On January 19, 2022, the United States Supreme Court will hear an appeal by the Federal Elections Commission (FEC) from a successful challenge to campaign finance restrictions brought by Sen. Ted Cruz. The action centers on a provision of the Bipartisan Campaign Reform Act (BCRA) of 2002, otherwise known as McCain-Feingold, that restricts candidates’ ability to use campaign donations received after the election to pay back personal loans made to their campaign.
Pursuant to BCRA, the case was heard by a 3-judge district court panel in Washington, D.C. and, after the court struck down the limitation, the FEC appealed directly to the Supreme Court, which set it for oral argument. The case offers an opportunity for the Court to clarify and/or refine its campaign finance jurisprudence, including reviewing the real-world effect of such restrictions on political speech, the distinction devised in Buckley v. Valeo between expenditures and contributions, and the various levels of scrutiny for each.
The webinar will review the traditional free speech issues in the case (including the extent of any risk of corruption or its appearance presented by a candidate's loan to his or her own campaign), as well as practical concerns about the effect these limitations might have on campaigns -- including on the kinds of candidates who will be able to run for office.
Donald A. Daugherty, Jr., Senior Litigator, Institute for Free Speech
Harmeet Dhillon, Founding Partner, Dhillon Law Group Inc.
To register, click the link above.
As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.
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Guy DeSanctis: Welcome to The Federalist Society’s webinar call. Today, January 21st, we discuss “Litigation Update: FEC v. Cruz for Senate.” My name is Guy DeSanctis, and I am Assistant Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today’s call.
Today, we are fortunate to have with us Donald A. Daugherty Jr., Senior Litigator, Institute for Free Speech, and Harmeet Dhillon, Founding Partner at Dhillon Law Group Inc. Throughout the panel, if you have any questions, please submit them through the question-and-answer feature so that our speakers will have access to them for when we get to that portion of the webinar. With that, thank you for being with us today. Donald and Harmeet, the floor is yours.
Donald A. Daugherty: Great. Great. And good afternoon. My name is Don Daugherty. I am, as Guy noted, a senior attorney with the Institute for Free Speech, which is based out of Washington, DC. Although, through the wonders of remote technology, I actually work out of my home here in the Milwaukee, Wisconsin area. Today, we’ll be discussing FEC v. Senator Ted Cruz and Senator Ted Cruz’s 2018 Senate Campaign, a case that was argued before the Supreme Court this past Wednesday. The case is an appeal by the FEC from a successful challenge brought by Senator Cruz and his campaign to finance restrictions under the McCain-Feingold Act, also known as BCRA, of 2002. My organization, IFS -- we filed an amicus brief right here, so there’s purportedly going to be some expertise on the topic.
I’d like to begin by reviewing for all of you the format of our webinar today. First, I’ll give a brief overview with the background—facts of the case. Although, for purposes of time, I’ll assume that you all have some familiarity with them. I’ll also discuss some of the traditional free speech issues that are implicated by the case and that were discussed at oral argument this past Wednesday, as well as in the parties’ briefs. Then I’ll turn it over to Harmeet, and she’ll address some more practical concerns about the effect that FEC’s rule may have on campaigns, including on the kinds of candidates who would be able to run for office with or without this loan repayment limit that we’re talking about today. And then after that, we’ll certainly have time for your all’s questions.
So first, the background facts. The action centers on a provision of the 2002 Bipartisan Campaign Reform Act—BCRA, or McCain-Feingold. The provision restricts candidates’ abilities to use campaign donations received after the election in order to pay back personal loans made by the candidates to their campaigns. Specifically, section 304, which was the statutory provision at issue here, that limits repayment of candidates’ loans to their campaign from post-election contributions. It caps it at $250,000. This loan repayment limit, section 304, was part of BCRA’s Millionaire Amendment that got a lot of press and some notoriety when another part of the amendment apart from section 304 was gutted by the Supreme Court in the 2008 Davis decision. Much of the legislative history surrounding the Millionaire’s Amendment indicated that its proponents intended the statute to level the playing field between the wealthy and less wealthy candidates for federal office.
In his 2018 election, Senator Cruz defended his US Senate seat successfully against a challenge by the well-known Robert Francis O’Rourke, also known as Beto O’Rourke. It was a hugely expensive race. I think I read somewhere that Senator Cruz was actually outspent by Beto O’Rourke by some $33 million. I don’t know if that’s accurate. I read it in a paper somewhere. But either way, it was very expensive race. During the course of the race, Senator Cruz lent his campaign—I think the day before, shortly before the actual election—he lent it $260,000. After he had won the race, $250,000 of that $260,000 loan was repaid to him.
