Legal Library

No. 98-36256

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

____________________________________

Montana Chamber of Commerce, et. al.

Plaintiffs-Appellees,

v.

Ed Argenbright, in his official capacity as Commissioner of Political Practices,

Defendant,

League of Women Voters of Montana, Montana Common Cause, MontPirg 2030 Fund and Citizens for I-125,

Defendant-Intervenor-Appellant.
____________________________________

Reply/Answer Brief of Defendant-Intervenor-Appellant, League of Women Voters of Montana, Montana Common Cause, MontPirg 2030 Fund and Citizens for I-125 (Challenging the District Court Ruling on I-125)
____________________________________

BRENDA WRIGHT
JOHN C. BONIFAZ
GREGORY LUKE
National Voting Rights Institute
294 Washington Street, Suite 713
Boston, Massachusetts 02108
(617) 368-9100

JONATHAN MOTL
Reynolds, Motl and Shewood, P.L.L.P.
401 Last Chance Gulch
Helena, Montana 59601
(406) 442-3261

ARGUMENT

I. MONTANA’S I-125 IS NARROWLY TAILORED TO SERVE COMPELLING STATE INTERESTS AND SHOULD BE UPHELD BY THIS COURT.

A. The Constitutionality of a Segregated Fund Requirement Is Not Dependent on a Showing of Quid Pro Quo Financial Corruption.

Plaintiffs whole-heartedly embrace the district court’s use of the wrong definition of corruption, arguing that I-125 should be struck down because "there is no evidence of corruption in the form of buying and selling votes or in tampering with election results." Combined Brief of Plaintiffs-Appellees Montana Chamber of Commerce, et al. (hereafter, "Chamber Brief") at 12; see also id. at 27: "First Amendment rights may be limited only where there is a showing of a compelling governmental interest to prevent quid pro quo corruption between a contributor and a candidate".

As already explained in Defendant-Intervenors’ principal brief, however, the Supreme Court has held that a showing of quid pro quo corruption is not necessary to support a requirement that corporations use segregated funds for political spending. Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990); Brief of Defendant-Intervenor-Appellants League of Women Voters of Montana, et al. ("Principal Brief") at 13-20. Instead, Austin expressly relied upon "a different type of corruption," which the Court defined as "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 corporation’s political ideas." 494 U.S. at 660.

In their effort to distinguish Austin, plaintiffs simply misread the key passage from the decision. Plaintiffs contend that the critical factor in Austin was that it addressed independent spending in candidate elections. See Chamber Brief at 31, quoting Austin, 494 U.S. at 659-660. The very passage they quote, however, states that Michigan has an interest supporting its segregated fund requirement "regardless of whether" the danger of quid pro quo corruption applicable to candidate elections is present:

Regardless of whether this danger of "financial quid pro quo" corruption may be sufficient to justify a restriction on independent expenditures, Michigan’s regulation aims at a different type of corruption in the political arena: 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 corporation’s political ideas.

Id. at 659-660 (emphasis added). It is futile, therefore, for plaintiffs to attempt to distinguish Austin by arguing that its holding depended on the potential for quid pro quo corruption in candidate elections.[1]

I-125’s segregated fund requirement for initiative elections serves the same state interests recognized as compelling in Austin. First, a segregated fund requirement helps assure that corporate spending in the electoral arena reflects individuals’ actual support for the corporation’s views, and not merely the sheer economic power of the resources in the corporate treasury. Principal Brief at 16-18. Second, a segregated fund requirement helps avoid the danger that the state-created advantages of the corporate form will provide corporations with an artificial advantage in presenting their views — an advantage not available to individuals and non-corporate organizations. Principal Brief at 18-20. There is nothing about ballot issue elections that requires corporations to enjoy state-created advantages in presenting their views, or to exploit funds that were never amassed for political purposes and that have little or no correlation to the public’s support for the corporation’s electoral goals. While free expression concerning ballot issues is a protected First Amendment right, so is free expression concerning candidates for elected office.[2] Neither of those freedoms, however, requires that corporations exploit the economic power they have accumulated through the state-created advantages of the corporate form, nor that they use funds obtained from shareholders or customers who may disagree with management’s political views. Cf. Abood v. Detroit Board of Education, 431 U.S. 209, 234-236 (1977) (public employees’ union may not use funds of unconsenting union members for political expenditures).

Plaintiffs also attempt to circumvent Austin by arguing that the concurring opinions of Justices Brennan and Stevens undermine Austin’s precedential value. Plaintiffs rely on passages in those concurrences which note differences between ballot issues and candidate elections as discussed in decisions such as First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978). Plaintiffs’ reliance on these concurrences is misplaced.

First, contrary to plaintiffs’ suggestion, Justices Brennan and Stevens did not merely concur in the judgment in Austin while filing separate opinions, but expressly joined Justice Marshall’s majority opinion for the Court. 494 U.S. at 653. Thus, Austin’s holding that interests other than quid pro quo corruption justify a ban on corporate general treasury spending is a majority holding of the Supreme Court.

