Federal Election Commission v. Ted Cruz for Senate

Issues

Does Section 304 of the Bipartisan Campaign Reform Act (“BCRA”), which imposes a $250,000 cap on the amount of post-election funds a campaign can use to reimburse a candidate’s personal loans, impermissibly burden a candidate’s First Amendment right to free speech; and does a party seeking to invalidate a regulation implemented pursuant to that statutory provision have standing to challenge the statute?

Oral argument:

January 19, 2022

Court below:

United States Court of Appeals for the D.C. Circuit

This case asks the Supreme Court to decide whether Section 304 of the Bipartisan Campaign Reform Act (“BCRA”), which bars a campaign from disbursing more than $250,000 in post-election contributions to refund a candidate’s personal loans, violates the First Amendment. The Federal Election Commission (“the FEC”) contends that Senator Cruz’s current inability to obtain full reimbursement for his loan was not caused by Section 304, and that Cruz therefore lacks standing to challenge Section 304. Senator Ted Cruz and Ted Cruz for Senate (collectively, “Ted Cruz”) counter that Section 304 directly injures them, and that the statute should be held unconstitutional under the First Amendment for unjustifiably deterring candidates from exercising their free speech right to contribute to their own campaigns. The outcome of this case has implications for litigants who must establish standing to challenge allegedly unconstitutional government action in the courts, and the constitutionality of limits on the use of post-election funds for loan-repayment.

Questions as Framed for the Court by the Parties

Whether appellees have standing to challenge the statutory loan-repayment limit; and whether the loan-repayment limit violates the Free Speech Clause of the First Amendment.

Facts

In order to guard against actual and apparent quid pro quo corruption, Congress promulgated federal campaign financing restrictions through the Federal Election Campaign Act of 1971 (“FECA”). Ted Cruz for Senate v. Fed. Election Comm’n (“Ted Cruz for Senate I”) at 2. Approximately thirty years later, Congress amended FECA in the Bipartisan Campaign Reform Act of 2002 (“BCRA”), which set forth in Section 30116(j) that a “candidate who incurs personal loans . . . in connection with the candidate's campaign for election shall not repay (directly or indirectly), to the extent such loans exceed $250,000, such loans from any contributions made to such candidate or any authorized committee of such candidate after the date of such election.” Ted Cruz for Senate I at 2. Under BCRA and its implementing regulations, which are administered by the Federal Election Commission (“the FEC”), after an election, a campaign may either fully reimburse a candidate within 20 days of the election using pre-election contributions, or it may use contributions made after election day to repay up to $250,000 of the candidate’s loans. Ted Cruz for Senate I at 3–4. If the campaign does not repay the loan with pre-election funds within the 20 days, any remaining balance exceeding $250,000 is re-designated as a campaign contribution from the candidate. Ted Cruz for Senate I at 3–4.

Senator Rafael Edward (Ted) Cruz (“Senator Cruz”) ran for re-election in 2018. Ted Cruz for Senate I at 5. In an intended challenge to the BCRA limit, known as Section 304, on the day before the 2018 general election, Senator Cruz loaned his election committee, Ted Cruz for Senate (“the Committee”), $260,000. Ted Cruz for Senate I at 5. The Committee purposefully did not repay Senator Cruz within the 20-day deadline set by the FEC’s regulations. Ted Cruz for Senate I at 5. After the 20-day period passed, the Committee repaid $250,000 to Senator Cruz and the outstanding $10,000 was recharacterized as a contribution from Senator Cruz to his campaign. Ted Cruz for Senate v. Fed. Election Comm’n (“Ted Cruz for Senate II”) at 3. Senator Cruz and the Committee then sued the FEC in the United States District Court for the District of Columbia under BCRA Section 403(a) which provides for jurisdiction in the District Court for the District of Columbia for any constitutional challenges to BCRA. Ted Cruz for Senate I at 4. There, Senator Cruz and the Committee alleged that BCRA’s loan-repayment limit violates the First Amendment and sought declaratory and injunctive relief invalidating and enjoining the enforcement of Section 304. Ted Cruz for Senate II at 3.