There was some confusion in the record—and this was noted at oral arguments last Wednesday—about what specific amount of the debt, the loan, was repaid with post-election contributions versus pre-election contributions. I think in the original complaint, Senator Cruz had said it was entirely paid for with post-elections. There may have a stipulation that kind of muddied the waters as well as a deposition testimony from Senator Cruz’s campaign director, who was unclear because, of course, money’s fungible. So which exactly was used to pay was not -- there was some confusion about that at oral argument. The bottom line, though, nonetheless, was that because of section 304, the loan repayment limit -- was that Senator Cruz was left with $10,000 of his loan unpaid. And under section 304, and I believe the regulation that enacted it, or that was promulgated under it, that was uncharacterized as a contribution by Senator Cruz to his own campaign.
So the challenge brought by Cruz and his campaign involved a challenge to the constitutionality of BCRA. And under BCRA, it was decided by a three-judge -- a district court panel in Washington DC—a special provision that allows things to be taken to a three-panel judge district court when the constitutionality of BCRA is challenged. The DC panel—the district panel—struck down the limitation of section 304 in a June 2020 decision by DC Circuit Judge Neomi Rao, who sat on the panel—they found for the challengers, Cruz and his campaign.
The FEC then appealed directly to the Supreme Court, which again was allowed under the BCRA provisions for challenging constitutionality. And instead of summarily affirming or reversing the district court’s decision, which BCRA allows the Supreme Court to do as part of the direct appeal process, the Court actually set -- in September of 2021, the Court set the case for plenary consideration, oral argument, full briefing because the Supreme Court, rather than just taking sort of the easy way out and just summarily affirming or reversing or something like that, they actually wanted to hear more. And it made observers like myself and probably all of us on the call curious as to what the justices individually or collectively had in mind, what they wanted to do with the case. The district court noted in its decision—Judge Rao—that section 304 is a relatively obscure campaign finance provision. And instead of, again, just sort of signing off, disposing briefly of what was going to happen to this section 304, this obscure provision, the Supreme Court wanted to hear more. And again -- so all of our ears perked up, and we’ll be very interested in seeing the decision when it comes out, presumably in June or thereabouts.
So with regard to the issues -- and of course we got some hint as to what the Supreme Court -- each of the justices may have in mind with the case through oral argument. And I’ll talk about that, time permitting, as we go a little further here, but let me talk now about the issues that were before the Supreme Court. And the threshold issue and one that the FEC spent a lot of time in its brief at oral argument addressing was whether Senator Cruz and his campaign even had standing to bring the claim. The FEC was represented before the Supreme Court by Deputy Solicitor General Malcolm Stewart.
I think he did a very fine job of arguing. Especially because, in my mind, at least, he had the poorer of the argument. But the argument that was made was that Cruz’s harm was self-inflicted. He, in fact, could have paid himself back in full, but he chose not to do so in order to create the exact cause of action that went up before the Supreme Court. So his intentional conduct severed any causal link between the harm to him and the statute itself, saying, of course, that Senator Cruz had, in fact, manufactured his claim. And the analogy used by Mr. Stewart was someone who would go into McDonald’s and buy hot coffee, pour it on himself, and then later on sue McDonalds for the burns suffered.
Senator Cruz effectively stipulated that he really did intend to bring this case. He was trying to bring a test case to challenge section 304. But nonetheless, all nine justices seemed to quickly reject the notion that he lacked standing. They pointed to -- I think it was Justice Breyer pointed to, for instance, fair housing discrimination claims, which are often brought based on testers who go and try to rent housing with no intention of doing so but want to test whether there is in fact discrimination law based on race. Justice Thomas pointed to Mr. Plessy and his choice, deliberate choice, to sit in the whites-only railcar back in Louisiana in the late nineteenth century as another example of “manufactured claim.” So the justices did not seem to be too impressed by the standing issue, and I do think they’re going to get -- and this is all nine of them too, not just -- there was no sort of breakdown.
I do note that, not surprisingly, Chief Justice, not necessarily with regard to standing, but later on in the case, he did muse about ways that he could maybe reach a very narrow resolution of the matter, as he loves to do in his minimalistic sort of style. He said maybe we would just strike down -- what if the Court just struck down the relevant regulation that enacted section 304 and had been promulgated by the FEC? Would that be a narrow way of getting out of it? I don’t think that’s going to happen. I think it was musing by his part. I do think all six, or I should say nine justices, want to get to the merits. Although, of course, they have different opinions on the constitutionality of section 304.
So with regard to the merits, the FEC’s basic argument was that section 304 creates a relatively marginal insubstantial burden on speech, and any burden is far outweighed by what they see as the significant potential for corruption. And Mr. Stewart argued that Congress has the ability to balance competing interests, namely burdens on speech, with concerns about corruption. They can also draw lines that are at least rationally based for when corruption becomes too much. And here, of course, they drew that line at $250,000, even though, as I’ll mention here in a moment, they’re concerned about -- or the FEC is concerned about post-election contribution being used to pay off personal loans. They still allow it up to $250,000. But in any event, that was the line that they say the Congress drew, and Congress has the right to do that.
