Adventure Comm v. Kentucky Registry , 191 F.3d 429 ( 1999 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ADVENTURE COMMUNICATIONS,
INCORPORATED, a West Virginia
corporation; GATEWAY
COMMUNICATIONS, INCORPORATED, a
Delaware corporation; HARVIT
BROADCASTING CORPORATION, a West
Virginia corporation; HERITAGE
MEDIA, INCORPORATED, a Delaware
corporation; LEE ENTERPRISES,
INCORPORATED, a Delaware
corporation; SULLIVAN
BROADCASTING OF WEST VIRGINIA,
INCORPORATED, a Delaware
corporation,
Plaintiff-Appellees,
v.
No. 98-2778
KENTUCKY REGISTRY OF ELECTION
FINANCE,
Defendant-Appellant,
ILLINOIS BROADCASTERS ASSOCIATION;
INDIANA BROADCASTERS ASSOCIATION;
MISSOURI BROADCASTERS
ASSOCIATION; OHIO ASSOCIATION OF
BROADCASTERS; TENNESSEE
ASSOCIATION OF BROADCASTERS; THE
WEST VIRGINIA BROADCASTERS
ASSOCIATION; KEN HECKLER,
Secretary of the State of West
Virginia; COMMON CAUSE OF
KENTUCKY AND WEST VIRGINIA,
Parties in Interest.
Appeal from the United States District Court
for the Southern District of West Virginia, at Huntington.
Joseph Robert Goodwin, District Judge.
(CA-96-938-3)
Argued: May 6, 1999
Decided: September 9, 1999
Before WILKINSON, Chief Judge, and TRAXLER
and KING, Circuit Judges.
_________________________________________________________________
Reversed by published opinion. Judge Traxler wrote the opinion, in
which Chief Judge Wilkinson and Judge King joined.
_________________________________________________________________
COUNSEL
ARGUED: Sheryl G. Snyder, BROWN, TODD & HEYBURN,
P.L.L.C., Louisville, Kentucky, for Appellant. David Allen Barnette,
JACKSON & KELLY, P.L.L.C., Charleston, West Virginia, for
Appellees. ON BRIEF: Ancil G. Ramey, George E. Carenbauer,
STEPTOE & JOHNSON, Charleston, West Virginia, for Appellant.
_________________________________________________________________
OPINION
TRAXLER, Circuit Judge:
At issue in this appeal is a Kentucky statute imposing reporting
requirements upon broadcast media that sell advertising time to Ken-
tucky gubernatorial candidates. The sweep of the statutory scheme
encompasses appellees -- a number of nonresident television and
radio broadcasters located in West Virginia (collectively "Broadcast-
ers"). We are presented with the question of whether the Kentucky
reporting requirements may be applied to the West Virginia Broad-
casters within the constraints of the Due Process Clause of the Four-
2
teenth Amendment and the Free Speech Clause of the First
Amendment. We conclude that the statutory provisions at issue do not
offend the Constitution.
I.
During the past decade, the Commonwealth of Kentucky has suf-
fered a number of high-profile political campaign scandals, culminat-
ing in the indictment of various public officials and lobbyists. In
1992, in an effort to curb further corruption, Kentucky passed exten-
sive campaign finance reform legislation, see Ky. Rev. Stat. Ann.
§ 121A.005-.990 (Michie 1993 & Supp. 1999), featuring a provision
establishing partial public funding for qualifying slates of candidates
seeking the office of governor or lieutenant governor, see Ky. Rev.
Stat. Ann. §§ 121A.020, 121A.080. The public-funding provision
operates on a quid pro quo basis: a slate of candidates must agree to
a total campaign spending cap of $1.8 million, including public funds
received by the candidates, per primary or general election in order
to qualify for public financing. See Ky. Rev. Stat. Ann.
§§ 121A.010(5), 121A.030. Kentucky will match two dollars for
every one dollar in private donations raised by a qualifying slate of
candidates, see Ky. Rev. Stat. Ann. § 121A.060(3)(c), with the provi-
sion that the slate accept no more than $600,000 in private donations
per election, see Ky. Rev. Stat. Ann. § 121A.060(1).
In order to police compliance with the spending limit, Kentucky
enacted a number of reporting requirements as part of its reform legis-
lation. See 1992 Ky. Acts, ch. 288, § 28.1 Candidates for governor and
lieutenant governor, along with their campaign committees and trea-
surers, are required to report all expenditures and contributions to the
Kentucky Registry of Election Finance (the "Registry"). See Ky. Rev.
Stat. Ann. § 121.180(3)(a) (Michie Supp. 1998). Likewise, fundr-
aisers are required to report contributions received and expenditures
made on behalf of gubernatorial candidates. See id. Political action
_________________________________________________________________
1 Prior to 1992, Kentucky's existing campaign finance laws imposed
various reporting requirements upon the candidates and their committees;
however, the reform legislation in 1992 overhauled the reporting scheme
and included additional groups and individuals within its scope. See 1992
Ky. Acts, ch. 288, § 28.
3
committees, too, are obliged to report expenditures made "for a com-
munication which expressly advocates the election or defeat of a
clearly identified candidate or slate of candidates ...." Ky. Rev. Stat.
Ann. § 121.015(12) (Michie Supp. 1998); see Ky. Rev. Stat. Ann.
§ 121.180(6)(d) (Michie Supp. 1998).
