Public Relations & the Law Dr. Linda M. Perry In this section: Constitutional basis Corporate Speech Elections Lobbying Securities Reporter-Source Relations Other topics The First Amendment Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances. First Amendment clauses Religion (establishment, free exercise), Speech (spoken, written, symbolic), Press (mass publishing; news) Assembly (association), Petition government (lobbying, grassroots lobbying). First Amendment societal values attainment of truth; self-government; check on government power; change with stability; Individual fulfillment. Strict Scrutiny Restrictions on liberties necessary to an ordered society must be narrowly tailored to serve a compelling governmental interest Restrictions on corporate speech Vast resources might be used to: (1) dominate national debate and corrupt the electoral processes, and (2) violate rights of shareholders, union members and customers.     TOP Corporate free speech rights First National Bank of Boston v. Bellotti (1978) U.S. Supreme Court first recognizes free speech right for corporations. Prohibition on speech by corporations, especially where speech is intimately related to the process of governing, will be examined with strict scrutiny. Corporations' free speech rights founded on public's right to listen, to receive information. Identity of speaker does not deprive the speech of First Amendment protection. Government has no power to restrict expression because of its message, its ideas, its subject matter or its contention. Press does not have monopoly on First Amendment or ability enlighten. Consolidated Edison Co. of NY v. Public Service Commission of New York Right to disseminate controversial messages; Based on people's right to receive information; Brochures did not invade privacy. Pacific Gas & Electric Co. v. Public Utilities Commission of California Freedom from compelled speech. Full protection of FA to corporate newsletters when they contain matters of public concern. Miami Herald v. Tornillo: Can't be forced to carry unwanted messages Right not to speak. Corporate free speech--summary Taken together: FA protects content in ads, newsletters, press releases, brochures, speeches; Corporate speech protections based on political content and public interest of expression and the people's right to receive information.   Elections Speech affecting elections may be prohibited: Large amounts of money might corrupt elections in ways they would not corrupt referenda, or public debate. The problem of large campaign contributions is precisely where the actuality and potential for corruption have been identified.   TOP Congress limits corp. speech: 1907 Tillman Act prohibited corporations from making contributions to federal candidates. The Federal Corrupt Practices Act, 1925, extended prohibition to anything of value (expenditures). The Taft-Hartley Act of 1947 barred unions as well as corporations. Federal Election Campaign Act of 1971. Federal Election Campaign Act Federal Elections Campaign Act had limited both contributions and expenditures. Prohibited corporations from making both contributions and expenditures. 1974 amendment allows PACs (See How Corporations Legally Influence Elections). Corporate employees and union members can contribute to candidates individually or as a group, called a political action committee; Sponsored PACs: Corporations and unions can pay salaries, overhead and costs of soliciting contributions. Independent PACs: Unsponsored and independent. Buckley v. Valeo, 1976 Court distinguished between contributions and expenditures for individuals & PACs: Upheld limitations on contributions (symbolic speech) Struck down limitations on independent expenditures (pure speech). Corporations still not permitted to give contributions or expenditures directly (only through PACs). 1979 amendment: Permits contributions directly from corporate treasuries and wealthy individuals to local, state and national parties for "minor election activities" (See How Corporations Legally Influence Elections): Called soft money; Frees other contributions for federal campaigns; Issue: 1979 loophole (soft money) allows corporations' contributions into federal election campaigns indirectly. LOOPHOLE CLOSED WITH CAMPAIGN FINANCE REFORM ACT OF 2002. Money political parties can't go even indirectly to federal candiates. No individual can donate more than $10,000 to state, district or local political party. Effective Nobember 6, 2002 (after election). Federal Election Commission v. Mass. Citizens for Life Inc., 1986--non-profit, ideological corporations exempted from limits on expenditures. Austin v. Michigan Chamber of Commerce, 1990--profit-promoting corporation not exempt from prohibitions on contributions or expenditures. Corporate