The basic assumption on which the loan repayment limit rests is that post-election contributions are particularly corrupted and certainly more so than pre-election contributions. So that really was a fundamental premise that the FEC was working with. And as part of that premise—or in support of that premise—again, both in his briefs and at oral argument, the FEC promoted, put forth repeatedly, the notion that post-election contributions, they’re used to repay candidate loans. They go directly into a candidate’s pocket and thereby increase his or her wealth. The FEC analogized section 304 to laws that ban gifts to federal officials. And those laws are well established. They’ve survived First Amendment challenges in the past, so they said this is simply like a gift ban.
I think that’s a really poor analogy, and I think the justices’ questioning sort of brought that out. A loan simply does not equal a gift. Before, if there’s any repayment of the loan, the money that went out of, in this case, Senator Cruz’s pocket -- so it was going out of his pocket. And so what repayment does is merely return that money into his pocket. Now, he may get -- candidates can charge interest on loans they make. They don’t have to, but they can. But even that is, I should say, capped at a commercially reasonable rate. So it’s not putting new money as much as it is returning old money, as if Senator Cruz had lent his car to the campaign and then after, gotten his car back. It’s not like he was getting a new car.
Also, the FEC kind of elided past the fact that money loaned by a candidate to his or her campaign pays for protected First Amendment speech and other political activities. So it is, in fact, going to the purpose that is promoted, that the Supreme Court has said. It’s clearly protected and at the core of the First Amendment, namely political speech and political activity. And that’s what the money went for. The district court criticized the FEC as focusing narrowly just on repayment. They just said, “Well, repayment, that’s money going into pocket.” And I think they were correct, the district court was, that that’s just really not the way to look at it. In fact, the FEC, I think, took an exclusively ex-post point of view, again looking only at repayment after the election as opposed to what the money had been for and that kind of thing. And I think that really distorted what was actually going on with a loan that’s given by a candidate, the campaign. Again, it’s not putting new money in their pocket. It’s simply replacing money that they had put out before for purposes of promoting free speech and all the activity the First Amendment certainly encourages.
Justice Barrett also—and others, but critically her—hit on the fact that there really was pretty weak, pretty lame evidence put forth by the FEC with regard to post-election contributions being particularly corrupted. In fact, there are -- I think there’s only ten states that have a loan repayment limitation provision like section 304. And all the other states that don’t have them, the FEC found no evidence of corruption that resulted from the lack of the loan repayment limitation. There was nothing, no evidence. The FEC also looked and talked about, of course, always the appearance of corruption. But they supported that by really just a self-serving poll that the FEC itself commissioned and that they designed themselves. And then, not surprisingly, it reached a result favorable to their premise of post-election contributions being bad or particularly nefarious.
But really, all that that showed, that poll they had commissioned—and it was really pretty weak poll—it just showed that Americans are skeptical about government, I mean, and elections and politicians generally. Well, no kidding. Of course they are. But that doesn’t necessarily mean that there is a real corruption going on or appearance of real corruption going on. And, of course, the notion that you’re going to infringe the rights of individuals under the First Amendment with the loan repayment limitation based on vague, generalized public skepticism towards government as reflected in a self-serving poll by the FEC, that’s something that I don’t think is going to get fought. That is something that we briefed in our amicus. I don’t know -- I’ll confess I don’t know that the Supreme Court talked about that too much, but you always hear quid pro quo corruption or its appearance.
And there are, in the circuit courts, a lot of cases that talk about what is evidence of the appearance. And a lot of them look to Coles. I think that’s pretty weak evidence. I’d like it if the Supreme Court kind of flushed out what they will require for evidence of the appearance of corruption, but we’ll have to see when the decision comes out. The FEC also, in response to Justice Barrett’s question, said, “Well, you need to -- the judiciary needs to defer to the political branches, and legislators are critically knowledgeable about what corrupts them,” I guess, was kind of the argument. But really, I think the response to that is that, when you’re talking about risks or threatening or limitations or chilling of First Amendment rights or other constitutional rights, that the deference owed to the political branches recedes greatly. And as people talk about, “You don’t need judicial restraint there. What you need is judicial engagement --” and I think that’s something else that carried the day hopefully.
I also know—and Harmeet may get into this—that self-financing, like what occurs when you loan money to your own campaign, that’s critically important for challengers who may lack the name recognition and establish a list of donors and things like that that an incumbent has. And so, this self-financing -- not surprisingly, the rules that we’re talking about here—section 304, the Millionaire’s Amendment—they’re written by incumbents. Not surprising that the rules would be written to protect incumbents. And so, I think that’s something else, too. Even though Senator Cruz obviously wasn’t a challenger, nonetheless, really, I think these rules benefit incumbents. And again, that shouldn't be surprising.
