In Western States, Montana Sets Standard for Barring Corporate Contributions in State Elections

Last month, in a 2-1 decision, the U.S. Court of Appeals for the Ninth Circuit upheld Montana’s statutory bar against corporate contributions to state candidate election campaigns in Lair v. Motl. Lair’s holding is important for corporations that were hoping to contribute to state candidate campaigns in Montana’s elections. Notably, it also rejects precedent set forth in the U.S. Supreme Court’s 2010 decision in Citizens United v. FEC. The circuit court effectively maintains Montana’s historical contribution limitations rooted in the state’s Corrupt Practices Act of 1912. Corporations will need to rely on other means to support their preferred state candidates’ campaigns.

The Montana statute at issue (§ MCA 13-35-227) bars corporations or unions from both direct and indirect (“through an intermediary”) contributions to candidate campaigns. The statute is silent on lobbying activity directed at other ballot provisions. Although violations plateau at $500 (or “three times the amount of the unlawful contributions or expenditures, whichever is greater,” § MCA 13-37-128 ), the bar is surprisingly uncompromising. The Montana legislature effectively bars corporate contributions, making a strong statement against even the possibility of quid pro quo corruption.

The state’s aversion to corporate campaign contributions is not an anomaly within the circuit court's jurisdiction. Both Alaska and Arizona bar corporate contributions to candidates. (See Alaska Stat. § 15.13.074(f); Ariz. Rev. Stat. § 16-916). Washington also bars contributions from corporations that do not conduct business in the state. (See Wash. Rev. Code § 42.17A.405(12)). At the opposite end of the spectrum, Oregon has an unlimited cap on corporate contributions. Court-watchers and corporations alike will have to wait and see how states in the ninth circuit court applies Lair moving forward.

Why Are Corporations Barred from Contributing?

The ninth circuit found that the “risk of actual or perceived quid pro quo corruption” justified the statutory limitations on campaign contributions. According to the court, quid pro quo corruption is

‘a direct exchange of an official act for money’ or ‘dollars for political favors’ and the ‘appearance’ of quid pro quo corruption as ‘public awareness of the opportunities for abuse inherent in a regime of large individual financial contributions to particular candidates.’

Here, the quid pro quo analysis is composed of two elements. First, there must be an exchange. During litigation, the state of Montana brought forth a “burn after reading” letter evidencing an exchange of campaign contributions in exchange for political favors. Second, there must be an awareness of a regime whereby opportunities for bribery and other forms of corruption exist. Cognizant of this reality, the Montana legislature put an absolute bar on corporate contributions in order to prevent such a regime from forming.

The ninth circuit upheld the legislative intent by finding that Montana has an “important state interest” in setting contribution limits due to the risk of actual or perceived quid pro quo corruption. Interestingly, the “burn after reading” letter originated before the U.S. Supreme Court’s holding in Citizens United.

Other Ways of Contributing

Montana’s statutory law not only bars corporate contributions, but also bars candidates from receiving indirect contributions received through a corporation’s intermediaries (§ MCA 13-35-227(1)). However, subsection 3 provides for a “political committee that is not a corporation or union to establish a fund” for contributing to candidates (see also § MCA 13-1-101(31)(a)-(d) (defining “political committees”). Such a fund must consist of funds that have not been received by non-corporate and nonunion sources, such as individuals who may happen to be associated with the corporation.

Although the Montana statute remains highly restrictive, the ability to create a political committee allows a corporation to maintain a contributory mechanism, albeit indirect, as long as the committee’s fund is fully separated from the corporation’s own funding streams.

Additionally, the ninth circuit noted that individuals and corporations are not statutorily prohibited from

affiliating with their chosen candidates in ways other than direct contributions, such as donating money to a candidate’s political party, volunteering [their] services, sending direct mail to their supporters, or taking out independent newspaper, radio, or television ads to convey their support.

The court will have to determine whether such support constitutes a “contribution” under Montana's definition of “contribution” on another day (defined in § MCA 13-1-101(9)(a)(i)-(iv)). In the interim, corporations will have to forego donating, whether directly or indirectly, to state candidate election campaigns.