The 5-2 Montana ruling flies in the face of the landmark 2010 U.S. Supreme Court ruling in Citizens United v. the Federal Elections Commission. That ruling by a 5-4 margin in 2010 blocked the government from limiting spending by corporations and unions for political purposes, as long as that spending is independent and not coordinated with campaigns.

The Montana Supreme Court (Photo: mt.gov)

Montana Supreme Court Chief Justice Mike McGrath, writing for the majority, argued that the sprawling western Rocky Mountain state passed its law to limit the undue influence of “mining and industrial enterprises controlled by foreign trusts or corporations.” He referenced the state’s “Copper Kings” who used to buy politicians and state officials.

“The question then, is when in the last 99 years did Montana lose the power or interest sufficient to support the statute, if it ever did. If the statute has worked to preserve a degree of political and social autonomy is the State required to throw away its protections?” McGrath wrote.

Some observers welcome the opportunity to re-open the debate and compel the U.S. Supreme Court to rule again on the issue.

“If they take it up, there will be a new opportunity to push forward all the arguments as to why the court got it wrong,” John Bonifaz of Free Speech for People told Politico, adding that if they reaffirm their prior decision, “that will only fuel the efforts further to allow a constitutional amendment.”

A Slate analysis on Wednesday offered this take on the Montana ruling:

“Western Tradition Partnership, the lead plaintiff in the case, merits extra special scorn from the court for circulating a fundraising brochure that said, ‘If you decide to support this program, no politician, no bureaucrat, and no radical environmentalist will ever know you made this program possible.’ The majority openly accuses WTP of being responsible for ‘a multi-front attack on both contribution restrictions and the transparency that accompanies campaign disclosure requirements.’”

The question of who’s funding American Tradition Partnership, which was called Western Tradition Partnership when it first challenged the Montana law in 2010, dates back to 2008 when the group was first registered as a 501(c)4 nonprofit in Colorado by Republic political operative Scott Shires.

The group was later re-registered by an attorney for the Denver law firm of Hackstaff Gessler, which is the former firm of current Republican Colorado Secretary of State Scott Gessler, a conservative election campaign lawyer who in the past represented Shires in various campaign finance violation cases.

Ferguson last summer flew out to Montana – at his own expense, he said – to counter community and environmental outrage in the wake of an ExxonMobil oil pipeline spill in the Yellowstone River.

Besides the corporate spending case, ATP is involved in other litigation challenging Montana campaign disclosure laws. The Montana Commissioner of Political Practices in 2010 found that WTP’s anonymous campaign fliers attacking Democrats and moderate Republicans “raised the specter of corruption” and merited formal action by the state’s attorney general.

That case is being heard by the same judge, District Judge Jeffrey Sherlock of Helena, who ruled in favor of WTP in the corporate spending case just overturned by the Montana Supreme Court.

A trial in that case has been set for March 19, according to John Doran, a spokesman for the Montana Department of Justice, who adds that the case essentially boils down to whether 501(c)4’s (named for a section of the IRS tax code) are educational organizations or political committees.

“The State of Montana contends they are political committees subject to state disclosure and disclaimer laws, and that they’ve spent hundreds of thousands of dollars secretly in Montana to influence Montana elections,” Doran said in an email. “They are arguing they are educational organizations that don’t need to disclose anything to the state.”

Colorado lawmakers are watching closely after WTP sent out fliers in a tight state Senate race in 2010 that prompted calls for tougher campaign disclosure laws for 501(c)4 nonprofits.

Photo: Flickr Creative Commons/www.BackgroundNow.com

A press release for the report explained the shift. “While many people assume that strong disclosure and governance practices will reduce corporate political spending, the data show that’s far from a foregone conclusion,” said Lukomnik, executive director of the IRRC Institute, one of two institutes that conducted the study. “Indeed, on a revenue-adjusted basis, companies with greater board involvement in the process actually spend more.” The study found that companies with board oversight of political expenditures spent about 30 percent more in 2010 than those without such explicit policies.

The two trends seem to be going hand-in-hand as attention to company spending has swelled and as companies have found themselves with unlimited donation-limits to 501 (c) issue groups at their disposal.

“It stands to reason that the boards of highly regulated companies would both be more concerned with such spending, and could view such spending as a necessary cost of business,” added Lukomnik.

