Legal Library

Montana Chamber of Commerce v. Argenbright


In 1996, Montana voters approved I-125, an initiative that prohibits for-profit corporations from using general treasury funds on ballot initiative campaigns in Montana. Spending by political action committees funded by contributions from corporate officers, shareholders and employees is still permitted under I-125. When the Montana Chamber of Commerce and other corporate plaintiffs filed a First Amendment challenge seeking to overturn I-125, the initiative's proponents, including Montana chapters of PIRG and Common Cause, intervened to defend I-125's constitutionality. After the case was set for trial, the defendant-intervenors and their lead counsel, Jonathan Motl, asked NVRI to enter the case to handle any appellate proceedings, and to assist in presenting expert testimony at the trial.

The federal district court's February 1998 opinion denying the plaintiff's motion for summary judgment, and setting the case for trial, had employed a highly favorable analysis which recognized the Supreme Court's 1990 decision in Austin v. Michigan Chamber of Commerce as strong authority for the constitutionality of regulating corporate expenditures. In Austin, the Supreme Court upheld a Michigan statute forbidding corporations from making independent expenditures on behalf of candidates, except through PAC funds raised from individual officers, employees or shareholders.

The summary judgment decision framed the issue for trial as follows:

"whether on one or more occasions a Montana ballot initiative campaign has been so dominated by corporate money as to overwhelm opposing citizen voices, to give the appearance of corruption, to cause a distortion of Montana's political system, or to undermine citizen confidence in the ballot initiative process."

At trial, the defendant-intervenors presented comprehensive evidence that corporate spending on Montana ballot initiatives had, on many occasions, brought about precisely the consequences listed in the federal district court's opinion. Despite the evidence, the district court, at the close of the trial, struck down the new law as an infringement of corporations' First Amendment rights. The court cited two primary reasons: (1) the defenders of I-125 had not demonstrated that money was the only factor affecting the outcome of ballot initiatives in Montana, and (2) voter turnout in Montana is generally higher than the average turnout in the United States, indicating that the political system in Montana is healthy.

Of course, if reform proponents are required to demonstrate that money is the only factor affecting election outcomes, no reform effort could ever be sustained; such a standard is simply impossible to meet and does not exist in the related case law. As to voter turnout, the court appeared to have ignored the fact that turnout in Montana, while high in comparison with other states, has been dropping steadily. The evidence also included more direct indicia of the impact of corporate spending on citizens' confidence in the integrity of the political process, including a public opinion research study by John Deardourff and Celinda Lake demonstrating that Montana voters by overwhelming majorities view corporate spending in initiative campaigns as a major source of corruption of the electoral process.

The Supreme Court's ruling in Austin never required that corporate independent expenditures be the sole factor in determining candidate elections, as the federal district court in Montana now says is required as proof of corruption. Rather, Austin simply found that there was a compelling state interest in banning corporate spending on independent expenditures because of the "corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public's support for the corporations' political ideas."

NVRI assumed full responsibility for handling the appeal to the U.S. Court of Appeals for the Ninth Circuit. On September 26, 2000, in a divided 2-1 ruling, the Ninth Circuit panel ruled that I-125 is unconstitutional on First Amendment grounds. Montana Chamber of Commerce v. Argenbright, 226 F.3d 1049 (9th Cir. 2000). Over a cogent dissent by Circuit Judge Michael Daly Hawkins, the majority found that the question of the constitutionality of I-125 was controlled by First National Bank of Boston v. Bellotti, a 1978 U.S. Supreme Court ruling which struck down a Massachusetts law barring all corporate spending in ballot initiative campaigns, even spending by a corporation's political action committee. Montana's I-125, by contrast, applies only to a corporation's general treasury funds, as did the law at issue in Austin, a ruling which the Supreme Court issued twelve years after Bellotti.

Judge Hawkins' dissenting opinion pointed out the majority's failure to take proper account of the Supreme Court's 1990 Austin decision, and concluded that I-125 "is justified by Montana's asserted interest in eliminating what its people have determined to be distorting effects of corporate wealth on the electoral process." In light of that dissent and the importance of the issue, the Institute filed a petition for writ of certiorari seeking review by the United States Supreme Court in May 2001. The State of Montana, represented by the state attorney general's office, joined us in seeking Supreme Court review. Those petitions were denied on October 1, 2001. Despite this setback for Montana's I-125, Judge Hawkins' dissent demonstrates that there are strong legal arguments for the constitutionality of limits on corporate general treasury spending on ballot initiatives which may support future efforts by reformers in states outside of the Ninth Circuit.