And there was, as I said earlier, discussion of legislative history about this amendment leveling the playing field. I think that’s because incumbents are concerned about extremely wealthy challengers, like Mr. Davis in the Davis case and others. But, of course, leveling the playing field is an utterly invalid interest and really only quid pro quo corruption or its appearance, preventing that is really all that the Supreme Court tolerates to infringe First Amendment rights.
Justice Kavanaugh had a great question. I think a real factual scenario where this loan repayment limit may really chill speech -- he talked about how a close election, in the eleventh hour, some candidates may want to -- it may be very close, and they want to put in some final ads, make a final run -- excuse me -- getting out their message through campaign ads and they may need the money. But the person who -- but if you know that doing that, putting that money into your campaign, you may not get paid over $250,000—repaid that amount—that’s going to be a real disincentive and chill your interest in putting in money into your campaign at the last minute.
Now, what Senator -- I should say Justice Kavanaugh pointed out was that someone like Michael Bloomberg or Tom Steyer or somebody, they’re not -- I mean, they’re filthy rich, okay? They don’t care about putting $250 grand in. They sneeze out that kind of money, and they don’t care about getting it back or anything like that. It really is the loan repayment limitation, at least in that scenario outlined by Justice Kavanaugh -- really favors the filthy rich at the expense of most of us who are not filthy rich.
So just a couple more things before I turn it over to Harmeet here. As I said -- and one of the reasons we were also curious after the Court said it wanted to hear oral argument and full briefing -- there are possibilities for clarification of some of the campaign finance jurisprudence that’s out there. The trend, as we all know, has been decidedly in favor of First Amendment rights over the course of the Roberts Court, McConnell notwithstanding. And so, some of the issues that may be clarified by the opinion, once we get it out, is what exactly closely drawn scrutiny, which applies to contribution limits, what does that mean? Those have been implied inconsistently by lower courts. And maybe just an affirmation by a Supreme Court that Judge Rao, who did exclude very strictly give -- really strictly construe -- or I should say go over the evidence put forth by the FEC, maybe that’ll be a result of this.
There was discussion at oral argument and otherwise about is this really affecting expenses, expenditures, in which case it’d be subject to strict scrutiny by a campaign. Does it really affect contributions—what you do with the contributions—again, which is subject to the lesser closely drawn scrutiny? Although again, closely drawn scrutiny has to be very rigorous. Maybe there’ll be some clarification about that. Maybe there’ll be some clarification about what constitutes -- what evidence supports an appearance of corruption. Those are kind of some of the things that those of us who practice in this area of campaign finance and litigate in it would really like to get some clarification on. And hopefully, we’ll see that when we get the decision. So with that, I’ll turn it over to Harmeet.
Harmeet Dhillon: Well, thanks so much, Don. That was really thorough. And you really covered all of the legal bases. In this webinar, I was asked to cover the practical perspective. And so, let me give you a little bit of background for me. We practice election law at my law firm. I do mostly litigation and not campaign finance, but several lawyers at my firm do focus on campaign finance issues and actually work at the FEC. And we advise a number of candidates in campaigns. And so, in a way, I have a bit of a conflict of interest here because the business of my firm depends on there being these opaque and obscure and, I think, contradictory types of regulations. But the free speech lover in me is very much in favor of the trend that Don articulated of the Court for increasing freedom of speech in the Court and in our elections.
And so, in so many ways, the sheer volume and scope of what it costs to win a federal election today has really outpaced some of these regulations. And I think even some of the dialogue that we heard in this oral argument was somewhat archaic in terms of the practical scope of the amount of dollars that it requires to win an election and be effective, these types of regulations on who can run and what that campaign will look like. Before I get into that, though, I do recommend listening to this oral argument. Of the many arguments I’ve listened to so far this year, I thought it was really illuminating, entertaining, very well-argued on both sides. And so, I commend it to you.
In addition to being a lawyer who handles these types of issues, I’ve actually run for office twice here in San Francisco as a Republican in races which I would characterize as long-shot races. So I had the perspective of a candidate as well, including a candidate who expends their own funds in a campaign and has had to also go out and raise money and what the practical effects of these types of regulations would be. So as Don mentioned and as was clearly highlighted in the Court dialog as well, the main consequence of a regulation such as 304 is to discourage wealthy candidates from making large loans to their own campaigns if they have the money, but it actually also deters non-wealthy candidates from doing it.
And frankly, when you’re talking about running for a federal office, $250,000 is throat-clearing money. It’s the money that you end up spending on the road in a large state. It is really not a lot of money. But when you’re starting a campaign, it’s the kind of seed money that is often required when you get up one morning, and you decide, “You know what? We got to throw that bum out. I want to run for Congress, and I want to run for United States Senate. And to get started, I’m going to put in my own money.” So it’s real money. But actually, when you get to a successful campaign like the Ted Cruz campaign or the unsuccessful Beto O’Rourke campaign, it isn’t a lot of money. So from the perspective of who’s harmed and what this case is really about, this isn’t a particularly compelling case in terms of the harm. As was covered in the beginning of the argument with the Solicitor General’s Office very ably arguing the point—but I don’t think it’s going to carry the day—about standing and manufactured standing -- no, Ted Cruz’s campaign—he won the race—isn’t a particularly compelling case, but I think the points that are raised were really critical. And we may see an upholding of this change in the law.
