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On September 18, 2009, the U.S. Court of Appeals for the District of Columbia found that three Commission regulations that implement how nonconnected federal political committees may allocate funds to finance certain activities that influence both federal and non-federal elections, and that clarify when funds obtained in response to solicitations are contributions under the Federal Election Campaign Act (the Act), violate the Constitution and are in excess of the Commission’s statutory authority. The court found these regulations to be invalid and ordered the district court to vacate the challenged regulations.
On March 11, 2004, the Commission issued a Notice of Proposed Rulemaking on Political Committee Status, which proposed a number of regulatory changes concerning, among other things, the definition of "political committee" and the allocation ratios for PACs. On November 23, 2004, it published final rules that define as "contributions":
- All funds received in response to a communication that indicates that any portion of the funds received will be used to support or oppose the election of a clearly identified federal candidate; and
- At least 50 percent of the funds received from such a communication if it refers to both federal and nonfederal candidates.
(The final rules were published in the November 23, 2004, Federal Register (68 FR 68056). The rules took effect on January 1, 2005.)
The regulations at issue established a new rule for when funds received by political committees in response to certain solicitations must be treated as "contributions" under the Act and thereby must abide by federal limitations and prohibitions. The regulations also modified the Commission’s rules regarding how political committees may allocate spending between federal and nonfederal accounts.
Under current FEC rules, nonconnected political committees that maintain both federal and nonfederal accounts may allocate administrative expenses, costs of generic voter drives and costs of public communications that refer to a political party but not to specific candidates with a minimum of 50 percent federal funds. (The remainder may be allocated to the nonfederal account). 11 CFR 106.6. Public communications and voter drives that refer to one or more clearly identified federal candidates, but not to any nonfederal candidates, must be financed with 100 percent federal funds. 11 CFR 106.6(f)(1). Public communications and voter drives that refer to one or more clearly identified nonfederal candidates but do not refer to any federal candidates may be financed with 100 percent nonfederal funds. 11 CFR 106.6(f)(2).
With regard to solicitations, Commission regulations state that funds received in response to a solicitation must be considered federal "contributions" under the Act if the communication indicates that any portion of the funds received will be used to support or oppose the election of a clearly identified federal candidate. 11 CFR 100.57(a). Likewise, if a solicitation refers to a clearly identified federal candidate and a political party, but not to a clearly identified nonfederal candidate, all funds received in response are considered contributions. 11 CFR 100.57(b)(1). In contrast however, if the solicitation refers to one or more clearly identified nonfederal candidates, in addition to a clearly identified federal candidate, at least 50 percent of the funds received must be treated as contributions under the Act, regardless of whether the solicitation also refers to a political party. 100.57(b)(2).
EMILY’s List, a nonconnected political action committee (PAC) that maintains both federal and nonfederal accounts, filed a complaint on January 12, 2005, challenging the Commission’s regulations regarding the treatment of funds received in response to certain solicitations and its amended rules regarding federal/nonfederal fund allocation ratios for PACs.
The plaintiff alleged that the Commission exceeded its statutory authority in these regulations because the Federal Election Campaign Act (the Act) only regulates money spent by nonconnected committees "for the purpose of influencing any election for Federal office." 2 U.S.C. §431(8) and (9). According to the plaintiff, the solicitation regulations exceed the Commission’s statutory authority by requiring that funds be considered "contributions" under the Act even if they will also be used for nonfederal elections or other nonfederal activities. Similarly, the plaintiff alleged that the new allocation rules exceed the Commission’s statutory authority by requiring federal funds to be used to pay for nonfederal activities. According to the plaintiff, these allocation rules result in "a mandatory subsidization of nonfederal electoral expenses with federal funds" and restrict activities that are not for the purpose of influencing a federal election.
The plaintiff further alleged that the regulations violate the Administrative Procedures Act (APA) because the Commission failed to give proper notice of the final regulations or to give interested parties a fair and meaningful opportunity to comment. According to the plaintiff, the proposed solicitation rules only addressed express advocacy communications, and the proposed allocation rules did not suggest a "blanket" 50 percent allocation ratio, but instead focused on a "promote, support, attack, or oppose" standard for determining how a given cost should be allocated. Thus, the plaintiff alleged that the Commission’s notice of the proposed rules did not give reasonable notice of the scope or nature of the final regulations, in violation of 5 U.S.C. §553(b).
In addition, the plaintiff claimed that the regulations are arbitrary, capricious and an abuse of discretion, in violation of 5 U.S.C. §706(2)(A). The plaintiff alleged that the FEC failed to provide a rational explanation for its decisions or to take public comments into account when making its final rules. According to the plaintiff, the FEC also failed to identify for these rules "any purpose to deter corruption or the appearance of corruption, and they serve no such purpose."