Of particular import here is a requirement mandating that all major
advertising media report certain information regarding their sales of
advertising spots to gubernatorial candidates. See Ky. Rev. Stat. Ann.
§ 121.180(11) (Michie Supp. 1998). Newspaper and magazine pub-
lishers must "file with the registry a copy of the material or communi-
cation purchased which supports or opposes any slate of candidates
...; a copy of the receipt for the funds paid; the name and address of
each purchaser; and the source of the funds for the purchase if differ-
ent than the purchaser." Ky. Rev. Stat. Ann.§ 121.180(11)(a). This
requirement also applies to "any other person, company, corporation,
or business organization offering its communications or advertising
services for hire to the public." Id.
Television and radio stations are subject to other, arguably less
onerous, reporting requirements than the print media, having to file
with the Registry only "a copy of the documentation of paid political
campaign advertisements that is required to be maintained by the Fed-
eral Communications Commission, along with a cover letter from the
manager of the station or network or the manager's designee." Ky.
Rev. Stat. Ann. § 121.180(11)(b).2 A noncomplying radio or televi-
_________________________________________________________________
2 The FCC requires that television and radio stations maintain certain
basic information relating to political campaign advertisements:
(a) [The stations must] keep and permit public inspection of a
complete and orderly record (political file) of all requests for
broadcast time made by or on behalf of a candidate for public
office, together with an appropriate notation showing the dispo-
sition made by the licensee of such requests, and the charges
made, if any, if the request is granted. The "disposition" includes
the schedule of time purchased, when spots actually aired, the
rates charged, and the classes of time purchased.
...
(c) All records required by this paragraph shall be placed in the
political file as soon as possible and shall be retained for a period
4
sion station is subject to a civil penalty of up to $5,000. See Ky. Rev.
Stat. Ann. §§ 121.140(2), 121.180(11)(e). The report must be mailed
to the Registry no later than 30 days after the election. See Ky. Rev.
Stat. Ann. § 121.180(11)(c). According to the Registry, the purpose
of requiring the media to file reports is to ensure that Kentucky has
independent information with which to verify the media expenditure
reports from the candidates.
The Broadcasters operate television and radio stations located
within the Charleston-Huntington, West Virginia television "Domi-
nant Market Area" (DMA), which consists of 16 counties in West
Virginia, 12 counties in Kentucky, and 7 counties in Ohio. Approxi-
mately 25% of the households within the DMA are located in Ken-
tucky. The Broadcasters routinely cover news stories originating from
Kentucky, including statewide elections and local elections in eastern
Kentucky. Not surprisingly, then, the Broadcasters solicit potential
sponsors from the 12 Kentucky counties within the Charleston-
Huntington DMA through sales agents operating inside of Kentucky.
The Broadcasters do not dispute that they derive substantial advertis-
ing revenue from sponsors located in Kentucky.
In 1995, Kentucky held its primary and general elections for the
first time under the new campaign spending and reporting provisions.
Because the Broadcasters service a large part of eastern Kentucky,
statewide candidates purchased advertising time from these stations as
they had done during previous elections. All told, the Broadcasters
received $267,202 in revenue from candidates for governor and lieu-
tenant governor during the 1995 primary and general elections. At the
conclusion of the elections, however, when they failed to comply
fully with the reporting requirements, the Registry sent written
demands for compliance, in certain instances referencing the poten-
tially applicable penalties.3
_________________________________________________________________
of two years. As soon as possible means immediately absent
unusual circumstances.
47 C.F.R. § 73.1943 (1998).
3 When originally enacted, and at the time of the 1995 elections,
§ 121.180(11) required television and radio broadcasters to file the same
information as the print media: a copy of the political advertisement; a
5
In September 1996, the Broadcasters filed this action for declara-
tory and injunctive relief, raising several constitutional claims.
Among these were the two contentions we consider on appeal: that
Kentucky's attempt to enforce its reporting requirements against them
was an extra-territorial application of state law for which Kentucky
had no jurisdiction, abridging their due process rights, and that Ken-
tucky's application of the reporting requirements to members of the
broadcast media had a chilling effect on commercial speech.
The district court concluded "that the Kentucky statutory scheme,
if applied to the [Broadcasters], would improperly extend the Com-
monwealth's sovereign power beyond its territorial boundaries" and
that "Kentucky lacks the legislative power to apply Section
121.180(11) of the Kentucky Revised Statutes to the[Broadcasters]."
J.A. 363-64. Having decided that Kentucky could not, consistent with
due process, enforce the statute against the Broadcasters, the district
court did not address the Broadcasters' First Amendment claim.4 The
Registry appealed.
_________________________________________________________________
receipt showing the amount of funds paid for the advertisement; the iden-
tity of the purchaser of the advertisement; and the source of the funds for
the advertisement if not identical to the purchaser. See Ky. Rev. Stat.
Ann. § 121.180(11) (Michie 1993). Also, at the time of the 1995 elec-
tions, the statute imposed both civil and criminal sanctions for violations
of the reporting requirements. See Ky. Rev. Stat. Ann. §§ 121.990,
121A.990 (Michie 1993).
In 1996, Kentucky's General Assembly eliminated the criminal penal-
ties for violating the reporting requirements. See Ky. Stat. Ann.