Second, plaintiffs are reading too much into the concurring opinions, particularly that of Justice Stevens. The relevant passage in Justice Stevens’ brief concurrence states as follows:

In my opinion the distinction between individual expenditures and individual contributions that the Court identified in Buckley v. Valeo, 424 U.S. 1, 45-47 (1976), should have little, if any, weight in reviewing corporate participation in candidate elections. In that context, I believe the danger of either the fact, or the appearance, of quid pro quo relationships provides an adequate justification for state regulation of both expenditures and contributions. Moreover, as we recognized in First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978), there is a vast difference between lobbying and debating public issues on the one hand, and political campaigns for election to public office on the other.

494 U.S. at 678 (Stevens, J., concurring) (footnote omitted, emphasis added). As the passage demonstrates, the primary purpose of Justice Stevens’ concurrence in Austin is to emphasize his view that Buckley’s distinction between contributions and expenditures should have little importance to the outcome in Austin.[3] The concurrence thus emphasizes that the danger of quid pro quo corruption would be sufficient to uphold the Michigan expenditure limitation, just as it is sufficient to uphold a ban on contributions. To emphasize that the traditional anti-corruption interest would be sufficient, however, is a far cry from saying that it is the only interest that can support a requirement of using segregated funds — which is how plaintiffs attempt to read the passage. Had Justice Stevens held such a view, he clearly would not have joined the majority opinion which expressly relies upon a different interest. Further, the brief additional reference to Bellotti and the differences between ballot issue campaigns and candidate elections in Justice Stevens’ concurrence did not purport to be a holding that an Austin-style regulation would be unconstitutional as applied to ballot issue elections, and cannot fairly be read as such.

Plaintiffs’ argument boils down to the contention that the holding of Bellotti requires invalidation of I-125. But they wholly fail to address the critical difference between I-125 — which permits corporate spending in ballot measure campaigns so long as the corporation uses segregated funds raised from interested officers, shareholders and employees — and the statute at issue in Bellotti, which entirely banned corporate participation in particular ballot initiative campaigns. The Supreme Court’s majority decision in FEC v. Massachusetts Citizens for Life ("MCFL"), 479 U.S. 238 (1986), distinguished Bellotti for precisely this reason, noting that a segregated fund requirement "is of course distinguishable from the complete foreclosure of any opportunity for political speech that we invalidated in the state referendum context in [Bellotti]."[4] 479 U.S. at 259 n.12 (emphasis added). Accordingly, the key factor in determining the constitutionality of a restriction on corporate spending is whether the restriction leaves open an avenue of expression for the corporation, as does Montana’s I-125, or instead "completely foreclos[es]" any such opportunity. Id.; see also Austin, 494 U.S. at 660 (noting that Michigan’s statute "does not impose an absolute ban on all forms of corporate political spending but permits corporations to make independent political expenditures through separate segregated funds").

It is not surprising, then, that academic commentators are uniformly of the view that, after the Supreme Court’s decisions in Austin and MCFL, the older decision in Bellotti should not be read to bar a segregated fund requirement for corporate spending in ballot campaigns. See articles cited in Principal Brief at 11 & n.5.

The other decisions on which plaintiffs rely are similarly inapposite. Citizens Against Rent Control v. Berkeley, 454 U.S. 290 (1981), placed an absolute cap of $250 on the amount any person could contribute to political committees formed to support or oppose ballot initiatives. Montana’s I-125, by contrast, places no limit whatsoever on the amount that may be contributed to a ballot measure committee, but simply requires corporations to raise the funds for such contributions from officers, employees and shareholders who actually support the corporation’s electoral agenda.

I-125 is also completely compatible with the Supreme Court’s decision in Consolidated Edison Co. v. Public Service Commission, 447 U.S. 530 (1980), which struck down a regulation forbidding public utilities from placing mailing inserts on policy issues in customer bills. Under I-125, a company would be entirely free to send its customers (or the general public) an insert urging them to vote for or against a ballot measure, so long as the monies used for the communication came from the corporation’s segregated political fund.

In a similar vein, plaintiffs cite McIntyre v. Ohio Election Comm’n, 514 U.S. 334 (1995), and Buckley v. American Constitutional Law Foundation, ___ U.S. ___, 119 S. Ct. 636 (1999), for the proposition that ballot initiatives do not involve a risk of quid pro quo corruption. As already shown above and in defendant-intervenor’s principal brief, however, that is irrelevant, because Montana’s segregated fund requirement is designed to avoid the "different" type of corruption recognized in Austin and MCFL. Principal Brief at 7-20. Further, McIntyre and Buckley do not involve regulation of corporate spending, but of direct, one-on-one political communications by individuals, of which the Court has been particularly protective. See Buckley, 119 S. Ct. at 645-646 (noting Court’s concern for protecting individuals from potential harassment when engaging in one-on-one political communications); McIntyre, 514 U.S. at 353-354 (noting potential distinction between speech by individuals and speech by corporations). Indeed, I-125 is fully compatible with these decisions’ concern for the role of the individual in initiative campaigns, because it assures that the funds of individual shareholders will not be used by the corporation for political purposes without their consent.

