A federal appellate court has shut down Judge Rudolph Randa's decision halting the criminal probe into Wisconsin Governor Scott Walker and allied groups, rejecting Randa's interpretation of campaign finance law and declaring the investigation best resolved by state courts.

The investigation remains halted by a state court decision from January [3], and the probe's future now rests with Wisconsin appellate courts. However, some justices on the Wisconsin Supreme Court could have a conflict of interest [4]: the four-justice Republican majority was elected by millions in spending from the same groups under investigation in the coordination probe, calling into question whether they can be impartial.

"Imprudent," "Unnecessary" Ruling Reversed on Federalism Grounds

Wednesday's decision [5] from the 7th Circuit Court of Appeals ordered Judge Randa to throw out the federal lawsuit filed by Wisconsin Club for Growth and its director Eric O'Keefe, declaring that Randa never should have taken the case in the first place. The unanimous decision was authored by Judge Frank Easterbrook, a Ronald Reagan appointee and prominent conservative jurist.

Judge Easterbrook, writing for the three-judge panel, held that Randa's May 6 ruling [6] halting the investigation was "imprudent," "unnecessary," and "an abuse of discretion." Randa regularly attended judicial junkets [7] funded by the Koch and Bradley foundations, financial interests tied to the groups under investigation, the Center for Media and Democracy discovered earlier this year.

Randa acted improperly when he interfered with an ongoing state criminal investigation, being conducted under state law, and overseen by state courts, Easterbrook wrote. Randa ran afoul of the federal Anti-Injunction Act barring federal courts from enjoining state proceedings, as well as judicial principles of federalism and comity, the 7th Circuit panel held.

“State courts are free to conduct their own litigation, without ongoing supervision by federal judges, let alone threats by federal judges to hold state judges in contempt,” Easterbrook wrote.

Randa's Holding on Campaign Finance Overturned

Perhaps the most closely-watched aspect of the case was how the 7th Circuit would treat Randa's far-out ruling [8]on regulation of money in politics.

Prosecutors had been investigating whether Walker and his campaign were part of what they called a "criminal scheme" to evade Wisconsin disclosure requirements and contribution limits, by coordinating activities with nonprofit groups like WiCFG (which accept secret, unlimited donations) during the 2011 and 2012 recall elections. WiCFG and the Walker campaign argued that any coordination only involved electoral "issue ads" that stop short of telling viewers to vote for or against a candidate, which they claimed are beyond the reach of Wisconsin law.

In his May 6 decision, Judge Randa sided with WiCFG's arguments, holding not only that "issue ad" coordination does not violate state law, but that it is protected First Amendment activity.

Randa's ruling gave ammunition to Walker and his supporters in the state. Walker declared that Randa's ruling [9] showed that "there is nothing wrong with what we did." Allies of Governor Walker, like Wisconsin Institute for Law & Liberty director Rick Esenberg, argued that [10]the 1999 Wisconsin court of appeals decision in Wisconsin Coalition for Voter Participation and a 2008 Government Accountability Board advisory opinion -- which both stated that "issue ads" coordinated with candidates would be counted as campaign contributions, subject to disclosure and contribution limits -- had been rendered unenforceable [11] by the U.S. Supreme Court and the 7th Circuit.

Easterbrook solidly rejected those claims.

"Until the district court’s opinion in this case, neither a state nor a federal court had held that Wisconsin’s (or any other state’s) regulation of coordinated fundraising and issue advocacy violates the First Amendment," Easterbrook wrote, with a nod towards the Wisconsin Coalition for Voter Participation precedent.

Because of this, the appellate court rejected Randa's assertion that the bipartisan group of prosecutors acted in "bad faith," and pursued the investigation only as a means or harassment and retaliation. Prosecutors are entitled to immunity for enforcing a legitimate (and constitutional) interpretation of Wisconsin law, Easterbrook wrote.

"No opinion issued by the Supreme Court, or by any court of appeals, establishes . . . that the First Amendment forbids regulation of coordination between campaign committees and issue-­advocacy groups—let alone that the First Amendment forbids even an inquiry into that topic."

As the Center for Media and Democracy explained in a Milwaukee Journal Sentinel editorial [12], even if Walker and WiCFG thought that campaign finance law was evolving on regulation of "issue ads" or coordination, this did not mean they could ignore prevailing interpretations of state law. Easterbrook echoed this sentiment.

"Although the Court’s views about the proper limits of campaign finance regulation continue to change," he wrote, "as the Supreme Court’s doctrine stands it is not possible to treat as 'bad faith' a criminal investigation that reflects Buckley’s interpretation of the First Amendment," referencing the landmark campaign finance decision Buckley v. Valeo.

Walker Circumventing Campaign Finance Laws?

Easterbrook noted that rules against coordination are a constitutional means of preventing circumvention of campaign finance laws (a point [8] that CMD has repeatedly [12] emphasized [3].)

"If campaigns tell potential contributors to divert money to nominally independent groups that have agreed to do the campaigns’ bidding, these contribution limits become porous, and the requirement that politicians’ campaign committees disclose the donors and amounts becomes useless," Easterbrook wrote.

This statement has particular relevance to the Walker investigation. Documents released late last month showed the governor soliciting funds [13] for WiCFG from out-of-state millionaires, billionaires, and corporations, with the promise that donations to WiCFG "are not disclosed," and not subject to contribution limits, according to a set of fundraising talking points prepared for Walker.

The 7th Circuit acknowledged that the "Supreme Court has yet to determine what 'coordination' means," and did not take a position on whether WiCFG and Walker broke state law, declaring that this is an issue best resolved at the state level.