§§ 121.140(2), 121.180(11)(e) (Michie Supp. 1998). And, in 1998, the
General Assembly loosened the reporting requirements that Kentucky
applied to over-the-air broadcasters such that television and radio sta-
tions are now required to submit to the Registry only a copy of their FCC
report along with a cover letter. See Ky. Rev. Stat. Ann. § 121.180(11)(b)
(Michie Supp. 1998). Despite these amendments, which occurred during
the pendency of this case, the Broadcasters continue their attack against
the current version of the statute, and the parties agree that it is only this
version which is at issue.
4 The Broadcasters also asserted that Kentucky's reporting scheme
unduly burdened interstate commerce in violation of the Dormant Com-
merce Clause and that the reporting requirements impermissibly
restricted the Broadcasters' fundamental right to free speech in violation
of the Equal Protection Clause. The district court, however, did not
address these claims, and the Broadcasters do not advance them here.
6
II.
Relying on the general principle that a state's legislative jurisdic-
tion is restricted to "its territorial limits, and its laws have no opera-
tion in other states except as allowed by those states or by comity,"
Stover v. O'Connell Assoc., Inc., 84 F.3d 132, 136 (4th Cir. 1996), the
district court concluded that Ky. Rev. Stat. Ann.§ 121.180(11)(b)
cannot constitutionally be applied to the Broadcasters because the
conduct sought to be regulated, when viewed precisely, occurred
wholly outside of Kentucky's borders. In the district court's view,
since the Broadcasters' actual conduct, consisting of reproducing their
FCC files and placing the copies in the United States mail, technically
occurred in West Virginia, such was not subject to control by Ken-
tucky. In so concluding, the district court noted the distinction
between legislative and adjudicative jurisdiction, and rejected any
suggestion that the familiar "minimum contacts" analysis developed
to determine whether a state can assert judicial jurisdiction over a per-
son applied in this context. See Quill Corp. v. North Dakota, 504 U.S.
298, 319-20 (1992) (Scalia, J., concurring) (observing that adjudica-
tive jurisdiction and legislative jurisdiction are distinct concepts). The
district court apparently concluded that the Broadcasters' contacts
with Kentucky, regardless of their number, were irrelevant to deter-
mining legislative jurisdiction, and that the analysis should instead
focus exclusively on whether the physical activity purportedly being
regulated occurred within Kentucky's borders or caused harm there.5
_________________________________________________________________
5 We cannot help but conclude that the district court's analysis was
based largely on the assumption that the Kentucky statute at issue was
essentially a criminal statute and that, as a result, the issue was really
whether Kentucky has the power to criminalize conduct occurring
wholly outside of its territorial boundaries. Indeed, the district court
explained that "[d]espite the frequency of the [Broadcasters'] contacts
with Kentucky ... Kentucky simply does not have the legislative author-
ity to require a West Virginia citizen to comport with Kentucky's crimi-
nal laws when conducting activity that occurs totally outside the
Commonwealth." J.A. 376. As we noted, however, Kentucky has elimi-
nated the criminal penalties for failing to file a report under its statute,
and the Broadcasters' challenge is limited to the Kentucky statute in its
current form. Neither party suggests that the penalties for failure to com-
ply with § 121.180(11) are criminal in nature.
7
The Registry argues that where the Broadcasters prepare the report
is less important than the relationship between the Broadcasters and
the Commonwealth of Kentucky. Although the Registry does not sug-
gest that we apply a minimum contacts analysis, it contends that the
Broadcasters' aggregate contacts with Kentucky are indeed relevant
and are substantial enough that it is not fundamentally unfair to sub-
ject them to the Kentucky statute.
A.
The district court correctly observed that there is a difference
between jurisdiction to adjudicate or judicial jurisdiction on the one
hand, and legislative jurisdiction on the other. See generally Willis
L.M. Reese, Legislative Jurisdiction, 78 Colum. L. Rev. 1587, 1587-
94 (1978). The former concerns the power of a state to resolve a par-
ticular dispute through its court system, while the latter involves "the
authority of a state to make its law applicable to persons or activities."
Hartford Fire Ins. Co. v. California, 509 U.S. 764, 813 (1993) (inter-
nal quotation marks omitted) (Scalia, J., dissenting). Legislative juris-
diction is a core concept "to determining the extraterritorial reach of
a statute." Id. To put it succinctly: Legislative jurisdiction refers to
both "the lawmaking power of a state" and"the power of a state to
apply its laws to any given set of facts," whereas adjudicative juris-
diction "is the power of a state to try a particular action in its courts."
McCluney v. Jos. Schlitz Brewing Co., 649 F.2d 578, 581 n.3 (8th Cir.
1981) (emphasis in original), aff'd, 454 U.S. 1071 (1981).
Nevertheless, the concepts are closely related. A state's adjudica-
tive jurisdiction is circumscribed by the due process clause, see Asahi
Metal Indus. Co., Ltd. v. Superior Court of Cal., 480 U.S. 102, 113
(1987) (state may not exercise judicial jurisdiction over a person if to
do so would run afoul of "traditional notions of fair play and substan-
tial justice" (internal quotation marks omitted)), as is its legislative
jurisdiction, see Allstate Ins. Co. v. Hague, 449 U.S. 302, 312-13
(1981) (state may not apply its substantive law if to do so would be
fundamentally unfair).6
_________________________________________________________________
6 Another traditional constitutional source of restriction on a state's
power to apply its law beyond its borders is the full faith and credit
clause. See Hague, 449 U.S. at 308 n.10. Here, however, the Broadcast-
ers' challenge is limited to whether the Kentucky statute, as applied to
them, exceeds the constraints of the due process clause.
