Political & Election Law: Texas Supreme Court Upholds Ban on Corporate Contributions

Monday, July 3, 2017

On June 30, 2017, the Texas Supreme Court issued a fairly predictable decision in the campaign finance arena, upholding the Texas law banning corporations from giving campaign contributions directly to state and local candidates. In a unanimous decision, the court also validated civil causes of action for campaign finance violations and the constitutionality of defined terms central to the State’s regulation of campaign activity.

The opinion stems from a lawsuit between the Texas Democratic Party and a 501(c)(4) nonprofit organization known as King Street Patriots. Amid a barrage of allegations, the Democratic Party alleged that King Street Patriots is a “sham domestic nonprofit corporation” that “was explicitly created in an effort to make and receive political contributions and to make political expenditures without complying with federal or state disclosure laws” and is knowingly operated as “an unregistered and illegal political committee.” The Texas Democratic Party claimed King Street Patriots’s violations of the Texas Election Code included:

  • Making undisclosed and non-independent political expenditures from group members’ contributions;
  • Training and assigning poll watchers “to polling locations in direct coordination with and [at the] request of Republican Party and elected officials”;
  • Designing, preparing, and implementing training materials for poll watchers, which were used by the Travis County Republican Party and others;
  • Providing forums only for “Republican interests,” including “political rallies” for the Governor and other Republican officeholders;
  • Holding statewide and nationwide “summit[s]” to impact the election; and
  • Organizing events and making expenditures, in funds or in-kind, to press for changes in the Election Code.

The Texas Democratic Party sought damages and injunctive relief under the Texas Election Code, along with declaratory relief. King Street Patriots denied that it is a political committee and challenged the constitutionality of a variety of Texas campaign finance laws. Presented with a muddled procedural history, the Supreme Court, in an opinion by Justice Eva Guzman, upheld the constitutionality of Texas law in three important areas.

Ban on Corporate Contributions. King Street Patriots sought to invalidate the Texas law preventing corporations from making political contributions to candidates. The court made quick work of this challenge, noting that the Citizens United case did nothing to invalidate the U.S. Supreme Court’s earlier ruling in F.E.C. v. Beaumont, in which that Court determined that the First Amendment does not prohibit a governmental ban on corporate contributions to candidates. Recognizing that F.E.C. v. Beaumont remains binding Supreme Court precedent, the Texas court wrote that:

even if Beaumont’s rationale is in doubt, we are bound to follow it unless and until the Supreme Court overrules it. Our unanimous acknowledgement that Beaumont is binding Supreme Court precedent terminate our inquiry.

It’s also worth noting that the Texas Supreme Court’s decision follows the same rationale employed by the U.S. Court of Appeals for the Fourth Circuit in the 2012 case, United States v. Danielczyk, which upheld the federal ban on corporations making direct contributions to candidates.

Private Right of Action for Campaign Finance Violations. King Street Patriots alleged the Texas Election Code’s private rights of action against candidate and committees were constitutionally invalid because multiple plaintiffs could sue – and recover damages – for the same unlawful activity. The Texas Election Code permits a candidate to sue an opposing candidate for unlawful contributions or expenditures. The code also authorizes a political committee to be sued for unlawful activity by a committee with an opposing interest in the same election. The damages for each type of suit are twice the amount of the unlawful activity, as well as reasonable attorneys’ fees. In dispensing with these challenges, the Texas Supreme Court noted that it does not “invalidate statutes merely because it is possible to imagine some unconstitutional application.”

Alleged Vagueness of Statutory Definitions. King Street Patriots also alleged that the definitions of “campaign contribution,” “political committee,” and “political contribution” were facially unconstitutional. First, under the doctrine known as “prudential ripeness,” the Texas Supreme Court refrained from ruling on the “political committee” challenge because the court concluded that King Street Patriots does not fall within the definition of a political committee (i.e., for King Street Patriots to challenge the constitutionality of a law, the law first has to apply to them). Second, with respect to the “campaign contribution” and “political contribution” facial challenges, the Texas Supreme Court held that those definitions are neither circular nor unconstitutionally vague.

A Note About the Facial vs. As-Applied Challenges. It’s worth noting that nothing about the Texas Supreme Court’s decision is particularly surprising (although King Street Patriots was probably very happy to hear the court state that “the limited record before us establishes King Street Patriots is not a political committee.”). King Street Patriots’s challenges to the “campaign contribution” and “political contribution” definitions would have had a fighting chance as an as-applied challenge (as opposed to the facial challenge actually considered by the court). Curiously, King Street Patriots had previously agreed to sever their facial and as-applied challenges, which meant that the court would only consider the facial challenges. This was an unconventional move, as facial and as-applied challenges are usually considered at the same time, and even the Texas Supreme Court referred to this move as creating “the muddled procedural posture we now face.” Unfortunately for King Street Patriots, that procedural move may have cost them a constitutional victory and a reimbursement of attorneys’ fees courtesy of the State.

You can read the Texas Supreme Court’s entire opinion here.