While No One Noticed, Did Vermont Just Win a Big Case Against the Republican Governors Association?

In the world of state politics, the Republican Governors Association (RGA) is an 800-pound gorilla. In the 2014 election cycle it raised $97 million. By comparison the Democratic Governors Association (DGA) raised nearly $65 million in the same period. As I demonstrated in a law review article in the NYU Journal of Legislation and Public Policy, year over year the RGA tends to out raise and out spend its plucky counterpart, the DGA.

The RGA occupies its days trying to elect Republicans to be governors. No surprise there. What is surprising is the RGA has made a very troubling argument in court that it is not a political action committee (or PAC), and thus it is not subject to state campaign finance rules. This odd argument usually arises when the RGA has been caught allegedly breaking a state campaign finance law, like ones that restricts corporate money from being given directly to state candidates, or laws that place a dollar cap on the amount of contributions that can be given to a PAC. These two types of regulations are constitutional under the Supreme Court precedents of FEC v. Beaumont and Cal. Med. Ass’n v. FEC, respectively.

The RGA’s argument that it is not a state PAC is based on an aggressive reading of Buckley’s major purpose test. In 1976’s Buckley v. Valeo, the Supreme Court interpreted “political committee” or “PAC” to include only organizations “that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate…[because] [t]hey are, by definition, campaign related.”

The issue for lower courts has been how to quantify “the major purpose” of a given entity that is doing multiple things at once. If courts apply a 51 percent test to measure the major purpose of an entity, then many big political groups suddenly are not PACs so long as they pile on more activities on top of their politicking.

This 51 percent approach to the major purpose test also has a perverse impact on multi-state groups. Say we have a group that spends 20 percent of its resources in elections in all five New England states and calls itself New England Action. If the test is 51 percent of spending in each state, then arguably it won’t meet that threshold in any of the five states, and none of the states may be able to apply PAC regulations to New England Action even if it has spent 100 percent of its funds on electoral politics. This is precisely the argument that the RGA has put forward in various cases around the country. And troublingly, they have won this argument in the Fourth Circuit which covers North Carolina, South Carolina, Virginia, West Virginia, and Maryland.

But not all courts are falling for the Fourth Circuit’s approach to the major purpose test. In the Ninth Circuit, which covers California, Arizona, Nevada, Montana, Idaho, Oregon, Washington, Alaska and Hawaii, the approach has been a more flexible requirement of merely “a” major purpose. This Ninth Circuit approach opens the door to a state’s regulating multiple purpose entities so long as they spend a sizable chunk of their resources on electing candidates in that state.

Against the backdrop of this circuit split on the meaning of the major purpose test, the small state of Vermont noticed that the RGA was spending money in its 2010 election cycle. The problem this posed from the point of Vermont election law is that Vermont only allows contributions of $2,000 to go to PACs that are spending in its candidate elections. Meanwhile the RGA takes in contributions of hundreds of thousands of dollars at a time and sometimes even more.

When Vermont sued the RGA for violating the $2,000 limit, the RGA responded that it would be unconstitutional to apply the limit to them because of the major purpose test. A ruling on this aspect of the case in October 11, 2011 stated that, “The court rejects the RGA’s argument that as a national organization with multiple purposes it is essentially too large and too complex to be subject to regulation at the state level.”

A few months ago after years of litigation in State of Vermont v. Republican Governors Association, the RGA lost its argument in a Vermont state court once more. (There’s a lot going on in this case including what counts as an independent expenditure when two groups are so entangled that they are basically a single group. This independence issue is also being litigated up to the US Supreme Court in another case called Vermont Right to Life v. Sorrell). But one of the key conclusions by the court in State of Vermont v. Republican Governors Association was that “[t]he $2,000 contribution limit constitutionally applies to the RGA.” Watch this space to see what happens in the penalty phase of the case and whether there is an appeal of this ruling.

This case between Vermont and the RGA is about a much larger issue. Boiled down to its essence, the question is this: can giant out of state organizations trample through state elections, amassing and spending big bucks, and in so doing, can the outside groups ignore local election laws?