8
Moreover, there is substantial overlap in the analysis employed in
determining the presence of each kind of jurisdiction. The standard
for deciding whether a court may exercise adjudicative jurisdiction
over a defendant, established by International Shoe Co. v.
Washington, 326 U.S. 310 (1945), and its progeny, is well-
recognized: Does the defendant "have certain minimum contacts with
[the forum state] such that the maintenance of the suit does not offend
traditional notions of fair play and substantial justice." Id. at 316
(internal quotation marks omitted).
In exploring the due process limits on the legislative power of a
state, the Supreme Court has employed language similar to that used
in personal jurisdiction matters, explaining that"[t]here must be at
least some minimal contact between a State and the regulated subject
before it can, consistently with the requirements of due process, exer-
cise legislative jurisdiction." Hellenic Lines Ltd. v. Rhoditis, 398 U.S.
306, 314 n.2 (1970) (emphasis added); see also McCluney, 649 F.2d
at 581 (noting that until Hague "it was unclear whether the due pro-
cess limitation upon a state's extraterritorial application of law mir-
rored the due process analysis for determining the limits of a state
court's judicial jurisdiction"). Thus, we conclude the idea of "con-
tacts" between the Broadcasters and Kentucky to be of great signifi-
cance -- indeed, primary significance -- when analyzing legislative
jurisdiction. To this end, the Supreme Court's conflict-of-laws juris-
prudence provides a useful guide.
In Home Ins. Co. v. Dick, 281 U.S. 397, 407-10 (1930), the Court
concluded that a Texas insurance statute could not be applied, consis-
tent with the due process clause, to invalidate a provision contained
in an insurance policy that had been issued in Mexico and was to be
performed in Mexico. In so holding, the Court examined the contacts
between the activity Texas purported to regulate-- the making of the
insurance contract -- and the State of Texas. See id. at 407-08. Find-
ing none that were substantial, the Court concluded that Texas was
without power to apply its law to alter the insurance contract, and that
to do so amounted to a due process violation. See id. at 408. Likewise,
in John Hancock Mut. Life Ins. Co. v. Yates, 299 U.S. 178, 182
(1936), the Court again examined the relationship between the trans-
action to be regulated and the state by applying the precept that the
Constitution does not permit a state to apply its law when the contacts
9
between it and the transaction are too attenuated. See Hague, 449 U.S.
at 310-11 ("Dick and Yates stand for the proposition that if a State has
only an insignificant contact with the parties and the occurrence or
transaction, application of its law is unconstitutional." (emphasis
added)).
In Hague, the Court provided a concise test for the exercise of leg-
islative jurisdiction: "[F]or a State's substantive law to be selected in
a constitutionally permissible manner, that State must have a signifi-
cant contact or significant aggregation of contacts, creating state inter-
ests, such that [application] of its law is neither arbitrary nor
fundamentally unfair." Hague, 449 U.S. at 312-13; see Thornton v.
Cessna Aircraft Co., 886 F.2d 85, 89 (4th Cir. 1989) (applying
Hague).
This standard is not too different from the gauge used by the Court
in evaluating a state's jurisdiction to tax various activities of nonresi-
dents. A state possesses the power to impose a tax upon an out-of-
state entity only when there is a "nexus between the taxing State and
the taxpayer," i.e., "some definite link, some minimum connection,
between a state and the person, property or transaction it seeks to
tax." American Oil Co. v. Neill, 380 U.S. 451, 458 (1965) (emphasis
added) (internal quotation marks omitted). It is clear, however, that
there can be sufficient contacts between the taxing state and the per-
son or transaction to be taxed to satisfy due process even though the
transaction does not physically transpire within the state's borders or
the person is not physically present there. See Quill, 504 U.S. at 308
(holding that North Dakota could impose a use tax upon an out-of-
state mail-order vendor within the constraints of due process even
though the vendor lacked a physical presence in North Dakota).7 Due
process requires simply that the taxpayer "purposefully direct[ ] its
_________________________________________________________________
7 In declining to find that due process requires an entity to have a physi-
cal presence within a state before it is subject to the state's jurisdiction
to levy a use tax, the Quill majority overruled National Bella Hess, Inc.
v. Department of Revenue, 386 U.S. 753 (1967), to the extent it held the
due process clause imposed such a requirement. Significantly, it found
that the analysis in Bella Hess was no longer viable in light of the court's
development of a less rigid approach to a state's adjudicative jurisdic-
tion. See Quill, 504 U.S. at 307.
10
activities" at the taxing state and develop sufficient contacts there
such that the imposition of the tax is not unfair. Id. And, a state's
power to extend its regulatory jurisdiction beyond its borders likewise
hinges on much the same reasoning. See Travelers Health Ass'n v.
Virginia, 339 U.S. 643, 648 (1950) ("[T]he contacts and ties of appel-
lants with Virginia residents, together with that state's interest in
faithful observance of [the statutory scheme it sought to apply to
appellants], justify subjecting appellants to[administrative] proceed-
ings.").
In sum, although not identical, judicial and legislative jurisdiction
are determined pursuant to like guidelines. As Justice Brennan
explained:
[B]oth inquiries are often closely related and to a substantial
degree depend upon similar considerations. In either case an
important linchpin is the extent of contacts between the con-
troversy, the parties, and the forum State. While constitu-
tional limitations on the choice of law are by no means
settled, important considerations certainly include the
expectancies of the parties and the fairness of governing the
defendants' acts and behavior by rules of conduct created by
a given jurisdiction. These same factors bear upon the pro-
priety of a State's exercising jurisdiction over a legal dis-
pute. At the minimum, the decision that it is fair to bind a
defendant by a State's laws and rules should prove to be
highly relevant to the fairness of permitting that same State
to accept jurisdiction for adjudicating the controversy.
