One for this account, one for the other.

Photographer: Scott Eells/Bloomberg

A Loss for Citizens United. And for Democrats.

Noah Feldman is a Bloomberg View columnist. He is a professor of constitutional and international law at Harvard University and was a clerk to U.S. Supreme Court Justice David Souter. His books include “Cool War: The Future of Global Competition” and “Divided by God: America’s Church-State Problem -- and What We Should Do About It.”
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A federal appeals court this week upheld an Alabama law that bans political action committees from making donations to other political action committees. That should be good news for Democrats, who generally oppose the Citizens United decision and the flood of political spending it released. But the twist is that the law was devised to interfere with the work of the Alabama Democratic Conference, and it was the losing party in the lawsuit.

The ADC was founded more than 50 years ago with the aim of organizing black voters and supporting black candidates. It’s the state’s largest grass-roots political organization, raising money and spending it on behalf of Democrats throughout the state. The ADC has traditionally gotten donations from both private individuals and other political action committees.

In 2010, the Republican-dominated Alabama Legislature passed the Fair Campaign Practices Act, a highly unusual form of campaign-finance regulation. The law generally doesn’t impose limits on the amount of money an individual or PAC can donate to a candidate for office, instead relying on disclosures.

The 2010 law also enacted a provision that was plainly aimed at the ADC. The “PAC-to-PAC transfer ban” makes it “unlawful for any political action committee … to make a contribution, expenditure, or any other transfer of funds to any other political action committee.”

The transfer ban does have an exception. A PAC may contribute to another PAC if the second one is set up by a candidate for office to make expenditures only on behalf of that particular candidate. In effect, that allows PACs to continue making contributions to individual candidates. Without the exception, the ban would almost certainly have been unconstitutional, interfering with one of the core functions of PACs.

The ADC does sometimes make contributions directly to candidates’ PACS, but it also raises a good chunk of its money from other PACs. As a result, the Alabama law cuts off a major source of its funding.

The ADC tried to get around the restriction by creating separate bank accounts. One, which would contribute money to candidates, wouldn’t take contributions from other PACs. The second would make only “independent expenditures” -- that is, the advocacy not coordinated with particular campaigns that was specifically protected in the Citizens United case. This bank account would continue to take money from other PACs, which the ADC hoped wouldn’t be seen as a violation of the PAC-to-PAC transfer ban.

The state wasn’t buying it, and told the ADC that the separate bank accounts still violate the law. The ADC went to court to challenge it, and the basis of its argument was none other than Citizens United. The group reasoned that if the state could not regulate independent expenditures of PACs, it also couldn’t regulate contributions to PACs that were used solely for independent expenditures -- like the money in the separate bank account. A Democratic organization was thus suing the state using the hated Citizens United decision to challenge the law passed by Republicans.

The Citizens United case famously -- and in my view wrongly -- held that as a matter of constitutional law, noncoordinated expenditures can never give rise to the appearance of corruption, and are therefore automatically constitutionally protected under the First Amendment.

The key question before the U.S. Court of Appeals for the 11th Circuit was therefore whether the ADC’s two-bank-accounts approach gives rise to the appearance of quid pro quo corruption.

Had the appeals court followed the spirit of the Citizens United decision, it should probably have struck down the law and allowed the ADC to use its separate bank accounts. The Citizens United case was all about constitutionalizing formal distinctions. In the real world, an “independent” PAC may be in the same building with a candidate’s campaign and be staffed by former campaign officials -- all the while remaining independent and therefore protected by the First Amendment. Assuming the ADC really segregated funds donated for distribution to particular candidates from those used on independent expenditures, it should have avoided the appearance of corruption at least as much as such “independent” PACs do.

Instead, the appeals court read the Citizens United decision in a more limited manner. It held that even after that case, it must look closely at a given practice to see whether it could give rise to the appearance of quid pro quo corruption. And it said the two banks accounts within the same organization could have that effect.

The result is a win for those who would like to limit the effects of Citizens United. It’s also a serious loss for the ADC.

By so ruling, the 11th Circuit joined two other circuits that have found that when the same organization maintains separate bank accounts, that’s not enough to avoid the possibility of the appearance of corruption. Notably, one other circuit, the 10th, has held to the contrary.

There is thus a deepening circuit split on the issue. The U.S. Supreme Court should take up the question, but only once it has nine members and can actually resolve it. Such a case would be a good opportunity for the court to lessen the effects of Citizens United -- or better yet, to reverse the disastrous precedent altogether.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Noah Feldman at nfeldman7@bloomberg.net

To contact the editor responsible for this story:
Stacey Shick at sshick@bloomberg.net