The Supreme Court’s %uFB01rst hearing of the October session had all the makings of great drama. The justices ended their recess a month early—something that is rare—for re-arguments in a case they %uFB01rst heard in March—something that is even more uncommon. It was newly con%uFB01rmed Justice Sonia Sotomayor’s %uFB01rst appearance on the bench, Solicitor General Elena Kagan’s %uFB01rst time before the court and featured arguments from two former solicitors general and the country’s preeminent First Amendment attorney. The courtroom was packed with Congressional leaders like Sens. Chris Dodd (D-Conn.), John McCain (R-Ariz.), Russell Feingold (D-Wisc.) and Mitch McConnell (R-Ky.), and the networks had reporters doing live stand ups in front of the court building.

If all of that wasn’t enough, hanging in the balance was a case that has the potential to fundamentally reshape the way campaigns are waged—and in time for the 2010 elections. By the end of the Sept. 9 arguments, most believed the current limits on corporations’ and unions’ political expenditures would be lifted, allowing those big money groups to air signi%uFB01cantly more television advertisements in the run up to Election Day. Asked about the potential impact of the case, Jason Torchinsky, a campaign %uFB01nance lawyer at Holtzman Vogel, tells Politics bluntly: “It could be massive.”

Last year, Citizens United, a nonpro%uFB01t, conservative advocacy group that has taken corporate contributions, produced “Hillary: The Movie,” a scathing documentary that attacked Hillary Clinton’s character and career—a %uFB01lm most mainstream reviewers criticized. Citizens United sought to broadcast the %uFB01 lm on a video-on-demand service during the contentious Democratic primary. The Federal Election Commission blocked the move, saying the %uFB01lm amounted to a lengthy political ad advocating for the defeat of a candidate and, therefore, could not be aired by a 501(c)(4) group like Citizens United. Citizens United challenged the FEC’s intervention in court. What started as a narrow case on whether this type of documentary from this type of group should be restricted from airing on this type of service quickly broadened during the case’s original Supreme Court arguments in March.

The issue, said former solicitor general and Citizens United attorney Ted Olson, was whether it was constitutional to limit the speech of corporations, unions and trade associations under the Bipartisan Campaign Reform Act of 2002, better known as McCain-Feingold. “Robust debate about candidates for elected of%uFB01ce is the most fundamental value protected by the First Amendment’s guarantee of free speech,” Olson said at the very beginning of the re-argument. “Yet that is precisely the dialogue that the government has prohibited if practiced by unions or corporations.”

Although his side originally argued, at least in part, for a narrow ruling, David Bossie, Citizens United’s president, tells Politics that his group always believed the case could be more far reaching. At issue, Bossie believed, was whether corporations and unions deserve the same free speech rights as individuals. “We always felt that there was a bigger case here and that this was a vehicle to right what we considered a great wrong: McCain-Feingold,” Bossie says. “We wanted to take as broad a view of this as possible. We thought it was important on multiple levels, not just our %uFB01rm. We thought it transcended all of campaign %uFB01nance.”

In re-arguments, Citizens United said that the court should overturn two of its precedents. In 2003, the court ruled against a challenge to McCain-Feingold and in 1990 it ruled in Austin v. Michigan Chamber of Commerce that corporate expenditures have “distorting and corrosive effects” on elections. Olson said that if the government is going to criminalize speech in an election, as he claimed McCain-Feingold does, it has to prove a “compelling interest” that justi%uFB01es the statute. The law, he added, must be “narrowly tailored” so as not to restrict more speech than necessary. No such compelling interest, Olson said, has been proven.

Olson was cut off by Justice Ruth Bader Ginsburg who said corporations and individuals do not inherently share the same rights. “A corporation, after all,” she said, “is not endowed by its creator with inalienable rights.” As the arguments unfolded, a majority of the Justices appeared receptive to Olson’s challenge on constitutional grounds. Justices Antonin Scalia, Clarence Thomas and Anthony Kennedy—the swing vote in the current court—had all signed a minority opinion in the past that called for lessening restrictions on expenditures by corporations and unions. Early in the arguments, Kennedy drew a distinction between expenditures—such as airing television ads—and contributions given directly to a speci%uFB01c candidate.

Because Chief Justice John Roberts and Justice Samuel Alito were not on the court for that previous opinion, court experts scrutinized their questions for indications of which way they were leaning. All agreed after the hearing that Roberts and Alito held true to their conservative reputations and were receptive to the constitutional challenge to McCain-Feingold.