Shaffer v. Heitner, 433 U.S. 186, 224-25 (1977) (Brennan, J., concur-
ring and dissenting) (internal quotation marks and citations omitted);
see also Hague, 449 U.S. at 317 n.23 (noting that the existence of per-
sonal jurisdiction is a significant factor in determining whether the
application of a state's substantive law is constitutional). Blending
these guiding precedents, we must determine whether there are suffi-
cient contacts between Kentucky and the Broadcasters, or the Broad-
casters' activities that Kentucky seeks to affect, creating state interests
such that it would not be fundamentally unfair to subject the Broad-
casters to the Kentucky campaign reporting requirements.
11
B.
The contacts between the Broadcasters and Kentucky are substan-
tial and pervasive. The Broadcasters' West Virginia stations are all
located within the Charleston-Huntington DMA, which is comprised
of a total of 35 counties in three states -- including 12 counties in
eastern Kentucky. Thus, the Broadcasters' telecasts and radio broad-
casts are directed toward eastern Kentucky and its citizens. A full
one-fourth of the households receiving these telecasts are located in
Kentucky. And, the Broadcasters maintain written retransmission
consent agreements with cable television systems whose subscribers
live in Kentucky. All of the Broadcasters, save one, provide regular
coverage of news developments in Kentucky, and some of them trans-
mit live radio broadcasts from various Kentucky businesses advertis-
ing on their stations. Most of the Broadcasters employ Kentucky
residents and maintain listings in telephone directories published in
Kentucky. As a result, the Broadcasters, as a general matter, market
advertising slots to potential sponsors residing within Kentucky's por-
tion of the DMA. The Broadcasters market their services in Kentucky
in person, by telephone, and by mail. The Broadcasters concede that,
collectively, they enjoy substantial revenue generated from Kentucky-
based advertisements.
The Broadcasters have direct links with Kentucky's statewide elec-
tions as well. Most significantly, they stipulated before the district
court that they "solicit business from candidates in statewide electoral
contests in Kentucky by marketing directed to the candidates and their
agents situated in Kentucky, as well as to the candidates' agents situ-
ated outside Kentucky." J.A. 77. And, since the Broadcasters "are the
only over-the-air television stations affiliated with the major commer-
cial television networks whose broadcasts reach a significant portion
of Eastern Kentucky, candidates for statewide political office in Ken-
tucky routinely purchase advertising time during election campaigns
on the [Broadcasters'] stations." J.A. 77. During the 1995 primary and
general gubernatorial elections, the Broadcasters received political
advertising revenues totaling $267,202.
Also significant is the fact that the majority of the advertising reve-
nue received by the Broadcasters was comprised of Kentucky tax dol-
lars. Because each gubernatorial slate that agreed to cap its campaign
12
spending received public funding of two dollars for every one dollar
in private contributions, two-thirds of the revenue received consisted
of Kentucky tax money.8 See Ky. Rev. Stat. Ann. §§ 121A.030,
121A.060.
Furthermore, in view of the fact that a large portion of the substan-
tial advertising revenues received by the Broadcasters was comprised
of Kentucky tax dollars, Kentucky had a clear interest in applying its
reporting scheme to the Broadcasters. The reporting requirements
advance the general statutory goal of stemming corruption and pro-
moting electoral integrity by serving as an additional method to
ensure compliance with the spending limits and to verify that Ken-
tucky tax money is put to proper use.
In short, we conclude that the Broadcasters' aggregate contacts
with Kentucky, coupled with Kentucky's interest in enforcing its stat-
utory requirements here, were sufficient to satisfy the demands of due
process. Thus, we reverse the district court's decision that Kentucky's
statutory requirement that television and radio stations provide the
Registry with a copy of their FCC political file, see Ky. Rev. Stat.
Ann. § 121.180(11), as applied to the Broadcasters, is an improper
exercise of legislative jurisdiction in violation of the due process
clause.
III.
The Broadcasters advance an alternative basis under the First
Amendment for affirming the order of the district court.9 They con-
_________________________________________________________________
8 We find it of no moment that the advertisements for many of the can-
didates were placed through out-of-state advertising agencies located in
Washington, D.C. and elsewhere. Although the actual physical transac-
tions in these instances may have occurred outside of Kentucky, they had
every connection with Kentucky because the transactions involved Ken-
tucky tax revenue expended on behalf of candidates seeking statewide
elected office in Kentucky.
9 In their cross-motion for summary judgment, the Broadcasters argued
that the Kentucky reporting statute contravened not only the due process
clause, but a number of other constitutional provisions as well, including
the First Amendment. The district court did not address the Broadcasters'
13
tend that the statutory reporting requirements impermissibly burden
speech under the First Amendment. The Broadcasters would analyze
the statute under an intermediate degree of scrutiny that is applied to
commercial speech regulations. Kentucky, on the other hand, con-
tends that the reporting requirement merely regulates business trans-
actions, not expressive conduct, and thus does not rouse First
Amendment concerns at all. Alternatively, Kentucky argues that even
if the statute is construed as regulating expressive conduct, it would
also apply an intermediate level of scrutiny, under which the statute
passes constitutional muster.