The report, conducted by the Investor Responsibility Research Center (IRRC) Institute and the Sustainable Investments Institute (Si2), is the most comprehensive study of corporate political spending to date, putting in perspective some of the effects of last year’s infamous and still controversial Citizens United Supreme Court ruling. It provides one of the first comparative benchmarks for the governance and political expenditures of the S&P 500.

Some key findings from the report:

65% of the S&P now identify who at the company is responsible for making political expenditure decisions, up from 58% last year.

There is a trend towards more oversight and more “no spending” policies: 77 companies now say they will not use independent expenditures, up from 58 in 2010.

In addition, the study uncovered inconsistencies between companies’ stated political expenditure policies and what is actually spent.Fifty-seven of S&P 500 companies state they will not make political contributions, up from just 40 in 2010. But an in-depth search of federal and state records shows that only 23 of these companies actually refrained from giving to candidates, parties, political committees and ballot measures in 2010.

Only 14% of S&P 500 companies actually give a numerical report on how much of their trade association dues are spent for political purpose.

The analysis also tallies what S&P 500 companies spent — some $1.1 billion from corporate treasuries in 2010. Broken-down, that figure included $979 million for lobbying at the federal level.

The ruling stipulates that PACs can open two banks accounts, one for the traditional, limited PAC, and another for the unlimited super PAC. As long as the money they receive under the two committees is not mixed, the hybrid PAC will be allowed to accept unlimited donations for their own ads and mailers while also donating and raising money for Congressional candidates.

The new rules were announced last week after the FEC lost a challenge from the National Defense PAC in Carey v. FEC. The PAC sought to use one bank account for making independent expenditures in federal elections and a separate account subject to donation limitations.

The FEC also gave guidance on disclosure rules for hybrid PACs. A new form letter will be appended to PAC registrations announcing the intention to form a hybrid PAC.

Efficient America PAC, which is in favor of energy efficiency legislation, is the first hybrid PAC formed after the Carey v. FEC ruling.

The vote of the Court’s newest justice on that issue, however, may be more predictable.

Although the issue in the case was originally relatively narrow — whether an “on-demand” video ought to be subject to the same restrictions as broadcast campaign advertising — the Supreme Court has asked both sides to re-argue the case next week, to answer a far more controversial and significant question: should the Court reverse its previous restrictions on corporate campaign financing on First Amendment grounds?

Justice Sonia Sotomayor, once a lawyer on New York City’s Campaign Finance Board who implemented campaign finance restrictions, isn’t likely to vote in favor of reversing those longstanding federal restrictions on corporate spending. She’s written in favor of restricting corporate spending on campaigns, such as in this law review article, where she wrote:

We would never condone private gifts to judges about to decide a case implicating the gift-givers’ interests. Yet our system of election financing permits extensive private, including corporate, financing of candidates’ campaigns, raising again and again the question what the difference is between contributions and bribes and how legislators or other officials can operate objectively on behalf of the electorate. Can elected officials say with credibility that they are carrying out the mandate of a “democratic” society, representing only the general public good, when private money plays such a large role in their campaigns?

In the one campaign finance matter that confronted her as a judge on the Second Circuit, Sotomayor voted to allow a Vermont campaign finance spending limit to stand, although her vote was based on a procedural issue, not the merits of the law. The Supreme Court eventually overturned the Vermont restrictions.

Of course, Justice David Souter, whom Sotomayor replaced, generally favored restrictions on corporate campaign spending as well, so Sotomayor’s position isn’t likely to swing the court in a different direction.

Justice Samuel Alito, Jr. and Chief Justice John Roberts, however, are skeptics of campaign finance regulations and could lead the court’s conservative wing toward tossing out longstanding laws restricting corporate spending on political campaigns. The conservatives on the court — oddly joined by the ACLU — see such rules as restrictions on freedom of speech.

Instead of ruling on Citizens United v. FEC, a case that questions the legitimacy of corporate funding that supported an anti-Hillary Rodham Clinton documentary released just before the 2008 primaries, the court on Monday ordered reargument of the case in September.  The court will then have to decide whether to overrule two previous decisions that upheld limits on corporate spending in federal elections.

Predicts Hasen:

Given the dynamics of the court, there is a great chance the justices will use the opportunity to overrule limits on how much money corporations can spend supporting candidates—whether or not Judge Sonia Sotomayor is confirmed in time to hear the case in September.