The district court concluded that Senator Cruz had standing to sue because he had suffered a “$10,000 financial injury” due to BCRA’s loan-repayment limit. Ted Cruz for Senate I at 14. The court granted Senator Cruz’s motion for summary judgment, denied the FEC’s motion for summary judgment, and held that BCRA’s $250,000 loan-repayment limit violates the First Amendment by burdening the exercise of political speech. Ted Cruz for Senate I at 37. The court applied heightened scrutiny, and concluded that the government had not adequately justified the provision’s burden on candidate speech. Ted Cruz for Senate I at 28–29. The court found that the FEC failed to show that use of post-election contributions to repay candidate loans posed a risk of corruption. Ted Cruz for Senate I at 20–22. Therefore, the limit was not sufficiently tailored. Ted Cruz for Senate I at 29–32.

The FEC appealed to the Supreme Court and filed a jurisdictional statement challenging the ability of the Court to hear the case on the grounds that the district court had erred in holding that Senator Cruz and the Committee had standing. Jurisdictional Statement for Petitioner, the FEC at 8. Under BCRA Section 403(a)(3), a final decision of the three-judge panel as to the constitutionality of challenged sections of the BCRA is only reviewable on appeal directly to the Supreme Court. Ted Cruz for Senate I at 4. The Supreme Court granted certiorari, postponing its consideration of the jurisdictional standing question to its hearing of the case on the merits. Brief for Petitioner, the FEC at 2.

Analysis

SELF-INFLICTED INJURY OR REDRESSABLE INJURY-IN-FACT

Petitioner The FEC argues that Senator Cruz does not have Article III standing to bring this suit. Brief for Petitioner, the FEC at 10. Under Article III, a party must satisfy three requirements to have standing to sue: (1) he has suffered an injury in fact that is concrete, particularized, and actual or imminent; (2) the injury is fairly traceable to the defendant’s challenged action; and (3) the judicial relief he seeks would likely redress the injury. Id. The FEC concedes that Senator Cruz suffered a concrete injury—the unpaid $10,000 balance on a $260,000 loan—but disputes that Section 304 was the cause. Id. at 22. The FEC reasons that the Committee voluntarily and without justification missed the 20-day window to repay Senator Cruz’s loan, and is therefore responsible for Senator Cruz’s injury. Id. Since the injury is self-inflicted and not fairly traceable to any unlawful conduct by the FEC, the FEC contends that Senator Cruz fails the causation requirement for standing. Id. at 11, 20.

The FEC notes that Senator Cruz also fails the causation requirement because his injury does not stem directly from Section 304, but rather from a regulation promulgated to implement it. Id. at 24. The FEC explains that since the $250,000 limit only applies to post-election funds, and Senator Cruz used pre-election funds to recoup $250,000 of his $260,000 loan, the Committee could have satisfied the remaining $10,000 using post-election funds without ever implicating Section 304’s cap. Id. Senator Cruz’s injury stems not from Section 304, therefore, the FEC contends, but rather from the Committee’s non-compliance with the regulation; once the 20 days passed, the regulation redesignated the $10,000 loan as a contribution, which rendered it ineligible for reimbursement, regardless of whether pre- or post-election funds were used. Id. at 16–17. Failure to meet the deadline, according to the FEC, constitutes an injury that is “so completely due to the plaintiff’s own fault as to break the causal chain” required for standing. Id. at 24.

The FEC concedes that an intentional delay can be excusable in the rare circumstance when a party is compelled to self-inflict injury to avoid a greater harm. Id. Here, however, the FEC contends that the Committee has not shown that it would have suffered any concrete harm from disbursing the $10,000 within the 20-day window. Id. The FEC concludes, therefore, regarding the third standing requirement, that since Senator Cruz cannot attribute his self-inflicted injury to Section 304, invalidating that statutory provision would not offer him redress. Id. at 16.

