now located in the Bipartisan Campaign Finance Reform Act, has been in force since Congress passed the Tillman Act in 1907. For more than a century, it has been one of the core protections against corruption in our democracy.

The Danielczyk case began when two businessmen gave corporate money directly to Hillary Clinton’s 2008 presidential campaign. During their trial, they argued that after Citizens United, the ban on corporate campaign contributions is unconstitutional. In effect, they urged the court to find that Citizens United invalidated the Supreme Court’s 2003 decision in F.E.C. v. Beaumont, which recently decided that the very same ban was constitutional.

While the lower court wrongly accepted this argument, the Fourth Circuit found that Citizen United’s reasoning is limited to independent expenditures — the Citizens United Court expressly declined to disturb any laws governing direct contributions. Circuit Judge Gregory, writing for a three-judge panel, refuted the proposition that the “‘corporations-are-equal-to-people’ logic necessarily applies in the context of direct contributions.” In other words, nothing about Citizens United weakens Beaumont’s holding that the government can ban corporate campaign contributions in order to prevent corruption and stop violations of other campaign finance laws.

In reaching this conclusion, the Fourth Circuit emphasized the different treatment given to direct contributions versus independent expenditures — a distinction that dates back to the Supreme Court’s seminal campaign finance case, Buckley v. Valeo. In that 1976 case, the Court found that independent expenditures implicate greater First Amendment rights than campaign contributions. This is because, as reaffirmed in Beaumont, contributions “do not necessarily fund political speech but must be transformed into speech by an individual other than the contributor.” This crucial difference is at the heart of the Fourth Circuit’s correct decision in Danielczyk, limiting the reasoning of Citizens United to independent expenditures.

The Danielczyk court also resolved a potential circuit split — another important aspect of the decision. While the Second Circuit, in Ognibene v. Parks, and the Ninth Circuit, in Thalheimer v. City of San Diego, recently upheld the federal corporate contribution ban, the Virginia lower court decision threatened to create the appearance of unsettled law. According to some experts, Danielczyk will “inevitably” be appealed to the Supreme Court. But thankfully, without a circuit split, the high Court will not face the same pressures to grant review.

And so, by affirming the corporate contribution ban as a valid and meaningful protection against corruption, and by limiting the reach of Citizens United, the Fourth Circuit took an important step towards protecting U.S. democracy from some of the most damaging effects of corporate money in politics.