B. Contrary To Plaintiffs’ Arguments, The Constitutionality Of I-125 Does Not Depend On Proof That Money Is The Sole Or Determining Factor In Ballot Elections, And The Record Here Is More Than Adequate To Sustain I-125.

Plaintiffs incorrectly contend that the applicable burden of proof to sustain I-125 is set forth in Bellotti, which held that Massachusetts’ ban on corporate spending in initiative campaigns might have been upheld on a record showing "that the relative voice of corporations has been overwhelming or even significant in influencing referenda in Massachusetts, or that there has been any threat to the confidence of the citizenry in government." 435 U.S. at 789-790. Although the evidence in this case is, in fact, more than sufficient to meet that burden, see Principal Brief at 46-51, Bellotti’s evidentiary standard is not applicable here. Bellotti sets forth the showing that would have been required to uphold a total ban on corporate spending such as that imposed by the Massachusetts statute. As explained in defendant-intervenors’ principal brief, the standard by which the less burdensome provision of I-125 should be judged is set forth in Austin, which focused on whether corporate spending presents "the potential for distortion" of the political marketplace. 494 U.S. at 661; see Principal Brief at 20-23 (describing distortion caused by corporate spending in Montana). Austin nowhere imposes the standard that the plaintiffs put forward and the district court embraced — namely, that spending must be the sole or most significant factor in initiative campaigns before a state may require corporations to use segregated funds.[5] CR 186 at 21 (district court opinion).

Defendant-intervenors have already described in detail the record evidence demonstrating how corporate spending in Montana ballot measure elections has distorted the political process, subverted the original purpose of the initiative as an outlet for citizen involvement when the legislature is unresponsive, discouraged citizens from participating in initiative campaigns, and undermined voters’ faith in the integrity of the initiative process. Principal Brief at 23-38. Notably, plaintiffs do not take issue with the figures on corporate spending set forth in defendant-intervenors’ brief. Although Austin requires only a showing that corporate spending presents a "potential for distorting the political process", 494 U.S. at 661, the record here goes much farther and demonstrates the actual distortion that has resulted from corporate spending in Montana elections.

Plaintiffs’ response consists of inherently contradictory assertions about the role of spending in Montana ballot measure elections. At some points, plaintiffs insist that spending has little importance in ballot measure campaigns, arguing that a well-thought-out campaign strategy with strong grass-roots support and a good get-out-the-vote effort "can compensate for lack of money in a campaign." Chamber Brief at 51. Elsewhere, however, plaintiffs argue just the opposite, contending (for example) that I-125’s ban on corporate general treasury spending left the Six Mill Levy campaign "underfunded" in 1998 and that consequently "campaign supporters were not able to deliver their important political message to the electorate as they had been able to do in prior years." Chamber Brief at 18. Indeed, the entire theme of plaintiff witnesses, such as Jill Andrews of the Montana Mining Association, was that lack of access to the funds available in corporate general treasuries allegedly prevented them from communicating their views on initiatives to the public. See Andrews Testimony, RTMMA 64 (ERMMA 5) (lamenting her inability to "build the best grass-roots coalition money could buy").

Plaintiffs’ confusion about which factual contention to defend — "money doesn’t matter" or "we can’t get along without the corporate checkbook" — stems from their misunderstanding of the controlling legal issue, which involves not the amount of money in ballot issue campaigns, but the source of the funds. The fundamental purpose of I-125 is to assure that, whatever the amount of money raised by either side of an initiative campaign, that money comes from individuals who support the electoral agenda of the organization spending the money. Its concomitant purpose is to assure that the state-created advantages of the corporate form, which allow corporations to amass enormous resources in the economic marketplace, are not used to gain an artificial advantage for the corporation in the electoral arena. Neither of plaintiffs’ contradictory arguments about the role of spending — the contention that it is unimportant and the contention that it is vital — provides a justification for corporations to exploit their state-created advantages, and funds never raised for political purposes, in presenting their views.

In the remainder of this section, defendant-intervenors will reply to various points that plaintiffs make about the factual record supporting the need for I-125 and, in particular, the role of corporate money in past initiative campaigns in Montana. In Part C, defendant-intervenors respond to plaintiffs’ incorrect argument that corporations will have no voice in initiative campaigns if they cannot spend corporate general treasury funds.

