Ninth Circuit Brings Out-of-State Donors In From The Cold

November 22, 2021

By: Ellie Halfacre

When Wes Keller ran for re-election to the Alaska House of Representatives in 2015, his brother-in-law David Thompson tried to support his candidacy and donate $500 to the campaign. However, due to §15.13.072(e)(3) of Alaska’s elections statute, he was unable to do so. Under this law, Keller’s campaign had already received the maximum dollar amount it could accept from nonresidents—$3,000—according to the state’s restrictions on campaign contributions. Thompson, a Wisconsin resident, sued, challenging Alaska’s campaign finance laws under the First and Fourteenth Amendments.

The law that barred Thompson’s donation, §15.13.072, specified several fundraising limitations on out-of-state donors: candidates could not accept more than $20,000 a year from nonresident donors for gubernatorial campaigns, $5,000 a year for state senate campaigns, and $3,000 a year for campaigns for state representative, or municipal or other office.

First introduced in 1996, the limits were not indexed for inflation. In addition to a “nonresident aggregate limit” on campaign donations, the state’s legislature restricted candidate solicitations from Alaska residents, lobbyists, and political parties in §15.13.070. Notably, the law restricted the amount any individual could contribute to a candidate or other non-party political group to solely $500 per year.

According to the Alaska Supreme Court, the nonresident aggregate limit was valid. State v. Alaska C.L. Union held that the provisions were “not so obviously invalid” as to justify court intervention in 1999. General, not specific, evidence on corruption supported this finding, as “Alaska has a long history of both support from and exploitation by nonresident interests.”

Therefore, instead of pursuing his challenge in state courts in 2016, Thompson filed his lawsuit with the U.S. District Court of Alaska. Like the Alaska Supreme Court, the District Court upheld the restrictions.

Alaska’s natural resources played a large role in the arguments defending §15.13.072, for outside interests related to the state’s fossil fuel industry posed a potential for undemocratic influence. The state’s dependence on outside firms for extracting its natural resources arguably made Alaska “especially vulnerable to exploitation” by nonresident influence in elections.

The State introduced evidence that proved, in the court’s view, a nexus between the nonresident aggregate limit and the prevention of quid pro quo corruption or its appearance. Experts supported the claims that the “unique combination of Alaska’s small population, geographic isolation, and great natural resources make it extremely dependent on outside industry and interests.”

The Equal Protection claim failed because Alaska residents and nonresidents are not similarly situated with respect to state elections, as only residents were eligible to vote. Additionally, the First Amendment challenge failed because once the nonresident aggregate limit is reached, a nonresident retains the ability to contribute to a political party that supports the candidate.

The court found that the state had also presented adequate evidence that the nonresident aggregate limit furthers Alaska’s sufficiently important interest in preventing quid pro quo corruption in two ways: first, it directly prevented large amounts of out-of-state money from being contributed to a single candidate—thus reducing the appearance that the candidate feels obligated to outside interests over those of his constituents—and second, it discourages circumvention of the $500 base donation limit and other game-playing by outside interests.

On appeal, the Ninth Circuit reversed, holding that Alaska’s nonresident aggregate limit violated the First Amendment. The Circuit reversed the District Court’s judgment on the issue and “unequivocally overturned” the holding of Alaska C.L. Union.

On de novo review, Ninth Circuit judges found that they “cannot agree that the nonresident limit targets quid pro quo corruption.” At most, the Ninth Circuit said, “the law aims to curb perceived ‘undue influence’ of out-of-state contributors—an interest that is no longer sound” after the Supreme Court’s decisions in Citizens United and McCutcheon limited valid government interests in this context to the aim of preventing quid pro quo corruption.

The Ninth Circuit also deemed the statute a poor fit: “Out-of-state interests can still maximize their influence across a large number of candidates—they just need to be early players so that they can contribute the maximum $500 donation before each of those candidates reaches the $3,000 limit.”

Lastly, the Ninth Circuit held that the state interest in protecting its system of self-governance failed because “[w]hat Alaska calls ‘self-governance’ is really a re-branding of the interest of combating influence and access that the Supreme Court has squarely rejected” in prior cases.

However, the Ninth Circuit ultimately upheld the separate $500 base donation contribution limit on individuals, including Alaskan residents.

On further appeal, the Supreme Court vacated and remanded the Ninth Circuit’s decision on the $500 base donation contribution limit on individuals to revisit whether that contribution limit was consistent with First Amendment precedents. The Supreme Court did not consider the Ninth Circuit’s holding on out-of-state contributions.

In a filed “statement” reacting to the per curiam decision, Justice Ginsburg also noted that because Alaska “derives approximately 90 percent of its revenues from one economic sector—the oil and gas industry,” the District Court’s finding that the state was particularly “vulnerable to corruption” may pose a “special justification” for its campaign finance restrictions.

Finally, on remand in July 2021, the second Ninth Circuit decision also held that Alaska’s nonresident aggregate limit on contributions violates the First Amendment under the same rationale as the first Ninth Circuit decision. The state has chosen to forgo further legal review, thereby allowing individuals to fund Alaskan political campaigns regardless of their state residency, their financial interest in the state’s fossil fuel industry, and their brother-in-law’s candidacy for legislative office.