The goal of what this regulation is supposed to achieve and how the regulation furthers the goals, I think, are incompatible and inconsistent, and that was highlighted in the oral argument with a lot of discussion about the practical effects of these types of rules and how it works in real life. Now, all of these regulations date back to the 1976 Buckley v. Valeo, which upheld the campaign contributions on the grounds that contribution limits supposedly prevent quid pro quo corruption or its appearance. I mean, today, I would argue that the size and scope of federal campaigns and the closeness with which so many donors are in constant contact with the politicians who they patronize, I think you got plenty of appearance of quid pro quo corruption going on, in fact. And I’m not sure this regulation would make a difference when you look at the size and the scope of it.
Fundamentally, justices are at odds over this concept of whether you could actually bribe yourself -- you can’t bribe yourself, right? So there’s no risk of quid pro quo corruption when a candidate makes a contribution to their own campaign. But supposedly, there’s a special risk of corruption when a donor, after the election, makes a contribution that helps the candidate pay back the contribution to themselves. Yet, at the same time, everybody who’s ever run a campaign can tell you that, at the end of the day, if you’re running hard and spending that money, you’re going to have debts, not only to yourself if you loaned yourself that seed money, but you’re also going to have loans -- not loans, sorry -- expenditures outstanding that you incurred to the political consultant, the mail consultant, the social media people, your comms director, your billboard vendor, you fill-in-the-blank vendor. There are tons of vendors. Yet, this regulation only targets the payment back of the loan that the candidate made to themselves. It doesn’t prohibit post-election contributions to pay down other candidate debt.
But from the candidate’s perspective, that is real debt. And in fact, the expenditures that they had made and gotten out ahead of their skis on how much money they spent at the end of their campaign could be significantly greater than the money that they loaned to themselves. Those are real debts. I can tell you, as a lawyer, I’ve pursued those types of debts. And so, the idea that that money paid back to oneself versus the money that is owed to others somehow is materially different in terms of the corruption risk, I think, is a fallacy. And they didn't really go into that too much in the argument. But the line drawing, I think, is an interesting question that was highlighted. How is this line drawn? Where is the line drawn? Certainly, line drawing is permitted by Congress, permitted by the FEC, but is this line a logical one? I would argue from the perspective of a -- a practical perspective, it isn’t really.
So the drafters and supporters of McCain-Feingold sought to level the electoral opportunities for candidates of different personal wealth. We ultimately got that Millionaire’s Amendment that was struck down several years ago. And this is the residue of that well-meaning but, ultimately, I think, impotent rule. The Millionaire’s Amendment, as Don mentioned, set higher contribution limits for candidates whose opponents spend over a certain amount of their own money. It was meant to deter these big-bucks candidates from coming in. In effect, it’s really a protectionist racket for the members of Congress.
So in Davis v. FEC, Justice Alito rejected this leveling rationale by saying, “Different candidates have different strengths”—and I’m quoting—“Some are wealthy. Others have wealthy supporters who are willing to make large contributions. Some are celebrities. Some have the benefit of a well-known family name. Leveling electoral opportunities means making judgments about which strengths should be permitted to contribute to the outcome of an election. However, the Constitution confers upon voters, not Congress, the power to choose the members of the House of Representatives. And it’s a dangerous business for Congress to use the election laws to influence the voters’ choices.” So that was a clear blow in favor of free speech rights and a practical consideration of the fact that money is only one of the many factors that goes into the winning of an election.
There was some discussion, as Don alluded to briefly in his remarks, about a regulation at the FEC that goes even further by requiring any repayment over $250,000 to be made within 20 days of the election. So that is another one -- and as Justice Roberts asked about—whether there could be a more tailored result here by simply attacking that regulation. And the appellee in this case arguing -- Chuck Cooper arguing for that position said that the regulation in question—he used very colorful language—described it as a parasite on the host—being 304. So the government tried to defend the position very valiantly as an anticorruption measure based on the idea that contributors know that they’re giving money to the candidate when they make a post-election contribution—that is, giving the money to the candidate personally.
However, I think there are a few flaws, and some of these are highlighted in this theory. Candidates can still make personal loans to their campaign that are paid back with donor funds, including up to $250,000 after election day. There’s nothing special about that $250,001 that separates it or makes it more corrupting than the dollar before it. As Mr. Cooper argued before the Court, $250,000 at max-out contributions of the current limit per general election cycle is 87 donors. It’s 87 different donors. So are we really going to say that those 87 donors are okay, but then the next donor -- 86 donors are okay, then the next donor, the 87th donor, “Aha. That’s the one where the corruption starts.” Is that even in the ballpark of reality?