First, money does, of course, matter in initiative campaigns. Plaintiffs will never convince anyone that a $1.5 million opposition campaign funded exclusively by tobacco companies’ general treasuries and trade association funds really provided little advantage over the citizen-run I-115 campaign, with a total budget of less than $44,000. The record unmistakably shows that, when corporations have taken an interest in defeating a Montana initiative, and have used their economic leverage to vastly outspend the initiative’s proponents, they have overwhelmingly succeeded in blocking the initiative. See Principal Brief at 24-26. Indeed, an analysis of all initiative campaigns since 1982 in which two-thirds or more of the total spending was done on the "no" side (the side opposing enactment of the initiative) showed that such initiatives were defeated seven out of nine times. Ex. 742. The vast majority of the spending on these campaigns came from corporations and their allied trade associations.[6] As pointed out in defendant-intervenors’ opening brief, and as plaintiffs do not dispute, the facts in Montana closely track the findings of respected political scientists who have concluded that one-sided spending is highly influential in defeating ballot initiatives. See Principal Brief at 49-51.[7]

Plaintiffs’ efforts to explain the defeat of citizens’ initiatives such as I-115, the anti-tobacco initiative, only serve to underscore the enormous advantage enjoyed by corporations because of their economic clout. Plaintiffs chide Dr. Robert Shepard, who directed the proponents’ campaign, for "not hav[ing] any experience in political fundraising, campaign organization, or generally running a campaign." Chamber Brief at 55. That, of course, is correct; Dr. Shepard was not a highly paid political consultant, but a Helena general practitioner who took uncompensated time off from his practice to work on I-115 because he had observed for many years the devastation that tobacco caused in the lives of his patients. RT 513-520 (ER 37-44). The tobacco companies, by contrast, would never rely on a mere interested citizen to run their initiative campaign — not when the corporate checkbook can be used to hire a team of professionals. Indeed, the consulting fees paid to Jerome Anderson, the tobacco company’s professional campaign director, alone exceeded the entire budget available to the I-115 proponents for all of the costs of their campaign. RT 528 (ER 46). The use of corporate funds to suppress "fairness doctrine" advertising, Ex. 525 at 2-3, 14-1, and to assure that "[m]ost voters didn’t really know what I-115 was all about," Ex. 531, is revealed in the tobacco companies’ own campaign documents, as already discussed in defendant-intervenors’ Principal Brief. See Principal Brief at 27-29.

Plaintiffs also cite Tony Jewett’s testimony that the citizens’ campaign to enact I-122, the clean water initiative, was "a marvel of citizen participation" and perhaps the best-organized campaign he had ever witnessed. Chamber Brief at 56. All of that is true, but Mr. Jewett went on to point out that citizen participation simply could not overcome the millions in corporate money that "inundated the political system of Montana" in opposition to I-122. RT 643, Supp. ER 112. Similarly, plaintiffs cite Stanley Frasier’s testimony that the I-122 proponents had a voice during the campaign because of the tremendous organizing efforts of hundreds of volunteers. Chamber Brief at 57. Mr. Frasier, however, went on to explain that the disparity in resources available to the corporate side ultimately made the citizens’ voice meaningless. RT 689, ER 58.

Next, plaintiffs insist that the record is inadequate to support I-125 because voter turnout in Montana is "healthy." Chamber Br. at 40-45. Defendant-intervenors’ principal brief discusses in detail the factual record on this issue and explains the clear flaws underlying plaintiffs’ assertions about voter turnout and the "health" of the political system. Principal Brief at 33-38. Defendant-intervenors add only one point here, to respond to plaintiffs’ self-serving criticisms of the survey research introduced by defendant-intervenors. That survey research, conducted by two nationally known and respected polling firms, confirmed that corporate spending on initiative campaigns has been harmful to Montanans’ confidence in the integrity of the political process. Ex. 580A, 580B. For example, two-thirds of voters believed that such spending "undermines voters’ sense of faith in the honesty and integrity of initiative campaigns." Ex. 580 B at 6, Question 23. Plaintiffs chose not to conduct their own survey to explore voter attitudes toward corporate spending in initiative campaigns, so their only recourse is to criticize the survey research that does exist.

Plaintiffs’ elaborate efforts to explain away the results of the survey should be disregarded. Plaintiffs do not challenge the sampling methods or interview methods employed for the survey, but merely speculate that the results would be different if questions were worded differently or had been asked in a different order, or if different questions had been asked. As plaintiffs’ witness conceded on cross-examination, however, the best way for plaintiffs to test their hypothesis would have been to conduct their own survey using the wording and order they believed preferable. RT 795-796 (Reply ER 90-91). Plaintiffs certainly had more than adequate resources and opportunity to conduct such a survey. As it is relatively easy for one expert to criticize a survey done by another, courts give little weight to expert rebuttal unaccompanied by counter-surveys. Gucci v. Gucci Shops, Inc, 688 F. Supp. 916, 926 (S.D.N.Y. 1988); National Football League Properties, Inc. v. Wichita Falls Sportswear, Inc., 532 F. Supp. 651, 657-58 (W.D. Wash. 1982).