election-speech limitations The corporate right to speak does not include using for-profit corporate funds to support a political candidate--either contributions or expenditures. Prohibition only against profit-making or profit-promoting corporations, not non-profit, ideological corporations. Prohibitions on contributions and expenditures:includes those by public relations firms. Permitted communication: Election coverage by news--commentaries. Advertising/communication about public issues. Nonpartisan communications promoting process. EFFECTIVE 2003 (CAMPAIGN FINANCE REFORM ACT OF 2002), ISSUE ADS THAT REFER TO CANDIDATES BY CORPORATIONS, UNIONS AND SOME INDEPENDENT GROUPS ARE PROHIBITED WITHIN 60 DAYS OF A GENERAL ELECTION AND 30 DAYS WITHIN A PRIMARY ELECTION. Limitations on Contributions Individuals (Reform Act changes in bold; limits to be modified each year for inflation, beginning in 2003): $1,000 per candidate $2,000 in 2003. $5,000 per PAC; $25,000 to national political parties in 2003. $10,000 to state, district or local political parties. $25,000 all PACs and candidates per election; $37,500 for candidates, PACs and parties per over 2 years, effective in 2003. $57,500 for other contributions over 2 years, with no more than $37,500 of that to PACs. PACs Up to $5,000 per candidate; unlimited number of candidates, $5,000 per year to other committees; $15,000 per year to national parties. Contributions disclosure Federal Election Campaign Act requires each PAC and candidate to Keep records of contributions and expenditures. Disclose source of funding on advertising to advocate or defeat candidate or to solicit contributions. File periodic reports of contributions: name, address, amount and date. Must file periodic reports of recipients of more than $200 a year and make available for public inspection and copying. Buckley v. Valeo: Court upheld disclosure but exempted minor parties, such as socialists, communists. Could limit right of association. A shield from tyranny of the majority. TOP LOBBYING Part of FA right to speak and petition government for redress of grievances. Carried out with direct contacts with legislators, or through indirect public relations campaigns (grassroots lobbying). Lobbying Disclosure Act of 1995 Must register as lobbyist if make contact &endash; written or oral -- with legislators or executive branch officials, and Paid or raise money to influence federal legislation or policy: Now $5,000 within six months. In-house lobbyists register if the corporation spends $20,000 in six months. Estimates of income and expenses rounded to nearest $20,000 if more than $10,000. Must I.D. names of clients and issues lobbied, bill numbers and executive branch action/order numbers. But not the legislators or officials. Act applies also to nonprofit corporations and unions. Excluded: PR grassroots lobbying campaigns. public officials acting in an official capacity, news media and testimony on legislation before Congress or a congressional committee. Extends to public relations staff who help prepare witnesses by gathering information and writing statements. Foreign Agents Registration Act 1938 Lobbyists who work for foreign governments must disclose: their activities, affiliations how money obtained and spent, and how they influence public opinion. PR firms for foreign governments are subject to registration. Hill & Knowlton: Citizens for a Free Kuwait. Prohibited from spending money to influence an American political election. Required to label political propaganda Labor-Management Taft-Hartley Act: Regulates communication between labor and management during periods of union formation, collective bargaining and strikes. Unfair labor practice for management to interfere with employees' forming a union. Management may oppose union formation through speeches and other expression without unfair practices. Unfair practices are coercive. TOP Securities Securities Act of 1933 regulates initial offering and sale of securities. Securities Exchange Act of 1934 regulates trading of securities on stock exchanges. Investment Advisors Act of 1940 regulates some financial publications. All securities acts administered by the Securities and Exchange Commission. Also regulates disclosure by cities and public agencies that issue municipal bonds. Mandated speech Register securities Securities Act of 1933 Initial public offering (IPO) Stockholders can make informed decisions. Prohibits company from going public before filing registration statement with SEC containing extensive financial information. Trading Securities&emdash;from one purchaser to another after initial distribution. Securities Act of 1934 requires annual, quarterly and periodic reports. Annual report&emdash;10K&emdash;Five-year summary. Quarterly