And one of the things that you learn when you run for office is you’re constantly begging for dollars from day one from anybody who can give it to you. I can tell you that what they train you as a candidate and going through this training is you got to ask your high school teacher, your grade school teacher, your mom, your aunt, everybody. You ask everybody for money who can possibly give you a buck or ten bucks or, if you’re lucky, the max-out contribution. And it quickly blurs in your mind. The focus is raising money as much as you can and getting the money in the bank to pay the people and run. There’s little attention paid to remembering the exact amount of somebody’s contribution or when they made it, quite frankly. And I’ll get to another important point about this in a minute.
All funds sent to the campaign must still comply with the contribution limits, and this was something that was well argued before the Court. The contribution limits are sufficiently low to prevent corruption or the appearance of corruption. And so, even if you have, supposedly, some wealthy person who, now that you just got elected to Congress, wants to somehow buy your favor by giving you a big contribution and get you out of debt, they’re still subject to the same campaign finance contributions. So how is the donation after the election any more corrupting than the donation that they gave you when the polls showed—like in Ted Cruz’s case—that days before the election, it was looking pretty good for Ted Cruz to win that election. What is the difference? The material difference, I would argue, is very little.
There’s also the regulation itself. What is special about 20 days after an election? The FEC has previously hounded committees to pay off their campaign debts, sometimes years and even decades after a campaign ended. John Glenn ran for president in 1984, but his campaign didn't officially end at the FEC for 22 years later because it had an outstanding debt. And so, these are some of the realities. Twenty days is a peppercorn. Twenty days is a pittance. And these regulations are completely out of whack with the reality here.
So what’s really going on? The bottom line here is the practical consequence of this rule, if it were allowed to stand by the Supreme Court, is to make wealthy people think twice about -- and less wealthy people think twice about loaning large amounts of money to their campaign. But it won’t make super-wealthy people—Tom Steyer is one that was mentioned; Beto O’Rourke is actually another—it isn’t going to deter them because this is just change for them. It’s budget dust for a wealthy person, $250,000. But it is not budget dust to the small challenger, the first-time candidate, maybe even a minority party candidate who wants to make a point in an election they know -- like in my case, knowing fairly well you aren’t going to win the election. You still would like to give voters a choice in your district on the issues that matter to you. You want to make a point.
That’s free speech. That’s why candidates like me run in San Francisco. That’s why candidates who are for the Libertarian party or some other party run. But if they’re deterred from being able to actually get their supporters who share their views to help them continue to make these points in other elections by these campaign finance limits, what you are going to have is plutocrats of any political stripe being able to do this with abandon and freezing out the speech of the people who are more marginal in terms of their abilities to win or even candidates who may win in a close race, but they’re first-time candidates.
Congress should not be in the business of leveling the playing field or using these laws to shape what qualifications they should value. The end result here has been an incoherent regulatory scheme that’s increasingly out of touch. When you look at campaigns where one party is outspent by the other by $30 million-plus, $250,000 is really just a rounding error. And so, even the scope of this regulation is completely out of whack. If you were to have a regulation like this, the number ought to be a much higher number. In real life—and one point I want to make that wasn’t really made in the oral argument is—in real life in Congress with the power of incumbency of federal elections, just about every election, contribution is a post-election contribution.
Once that person gets elected the first time, guess what? They are immediately beginning to run for their next campaign, their next office. If it’s Congress, it’s a two-year cycle. They are running for office constantly. So literally, every election that an incumbent gets is a post-election contribution because it is pre the next election, of course, but they’re always running, and they’re always raising. So this pre-, post-election divide is really kind of a fallacy for the majority of successful politicians. And by the way, if we’re worried about the ones who didn't win, there’s no corruption there. If they didn't win the election, there’s no possibility of quid pro quo corruption, so what’s the problem?
Okay. Finally, a couple points I’ll make from the oral argument. The analogy of the gift rules is a fallacy for the reasons that Don mentioned and stated above. It isn’t a gift to give money to yourself, and it isn’t a big deal for your supporters to give you money back right after the election either way. I think that’s what’s going to come out in the Court opinion. I feel from what I heard of the oral argument that there’s a pretty good chance of the DC Circuit’s opinion being upheld.
And a final point, as a lawyer who practices a lot of civil rights law, it was a little alarming to hear some of the justices kind of appear to buy into this argument that Solicitor General’s Office was making about standing. Plessy v. Ferguson was a case that was mentioned in some detail. But in reality, so much of civil rights litigation, both historically in this country and today, involves plaintiffs who have what some would disparagingly characterize as manufactured standing. Did they really want to buy that house? Did they really want that job? Did they really want to go to the beach that day when they challenged the governor’s shut down of the beaches? Did they really want to go protest that day in the rain with a challenge to shut down the protest? So if it were to be the case that a candidate, a successful candidate like Ted Cruz, could not make a point, which itself is free speech by coming into Court to make these arguments, this would be really a death blow to much of civil rights standing jurisprudence.