Equally unavailing is plaintiffs’ contention that poll results should be disregarded because were conducted for purposes of litigation. To the contrary, it is commonplace for surveys to be commissioned because they may shed light on an issue being litigated in court. See Keith v. Volpe, 858 F.2d 467, 480-481 (9th Cir. 1988), cert. denied, 493 U.S. 813 (1989) (upholding admission of survey conducted during litigation); Anti-Monopoly Inc. v. General Mills Fun Group, Inc., 684 F.2d 1316, 1324-1325 (9th Cir. 1982), cert. denied, 459 U.S. 1227 (1983) (same). Plaintiffs’ arguments on this score are particularly suspect given that their own expert, Robert Moore, who conducted no research of his own, was hired by plaintiffs for the sole purpose of providing criticisms of the Lake-Deardourff survey.

In any event, John Deardourff, who conducted the poll in conjunction with Celinda Lake and her firm, fully responded to and rebutted the objections raised by plaintiffs. Mr. Deardourff has a national reputation for expert and reliable survey research, extending back over 35 years from his days working with Louis Harris and George Gallup and extending through dozens of campaigns on behalf of Republican candidates for governor, senator and other political offices throughout the country, including his work as the chief pollster for the Gerald Ford presidential campaign. RT 712-717, Reply ER 7 - 12. His background and reputation as a pollster are unimpeachable.[8]

Finally, plaintiffs are flatly wrong in contending that the district court must have deemed the survey unreliable because it is not mentioned in the district court’s opinion. Chamber Br. at 62. To the contrary, the district court’s opinion noted that Mr. Deardourff conducted a survey "which indicates that Montana citizens are displeased generally because of their perception of excessive corporate spending during ballot issue campaigns." CR 186 at 18. The district court also noted later that "[t]he popular sentiment among Montana voters may be that there is too much corporate money influencing ballot issue campaigns and also that it is exceedingly difficult for ordinary citizens to participate successfully in some ballot issue campaigns." Id. at 27.[9] The district court at no point mentioned or embraced any of the criticisms of the survey voiced by plaintiffs and their expert.

In sum, the record in this case concerning corporate spending in Montana initiative campaigns is more than sufficient to satisfy any burden properly imposed on defendant and defendant-intervenors. The detailed record here is far more extensive than that underlying the Supreme Court’s decision in Austin,[10] and amply demonstrates not only the potential but actual distortion of the political process caused by unfair deployment of the corporate form.

C. I-125 Does Not Prevent Corporations from Expressing their Views.

Plaintiffs attack a straw man by attributing to defendants the view that corporate speech on ballot issues should be "silenced" because such speech "has been effective in persuading the electorate." Chamber Brief at 35. I-125 does not "silence" anyone. Corporations are free to spend unlimited amounts raised from shareholders, officers, and employees, without facing any cap on either the amounts they can spend on ballot measure activities out of the segregated funds they have raised. For decades, corporations have faced this same requirement of using segregated funds to contribute to federal elections, see MCFL, 479 U.S. at 256-259, and no one could argue with a straight face that corporations lack sufficient influence in federal elections. Indeed, corporate PAC spending plays a prominent role in federal campaigns,[11] and there is nothing preventing corporations from using PAC expenditures to communicate the corporation’s views in ballot measure elections as well. If such communications are persuasive to the electorate, I-125 has nothing more to say on the matter.

To the extent a corporation is unsuccessful in raising segregated funds for ballot initiative spending, that would simply reflect the decision by officers, shareholders or employees that they do not wish to support the corporation’s electoral agenda. Indeed, groups such as the League of Women Voters — or the Massachusetts Right to Life group that was exempted from the segregated fund requirement in FEC v. MCFL — have no shareholders at all, and have funds available for political activity only to the extent that they can attract members who support the organization’s political goals. Through I-125, Montana has merely taken fully permissible steps to ensure that the corporation’s state-created advantages in amassing economic wealth do not create an artificial advantage for the corporation in the electoral arena, and that the corporation’s constituents actually support the corporation’s electoral agenda.

In any event, the factual record here squarely refutes any contention that corporations have been "silenced" by I-125. Defendant-intervenors’ Principal Brief, at pp. 38-46, contains a detailed discussion of the facts concerning corporations’ continued ability to participate in initiative campaigns under I-125. That discussion, which will not be repeated here, shows that plaintiffs’ witnesses are crying wolf; most of them simply failed to make any effort to use the options available under I-125. Remarkably, those few corporations that did make such an effort were successful in raising segregated funds for the 1998 elections comparable to the funds they had spent previously in initiative campaigns — even though the 1998 elections were the very first held under the provisions of I-125. See Principal Brief at 43-44. Plaintiffs simply ignore the facts in arguing otherwise. See also Brief of Defendant Cross-Appellant Secretary of State Mike Cooney at 12-16 (detailing how plaintiffs either failed to take advantage of I-125’s options or were simply unaffected by I-125).

