This Report summarizes opinions issued on May 16 and 23, 2022 (Part I); and cases granted review on May 16, 2022 (Part II).
Opinion: Federal Election Commission v. Ted Cruz for Senate, 21-12
Federal Election Commission v. Ted Cruz for Senate, 21-12. In a 6-3 opinion, the Court held that Section 304 of the Bipartisan Campaign Reform Act of 2002 violates the First Amendment right to free speech by capping the amount of post-election contributions a campaign may use to repay loans from the candidate. A candidate for federal office may spend an unlimited amount of his own money to support his campaign, and the campaign itself may borrow an unlimited amount of money from the candidate or third-party lenders. The campaign may also accept contributions from other organizations and individuals. Campaigns may continue to receive contributions after election day, so long as those contributions go toward repaying campaign debts. Section 304 provides that a candidate who loans money to his campaign may not be repaid more than $250,000 from contributions made to the campaign after the election date. The Federal Election Commission (FEC) implemented this provision by regulation in three ways. First, a campaign may repay a candidate up to $250,000 using contributions made at any time before, on, or after the election date. Second, to the extent candidate loans exceed $250,000, a campaign may use pre-election funds to repay the portion exceeding $250,000 only if the repayment occurs within 20 days of the election. Third, if more than $250,000 in candidate loans remains unpaid after the 20-day period, the campaign must treat the excess portion as a contribution to the campaign, precluding later repayment.
Before election day in 2018, Senator Ted Cruz loaned $260,000 to his reelection campaign committee, Ted Cruz for Senate (the Committee). At the end of election day, the Committee owed approximately $340,000 to various lenders. The Committee eventually began repaying the money Cruz had loaned it, but the 20-day window had closed. Accordingly, the Committee repaid only $250,000, leaving $10,000 unpaid. Cruz and the Committee filed an action in federal district court, alleging that Section 304 violates the First Amendment. A three-judge panel granted summary judgment to Cruz and the Committee, holding that the statute burdens political speech without sufficient justification and that related challenges to the regulation were moot. The government appealed directly to the Court, which affirmed in an opinion by Chief Justice Roberts.
The Court first addressed the government’s arguments that Cruz and the Committee lacked Article III standing. First, the government argued that the injuries were self-inflicted because Cruz made the loan, and the Committee waited to repay the loan, solely to establish the basis for this challenge. The Court rejected that argument, noting that it had previously found that “tester” plaintiffs have standing to sue in other contexts. Here, Section 304 applies directly to Cruz and the Committee, and they will face genuine legal penalties if they do not comply, regardless of their motivation. Even if the Committee could have fully repaid Cruz within 20 days of the election, demanding that it do so would require it to forgo the right at issue―the ability to repay debts in full, at any time. Second, the government argued that the plaintiffs’ harm is not due to the statute, which prohibits only the use of post-election contributions to repay more than $250,000, but to the FEC regulation, which prohibits any repayment above $250,000 more than 20 days after the election, regardless of when the contributions were made. The Court noted an “Alice in Wonderland” quality about this argument because the government claimed that repayment would not violate the statute (asserting that Cruz was paid with pre-election contributions) while the appellees claimed that repayment would violate it (asserting that Cruz was paid with post-election contributions). The Court noted that the appellees likely would have had standing to bring a pre-enforcement challenge, but it declined to go further down “this rabbit hole.” The regulation at issue implemented Section 304, so if the statute were declared invalid, the regulation could not be enforced. Thus, the Court found that the plaintiffs had standing to challenge the statute.
On the merits, the Court noted that the First Amendment is at its apex when political campaigns are at issue, and the government agreed that the statute abridges First Amendment rights to some extent. Section 304, “by design and effect, burdens candidates who wish to make expenditures on behalf of their own candidacy through personal loans.” This increases the risk that such loans will not be repaid, which “in turn inhibits candidates from loaning money to their campaigns in the first place, burdening core speech.” Since the passage of the Act, candidate loans “cluster” at the $250,000 threshold, and the percentage of candidate loans for exactly $250,000 has increased tenfold. The Court said this shows that Section 304 has altered many politicians’ propensity to make large loans and has “predictably restricted a candidate’s speech on behalf of his candidacy.” Although candidates remain free to donate money rather than lend it, the statute imposes a penalty on that choice. The Court noted that, as a practical matter, candidate loans are the only way for many new candidates and challengers to “frontload campaign spending,” which is critical to the candidate’s success and may signal to others that the candidate is confident enough to have “skin in the game.” By inhibiting such loans, Section 304 “raises a barrier to entry―thus abridging political speech.” As a burden on electoral speech, the provision “must at least be justified by a permissible interest.”