So I don’t think the Court was buying into that. I don’t think the argument, the opinion, is going to come out predicated on that. But I do think that it is a dangerous argument for the Solicitor General’s Office to make, given our robust history of civil rights in this country. So with that, I think I’ll conclude my remarks.
Donald A. Daugherty: Yeah. There’s the --I don’t know if you have the Q&A function, Harmeet. There’s a couple of questions. I’ll just look at one here. But, yeah. It was – “Given the free speech implications, do you think there is a possibility the Court would apply the exacting scrutiny standard applied in AFPF v. Bonta decision that was handed down last July?”
And I guess I would say there was certainly a lot of talk about levels of scrutiny. Chuck Cooper argued for strict scrutiny certainly. The district court applied closely drawn scrutiny, which applies to expenditures, strict applied to -- I should say applies to contributions. Strict applies to expenditures—expenditure limits. But some clarification of that is certainly important.
As I mentioned earlier, the lower courts are kind of all over the place sometimes with their application of closely drawn scrutiny to contributions. Given that I think AFPF is more of a freedom of association case, the exacting scrutiny that was discussed then, I don’t know if that would be directly transferable into the Cruz case. But again, one of the points that we made in our brief is that just because closely drawn scrutiny is sort of a middle standard, it doesn’t mean it is not a very robust, rigorous scrutiny of the evidence put forth by the government. And if anything, it’s similar to -- much more similar to strict scrutiny than it is to just mere rational basis scrutiny, in which you just sort of wave things through. So a clarification of the standard that would apply and how they worked, that’s always welcome. Whether it would be exacting scrutiny from AFPF, that decision, I don’t know. But, yeah, I’m looking forward to clarification on that from the Supreme Court, if we can get it. I don’t know if you have any additional thoughts, Harmeet.
Harmeet Dhillon: No, I would agree with that, that there was little discussion in this oral argument, at least the oral argument portion of the analysis on that scrutiny question. As you say, Chuck Cooper argued for strict scrutiny. Clarification would certainly be good. We had a lot of different levels of scrutiny floating around, and it would be a great aid to litigants to know what the correct standard is. That would be a contribution that the Court could make in this argument, in this opinion.
Donald A. Daugherty: Another question I see here says that Roe v. Wade and Lawrence v. Texas are the most notorious cases of manufactured standing. Did President Biden’s SG note that in his attack on Cruz’s standing? Well, not surprisingly, he didn't.
Harmeet Dhillon: No.
Donald A. Daugherty: Also, I mean, frankly, if you want to go back, Griswold even was -- they intended to set out -- I think the faculty at Yale in Connecticut intended to set out to challenge the contraceptive rule in the state of Connecticut, which really had been rarely enforced. But, yeah. And as Harmeet said, civil rights litigation is many times predicated on “manufactured cases.” But, no, they didn't point out Roe v. Wade or Lawrence. But I guess that was something else that could have been used.
Harmeet Dhillon: Well, I don’t think this case is going to hinge on the standing analysis. I think even the justices who were more deferential to the FEC rule were concerned about the idea that some of our civil rights litigants might have been excluded from having their voice heard in the Court if the rule being pushed by the SG’s Office was the rule. And to be fair, I think they led with that argument because it was a fairly difficult position to defend—their substantive argument. So they lead with what they thought was a good argument. But I don’t think that’s going to carry the day.
Donald A. Daugherty: Yeah, no. I would definitely agree that the amount of time in the brief as well as at oral argument that the FEC put on the issue of standing, I think it just sort of indicates that they don’t feel all that strong on the merits. But all nine justices, it seemed, want to get to the merits in some way or the other. And so, the issue now, too, I think, with the Roberts Court, it’s always, “What is the opinion going to say?” It’s going to be something extremely narrow and fact-bound and just sort of part of the Chief Justice’s incrementalist approach to everything, which actually leads into more and more cases coming back. In the religious expression context, Masterpiece Cake didn't really resolve the central issue. And so, you’ve got -- that Fulton came back. And even that was a narrow decision. So hopefully, they’ll do more to clarify things and not just try to get it resolved on the narrow issue because again, if they don’t, these kinds of cases are going to keep coming back to them in various forms.