A.
The Supreme Court has established varying degrees of review
under the First Amendment, depending upon the extent to which the
law being inspected infringes on speech. We are to"apply the most
exacting scrutiny to regulations that suppress, disadvantage, or
impose differential burdens upon speech because of its content."
Turner Broad. Sys. v. FCC, 512 U.S. 622, 642 (1994). Content-
neutral laws, i.e., "speech regulations ... that are justified without ref-
erence to the content of the regulated speech," see City of Renton v.
Playtime Theaters, Inc., 475 U.S. 41, 48 (1986) (internal quotation
marks omitted) (emphasis in original), have generally been subjected
to some form of intermediate scrutiny, see United States v. O'Brien,
391 U.S. 367, 376 (1968) (applying intermediate scrutiny to regula-
tion of conduct containing both speech and nonspeech elements);
United States v. Grace, 461 U.S. 171, 177 (1983) (discussing time,
_________________________________________________________________
alternative grounds for summary judgment, having concluded that the
Broadcasters' due process rights had been abridged. Consequently, the
parties did not brief the First Amendment issue. Finding First Amend-
ment grounds as a potential basis for affirming the district court, see
PHP Healthcare Corp. v. EMSA Ltd. Partnership, 14 F.3d 941, 945 (4th
Cir. 1993) ("[W]e are not restricted to the basis upon which the district
court made its ruling, but may affirm on any legal and factual basis fairly
presented in the district court...."), we directed the parties, after oral argu-
ment, to submit supplemental briefs on the following issue: Does the
statute at issue violate the Broadcasters' rights under the First Amend-
ment, either on its face or as applied?
14
place and manner restrictions). Likewise, the regulation of commer-
cial speech is subject to an intermediate degree of scrutiny. See
Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n, 447 U.S.
557, 566 (1980).
The First Amendment is also implicated when the government reg-
ulates the media -- even if speech is not being regulated directly --
because the media engage in the transmission of speech. See Leathers
v. Medlock, 499 U.S. 439, 444 (1991). Nevertheless, we are mindful
that the broadcast media -- which are involved here -- have histori-
cally been subject to more intrusive regulation than the print media.
See, e.g., Red Lion Broad. Co. v. FCC, 395 U.S. 367, 387-89 (1969).
The underlying reason for allowing greater regulation of the broadcast
media is that, given its limited nature, the spectrum of broadcast fre-
quencies is a scarce resource that cannot accommodate every person
who desires to project speech over the airwaves, whereas, theoreti-
cally, any person so inclined can publish written speech or engage in
oral speech. See id. at 388 ("Where there are substantially more indi-
viduals who want to broadcast than there are frequencies to allocate,
it is idle to posit an unabridgeable First Amendment right to broadcast
comparable to the right of every individual to speak, write, or pub-
lish."); see also Turner, 512 U.S. at 637-41 (explaining that the scar-
city policy basis for regulating the broadcast media does not apply to
the cable industry). Accordingly, the Court has typically applied a
relaxed form of scrutiny to general regulation of over-the-air broad-
casters as opposed to the print media, see, e.g. , Red Lion, 395 U.S.
at 387-401, or the cable industry, see Turner , 512 U.S. at 637-40.
Of course, laws that do not touch or concern speech or expressive
activity in the first instance do not raise First Amendment concerns,
even though they apply to the press, unless they impermissibly single
out the media. See Arcara v. Cloud Books, Inc. , 478 U.S. 697, 706-07
(1986). Such laws are subject to heightened scrutiny only if they tar-
get or disproportionately burden the press. See Cohen v. Cowles
Media Co., 501 U.S. 663, 669-70 (1991). Otherwise, we simply apply
a rational basis review. See id.
15
B.
The Kentucky statute does not in any way directly regulate speech
or conduct containing an expressive element, and the Broadcasters
make no such contention. Thus, the various levels of scrutiny ascribed
to content-based or content-neutral regulations of speech are not
appropriate here. Rather, the Broadcasters invoke the First Amend-
ment in more of a roundabout fashion. They suggest that the filing
requirement imposes significant costs upon them and, as a result,
potentially chills commercial speech. Thus, their argument is essen-
tially that the Kentucky statute incidentally burdens commercial
speech -- presumably because the Kentucky law requires them to
report information relating to advertisements -- and that we must
apply at least some level of intermediate scrutiny in testing the valid-
ity of the statute under the First Amendment.10 Specifically, they
invite us to apply the four-prong Central Hudson analysis for com-
mercial speech. See 447 U.S. at 566. The Broadcasters claim that the
statute fails the Central Hudson test because Kentucky's interest in
enforcing the reporting scheme is not sufficiently substantial to justify
subjecting them to it and that, even if Kentucky's interest qualifies as
substantial, the statutory provision at issue is more restrictive than
necessary to serve the asserted governmental interest. We decline to
apply Central Hudson because even if the statute incidentally burdens
speech -- which the Broadcasters have not demonstrated -- it is not
commercial speech.