The Court found that Section 304 cannot withstand scrutiny because it has no “legitimate objective.” The only recognized ground for restricting political speech is to prevent “quid pro quo” corruption or its appearance. The Court has consistently rejected attempts to restrict campaign speech based on other legislative aims, such as to “reduce the amount of money in politics,” “level electoral opportunities by equalizing candidate resources,” or “limit the general influence a contributor may have over an elected official.” Such proposals, while perhaps well-intentioned, limit the “right of citizens to choose who shall govern them.” The government argued that the risk of corruption is heightened in this situation, because the contributor knows that the successful candidate is in a position to benefit the contributor. The Court was skeptical, however, viewing the limitation as a “prophylaxis-upon-prophylaxis approach” which itself suggests that the regulation is not necessary. The Court noted that individual contributions are already regulated to prevent corruption or its appearance, “few if any” contributions involve quid pro quo arrangements, and it is difficult to imagine what additional marginal deterrence against corruption Section 304 provides. The government could not identify “a single case of quid pro quo corruption in this context―even though most States do not impose a limit on the use of post-election contributions to repay candidate loans.” The government relied on media reports, scholarly articles, polling, and statements by Members of Congress, but those merely hypothesized greater influence with or access to the candidate, which is not the type of quid pro quo corruption the government may target. To the extent the line between quid pro quo corruption and general influence is vague, the Court must “err on the side of protecting political speech rather than suppressing it.”
The Court similarly rejected the analogy to post-election contributions as “gifts” because they “add to the candidate’s personal wealth.” That argument “forgets that we are talking about repayment of a loan, not a gift.” Contributions that go toward a candidate’s debt could only enrich the candidate if the candidate did not expect to be repaid. “In other words, the Government’s gift comparison is meaningful only if the baseline is that the campaign will default. The Government, however, provides no reason to believe that most or even many winning candidates―the only candidates with whom its anticorruption interest is concerned―expect not to be repaid by their campaigns. To the contrary, the Government has recognized throughout this litigation that winning candidates are commonly repaid in full.” In those cases, the contributions simply return the candidate to the status quo. The Court also compared the $250 statutory cap on gifts to Senators with the $2,900 individual campaign contribution limits, more than 80 of which are necessary to reach the $250,000 limit in Section 304. “Either the government is openly tolerating a significant number of ‘gifts’ far more generous than what it would normally think fit to allow, or post-election contributions that go toward retiring campaign debt are in no real sense ‘gifts’ to a candidate. We find the latter answer more persuasive.” Finally, the Court declined to defer to Congress’s judgment that Section 304 furthers an anticorruption goal. That determination was based on scant evidence, and deference to Congress would be inappropriate where legislation may be an effort to insulate incumbents from effective challenge.
Justice Kagan dissented, joined by Justices Breyer and Sotomayor. She summarized the legislative purpose of Section 304: “Political contributions that will line a candidate’s own pockets, given after his election to office, pose a special danger of corruption. The candidate has a more-than-usual interest in obtaining the money (to replenish his personal finances), and is now in a position to give something in return. The donors well understand his situation, and are eager to take advantage of it. In short, everyone’s incentives are stacked to enhance the risk of dirty dealing. At the very least―even if an illicit exchange does not occur―the public will predictably perceive corruption in post-election payments directly enriching an officeholder.” Justice Kagan wrote that restrictions on electoral spending impose the greatest burdens on expression, while laws restricting third-party contributions entail only a marginal burden because donors may still express their views independently. Section 304, on the other hand, does not restrict a candidate’s ability to self-fund his campaign at all, only his ability to obtain third-party financing following an election. That “minor restriction on a candidate’s use of other people’s money does not severely burden his (or anyone else’s) expression.”
In the dissent’s view, the majority wrongly focused on the indirect effects that Section 304 might have, rather than the restrictions it actually imposes. Justice Kagan wrote that the restriction on post-election contributions for loan repayment probably has a much smaller effect on speech than contribution limits the Court has previously approved, and preventing quid pro quo corruption or its appearance is “a compelling interest by any measure.” Justice Kagan argued that quid pro quo corruption goes beyond bribery to include more subtle arrangements that threaten the integrity of the political system. Where the majority views reimbursement as simply returning a candidate to the status quo, the dissent views it as enriching a candidate who has already made a loan: if donors “had not stepped up, the officeholder would have been $250,000 poorer.” The dissent disagreed that winning candidates are usually repaid, arguing that the record shows only that they are repaid more often than losing candidates, which is “no surprise.” She argues that the common sense behind Section 304 reduces the need to identify past cases of quid pro quo corruption, which are “nigh-impossible to detect and prove.” Nevertheless, Justice Kagan provided examples of elections where she believed a candidate crossed the line from permissible general influence to impermissible quid pro quo arrangements. Finally, the dissent pointed to a study suggesting that post-election contributions are more likely to involve “selling votes” than “selling access,” and to a poll suggesting that the public largely perceives such contributions to be given with the expectation of a political favor in return.