Respondent Senator Cruz counters that his injury is directly traceable to Section 304. Brief for Respondent, Senator Ted Cruz and Ted Cruz for Senate (“Senator Cruz”) at 38. Senator Cruz agrees that the regulation represents an intermediate link between his injury and Section 304, but maintains that this chain of causation is sufficiently direct for standing purposes. Id. at 17. Senator Cruz asserts that parties with far more indirect causation arguments have repeatedly successfully established standing. Id. For example, Senator Cruz points out, litigants injured through government action successfully challenged the appointment process of the agency officials who inflicted those injuries. Id. Here, Senator Cruz asserts that the chain of causation is comparatively direct: since Section 304 is the sole statutory provision that authorizes the 20-day regulatory rule, it is plainly the but-for cause of his injury. Id. at 14.

Senator Cruz next argues that it is irrelevant that the Committee voluntarily bypassed the regulatory deadline because a party does not forfeit standing by refusing to adhere to the very provision they allege is unlawful. Id. at 33. Senator Cruz points out that a party’s standing to bring a post-enforcement challenge should not depend on their ability to prove, pre-enforcement, that they were compelled to choose between alternative harms. Id. at 37. Senator Cruz claims that his complaint does not describe a generalized, speculative harm, but rather a concrete injury caused by violation of his constitutional right to have his loan repaid using post-election contributions. Id. at 38. Senator Cruz further reasons that the Committee’s non-compliance was justified: they sought to avoid harm to creditors by prioritizing those who more urgently required reimbursement than Senator Cruz. Id. at 39. Finally, Senator Cruz contends that the FEC misstates the facts: the Committee did indeed repay $250,000 of Senator Cruz’s loan using post-election funds and was constrained by the cap: they used funds received after the 2018 election but that were designated for use in the 2024 election. Id. at 28–29.

Finally, Senator Cruz asserts that invalidating the statute would also vacate its implementing regulations, therefore redressing his injury and fulfilling the final requirement for standing. Id. at 16. Senator Cruz points out that, as established in fundamental principles of administrative law, “the regulatory branch cannot survive the death of the statutory tree.” Id. Senator Cruz concludes that both the authorizing statute and the 20-day regulatory rule are responsible for his injury, and therefore both must fall for his injury to be redressed. Id. at 22.

A MODEST OR SEVERE BURDEN ON FREE SPEECH

The FEC argues that the loan-repayment limit places only a modest burden on free speech, which is adequately tailored to serve the government’s compelling anti-corruption interest, and that the limit survives any standard of review. Brief for Petitioner at 27. The FEC points out that the First Amendment right to spend money on, and to contribute money to, political campaigns is not absolute: it is subject to a balancing of interests. Id. at 26. Here, the FEC reasons that the government’s interest outweighs the modest burden imposed by the limit. Id. at 33. The FEC contends that the burden is modest: first, because the regulation imposes a narrow timing requirement, the type of restriction that the Court has often upheld. Id. at 28–29. Secondly, according to the FEC, candidates often make loans without expectation of repayment or in amounts well below $250,000. Id. at 29–30. The FEC reasons that since the majority of loans are unaffected by the cap, and since candidate lending practices remained stable subsequent to the promulgation of the BCRA, fears of deterrence are likely exaggerated. Id.

The FEC asserts that the government’s interest in preventing corruption is compelling because contributors are more likely to have improper motivations post-election: special interests may make donations to avoid retaliation from a prevailing candidate or to incentivize that candidate to vote in their favor. Id. at 35–36. The FEC observes that a candidate is also more likely to change their votes to align with special interests when they stand to increase their personal wealth. Id. at 35. Therefore, the FEC concludes that a post-election contribution can be dangerously akin to a gift and points out that Section 304’s purpose in guarding against the risk of quid pro quo corruption underlies many federal laws prohibiting government officials from receiving gifts. Id. at 43–44.