As just one example of plaintiffs’ incorrect assertions, plaintiffs state that "[A]s a direct result of Initiative 125, MPC [Montana Power Company] was unable to support the Six Mill Levy by contributing to the 1998 campaign." Chamber Brief at 18. In fact, the director of the 1998 Six Mill Levy campaign, Senator Bob Brown, testified that funds for the 1998 Six Mill Levy campaign had been raised successfully from MPC officers.[12] RT 39 (ER 6). Further, MPC’s chief executive, Mr. Gannon, acknowledged that MPC’s political action committee had funds available at the time of trial that could have been contributed to the Six Mill Levy. Mr. Gannon was unable to explain why the MPC PAC had not made a contribution. RT 87; Reply ER 4. Plaintiffs’ other broad-brush assertions about their inability to participate in initiative campaigns through the options available under I-125 are equally erroneous. Principal Brief at 38-46.

Because the segregated fund requirement of I-125 places no limit whatsoever on the amount that a corporation can raise and spend from funds provided by individual shareholders, employees and officers who actually support the corporation’s electoral goals, there is no basis for plaintiffs to complain that important speech is being "silenced." Instead, what plaintiffs really are demanding is not the right to have the corporate viewpoint represented in ballot elections, but the right to present the corporate viewpoint with funds amassed through the state-created advantages of the corporate form, without regard to the political views of the shareholders or customers whose funds created the corporation’s wealth. The denial of that non-existent "right" does not violate the First Amendment.

D. I-125’s Focus on Corporate General Treasury Spending in Initiative Campaigns Does Not Render it Unlawfully Content-Based.

Plaintiffs argue that Montana’s I-125 must be struck down as a content-based regulation because it distinguishes between political speech and other types of corporate speech, and because it does not apply to expenditures by certain non-profit corporations. As to the first point, all campaign regulations, by definition, single out political activity for regulation, but that alone does not make them unlawfully content-based. Laws limiting individual contributions to political campaigns, for example, do not bar contributions to charities, but contribution limits are of course constitutional. See Buckley v. Valeo, 424 U.S. at 23-29 (upholding contribution limits); see also Burson v. Freeman, 504 U.S. 191, 197 (1992) (treating restriction on electioneering at polling place as content-based but holding that restriction served compelling state interests). Indeed, the Court in Austin acknowledged that Michigan’s statute placed burdens on expressive activity, 494 U.S. at 658, but upheld it because it served compelling state interests in protecting the speech rights of shareholders and consumers and avoiding the misuse of state-created advantages in the political arena — just as does Montana’s I-125.

As to the second point, the fact that I-125 permits a defined class of non-profit corporations to use general treasury funds in ballot measure elections does not create an invalid content-based distinction. Rather, I-125’s exemption for certain non-profit corporations was included solely to comply with the Supreme Court’s decision in FEC v. MCFL. That decision held that non-profit corporations must be permitted to use general treasury funds for electoral purposes if the corporation was formed for the purpose of promoting political ideas, had no shareholders, and did not derive funds from business corporations. 479 U.S. at 264; see Principal Brief at 10-11. This is precisely the exemption included in I-125. Mont. Code Ann. § 13-35-227(4)((a)-(d). Clearly, plaintiffs cannot cite I-125’s compliance with Supreme Court authority as a basis for finding I-125 to be unlawfully content-based. See also Principal Brief at 40-41.

II. THE I-137 PLAINTIFFS ARE NOT ENTITLED TO HAVE THE RESULTS OF THE I-137 ELECTIONS SET ASIDE.

Plaintiffs in the MMA case have cross-appealed on the issue of whether the district court was required to enjoin the election concerning Initiative 137 ("I-137"), or to set aside the election results after I-137 was enacted. Of course, the cross-appeal point is entirely moot if the district court erred in striking down I-125, as defendant-intervenors have argued above and in their Principal Brief. Even assuming that plaintiffs could establish the unconstitutionality of I-125, however, the MMA plaintiffs were not entitled to an injunction halting the I-137 election and are not entitled to have the results of that election set aside.

At the outset, the MMA plaintiffs failed to identify the standard of review applicable to their cross appeal. The standard of review here is whether the district court abused its discretion in denying injunctive relief. Amwest Mortgage Corp. v. Grady, 925 F.2d 1162, 1163 (9th Cir. 1991). Clearly, the district court did not abuse its discretion in denying plaintiffs the extraordinary relief of setting aside the results of an election. That is true for at least two reasons.

First, setting aside an election is a "drastic if not staggering remedy" that is entirely inappropriate here. Soules v. Kauaians for Nukolii Campaign Comm., 849 F.2d 1176, 1180 (9th Cir. 1987), quoting Bell v. Southwell, 376 F.2d 659, 662 (5th Cir. 1967). See also Cook v. Luckett, 735 F.2d 912, 921-922 (5th Cir. 1984) ("[O]ur decisions reveal a strong reluctance to undertake the ‘drastic, if not staggering’ remedy of voiding a local election") (citations omitted). Election results should not be set aside and special elections should not be imposed absent "serious voting violations or aggravating factors, such as racial discrimination or fraudulent conduct. . . ." Cook, 735 F.2d at 922. Accord, Saxon v. Fielding, 614 F.2d 78, 80 (5th Cir. 1980) (indicating that special elections are not appropriate "in the absence of aggravating factors such as denying the right of citizens to vote for reasons of race . . . fraudulent interference with a free election by stuffing of the ballot box,. . . or other unlawful conduct which interferes with the individual’s right to vote") (quotation omitted).

