The Texas Supreme Court heard arguments today in part of Texas Democratic Party v. King Street Patriots, Inc. The Texas Election Code allows private parties to sue political opponents for alleged violations of campaign finance law, and the Texas Democratic Party and some of its candidates sued KSP in 2010 for allegedly acting as a “political committee” as defined in Texas law without registering with the Ethics Commission, and for making corporate political contributions, which are prohibited. (There is no allegation that actual money was transferred; the allegation is that KSP’s activities resulted in deemed in-kind contributions to certain candidates by training poll watchers, etc.).
I went to Austin to watch the argument. More to come on this case later, but I wanted to post an initial reaction to the argument. Among other things, because the plaintiffs are claiming KSP made an illegal corporate contribution, KSP brings a facial challenge to the Texas ban on corporate contributions (which applies to both nonprofits and for-profit corporations). The attorney for the Democratic Party focused his argument on convincing the Court that if the Texas corporate contribution ban is struck down, it will “open the floodgates” to anonymous contributions funneled to campaigns through sham corporations set up to serve exactly that purpose. This is misleading.
In fact, just like federal law, Texas law already bans undisclosed earmarking. In other words, it is illegal in Texas to give money to an intermediary (individual or organization) earmarked for a campaign, without disclosing the true source of the contribution (that is, without informing the campaign of the true source of the funds so the campaign can report the true source). TEC Rule 22.3 (effective since 1993) states that “[a] person may not knowingly make or authorize a political contribution or political expenditure in the name of or on behalf of another unless the person discloses the name and address of the person who is the true source of the contribution.” 1 Tex. Admin. Code 22.3.
The U.S. Supreme Court has already indicated that the government cannot point to a hypothetical horrible that is “already illegal under current campaign finance laws” to justify additional restrictions on First Amendment-protected contributions. McCutcheon v. FEC, 134 S. Ct. 1434, 1456 (2014). Notably, the hypothetical rejected by the McCutcheon Court relied on already-illegal earmarking, just as the hypothetical offered by the Texas Democratic Party attorney today. In McCutcheon, the government claimed the aggregate limits were necessary because, otherwise, a single person could write a huge check to a joint fundraiser, where each participant would then conspire to transfer its portion of the contribution to a pre-ordained ultimate recipient, which would then spend the money to support a single candidate. The Court correctly pointed out that “this speculation relies on illegal earmarking.” Id. at 1455.
There are many aspects of this case. But the Democratic Party clearly wants to scare the Texas Court into following this theme of anonymous corporate cash. It is a ruse that ignores current Texas law (although nobody cited this provision today). The Court would err if it were to take the bait, as McCutcheon instructs.