In the abstract, the definition of commercial speech appears to be
fairly straightforward, if somewhat circular: it is speech that
"`propose[s] a commercial transaction.'" Board of Trustees v. Fox,
492 U.S. 469, 473 (1989) (quoting Virginia State Bd. of Pharmacy v.
Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 762 (1976));
see also Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 66 (1983);
Central Hudson, 447 U.S. at 562. In practice, however, application of
this definition is not always a simple matter. See generally Alex Koz-
_________________________________________________________________
10 Although the Broadcasters suggest in passing that the Kentucky stat-
ute impinges directly upon core political speech (and, by implication, is
therefore subject to strict scrutiny), their argument rests almost exclu-
sively on the proposition that intermediate scrutiny applies. In any event,
we find no merit in this suggestion.
16
inski & Stuart Banner, Who's Afraid of Commercial Speech, 76 Va.
L. Rev. 627 (1990). For instance, that speech is rendered in the form
of an advertisement does not necessarily render such speech commer-
cial in nature. See Bolger, 463 U.S. at 66; New York Times Co. v.
Sullivan, 376 U.S. 254, 265-66 (1964) (concluding that an advertise-
ment soliciting funds for political and social ends was entitled to more
protection than mere commercial speech). Nor does a cursory refer-
ence to a particular product necessarily convert into commercial
speech that which is otherwise noncommercial. See Bolger, 463 U.S.
at 66. In and of itself, profit motive on the speaker's part does not
transform noncommercial speech into commercial speech. See id. at
67. Yet, the confluence of these considerations may permit the con-
clusion that the speech at issue is commercial in nature. See id.
Furthermore, when the speech at issue contains both commercial
elements and political or social commentary, the line between com-
mercial and noncommercial speech can be difficult to discern. When
these elements are intertwined, the commercial or noncommercial
character of the speech is determined by "the nature of the speech
taken as a whole." Riley v. National Fed'n of the Blind of North Caro-
lina, Inc., 487 U.S. 781, 796 (1988). Consideration of the full context
of the speech is therefore critical. See Bolger , 463 U.S. at 67-68.
Thus, if a communication, at bottom, proposes a commercial transac-
tion, the fact that it contains some commentary about issues of public
interest will not alter its nature. See Fox, 492 U.S. at 475 ("We have
made clear that advertising which links a product to a current public
debate is not thereby entitled to the constitutional protection afforded
noncommercial speech." (internal quotation marks omitted)).
For purposes of this case, however, we need not ponder the analyti-
cal niceties of speech that contains both commercial and noncommer-
cial elements. The general contours of the definition of commercial
speech are sufficient for us to discern that the only speech which
could possibly be impacted here is not commercial. Rather, we are
addressing gubernatorial campaign messages which, generally speak-
ing, fall squarely within the notion of core political speech and are
quintessentially noncommercial. The only consideration that gives us
pause is the medium of the speech: paid advertisements. However, the
mere fact that political speech is delivered in such a fashion, i.e., that
"money is spent to project it, as in a paid advertisement," Virginia Bd.
17
of Pharmacy, 425 U.S. at 761, does not taint its otherwise noncom-
mercial nature, see id.; Bolger, 463 U.S. at 66. As the Court has
observed, the fact that the press is "paid for publishing the advertise-
ment is immaterial ... as is the fact that newspapers and books are
sold." New York Times, 376 U.S. at 266. Far more important is con-
tent of the political advertisement. See id.11
We are convinced that the speech which the Broadcasters contend
will be impacted by the reporting requirements -- gubernatorial cam-
paign advertisements -- is not speech that "proposes a commercial
transaction." Thus, we conclude the application of Central Hudson
would be inappropriate here, despite the contentions of the parties.
C.
This issue does not fit neatly under any distinct line of decisions.
However, we need not strain to force it into any particular niche
because this statute passes muster under any level of scrutiny.
Regardless of the level of scrutiny, it is clear that Kentucky selected
a narrowly tailored means to further a compelling state interest.
There is really no question that Kentucky is advancing a compel-
ling state interest here: the integrity of its electoral system and the
eradication of campaign finance corruption. Cf. Kentucky Right to
_________________________________________________________________
11 Although the New York Times decision was rendered prior to
Virginia State Bd. of Pharmacy, 425 U.S. 748, which first granted lim-
ited constitutional protection to "commercial speech" as we now under-
stand that term, it is nevertheless instructive on the essence of
commercial speech. In New York Times, the court considered the nature
of a newspaper advertisement which, among other things, solicited funds
for the defense of Dr. Martin Luther King against a perjury charge and
in support of students engaged in the civil rights movement. The court
rejected the idea that the speech at issue was of a"commercial" nature,
noting that the advertisement "communicated information, expressed
opinion, recited grievances, protested claimed abuses, and sought finan-
cial support on behalf of a movement whose existence and objectives are
matters of the highest public interest and concern." New York Times, 376
U.S. at 266. The campaign advertisements at issue here were likewise
directed to matters of the highest public interest and concern in Ken-
tucky.
18
Life, Inc. v. Terry, 108 F.3d 637, 640 (6th Cir.) ("[T]he purpose of
[Kentucky's campaign finance law] is to combat actual and perceived
corruption in Kentucky politics by regulating contributions and
expenditures in Kentucky public elections."), cert. denied, 118 S. Ct.
162 (1997). The Supreme Court has regularly recognized that the pre-
vention of real and perceived corruption in the electoral process quali-
fies as a compelling state interest. See Buckley v. Valeo, 424 U.S. 1,
27, 67-68 (1974) (per curiam); see also Colorado Republican Fed.
