More than a century ago, President Teddy Roosevelt charged up Capitol Hill to convince Congress to ban direct corporate contributions to federal election campaigns. The Rough Rider, unsurprisingly, got his way. Forty years later, Congress included unions in the ban and extended the prohibition to corporate and union expenditures.

In September, that legacy of campaign finance reform will be in the cross hairs of the U.S. Supreme Court because of a quirky challenge that now has the potential to be an election law blockbuster.

The case is unfinished business from the 2008-09 term, which doesn’t officially end until the first Monday in October. The justices in late June ordered reargument on Sept. 9 in Citizens United v. FEC, more popularly known as the “Hillary: The Movie” lawsuit. The case was first argued in March.

The Court specifically directed lawyers in the case to argue whether it should overturn two modern campaign finance precedents upholding the constitutionality of bans on the use of corporate treasury funds for advertising in federal elections.

Citizens United, a nonprofit ideological corporation that receives some for-profit corporate funding, initially raised a narrow challenge to the 2002 Bipartisan Campaign Reform Act’s bar on the use of corporate or union treasury funds for “electioneering communications.” It argued that the restriction did not apply to materials delivered through video-on-demand cable broadcasts — the vehicle it sought to distribute its anti-Hillary Clinton movie.

But the stakes are considerably higher now with the Court’s broader question of whether it should overrule its 1990 Austin v. Michigan Chamber of Commerce and 2003 McConnell v. FEC decisions.

If one or both of those precedents fall, campaign finance reformers foresee the kind of unleashed corporate wealth, influence peddling and other campaign scandals that triggered the Roosevelt-supported Tillman Act of 1907 and the subsequent Taft-Hartley Act of 1947. “A member of Congress would be facing the potential for a corporation or a number of corporations to spend tens of millions of dollars to directly influence the member’s campaign,” warned Fred Wertheimer, president of Democracy 21. “This would fundamentally change our electoral system. This is really a historical moment for our democracy and for the Court.”

But the two modern precedents at risk are “aberrations” from the high court’s First Amendment campaign finance rulings, contend business groups and others who challenge the dire predictions.

“In over half of the states, corporations are not only allowed to make independent expenditures, but direct contributions to candidates, including Virginia and Utah, where they are unlimited,” said Bradley Smith, a former Federal Election Commission (FEC) commissioner and chairman of the Center for Competitive Politics. “I don’t think people look at those states and think they are horribly corrupt. Where is the evidence that these states have problems that other states do not?”

NO LIMITS?

Since 1976, when the court decided the landmark Buckley v. Valeo — upholding limits on individuals’ campaign contributions, but striking down limits on independent expenditures — the Court’s jurisprudence has “swung like a pendulum” between periods of skepticism about Congress’ reform efforts and periods of great deference to the lawmakers, said Richard Hasen of Loyola Law School, Los Angeles, who runs the influential Election Law Blog. “We’re coming off of a period of great deference, when Justice [Sandra Day] O’Connor was on the Court,” he said. “Since she has left, we’ve moved into what appears to be the greatest period of deregulation, well beyond the rules set out in Buckley.

“It would not surprise me if we’re heading into a period of virtually no limits on money in politics and only disclosure requirements,” Hasen said. “The fact that O’Connor has been replaced by [Samuel] Alito has led to this moment.”

The first real hint of that came in 2003 in McConnell v. FEC, when the justices narrowly rejected a facial constitutional challenge to the electioneering communications provisions of the 2002 Bipartisan Campaign Reform Act. Those provisions bar the use of corporate and union treasury funds to pay for electioneering materials that expressly advocate the election or defeat of a candidate.

McConnell reaffirmed Austin‘s holding that corporate spending in elections could be limited because of the “distorting and corrosive effects” of huge aggregations of wealth, achieved with the help of the corporate form.

Three justices dissented in McConnell — Antonin Scalia, Anthony Kennedy and Clarence Thomas — saying the act’s provision was unconstitutional as applied to any corporate advertising. Three subsequent decisions eroded the 2002 law, and those justices called for the overruling of Austin and McConnell. Alito also later criticized Austin‘s anti-distortion rationale.

Judge Sonia Sotomayor, who would replace Justice David Souter, a staunch supporter of campaign finance reform, is expected to be confirmed in time to hear the Citizens United reargument.

In a brief just filed with the high court, Citizens United’s counsel, former Solicitor General Theodore Olson of Gibson, Dunn & Crutcher, making his second appearance for the group and his seventh argument of the term, urges the justices to reject the “anti-distortion” reasoning “for suppressing corporate political speech” that underlies Austin and was relied upon in McConnell and to overrule both.

“The government does not have any legitimate interest — much less a compelling one — in policing the marketplace of ideas for signs of ‘distortion,’ equalizing the relative voice of participants in political discourse, or preventing corporations from influencing the outcome of elections,” he argues.

Olson and his supporters contend that Austin‘s rationale is an outlier among the Court’s other campaign-finance rulings that had rejected equalizing political speech as a compelling government interest. The Court, they argue, has recognized a compelling government interest only in preventing corruption or the appearance of corruption to justify restrictions. “I think the corporate prohibition is part of a nostalgic era when there were very few corporations and they turned out to be huge players in a couple of presidential elections,” said Citizens United’s former counsel, James Bopp Jr. of Bopp, Coleson & Bostrom in Terre Haute, Ind., now representing eight former FEC commissioners in an amicus brief supporting Citizens. “Times have changed. Every mom-and-pop grocery store is a corporation.”

UNLEASHING WEALTH

In the government’s brief, Solicitor General Elena Kagan, who will be making her first-ever appellate argument in this case, does not even mention the corporate-wealth distortion reasoning in Austin, which the government defended in its first Citizens United argument. Instead, she presses the corruption rationale, arguing that the use of corporate treasury funds is “inherently likely to corrode the political system, both by actually corrupting public officeholders and by creating the appearance of corruption.”

Loyola’s Hasen calls the government’s approach remarkable but unsurprising. Austin‘s equality-distortion rationale, he said, was undermined by the Court’s decision in FEC v. Davis last year and is “not likely to find a receptive audience” in either Alito or Chief Justice John Roberts Jr. — potential “swing voters” in Citizens United.

But, he added, only Justice John Paul Stevens has ever embraced the argument that corporate independent spending can be limited to prevent quid quo pro corruption of candidates.

Using corporate funds, Kagan also argues, diverts shareholders’ money to the support of candidates whom the shareholders may oppose. Overruling Austin and McConnell‘s electioneering holding, she adds, would cast doubt on the constitutionality of all federal and state regulation of all independent corporate electoral advocacy. It also would make “vast sums of corporate money available for overt electioneering.”

The policy is simple and fundamental, said Democracy 21′s Wertheimer. “Individuals vote; individuals should finance our campaigns,” he said. “There are all kinds of precedents pre-Austin as well as post-Austin that carry forward this principle.”

The Court doesn’t have to rule on the constitutional question, Hasen said. Under the constitutional avoidance doctrine, it could answer, instead, the narrow statutory question initially raised by Citizens’ petition, he said, as it did in the term’s major voting rights decision and racial bias decision involving New Haven, Conn., firefighters. “But if that was a direction they were inclined to take, it’s hard to understand why they would set reargument specifically geared toward the constitutional issue,” he added. “It’s anti-avoidance.”

Marcia Coyle can be contacted at marcia.coyle@incisivemedia.com.