Campaign finance law challenged by Ted Cruz met with skepticism at Supreme Court

Washington — The Supreme Court on Wednesday grappled with a bid by Republican Senator Ted Cruz of Texas to dismantle a provision of federal campaign finance law that caps the amount of money a candidate can be repaid for personal loans made to their campaign.

The restriction at issue in the dispute between Cruz and the Federal Election Commission (FEC) was enacted by Congress under the Bipartisan Campaign Reform Act, otherwise known as the McCain-Feingold Act. The law says a campaign can use post-election contributions to repay up to $250,000 to a candidate who loaned money to their own campaign. A subsequent regulation from the FEC imposes a 20-day time limit after the election for a campaign to use money raised before Election Day to repay the portion of a candidate’s loan exceeding $250,000.

During his Senate reelection run against Democrat Beto O’Rourke in 2018, Cruz loaned his campaign $260,000 the day before the general election, $10,000 more than the maximum amount allowed to be reimbursed with post-election contributions under the law. The campaign repaid Cruz $250,000, but was foreclosed from reimbursing him the final $10,000 due to the 20-day window. 

The Cruz campaign admitted the “sole and exclusive motivation” behind the 2018 loan and subsequent timing of the reimbursement from the campaign was to pursue a legal challenge to the law, according to court filings from the FEC. The Texas Republican’s campaign mounted that court fight in April 2019, arguing the loan-repayment limit violates the First Amendment.

The FEC moved to dismiss the suit, claiming Cruz did not have legal standing to challenge the law. A three-judge federal district court panel in Washington, D.C., disagreed and also struck down the reimbursement cap as a violation of the First Amendment, finding it burdens the exercise of political speech.

The FEC appealed the decision to the Supreme Court and told the justices the limit aims to prevent corruption. The agency also argued that Cruz’s injury was “self-inflicted,” as his campaign could have reimbursed him using contributions made before the election.

“Once the election is over, it is less likely that the donor is giving money to fund speech or to help the favored candidate win, and more likely that she is giving money because of an expectation of special favors or a fear of retaliation,” the Justice Department, which argued on behalf of the FEC, told the court in a filing.

Senate Minority Leader Mitch McConnell urged the Supreme Court in a friend-of-the-court brief to use Cruz’s case as a vehicle to scrap the entire 2002 campaign finance law, which he called “a constitutional train wreck.”

During roughly 90 minutes of arguments, the court’s conservative members at times appeared skeptical the restriction passes constitutional muster.

“It would seem to me that the law puts the candidate to a choice of spending your own money for a loan above $250,000 or … foregoing any repayment for an amount above $250,000, so the choice is to spend that without any possibility of getting it back or not spending it at all,” Justice Brett Kavanaugh said. “And that seems to be, therefore, a chill on your ability to loan your campaign money.”

Kavanaugh also asked Malcolm Stewart, deputy solicitor general, why the $2,900 limit on individual contributions was not “sufficient” to addressing the government’s anti-corruption concerns, given that any reimbursement from the campaign is related to “a loan, not a gift.”

Chief Justice John Roberts asked how the justices were to weigh infringement of the First Amendment against the government’s need to protect against potential corruption.

“How are you supposed to weigh such imponderables such as the marginal burden on the exercise of First Amendment rights against the marginal assistance in preventing corruption?” he wondered.

Justice Elena Kagan told Charles Cooper, who argued on behalf of Cruz, that what “jumps off the page” is campaign funders finding a way to funnel money back into a candidate’s pocket.

“When the question is contributors repaying indebtedness of the candidate so as to make the candidate himself financially better off, richer, that to me screams quid pro quo corruption interest,” Kagan said.

Kagan repeatedly questioned Cooper as to why the reimbursement of a candidate’s loans after an election would not be a gift, as the money that flows to them is a direct benefit.

“If a third party says, ‘You’re doing such a good job, I want to repay your loan for you,’ I mean, one day I had a $10,000 loan; the next day I don’t. I’m $10,000 richer. Somebody just made me a $10,000 gift,” she said.

A key question in the case is whether Cruz has legal standing to challenge the loan-repayment limit. Justice Clarence Thomas asked Stewart about his argument that Cruz’s injury was self-inflicted, raising Homer Plessy’s decision to deliberately sit in a whites-only railcar in 1892 to challenge a state segregation law. The Supreme Court’s landmark 1896 decision in Plessy v. Ferguson upheld the principle of racial segregation and was overturned in 1954.

“What would you say about Plessy sitting in the wrong car?” Thomas asked. “All he has to do is go to another car.”

A decision from the Supreme Court is expected by the end of June.