State election laws on political ad reporting apply across state lines

West Virginia radio and television stations that air political advertisements for Kentucky’s gubernatorial candidates must comply with Kentucky election reporting laws, the U.S. Court of Appeals in Richmond (4th Cir.) ruled in early September.

The appellate court unanimously reversed a decision that held Kentucky did not have the authority to enforce its election reporting laws against West Virginia broadcasters and to do so would be a violation of the broadcasters’ due process rights. The appellate court also held that the campaign reporting requirement did not burden commercial speech in a manner that violated the First Amendment.

Kentucky passed an extensive campaign finance package in 1992 that was designed to bring campaign spending and electoral abuses in check.

The reform packet provides gubernatorial candidates $2 for every dollar received from private donors if they agree to a spending limit of $1.8 million for the entire campaign. Candidates also have to agree not to accept more than $600,000 in private donations each election. In addition, each candidate, campaign committee, and campaign treasurer is required to report all expenditures and contributions to the Kentucky Registry of Election Finance, also known as The Registry.

The law also requires all media that sell time slots to the gubernatorial candidates to report those sales to The Registry no later than 30 days after the election, meaning that all newspapers, magazines, radio and television stations, and “any other person, company, corporation or business organization offering its communications or advertising services for hire to the public,” have to submit documentation of advertising sales.

Print media are required to provide a copy of the advertisement, a copy of the bill or receipt showing how much was spent, the name and address of the purchaser, and the source of the payment if it was not the purchaser. Broadcasters are required to file a copy of the paid political campaign advertisement document required by the Federal Communications Commission, along with a cover letter from the manager of the station or network.

Those who did not comply with the election reporting requirements faced a civil penalty of up to $5,000.

Though enacted in 1992, the law was not tested until the 1995 gubernatorial election, during which West Virginia broadcasters that provide service to 12 counties in neighboring Kentucky aired election advertisements. A lawsuit over the reporting requirements was brought shortly after the election by Adventure Communications Inc., Gateway Communications, Harvit Broadcasting Corp., Heritage Media, Lee Enterprises and Sullivan Broadcasting. The companies operate television and radio stations located in the Charleston-Huntington, W. Va. area.

About 25 percent of the viewers and listeners in the broadcast area live in Kentucky, and Kentucky gubernatorial candidates spent $267,202 advertising with West Virginia broadcasters. West Virginia stations, however, failed to report these expenditures in compliance with the Kentucky law. When threatened with fines, the West Virginia broadcasters brought suit in federal District Court in Huntington asking the court to bar Kentucky officials from enforcing the law against them.

The District Court determined that the regulated conduct, which consisted of preparing the FCC reporting documents and mailing copies, took place in West Virginia, not in Kentucky. Therefore, the court ruled, the broadcasters were not subject to Kentucky law.

Kentucky election finance officials appealed the District Court’s decision to the U.S. Court of Appeals in Richmond (4th Cir.).

Kentucky officials argued that the state had a substantive interest in applying its reporting requirements to the West Virginia broadcasters. The broadcasters’ viewing audiences include a large portion of Kentucky’s population and the stations’ operations had a tremendous effect on a large portion of Kentucky tax dollars. Officials also said that the District Court erred in its determination that where the broadcasters prepared their FCC reports and the origination of the broadcasts were far more important than the relationship between the Commonwealth of Kentucky and the broadcasters.

In response to the broadcasters’ argument about infringement of commercial speech, Kentucky officials responded that the law merely regulates business transactions, not expressive conduct.

The broadcasters, however, maintained that their neighboring state’s legislative jurisdiction is confined under the U.S. Constitution to its territorial limits. As a result, its laws have no effect in other states except as allowed by comity or by permission of the other states. Therefore, any attempt by Kentucky officials to penalize the West Virginia broadcasters would violate Fourteenth Amendment due process rights.

Secondly, the broadcasters argued that the reporting requirement violates the First Amendment because the financial burden it imposes has a “chilling effect on commercial speech.”

In September 1999, the Court of Appeals ruled that West Virginia broadcasters must comply with Kentucky election reporting laws based on the fact that they have “substantive and pervasive” contacts with the state.

Judge William Traxler, who wrote the opinion for the appellate court, noted that while there is a difference between legislative and judicial jurisdiction, the concepts are closely related. Traxler pointed out that the “minimal contacts” test used in determining judicial jurisdiction has been cited by the U.S. Supreme Court in legislative jurisdiction cases.

“In sum, although not identical, judicial and legislative jurisdiction are determined pursuant to similar guidelines,” Traxler wrote. “Thus, we conclude that the idea of ‘contacts’ between the Broadcasters and Kentucky to be of great significance— indeed, primary significance — when analyzing legislative jurisdiction.”

The court noted that the broadcasters earn substantial revenue from Kentucky-based advertisements and political campaigns. They also noted that 25 percent of their audience is made up of Kentucky residents. In addition, the broadcasters have a direct link to statewide election campaigns because the West Virginia television stations are the only major network affiliates that reach residents in eastern Kentucky. All but one of the broadcasters provided regular news coverage on Kentucky events. Consequently, the court held that the contacts between the parties were “substantial” and “pervasive.”

“In short, we conclude that the Broadcasters’ aggregate contacts with Kentucky, coupled with Kentucky’s interest in enforcing its statutory requirements here, were sufficient to satisfy the demands of due process,” Traxler wrote.

In response to the broadcasters’ claim that the requirement infringed on commercial speech, the appeals court found that the reporting law did not affect commercial speech.

“The Kentucky statute does not in any way directly regulate speech or conduct containing an expressive element, and the broadcasters make no such contention,” Traxler wrote. “Thus, the various levels of scrutiny ascribed to content-based or content-neutral regulations of speech are not appropriate here.”

The broadcasters, however, invoked the First Amendment in a more roundabout fashion, alleging that the reporting requirement imposes significant costs on them. As a result, the costs potentially have a “chilling effect” on commercial speech.

Commercial speech, the court noted, is defined as “speech that proposes a commercial transaction.” The speech that Kentucky’s reporting requirement would affect is the gubernatorial candidate messages and that does not fall under commercial speech; it is political speech, the court ruled.

Still, the court noted, the reporting requirement law would pass even the strictest of constitutional tests whether commercial speech or political speech. Kentucky had already proved that the reporting requirement was necessary to enforce its new campaign law.

“There is really no question that Kentucky is advancing a compelling state interest here: the integrity of its electoral system and the eradication of campaign finance corruption,” Judge Traxler wrote. “Furthermore, we conclude that the reporting requirement, in its amended form, is a narrowly tailored means of achieving this aim.”

The court rejected the broadcasters’ argument that compliance cost them a significant amount, pointing out that the information requested by Kentucky was identical to the form the stations had to file with the FCC. (Adventure Communications, Inc. v. Kentucky Registry of Election Finance)