When Kagan began her case on behalf of the FEC, she was quickly cut off by the court’s conservative justices. Most notably, Roberts asked Kagan whether FEC regulations were in place to protect shareholders who do not monitor the political activity of companies in which they invest. He asked: Do “we, the government, big brother, have to protect you naive shareholders?” Kagan argued that the case did not warrant the First Amendment challenge to McCain-Feingold. She went so far as to say Citizens United is an “atypical plaintiff” because it is a nonpro%uFB01t advocacy group, not a major corporation. The court, she said, should rule narrowly on the grounds of this case and not broadly on the constitutionality of McCain-Feingold.

Kagan referenced the 1986 Supreme Court case FEC v. Massachusetts Citizens for Life that de%uFB01ned so-called “MCFL” groups as nonpro%uFB01t corporations who do not take any money from for-pro%uFB01t corporations—unlike Citizens United. The justices could rule, Kagan said, that the McCain-Feingold statute at issue should not apply to 90-minute documentaries or video-on-demand services. Having saved his %uFB01nal minutes for rebuttal, Olson concluded the 93-minute argument by saying that the government’s position had changed. “I don’t know as I stand here today what kind of corporations the government would choose to prosecute,” he said.
 
What It Could Mean For The Law

After the arguments, it seems very likely that campaign %uFB01nance laws are about to change. It just remains to be seen how far the court will go in allowing corporations and unions unfettered access to the airwaves in the days before an election. There are several routes the court could go in deciding this case. It could rule narrowly, as Kagan prescribed, and say that section 203 of the McCain-Feingold law does not apply to a documentary aired on a video-on-demand service. That would have the least effect on other areas of campaign %uFB01nance law.

The court could go slightly farther and adjust the de%uFB01nition of MCFL groups. It could rule that MCFL groups should include nonpro%uFB01t corporations and unions that take a small amount from for-pro%uFB01t corporations. Or it could go even farther and say MCFL groups may receive unlimited funds from for-pro%uFB01t corporations. Past that, the court would be choosing which parts of McCain-Feingold would be ruled unconstitutional on free speech grounds, notes Lyle Denniston, who has covered the Supreme Court for 51 years and wrote about this case for the popular SCOTUS blog. “The most the court could do is to announce that section 203 is unconstitutional as it applies to corporations when they use their own treasury funds to %uFB01nance independent campaign expenditures,” Denniston says. “That would sweep away all of section 203 as it applied to corporations and unions doing independent spending in campaigns.”

Denniston is convinced that the court will side with Citizens United but is wary of predicting how far it will go. The current court, though it leans to the right, has been reluctant to issue far-reaching decisions, although Denniston says this case could represent a turning point. “In the course of saying for-pro%uFB01t corporations can spend independently,” he says, “the court could make some very sweeping statements about the free speech rights of organizations that take the corporate form. And they could scuttle a whole lot of restrictions that are at the state level as well.”
 
What It Could Mean For Elections
If restrictions on expenditures by corporations and unions are eventually loosened, it could have a signi%uFB01cant impact on the way the %uFB01nal days of a race play out, particularly on television. “You would likely see a lot more 527s funded by left and right corporate interests airing television commercials,” says Torchinsky, the campaign %uFB01nance lawyer. Legal experts agree that it is unlikely the court will knock down restrictions on corporate and union contributions. Candidates, therefore, will still be prohibited from receiving money from these groups to use at their campaign’s discretion. But these groups may prefer the ability to air their own ads instead of going through a campaign, notes Sheila Krumholz, the executive director at the Center for Responsive Politics, a campaign %uFB01nance watchdog.

“In a way, this could be more bene%uFB01cial to corporations and unions because this would allow them to spend the money directly as they want to and not have to go through the %uFB01lter of the party or campaign,” Krumholz says. “They can control the money as they see %uFB01t. This would allow them to have a major, determinative effect in the 11th hour. They could use unlimited resources to blanket the airwaves.”

Others are wary of predicting that changes would have a signi%uFB01cant effect on campaigns. Parties will probably still have the funds to compete with corporations and unions with their independent expenditure campaigns, notes Phil Smith, the CEO of CapTel, a Republican fundraising %uFB01rm. “If [corporate and union spending] grows in a signi%uFB01cant way, it would effect the balance because whoever has the biggest bank account gets to talk more,” Smith says. “But I think the national party committees and state party committees are pretty well funded and will still probably hold the bigger stick.”

There is also the possibility that corporations will be hesitant to fully wade into elections to avoid the appearance that they are picking sides. Backing a candidate in a presidential race, for example, could alienate half of the country’s consumers. However, Philip Molfese, a Democratic consultant and the CEO of the fundraising %uFB01rm Grainger Terry, says he has worked with numerous corporate clients who want to get more involved, not less.

“Corporations are not wary of involvements, they are wary of bad investments,” Molfese says. “In some cases they have nothing to lose.”

Jeremy P. Jacobs is the staff writer for Politics magazine.