Senator Cruz argues that Section 304 unconstitutionally deters candidates, committees, and contributors from exercising their free speech rights. Brief for Respondent at 41. According to Senator Cruz, increasing the risk that a candidate’s personal loans will not be repaid in full or at all impermissibly causes candidates to be less likely to contribute to their own campaigns. Id. Senator Cruz points out that the cap unjustifiably compels committees to redirect their limited funds to repaying candidates for loan balances exceeding $250,000. Id. at 44. Finally, Senator Cruz argues that the cap represents yet another constraint that further burdens contributors already affected by existing federal contribution limits. Id. at 42. This direct and significant burden, Senator Cruz contends, fails strict scrutiny because it does not serve any anti-corruption interest. Id. at 44, 46. Senator Cruz points out that the original purpose of the limit was to “level the playing field” between incumbents and challengers with differing fundraising capabilities. Id. Senator Cruz observes that Congress already addressed the corruption risk by imposing a federal limit of $2900 on individual contributions; to imply that any post-election contribution inherently poses a corruption risk would illogically contradict Congress’s judgment in allowing post-election contributions at all. Id. at 49.

Senator Cruz argues that, following the FEC’s logic, the anti-corruption concern should apply only to winning candidates; losing candidates pose no risk of changing their votes to serve special interests. Id. at 53. Senator Cruz also points out that this risk should implicate loan-repayments of any amount; here, however, the cap inexplicably only bars amounts in excess of $250,000. Id. Cruz observes that the FEC failed to submit any evidence of actual quid pro quo corruption in the record and concludes that their fear is therefore unfounded. Id. at 52. Loan repayment, Senator Cruz contends, is not analogous to a gift because it does not increase a candidate’s personal wealth, but merely reimburses a personal investment. Id. at 48. Therefore, Senator Cruz contends that Section 304 is not sufficiently tailored because it is overbroad, applying to both winning and losing candidates, and underinclusive, addressing only loan repayments exceeding $250,000, and therefore should not survive strict scrutiny. Id. at 53–54.

Discussion

STANDING, TRACEABILITY, AND THE EASE OF CONSTITUTIONAL CHALLENGES TO ALLEGEDLY UNLAWFUL GOVERNMENT ACTION

Public Citizen, in support of the FEC, contends that while unduly narrowing the scope of standing threatens the ability of genuinely injured persons to challenge the constitutionality and legality of government actions, traceability between the alleged injury and the defendant’s purportedly illegal or unconstitutional action does not pose an onerous requirement. Brief of Amici Curiae Public Citizen, in Support of Petitioner at 1, 6. Public Citizen further argues that requiring the injury to be “fairly traceable” to the challenged action of the defendant is key to ensuring that would-be plaintiffs have a personal connection to the government action that they seek to challenge, and that courts do not exceed the boundaries of their constitutionally-prescribed role. Id. at 6. Public Citizen elaborates that the function of courts is limited—they are a non-political branch of government and therefore, courts should only resolve “‘real controvers[ies] with real impact on real persons,” rather than making policy via engineered test cases with no actual link between the alleged injury and the challenged action. See id. at 6–7.

The New Civil Liberties Alliance (“NCLA”), in support of Senator Cruz, counters that adopting the heightened standing requirement proposed by the FEC, which would require that the alleged injury be “fairly traceable” to the challenged conduct, would have disastrous effects for advocacy organizations conducting impact and public-interest litigation. Brief of Amici Curiae New Civil Liberties Alliance, in Support of Respondent at 12–13. In particular, NCLA contends that a “fairly traceable” standing requirement would “seriously hamper NCLA’s—and everyone else’s—ability to raise separation-of-powers and similar structural constitutional challenges” including “all nondelegation doctrine challenges, regardless of who brings them.” Id. NCLA asserts that for organizations which primarily bring structural challenges to the legality of actions taken by the administrative state, the “fairly traceable” doctrine would foreclose challenges to underlying statutes as would-be plaintiffs usually only sustain injury from implementing regulations and agency action—not the statute itself. See id. at 13–14. Ultimately, even beyond administrative-law challenges, NCLA claims that such a “heightened standard . . . would have a devastating impact on the ability of individuals to raise judicial challenges to unlawful action by federal officials.” Id. at 14.