None of the unusual factors that are necessary to justify the drastic result of a special election are present here. In the few cases cited by plaintiffs that granted special election relief, a class of voters or the entire electorate had been entirely prevented from voting or from having their votes counted in an election. See Duncan v. Poythress, 657 F.2d 691 (5th Cir. 1981) (entire electorate was disfranchised when an election required by state law was not held; therefore, state officials should have called special election to fill vacancy on state supreme court); Griffin v. Burns, 570 F.2d 1065 (1st Cir. 1978) (ordering new election because almost ten percent of the qualified electorate had been disfranchised by state officials’ refusal to count absentee ballots).

Here, by contrast, there is no allegation that any Montana voter was prevented from voting on I-137, and there are no special circumstances such as racial discrimination that would overcome the usual presumption against setting aside election results. Further, the mining companies that were interested in I-137 were entitled to use segregated funds to communicate their views to the electorate throughout the entire campaign period, and were even entitled to use their general treasury funds during the last two weeks leading up to the election. Plaintiffs merely argue that they would have liked to spend more money in communicating their views on I-137 to the electorate than they were able to raise from their shareholders, officers and employees under I-125. That does not amount to the kind of extraordinary showing needed to justify the remedy they seek.

Second, the I-137 plaintiffs’ delay in seeking pre-election relief was alone sufficient to warrant denial of their request for an injunction and their subsequent request to set aside the election results. I-125 was enacted in November 1996. Montana newspapers reported in April 1998 that a proposed initiative to ban cyanide heap leach open-pit mining had been submitted to the State of Montana for review. See Montana Mining Assoc. Inc. et al. v. Mark Siminich, No. 98-48-H-CCL, Slip Opinion at 12 (D. Mont March 19, 1999) (attached as Addendum to Brief Amici Curiae of Montana Environmental Information Center). The form of the initiative was approved on May 18, 1998, and proponents immediately began circulating signature petitions. None of this was a secret from the I-137 plaintiffs. Moreover, the initiative qualified for the ballot on July 16, 1998. Yet the I-137 plaintiffs waited until September 1, 1998 — just eight weeks before the election — to seek injunctive relief against I-125. This is not the behavior of parties who honestly believe that the survival of their companies is at stake because of I-125.

Given these facts, the district court certainly did not abuse its discretion in denying relief based on plaintiffs’ lack of diligence. McNeil v. Springfield Park Dist., 656 F. Supp. 1200, 1201-03 (C.D. Ill. 1987) (finding inexcusable delay when plaintiffs did not seek preliminary injunction until after candidate nominating petitions had been filed); Knox v. Milwaukee County Board of Elections Comm’rs, 581 F. Supp. 399, 404 (E.D. Wisc. 1984) (denying request for injunctive relief made seven weeks prior to primary election); Barthelmes v. Morris, 342 F. Supp. 153, 160-61 (D. Md. 1972) (denying relief where motion was made only eight weeks prior to election).

CONCLUSION

On defendant-intervenors’ appeal, the district court’s judgment striking down I-125 as unconstitutional should be reversed. On the I-137 plaintiffs’ cross-appeal, the district court’s judgment refusing to grant injunctive relief and refusing to set aside the results of the I-137 election should be affirmed.

Respectfully submitted,

/S/BRENDA WRIGHT
John C. Bonifaz
Gregory Luke
National Voting Rights Institute
294 Washington Street, Suite 713
Boston, Massachusetts 02108
(617) 368-9100

Jonathan Motl
Reynolds, Motl and Shewood, P.L.L.P.
401 Last Chance Gulch
Helena, Montana 59601
(406) 442-3261

Counsel for Defendant-Intervenor-Appellants

Footnotes

[1] The amicus brief of the Montana ACLU makes little pretense that Austin can successfully be distinguished, relying instead upon Justice Scalia's dissent in Austin to argue that I-125 should be struck down. See Brief of Amicus Curiae ACLU of Montana at 7, 9. Obviously, this Court should follow the majority opinion in Austin.

[2] Each of plaintiffs' assertions about the importance of free expression in the ballot initiative process could be matched by quotations from Supreme Court decisions on the importance of free expression in making independent expenditures, but the Court nevertheless upheld a segregated fund requirement for independent expenditures. See, e.g. Austin, 494 U.S. at 657 (independent campaign expenditures "constitute political expression at the core of our electoral process and of the First Amendment freedoms" (citations and internal quotations omitted)); Buckley v. Valeo, 424 U.S. 1, 48 (1976) ("Advocacy of the election or defeat of candidates for federal office is no less entitled to protection under the First Amendment than the discussion of political policy generally or advocacy of the passage or defeat of legislation").

