The U.S. Court of Appeals for the First Circuit ruled on Friday that a law passed by Maine voters in 2023 prohibiting foreign government spending in elections is likely unconstitutional. The ruling underscores that the landmark U.S. Supreme Court decision on corporate contributions continues to control the campaign finance landscape, those on both sides of the issue said.
The decision, which affirmed a district court’s temporary stay on the state from enforcing the law, is not the final word, as it will next return to the lower court.
The law prevents foreign government-influenced entities, defined as companies with 5% or more foreign government ownership, from donating to state and local ballot measures. It also requires media outlets to establish policies to stop campaign ads from those prohibited entities.
Voters overwhelmingly approved the law in 2023 with 86% voting in support.
“We really wanted to deal with the underlying root problem here of the inability of citizens to control their own elections,” said Maine Sen. Rick Bennett, chair of the ballot question committee and independent candidate for governor. “Now with this ruling… it means that foreign-government controlled entities, even with 100% foreign government control, can still spend millions of dollars in Maine elections.”
Meanwhile, Charles Miller, a senior attorney at the Institute for Free Speech who filed an amicus brief in support of the plaintiffs, argued the decision sends a message that states can’t put vague parameters on free speech.
“I think that we citizens have to all be on high alert for clever ways that politicians are going to use to try to limit our speech rights, and we have to fight against it, even when the target of those laws at the time are things that we don’t want to hear,” Miller said.
This law was one of two campaign finance changes Maine voters passed by referendum in recent years.
In 2024, voters also overwhelmingly approved a law to place limits on donations to political action committees that independently spend money to try to support or defeat candidates — teeing up a path to get the Supreme Court to reevaluate its 2010 decision Citizens United v. Federal Election Commission that enabled corporations and other outside groups to spend unlimited money on elections.
A decision on the lawsuit filed against the 2024 referendum is expected on Tuesday, before which the state agreed not to enforce that law. The plaintiffs believe Friday’s ruling could have consequences for that case, too.
The Office of the Maine Attorney General, which is defending the law on behalf of the state, does not comment on pending litigation, Director of Public Affairs Danna Hayes said.
Foreign spending in elections
Three different lawsuits arguing the ban on foreign government spending is unconstitutional were consolidated in the appeal. The utility companies Central Maine Power and Versant Power each filed a lawsuit. Two media groups, the Maine Association of Broadcasters and the Maine Press Association, jointly filed another.
The majority opinion issued on Friday, written by Judge Lara Montecalvo, concluded that the law is too broad in its definition of foreign government because it silences U.S. corporations that have their own First Amendment rights.
Central Maine Power is owned by the Spanish multinational company Iberdrola, while Versant’s parent company is owned by the city of Calgary in Canada. The companies’ filings outlined concern that the law prevents them from speaking on matters of concern to their company.
As the decision notes, this referendum was passed amid attempts to prevent the construction of an energy transmission line to Canada, which CMP would benefit from. The company spent millions to oppose that referendum, and both CMP and Versant spent millions to defeat another in 2023 that would have replaced the utilities with a consumer-owned utility.
While the court found that Maine has a “compelling interest” to limit foreign government influence in its elections, it ruled that the state has no such interest in trying to limit the “appearance of” foreign influence, such as with CMP and Versant.
The appeals court specifically highlighted a challenge it sees with the law’s practical implementation, given the prevalence of corporate ownership of publicly traded companies these days, which Miller sees as noteworthy.
“A corporation might not even know when it crosses that 5% threshold because of the way that stocks are traded routinely on a daily basis,” Miller said. “They could enter into and out of that threshold without even knowing it.”
The appeals court agreed, noting further that, “as a consequence, U.S. corporations with First Amendment protections will likely choose not to speak at all rather than risk criminal penalties,” the court wrote.
Bennett noted that the percentage that constitutes foreign influence will continue to be litigated, adding, “If we have to consider adjusting the law because of the ultimate court decision, whenever that comes months from now, then I think the Legislature could consider that.”
However, he also noted that there are other parts of the law that aren’t being challenged, one being a requirement that Maine’s congressional delegation put forth an “anti-corruption” resolution in Congress that could undo Citizens United.
‘An end-run around Citizens United’
The opinion, supported by all three of the judges on the First Circuit panel, also concluded that the 5 percent threshold looks like “an end-run around Citizens United, aimed at silencing a large swath of corporations merely because they are corporations.”
This is the crux of the issue at hand and broader attempts to place stricter regulations on spending in elections, those on both sides agree.
“Fundamentally, the problem goes back to this notion that the courts are stuck with this precedent saying that money is speech and corporations are people,” Bennett said.
Citizens United overturned century-old campaign finance restrictions by allowing corporations and unions to spend unlimited funds on elections.
“Really the most critical point overarching all of this is the court’s recognition that this case is controlled by Citizens United,” Miller said.
Miller believes the circuit court’s point on that decision in particular could also have consequences for the lawsuit against the 2024 referendum, in which Miller is representing the plaintiffs.
Three months after Citizens United, in SpeechNow.org v. FEC, the Washington, D.C. Circuit Court upheld that contributions to PACs cannot be regulated, either, so long as the PAC is independent from the campaign it is supporting. That decision essentially created the “super PAC,” which can receive unlimited contributions but can’t contribute directly to candidates. Other lower federal and state courts followed suit and the ruling was never reviewed by the Supreme Court.
Those behind Maine’s 2024 referendum to place limits on donations to PACs, including legal scholar Larry Lessig, argue that the reasoning behind SpeechNow is incorrect. They say large contributions to PACs inevitably create a risk of quid pro quo corruption, given that donors and candidates have the opportunity to collaborate even if a PAC is independent.
Supporters therefore expected, and planned, for the referendum’s legality to be challenged, presenting an eventual path to the Supreme Court.
Lessig previously told Maine Morning Star he specifically chose to introduce the referendum in the jurisdiction of the First Circuit Court because it hasn’t ruled on whether Super PACs are constitutionally required — meaning there is no precedent.
“They came to Maine to do this because they thought the First Circuit was their best chance to get a court to sort of try to sidestep or ignore Citizens United, and this opinion indicates that they have no appetite to do so,” Miller said.
Editor’s Note: The Maine Press Association, which filed one of the lawsuits, represents about 50 newspapers and digital news outlets in the state, including Maine Morning Star.