In ‘Hillary: The Movie’ case, Supreme Court considers major shift in election law

President Theodore Roosevelt campaigned as a trust-busting reformer, but was embarrassed by revelations that his 1904 campaign had received secret contributions from New York insurance companies. At his urging, Congress passed a law to keep corporate money out of political races.

Now, that century-old ban stands in danger of being overturned by the Supreme Court’s conservative majority, on the basis of an equally venerable principle: free speech in politics.

The justices signaled the prospect of a profound shift in election law by scheduling an unusual special argument for Sept. 9. At issue will be whether to overturn two rulings that limit corporate spending in elections.

In the first, the high court in 1990 upheld a state law barring corporations from using their “immense aggregations of wealth” to buy ads to oppose or endorse a candidate. Justices Anthony M. Kennedy and Antonin Scalia dissented.

The second was the court’s 2003 decision upholding the McCain-Feingold Act by a 5-4 vote, including its ban on corporate or union-funded broadcast ads that target a candidate in the month before an election. Justices Scalia, Kennedy and Clarence Thomas dissented, along with then-Chief Justice William H. Rehnquist.

The two precedents are endangered by a new case growing out of last year’s presidential election and involving “Hillary: The Movie.”

Between the earlier rulings and the latest case, however, the makeup of the court has changed. Three years ago, the majority flipped when Justice Sandra Day O’Connor retired and Justice Samuel A. Alito Jr. replaced her. With O’Connor, a narrow majority supported the campaign finance laws. Now, five of the nine justices are skeptics and have said government restrictions on political spending violate the 1st Amendment.

Advocates of campaign funding laws are sounding the alarm. Striking down corporate spending limits would be “a radical step” that would change the character of elections, said Fred Wertheimer, president of the nonprofit Democracy 21.

“Banks like Citicorp, investment firms like Merrill Lynch and insurance companies like AIG would be free to spend hundreds of millions of dollars of their corporate wealth to directly support the election of federal officeholders who do their legislative bidding and to directly oppose [those] who refused to carry out their wishes,” Wertheimer said.

“This could take us back to the era when people referred to the senator from Standard Oil,” said Washington lawyer Trevor Potter, who last year advised Republican Sen. John McCain’s presidential campaign. “If you have hundreds of millions of corporate dollars flowing into these races, it could drown out the speech of ordinary voters.”

Skeptics of the campaign finance laws are not convinced.

“This would not be the end of democracy,” said Bradley Smith, a law professor at Capital University in Ohio and a former chairman of the Federal Election Commission. About half the states, including California, permit corporations to spend freely in state races, he said, and few corporations have chosen to invest large sums in those contests.

Others note that wealthy individuals -- such as financier George Soros and New York Mayor Michael R. Bloomberg -- already spend vast sums of money to sway elections or to support their own candidacies.

At issue before the court is whether to erase the legal distinction between corporations and individuals.

“If dancing nude and burning the flag are protected by the 1st Amendment, why would it not protect robust speech about the people who are running for office?” said Washington lawyer Theodore B. Olson, who is leading the attack on the federal campaign law.

Olson, a former U.S. solicitor general, represents Citizens United, the small nonprofit company that produced “Hillary: The Movie,” which derided Secretary of State Hillary Rodham Clinton, then a U.S. senator running for president, as ruthless and untrustworthy.

Conservative activist David Bossie, who heads Citizens United, compared his anti-Clinton film to “Fahrenheit 9/11,” the commercially successful documentary by left-leaning film director Michael Moore that mocked President George W. Bush as he ran for reelection in 2004.

Bossie intended his film for viewing last year, and possibly for broadcast on TV, in anticipation that Clinton would be the Democratic nominee. But the film got tied up in a legal battle over whether the federal laws regulating corporate-funded “electioneering communications” applied to new types of campaign videos produced by nonprofit corporations.

The FEC decided that “Hillary: The Movie” was covered by the law. This limited how it could be shown, and it meant Citizens United had to disclose its donors. A lower court upheld that determination, but the Supreme Court agreed to hear an appeal.

When the case was argued in March, the justices did not focus on the details involving the video, but on whether the law itself was suspect. At one point, the lawyer defending the FEC was asked whether Congress could ban a corporate-funded book during an election year that attacked a candidate.

Yes, although no such law exists, the FEC lawyer replied.

“That’s pretty incredible,” Alito said.

In June, rather than deciding whether the election laws applied to the anti-Clinton movie, the justices announced they would hear a special argument on whether to overturn court precedents that limit election spending by corporations.

The outcome, whether a broad ruling on the law or a narrow one pertaining to the video, may well depend on Chief Justice John G. Roberts Jr. So far, he has taken the free speech side, but only on narrow questions. Now he faces the question of whether to broadly overrule long-standing laws.

The case will be Justice Sonia Sotomayor’s first. She replaced Justice David H. Souter, who steadily supported campaign finance laws, and is expected to do the same.

It also will be the first argument for Obama administration Solicitor General Elena Kagan.

“Corporations are artificial persons endowed by the government with significant special advantages that no natural person possesses,” she wrote in her brief. They “do not age, retire or die,” but they “can amass great wealth.”

Because they are state-created entities, the court should stick with its precedents and limit their role in American politics, she said.

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david.savage@latimes.com