COMBATING APPARENT OR ACTUAL CORRUPTION AND PRESERVING THE INTEGRITY OF GOVERNMENT

The Brennan Center for Justice at New York University School of Law (“Brennan Center”), in support of the FEC, contends that the loan-repayment limit furthers the government’s key interest in preventing actual or perceived quid pro quo corruption, in which public officials are “misusing their position for personal gain or otherwise acting—or even appearing to act—in favor of personal financial interests, rather than the public good.” Brief of Amici Curiae Brennan Center for Justice at NYU School of Law, in Support of Petitioner at 13. The Constitutional Accountability Center (“CAC”), also in support of the FEC, additionally argues that this anti-corruption interest is so important because “[c]orruption was a chief concern that informed the Framers’ design of the Constitution” as the Framers believed that even perceived corruption could destabilize the Republic, destroy the public trust, and risk the “integrity of the fledgling American government.” Brief of Amici Curiae Constitutional Accountability Center, in Support of Petitioner at 5, 8. To this end, the CAC points to existing constitutional provisions such as the Foreign Emoluments Clause, the Domestic Emoluments Clause, the Ineligibility and Emoluments Clause, and the Elections Clause as illustrative of the Framers’ concerted efforts to create constitutional safeguards against even the perception of corruption. Id. at 11–18. The CAC claims that the loan-repayment limit similarly furthers this foundational anti-corruption interest by narrowly targeting post-election contributions which directly benefit the candidate. Id. at 18. The CAC contends that such contributions are especially dangerous because there are no restrictions on a candidate’s use of the repaid funds, and donors make post-election contributions with the knowledge of which candidate won, thereby risking at least the appearance that the donor expected political favors from a winning candidate in return for his contribution. Id. at 18–20. The Campaign Legal Center (“CLC”), further in support of the FEC, concurs, arguing that even if there is not a single actual instance of quid pro quo corruption stemming from repayments with post-election contributions, the potential for corruption inherent in such transactions is sufficient to merit the loan-repayment limit. Brief of Amici Curiae Campaign Legal Center, in Support of Petitioner at 12–13, 16.

The Public Policy Legal Institute (“PPLI”), in support of Senator Cruz and the Committee, counter that the FEC’s regulation is unnecessary because there is no record of actual quid pro quo corruption occurring in the use of post-election contributions to repay a candidate's personal loan to his campaign. Brief of Amici Curiae Public Policy Legal Institute, in Support of Respondent at 6. PPLI additionally claims that studies show that campaign finance restrictions actually increase public suspicion of government misconduct, undermining the idea that the loan-repayment restrictions minimize the appearance of corruption. Id. at 6–9. Senators Blunt, Cassidy, Cramer, Hyde-Smith, and Wicker (“Senators”), also in support of Senator Cruz and the Committee, further contend that the loan-repayment limit is unnecessary as any risk of corruption is already addressed by general limits on contributions and disclosure requirements. Brief of Amici Curiae Institute for Senator Roy Blunt et al., in Support of Respondent at 11. Furthermore, the Republican National Committee (“RNC”), also in support of Senator Cruz and the Committee, claims that candidates do not actually benefit from making loans to their campaigns; rather, upon repayment, the candidates are merely returned to their prior financial position. Brief of Amici Curiae Republican National Committee, in Support of Respondent at 27. The Institute for Free Speech (“IFS”) further concurs in support of Senator Cruz and the Committee, arguing that by making a loan to their campaign, candidates risk losing their principal or the interest they could have made by investing their money elsewhere. Brief of Amici Curiae Institute for Free Speech, in Support of Respondent at 8–9. The IFS adds that candidates are limited to commercially reasonable rates if they do charge interest. Id. Furthermore, the IFS contends that a winning candidate may actually frown upon “fair-weather” donors who contribute only after the candidate wins the election, further minimizing the risk of corruption. Id. at 9. Ultimately, Senator McConnell argues, in support of Senator Cruz and the Committee, that rather than furthering a legitimate government interest in anti-corruption, the loan-repayment limit serves only to protect incumbents from self-funded challengers. Brief of Amicus Curiae Senator Mitch McConnell, in Support of Respondent at 23–24.