By Lawrence Hurley
WASHINGTON, Oct 8 (Reuters) - Taking on campaign finance law for the first time since its landmark 2010 Citizens United ruling, the U.S. Supreme Court appeared closely divided on Tuesday over a case that could expand how much individuals can give candidates and parties.
Based on questions posed by the justices during oral argument, in particular Chief Justice John Roberts, the court appeared poised to take a narrower approach than it did in that 2010 decision, Citizens United v. Federal Election Commission, that cleared the way for increased independent corporate and union spending during federal elections.
The most likely outcome, if the court's five conservatives vote together, would be a ruling that would lift the limit on contributions donors can make to individual candidates over a two-year federal election cycle without drastically overhauling existing court precedent that underpins other campaign finance laws.
The nine justices appeared conflicted as they weighed a challenge by both Republican donor Shaun McCutcheon, an Alabama businessman, and the Republican National Committee (RNC). The challengers say the limits, imposed under federal law, violate the freedom of speech protections under the First Amendment of the U.S. Constitution.
Unlike Citizens United, the McCutcheon case deals with donations to candidates by individuals rather than outside expenditures by corporations and unions. Senator Mitch McConnell, the Republican minority leader in the U.S. Senate, has, along with the RNC, joined McCutcheon's side in the case and was in the courtroom on Tuesday. Outside, supporters of campaign finance reform gathered to denounce the influence of money in politics, with some holding a sign saying "money out, voters in."
It was the first time the court had waded into the politically charged debate since the Citizens United ruling, in which the court was split 5-4 along ideological lines.
That ruling greatly increased outside expenditures during the 2012 presidential election, experts said. It also prompted backlash led by President Barack Obama, who criticized the ruling in his 2010 State of the Union speech.
During a news conference later on Tuesday, Obama said, "There's nobody who operates in politics that has perfectly clean hands on this issue." But, he added, it was important that there be some binding rules.
"The people who vote for us should be more important than somebody who's spending $1 million, $10 million, or $100 million to help us get elected, because we don't know what their agendas are," he said.
Dan Backer, one of McCutcheon's lawyers, disputed that interpretation.
"Dollars don't vote, people do," he said in a phone interview. "At the end of the day, it's always going to be the voters who ultimately decide."
Roberts, who was in the majority in the 2010 case, appeared to be looking for some middle ground that would allow individual donors to give to more candidates without opening the floodgates to multimillion dollar contributions.
McCutcheon can only give the maximum amount allowable to a total of nine candidates before he hits the cap under the current law.
"We are telling him he can't make that contribution however modest," Roberts said.
During the argument, questions posed by several conservative justices indicated they might vote to lift the restrictions in question. There was no sign, however, of a desire to go further in weakening a key 1976 ruling, called Buckley v. Valeo, which upheld limits on campaign finance donations while also describing how courts should analyze such regulations.
The four justices appointed by Democratic presidents appeared reluctant to lift the restrictions. Justice Anthony Kennedy, appointed by a Republican but the court's regular swing vote, was suspicious of the government's current limits but did not signal a strong interest in taking any dramatic steps.
In the current two-year election cycle (2013-14), an individual can give $2,600 to a candidate or committee and $32,400 to a political party. But donors cannot exceed the $123,200 overall limit during that period.
There is also a $48,600 cap on total donations to candidates and a $74,600 cap on donations to political action committees and parties.
The Obama administration, which is defending the federal campaign finance laws that the Federal Election Commission implements and enforces, argues that the court already upheld similar limits in the landmark 1976 decision.
Solicitor General Donald Verrilli, arguing for the administration, told the justices that if they were to rule in favor of McCutcheon, a small number of people could effectively finance an entire federal election. Fewer than 500 people "can fund the whole shooting match," he said.
Verrilli also said that a single donor would be able to give a total of more than $3.6 million to a combination of candidates and parties if McCutcheon won.
Such rhetoric was warmly received by the liberal members of the bench, including Justice Stephen Breyer and Justice Elena Kagan, but not by Justice Samuel Alito, one of the Republican appointees who was in the Citizens United majority.
Alito criticized supporters of campaign finance reform for putting forward "wild hypotheticals that are not obviously plausible."
Justice Antonin Scalia was the most vocal conservative in criticizing the current restrictions, noting that one of the biggest ramifications is that more money now flows into independent political action committees (PACs).
"I'm not sure that's a benefit to our political system," he said.
Kagan, who argued and lost the Citizens United case in her former role as solicitor general under Obama, countered by noting that it was the 2010 ruling that led to a rise in independent expenditures via PACs.
"I suppose that if this court is having second thoughts about its rulings that independent expenditures are not corrupting, we could change that part of the law," she said, prompting laughter in the courtroom.
The case is McCutcheon v. FEC, U.S. Supreme Court, 12-536.