Campaign Comm. v. Federal Election Comm'n, 518 U.S. 604, 609
(1996) (recognizing a compelling governmental interest "in assuring
the electoral system's legitimacy, [and] protecting it from the appear-
ance and reality of corruption"); McIntyre v. Ohio Elections Comm'n,
514 U.S. 334, 356 (1995) (acknowledging Ohio's compelling interest
"in avoiding the corruption that might result from campaign expendi-
tures"); Federal Election Comm'n v. National Conservative Political
Action Comm., 470 U.S. 480, 496-97 (1985) ("[P]reventing corruption
or the appearance of corruption are the only legitimate and compel-
ling government interests thus far identified for restricting campaign
finances."). What Kentucky seeks to circumscribe is the "subversion
of the political process" where "[e]lected officials are influenced to
act contrary to their obligations of office by the prospect of financial
gain to themselves or infusions of money into their campaigns."
National Conservative PAC, 470 U.S. at 497. As we have explained,
"[c]orruption, either petty or massive, is a compelling state interest
because it distorts both the concept of popular sovereignty and the
theory of representative government." North Carolina Right to Life,
Inc. v. Bartlett, 168 F.3d 705, 715 (4th Cir. 1999), petition for cert.
filed, ___ U.S.L.W. ___ (U.S. May 18, 1999) (No. 98-1887).
Sadly, for Kentucky, the risk of corruption, both actual and per-
ceived, is all too real. See supra Part I. Indeed, case reporters contain
several examples that bear this out. See, e.g. , United States v. Collins,
78 F.3d 1021 (6th Cir. 1996) (affirming conviction of governor's hus-
band for federal violations arising from gubernatorial fundraising
activities); United States v. LeMaster, 54 F.3d 1224 (6th Cir. 1995)
(affirming conviction of state senator for making false statements to
the FBI during investigation of corruption in the Kentucky General
Assembly); United States v. Blandford, 33 F.3d 685 (6th Cir. 1994)
(same with respect to Kentucky's Speaker of the House). We think it
is clear that Kentucky's interest in maintaining the integrity of its
19
electoral process and stemming actual or perceived corruption is com-
pelling.
Furthermore, we conclude that the reporting requirement, in its
amended form, is a narrowly tailored means of achieving this aim. To
begin with, the statute implements the reporting requirement only for
direct advocacy, not for issue advocacy where the state interest would
be "less powerful." McIntyre, 514 U.S. at 356. In our view,
§ 121.180(11)(b) directly advances Kentucky's asserted state interest.
As the Court explained at length in Buckley, disclosure and reporting
requirements generally have the effect of "exposing large contribu-
tions and expenditures to the light of publicity" which, in turn, "dis-
courage[s] those who would use money for improper purposes" and
enables the voting public "to detect any post-election special favors
that may be given in return" for campaign contributions. Buckley, 424
U.S. at 67. Reporting requirements, in particular,"are an essential
means of gathering the data necessary to detect violations of [cam-
paign finance laws]." Id. at 68. Under Kentucky's scheme, the
requirement that the Broadcasters file a copy of their FCC report with
the Registry functions as just such a means of identifying and detect-
ing campaign finance infractions.
Moreover, we agree with Kentucky that the reporting requirement
visits no real hardship on the Broadcasters. The Broadcasters assert
that "the costs associated with the compilation and certification of
[the required] reports" impose an onerous burden upon them, espe-
cially in light of the requirement that they sell political advertising at
their lowest unit rate. These requirements, the Broadcasters contend,
potentially chill speech because the only alternative for reducing these
purported costs is for them to forego the sale of political advertising
to Kentucky candidates altogether.
We find the Broadcasters' complaint that compliance forces them
to absorb significant costs unpersuasive, particularly in light of the
fact that the Broadcasters are already required by the FCC to compile
the identical information Kentucky seeks. The statute requires that the
Broadcasters merely "file with the registry a copy of the documenta-
tion of paid political campaign advertisements that is required to be
maintained by the Federal Communications Commission, along with
a cover letter from the manager of the station or network or the man-
20
ager's designee." Ky. Rev. Stat. § 121.180(11)(b). As far as we can
see, the only additional trouble the Broadcasters are put to by the stat-
ute is that they must make a second copy of their FCC report and the
station manager must draft a cover letter to accompany the additional
report. The only added costs we can perceive are photocopying costs
and postage. For the Broadcasters to characterize this relatively mini-
mal imposition as burdensome strains our imagination. Indeed, they
have not suggested that the FCC regulation referenced in the Ken-
tucky statute is unconstitutionally burdensome. And, to the extent the
Broadcasters bristle at the added costs imposed by the requirement
that they sell advertising slots at the lowest unit rate, we simply note
that it is a requirement of the FCC. We cannot agree that the statutory
provision at issue, requiring the Broadcasters merely to file with the
Registry a copy of their FCC report, impermissibly treads upon the
First Amendment.
The requirement that the Broadcasters file a copy of their FCC
report specifically advances the worthy goal of fostering honest elec-
tions by serving as a "cross-check" for determining whether the candi-
dates are complying with the spending limits. In providing an
additional method for Kentucky to monitor campaign spending com-
pliance, the provision at issue advances Kentucky's interest in ferret-
ing out campaign corruption and imposes only the slightest of
inconveniences in doing so.
IV.
For the reasons set forth above, we conclude that the enforcement
of Ky. Rev. Stat. § 121.180(11)(b) against the Broadcasters poses no
problems under either the Due Process Clause or the First Amend-
ment. Accordingly, we reverse the judgment below.
REVERSED
21