July 20, 2024

Judge halts Minnesota law barring donations by businesses with level of foreign investors

A federal judge on Wednesday suspended a Minnesota campaign finance law that was due to take hold in January and was aimed at discouraging election activities by corporations with a measure of foreign ownership.

The Minnesota Chamber of Commerce won an injunction while a lawsuit filed in July proceeds. U.S. District Court Judge Eric Tostrud said the law could squelch speech and is therefore counter to the First Amendment. His 34-page ruling also said lawmakers failed to show how donations or independent spending by companies with foreign shareholders results in undue influence.

The law applies to companies with foreign ownership thresholds that meet or exceed state limits, which were one percent for a single foreign investor or 5 percent for overall foreign national owners.

Tostrud prevented prosecutors and the Minnesota Campaign Finance and Public Disclosure Board from enforcing it.

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“Because the Board has failed to identify evidence that minority foreign shareholders regularly (or ever) exercise influence or control over corporations’ political expenditures, the challenged provisions of [the law] sweep far too broadly,” the judge wrote.

DFL legislators have argued the law was narrowly tailored. Approved in the 2023 session, the law carried the possibility of civil penalties as well as criminal sanctions.

The 6,000-member Minnesota Chamber of Commerce insisted it would unfairly expose domestically-run companies to fines over political participation and might discourage political involvement by otherwise eligible people.

Chamber president and chief executive Doug Loon said the law is flawed.

“With this injunction in place, businesses can continue to exercise their ability — as `people’ in the eyes of the law — to participate in the democratic process without the fear of being prosecuted,” Loon said in a written statement.

The preliminary injunction is only one step in the lawsuit, but Tostrud suggested the business group was well-positioned to succeed in the legal matter.

“Preventing foreign influence on Minnesota elections is a compelling state interest in the abstract,” Tostrud wrote. “The problem is that settled constitutional principles require any state statute that burdens — or, as here, outlaws — political speech to be narrowly tailored to achieving that compelling interest.”

Free Speech For People, a group that supported passage of the law, said it was needed to close an influence loophole. The group said it would continue to back Minnesota officials as the case moves ahead.

“While it is disappointing that the Chamber’s request has been granted, the law has not been struck down,” the group said in a written statement reacting to the ruling.

The legal defeat isn’t the first around a law approved in the most-recent session. Last month, another federal judge sided with makers of generic medicines in putting on hold another law intended to hold down prescription drug price increases.

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