This isn't the first time that the 7th Circuit reversed Randa in a politically-charged case.

In 2006, Randa oversaw the wrongful conviction [14] of state purchasing supervisor Georgia Thompson for allegedly steering state travel contracts towards a firm linked with Wisconsin's then-Governor Jim Doyle, a Democrat. The conviction came just before the gubernatorial elections, and Republicans spent $4 million on ads tying Thompson's "corruption" to Doyle, who was reelected. Within hours after the 7th Circuit heard Thompson's appeal in 2007, they immediately ordered her release, with Judge Diane Wood calling the evidence used to convict her "beyond thin [15]."

The U.S. Attorney who prosecuted Thompson, Steven Biskupic, is now Walker's campaign attorney, and his wife is Randa's judicial assistant.

Conflict of Interest at Wisconsin Supreme Court

The future of the investigation now rests with Wisconsin courts -- where things will really get interesting.

The probe currently remains halted at the state level, after a state court judge quashed subpoenas issued to WiCFG and the Walker campaign in January [3]. However, that same judge then stayed his own order [8], acknowledging long-standing Wisconsin precedent on coordinated issue advocacy and calling the prosecutors’ theory an “arguable interpretation” of the statutes.

The Wisconsin Court of Appeals was then asked to resolve the dispute between dueling interpretations of Wisconsin campaign finance law; they have been sitting on the case for seven months. A separate petition was filed with the Wisconsin Supreme Court asking that they take the case directly, since it will eventually come before those seven justices, but they have not acted on the petition.

Four of the seven members of the Wisconsin Supreme Court have a potential conflict of interest in hearing the case [4]. At least two of the groups under investigation in the probe, Wisconsin Club for Growth and Wisconsin Manufacturers & Commerce, played a key role in electing the four justices in the conservative majority, in most cases spending more than the candidates themselves.

In every single one of the elections for the court's four Republican justices -- Justices David Prosser, Annette Ziegler, Michael Gableman, and Patience Roggensack -- spending by WiCFG, its surrogates, and WMC amounted to almost all of the independent support for the candidate. Together, the two groups have spent $7.88 million since 2007 helping elect the court's four-justice conservative majority, and have been among the top spenders in judicial elections.

According to data from the Wisconsin Democracy Campaign, WiCFG spent at least $1,615,860 on the last four Supreme Court races, and groups it funds has spent $836,000 more. WMC has spent at least $5.43 million electing the court's conservative majority. In three out of the four Supreme Court races since 2007 where WMC has been active, it has spent more than the candidate it supported.

Any ruling by the Wisconsin Supreme Court would directly affect the same groups that helped put four of the justices on the bench.

Although the Wisconsin Supreme Court has grown notorious for its lax recusal practices, the level of spending by the groups in this case -- and their direct stake in the outcome -- could demand recusal under the U.S. Constitution, following the 2009 U.S. Supreme Court decision in Caperton v. Massey. In that case, the U.S. Supreme Court held that a West Virginia Supreme Court justice should have recused himself from a decision involving a major campaign contributor, when the election was decided by less than 50,000 votes and the donor had a disproportionate influence on the election's outcome.

"This could be a landmark case for applying the Caperton standards," Matthew Menendez, counsel at the Brennan Center for Justice, told the Center for Media and Democracy earlier this year.

Groups Under Investigation Had Significant and Disproportionate Influence on Supreme Court Elections

In 2011, Justice Prosser won reelection by just 7,000 votes. WMC, the powerful state chapter of the U.S. Chamber of Commerce, spent around $1 million helping reelect Prosser. A new front group, Citizens for a Strong America, came out of nowhere [16] and spent $836,000 backing Prosser and attacking his opponent; it was entirely funded by Wisconsin Club for Growth that year. Wisconsin Club for Growth itself spent $415,860 supporting Prosser. Prosser's campaign spent only $700,000. Together those groups spent three times as much combined as the Prosser campaign.

Justice Gableman won his 2008 election [17] by around 20,000 votes. WMC spent $1.76 million getting Gableman elected. Wisconsin Club for Growth spent over $500,000 to elect Gableman. Another phony issue ad group, Coalition for America's Families, which received funding from Wisconsin Club for Growth and shared a board member, spent $480,000 supporting Gableman that year. The Gableman campaign spent only $411,000 -- meaning that WMC alone spent four times as much as the justice's own campaign.

In 2007 [18], WMC spent an eye-popping $2.2 million to put Justice Ziegler on the court. Wisconsin Club for Growth added $400,000. Together they nearly doubled the $1.4 million spent by the Ziegler campaign.

In last year's Supreme Court race [19], WMC spent $470,000 supporting Justice Roggensack, and Wisconsin Club for Growth spent $300,000, together outspending the justice's own campaign.

A justice who was not a beneficiary of WCFG or Citizens for a Strong America spending, Justice Ann Walsh Bradley, recused herself [20] in a separate challenge to the John Doe in March, on grounds that her son practices with one of the attorneys in the case.

Justice Bradley's letter announcing the recusal, though, appeared to be a subtle call to other justices to join her: despite Bradley's reasons for recusing herself having nothing to do with election spending, she quoted from Caperton v. Massey, writing, "The inquiry [requiring recusal] centers on the contribution's relative size in comparison to the total amount of money contributed to the campaign, the total amount spent in the election, and the apparent effect such contribution had on the outcome of the election."

“This court has been subject to extensive criticism for its recusal rules and practices,” Bradley wrote. “Weak recusal rules and lapses in recusal practices undermine the public trust and confidence in a fair and impartial judiciary."

The justices have not yet stated whether they will take the case.