Let me see. What else do we got here? Yeah. And so, the panel’s -- so someone else says, why did the Court—as I understand this question—why did the Court have this inordinate fascination with such a small matter? That is, given that section 304 is relatively obscure and not a big deal necessarily, and the Supreme Court could have disposed of it summarily and chose not to, why did they do that? And again, you’re preaching to the choir there. I am extremely curious. There was a lot of the broader issues that were discussed at oral argument. And exactly what they’re going to settle on, ultimately, I don’t know. I do think they want to uphold, affirm what the district court did. But some of the broader themes of contributions versus expenditures and things of that nature, I don’t know. Maybe they just want to complete, drive a final stake in the heart of the Millionaire’s Amendment. Maybe that’s all that they want to do. But I do think that there is probably going to be some clarification or broader pronouncement that we’ll get in this opinion that hopefully will simplify things. Although, I know from Harmeet’s point of view, like any litigator, sometimes the more confused things are, the better it is for business.
Harmeet Dhillon: That’s right.
Donald A. Daugherty: But I do think that clarification in this area of some kind is important. I don’t know, Harmeet, if you were listening to oral argument, got a sense as to why do you think they took it on.
Harmeet Dhillon: I think you’re right. Clearly, it’s a matter -- look, the questioning was lively and well informed on both sides. And Justice Kagan was very active in her questioning, and really on that issue of expenditure versus contribution, she was really, really -- spent a lot of minutes on that issue. But ultimately, both parties made their cases very briefly, and the majority of the argument was the questioning, as we’ve often seen. So I think that -- I’m hoping that the reason they took this case up and what we’re going to see out of it is some clarification of some of these standards.
What correct standards should apply would be a huge contribution to the jurisprudence in this regard. Driving a stake through this silly rule would be a contribution as well. But they couldn't have taken up this case just for this relatively obscure and rarely consequential in terms of the outcome of an election or really speech choices case. If somebody really wants to get in there and make a contribution and they’re aware of this rule, they just make it 20 days earlier, 10 days earlier, 1 day earlier, not such a big deal. So it has to be a bigger-picture reason for the cert and the oral argument grant than this case and Ted Cruz, who won.
Donald A. Daugherty: Yeah. Yeah. What else do we got here?
Harmeet Dhillon: That’s the last question. The earlier questions I think we’ve already addressed.
Donald A. Daugherty: Okay. Yeah. Yeah.
Harmeet Dhillon: Yeah. Was it a political motivation by a Democrat-dominated FEC? That’s the first question that we had. I’m not so sure. I’m a little cynical. I think that the power of incumbency is a bipartisan problem. And Republicans are no more noble about free speech than Democrats are, sorry to say.
Donald A. Daugherty: Yeah, no. And I would say that, too. I mean, I know some of the legislative history that the FEC pointed to was from former Senator Pete Domenici, who was Republican. So I think all incumbents want to protect each other. And that is something they can all truly agree on. Even in these polarized times, bipartisan, they want to make sure they keep their jobs. So I think that was --
Harmeet Dhillon: Right.
Donald A. Daugherty: —I think what was going on. Anything further, or we covered it all? Let me check here. Oh, one more.
Harmeet Dhillon: We have a follow-up question. “How can the Court come down with a big picture decision on such narrow facts on such an obscure regulation?”
Well, I think a big picture decision can include the level of scrutiny that is applied to one of these types of regulations, and that obviously has a broader implication than simply this particular rule. That’s one choice. Another choice is, of course, to take the narrow, incremental approach that Justice Roberts articulated and not go for the colorful analogy of the parasite on the host but rather just sort of swat the fly or swat the parasite and deal with it that way. So those are the choices before them. Who knows what they’re going to do? It would be folly to predict that with too much confidence.
Donald A. Daugherty: Yeah, no. And I would say, “How can they do that?” Well, the Supreme Court can do whatever the heck they want to some extent. You know? They can find a way to get to the larger issues, I think. And they are implicated, certainly. And I’ll walk right into the folly that Harmeet just said would be to predict things—and I have no real idea—but you could see a 5-1-3 kind of decision, where Justice Roberts concurs in striking down section 304 but does so on much narrower grounds than the other five “conservative colleagues.” I mean, that’s just one possibility. So we’ll see how it pans out. And I think that we’ll know by June.
Harmeet Dhillon: Well, fascinating issue. I’m really honored to be asked to discuss this issue. It was actually fun to listen to this argument and research it. So thank you, all of you, who tuned in to listen to us as well.
Donald A. Daugherty: Yeah. We appreciate it. And I think our contact information should be available on the world wide web or the FedSoc website, so please feel free to track us down if you have any questions about this or going forward, want to talk further. Does that work, Guy? Are we good?
Guy DeSanctis: Yeah. [Inaudible 0:51:48] On behalf of The Federalist Society, I want to thank our experts for the benefit of their valuable time and expertise today. And I want to thank our audience for joining and participating. We also welcome listener feedback by email at [email protected] As always, keep an eye on our website and your emails for announcements about upcoming Teleforum calls and virtual events. Thank you all for joining us today. We are adjourned.
Dean Reuter: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.