report&emdash;10Q&emdash;Updates. Interim reports&emdash;8K&emdash;Significant developments within 15 days. Fraud Knowingly making false or misleading statements in mandated communication, speeches & press releases that can affect price of stock. Must involve a material fact in connection with a purchase or sale. Materially deceptive facts can be positive misstatements or omissions.. PR firms can be liable for passing along misleading investment information. Must make a "reasonable investigation" that statements are true. Predictions have "safe harbor" if accompanied by cautionary statements. Duty to correct A publicly traded corporation has an affirmative duty to correct a published material misstatement if the error originates with the corporation or its agent. Corporate insiders Fiduciaries: people in a position of trust Prohibits them from acting in self-interest. Have duty to disclose material information before buying or trading; Disclose or refrain from trading. Disclosed information should be disseminated broadly and in a timely fashion. Market insiders Information processors who have access to corporate information but not fiduciary duties: financial journalists, financial newsletter publishers printers, bank employees, financial brokerage houses PR firms. Have access to nonpublic information about mergers, tender offers, and other sensitive financial information. Disclose Payment for Publicity PR firms must disclose payments for publicity affecting a security. Illegal to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service or communication about a security without revealing payment received. To halt articles in newspapers or periodicals that appear as unbiased opinion but are purchased. TOP Reporter-source relations Trial jury: $200,000 compensatory damages, $500,000 punitive damages to Dan Cohen. Found breach of binding contracts Both newspapers made material misrepresentation of facts when reporters represented they had authority to promise anonymity when they did not. Minnesota Court of Appeals on five issues, including whether FA banned breach of contract claim. Court said no. Affirmed the breach of contract claim, but Set aside the finding of misrepresentation, canceling $500,000 punitive award. Now award at $200,000. Minnesota Supreme Court reversed. Held that contract law does not apply. Moral obligation to keep the name of a source confidential is not a legal contract. $200,000 compensatory damages reversed. Award at zero. U.S. Supreme Court reversed 5-4. FA does not prevent confidential sources from recovering damages when a reporter breaches a promise of confidentiality recognized under state contract law -- common law. Minnesota common law of promissory estoppel requires people to keep their promises, provides remedy for those unjustly injured by broken promise. FA does not immunize the press when reporters violate laws (common laws) that apply to everyone. Dissent: Minnesota's law restricts political speech, so enforcement of the law should be upheld only if the state establishes a state interest of the highest order (strict scrutiny). Blackmun for dissent: Minn. Supreme Court held the state interest in enforcing promises is not sufficiently compelling to override the FA interest in the publication of Cohen's name. Souter said the public interest in providing citizens with additional information in an election campaign outweighs the state's interest in enforcing promises. Remanded to Minn. Supreme Court to determine whether Cohen could establish that he met the requirements of promissory estoppel. Already met two -- documenting (1) the promise and (2) the damage resulting from relying on that promise. Third was that Cohen must prove the broken promise led to an injustice that ought to be remedied. The court must weigh reasons why the newspapers decided to break the promise of confidentiality Minn. Sup. Ct. reinstated the $200,000 damages on promissory estoppel theory. Not remanded for retrial. Considered that the newspapers believed they generally must keep promises of confidentiality. Noted testimony of experts about ethical importance of keeping such promises. Said newsworthiness of Cohen's identity not a "level of such grave importance." Neither side clearly holds the higher moral ground. But no compelling need to break the promise. TOP Other law topics Privacy Private facts False light Appropriation Access to government-held information Freedom of Information Act Sunshine Law State public records laws State public meetings laws Intellectual property Copyright Trademark Patents Work for Hire Moral rights Libel Defamation Falsity when speech in public interest Public Officials/Public Figures -- NYT actual malice Private persons -- negligence Identification Damages Publication Back to top Back to Lectures Index