[3] Justice Stevens also took pains in Colorado Republican Federal Campaign Committee v. FEC, 518 U.S. 604 (1996), to suggest that, contrary to Buckley, both expenditures and contributions can be regulated. 518 U.S. at 649 (Stevens, J., joined by Ginsburg, J., dissenting).

[4] Justice Brennan's concurrence in Austin quotes this passage from MCFL with approval, thus recognizing the important distinction between the complete ban on corporate speech at issue in Bellotti and the much more limited regulation embodied in a segregated fund requirement. 494 U.S. at 670 n.1 (Brennan, J., concurring). His concurrence also emphasizes the need to protect dissenting shareholders whose speech is coerced by political spending from corporate treasuries. Plaintiffs thus vastly overstate the case in saying that Justice Brennan "specifically noted that the result would have been different" had the Court been addressing a segregated fund requirement for ballot elections. Chamber Br. at 31. At best, Justice Brennan's concurrence makes conflicting suggestions, and certainly contains no analysis of why the interests recognized in Austin would not be equally applicable to corporate spending on ballot measures.

[5] Indeed, that is not even the standard in Bellotti, which suggested that even a total ban on corporate spending might be upheld upon proof that the "relative voice" of corporations has been "overwhelming or . . . significant" in influencing referenda in Massachusetts. 435 U.S. at 790. Thus, Bellotti focuses on the "relative voice" of corporations compared to other speakers, not on whether spending is the sole explanation for initiative outcomes.

[6] For example, of the more than $548,000 spent in opposition to I-113, the recycling initiative, just two contributions came from individual citizens. Ex. 801, I-113 Tab. In the I-122 clean water campaign, opposition contributions of $350,000 or more by just three corporations - Atlantic Richfield, Golden Sunlight Mine, and Pegasus Gold Corp. - far exceeded all the contributions of hundreds of individual donors who supported I-122. Ex. 801, I-122 Tab. Even more remarkably, not one dime of the $1.5 million spent in opposition to I-115 came from an individual Montana citizen. Ex. 801, I-115 Tab.

[7] Plaintiffs attempt to surmount this evidence through a transparent ploy. They lump together spending on all initiatives - whether in support of or in opposition to the initiative, and whether one side outspent the other by $100 or $1 million, and argue that no pattern emerges of victory for the side that spent more. Chamber Brief at 46-47. Obviously, in campaigns where neither side significantly outspends the other, it is highly unlikely that spending would emerge as a determinative factor. See Adam Winkler, Beyond Bellotti, 32 Loy. L.A. L. Rev. 133, 177-178 (1998) ("Presumably any test of corporate dominance must separate out initiative campaigns in which business corporations make a concerted effort to sway the voters from those in which corporate participation is absent or minor. It would not make sense for judges to look at the extent of the corporate speech in all the initiative campaigns in a given state if corporations only involve themselves in some campaigns.") Similarly, Professors David Magleby and Thomas Cronin - acknowledged by plaintiffs' experts to be the leading authorities on the issue - have explained the importance of analyzing separately those initiatives in which one-sided spending occurred on the "no" side from those in which the "yes" side had better funding. Principal Brief at 49-51. The data in Montana fit precisely the pattern found by Magleby and Cronin, in which one-sided spending is overwhelmingly effective in assuring the defeat of an initiative. Id.

[8] The full text of Mr. Deardourff's testimony, that of plaintiff's expert, and Mr. Deardourff's rebuttal are included in the Further Excerpts of Record for Reply Brief filed herewith.

[9] The district court believed that Montanans' concern over the integrity of the initiative process was irrelevant because the corporation's First Amendment rights automatically trump such concerns. CR 186 at 27. To the contrary, states have a compelling interest in assuring that voters maintain confidence in the integrity of the states' political processes. Austin, 494 U.S. at 658; Buckley, 424 U.S. at 27.

[10] See also Florida Bar Assoc. v. Went For It, Inc., 515 U.S. 618, 628 (1995):

[W]e do not read our case law to require that empirical data come to us accompanied by a surfeit of background information. Indeed, in other First Amendment contexts, we have permitted litigants to justify speech restrictions by reference to studies and anecdotes pertaining to different locales altogether . . . or even, in a case applying strict scrutiny, to justify regulations based solely on history, consensus, and "simple common sense," Burson v. Freeman, 504 U.S. 191 (1992).

[11] See Larry Makinson, Center for Responsive Politics, The Price of Admission: Campaign Spending in the 1992 Elections (1993) at 15 (documenting dominance of corporate PAC spending over labor and ideological PAC spending).

[12] This Court can take judicial notice that the Six Mill Levy passed in the 1998 election.