Finally, the plaintiff alleged that the challenged regulations violate its First Amendment rights. The plaintiff claimed that in Buckley v. Valeo, 424 U.S. 1 (1976), and McConnell v. FEC, 540 U.S. 93 (2003), the Supreme Court prohibited the FEC from restricting the types and amounts of funds used to influence federal elections unless the restrictions are narrowly tailored to prevent corruption or the appearance thereof. According to the plaintiff, the regulations in question are unconstitutionally vague and overbroad.
District Court Decision
On February 25, 2005, the U.S. District Court for the District of Columbia denied the plaintiff's request for a preliminary injunction in this case.
When deciding whether to grant a preliminary injunction, courts consider whether:
- The party requesting the injunction is substantially likely to win the case on its merits;
- The requester would suffer irreparable injury if the injunction were not granted;
- An injunction would substantially injure other interested parties; and
- The public interest would be furthered by the injunction.
In this case, the court found that each of these standards weighed in favor of the FEC and that "the interests of both Defendant and the public would be disserved by the granting of Plaintiff's motion." Thus the court ordered that EMILY's List's motion for a preliminary injunction be denied.
Appeals Court Decision
On December 22, 2005, the U.S. Court of Appeals for the District of Columbia Circuit upheld the district court’s refusal to grant EMILY’s List’s request for preliminary injunctive relief. The suit challenges Commission regulations regarding the treatment of funds raised through certain solicitations and the rules on federal/nonfederal allocation by political action committees. See the April 2005 Record [PDF].
The appeals court found that the district court had not abused its discretion in denying injunctive relief. The district court had considered whether EMILY’s List has a substantial likelihood of success on the merits, whether it would suffer irreparable injury absent an injunction, and whether an injunction would substantially injure other interested parties or further the public interest. In light of the evidence of irreparable harm shown submitted by EMILY’s List and its likelihood of prevailing on the merits, the appeals court affirmed the district court’s decision.
On July 31, 2008, the U.S. District Court for the District of Columbia held that EMILY’s List has standing to challenge both the rule regarding how political committees must treat funds received in response to certain solicitations and the rules for how federal and nonfederal activities must be allocated. EMILY’s List brings a facial challenge to the rules rather than an "as-applied" challenge, asserting that the rules are overly broad under the First Amendment because "an individual whose own speech or conduct may be prohibited is permitted to challenge a statute on its face."
The court also held that the allocation and contribution limits that EMILY’s List challenged in this case are contribution limits, which are subject to lesser scrutiny than the "strict scrutiny" standard that is typically applied to limits on campaign expenditures. The Supreme Court has "recognized that contribution limits, unlike limits on expenditures,'entail only a marginal restriction upon the contributor’s ability to engage in free communication.'" Moreover, contribution limits do not pose the same danger to associational rights as expenditure restrictions because the "overall effect of dollar limits on contributions is merely to require candidates and political committees to raise funds from a greater number of persons."
The district court held in this case that the challenged solicitation and allocation regulations serve the governmental interest of preventing corruption and the appearance of corruption by foreclosing the circumvention of the Act’s contribution limits. The court held that EMILY’s List cannot establish that the FEC’s allocation regulations are facially overbroad since the regulations are closely drawn to match the sufficiently important interests of preventing corruption and the appearance of corruption by preventing the use of nonfederal funds for communications that may influence federal elections. The court also held that the solicitation regulations are closely drawn to match sufficiently important government interests and thus must be upheld under a lesser scrutiny standard. The court denied EMILY’s List’s motion for summary judgment and granted the FEC’s cross-motion for summary judgment.
On September 18, 2009, the U.S. Court of Appeals for the District of Columbia held that Commission regulations at 11 CFR 106.6(c), 106.6(f) and 100.57 violate the First Amendment and exceed the FEC’s authority under the Act.
In its discussion of the First Amendment, the court referred to Buckley v. Valeo, which found that campaign contributions and expenditures constitute "speech" and, therefore, fall under the protection of the First Amendment. The court noted that in Davis v. FEC 128 S. Ct. 2759, 2773 (2008), it was decided that limiting contributions and expenditures in an effort to equalize the political field is not a "legitimate government interest" and, therefore, cannot be the reasoning behind these types of regulations. The court went on to state that the only legitimate government interest that allows for the restriction of campaign finances is preventing corruption or the appearance of corruption. The appeals court stated that that government interest has only been applied to contributions to candidates and parties because those two groups pose the greatest risk of quid pro quo corruption. Buckley, 424 U.S. at 26-27; see also Citizens Against Rent Control v. City of Berkeley, 454 U.S. 290, 296-97 (1981).
The court stated that, since the regulations in question do not address candidates, parties or for-profit corporations, which the court said are the only entities the Supreme Court has allowed these types of limits to be placed on, the appeals court had to determine how to apply the above principles to non-profit entities. The court determined that "the central issue turns out to be whether independent non-profits are treated like individual citizens (who under Buckley have the right to spend unlimited money to support their preferred candidates) or like political parties (which under McConnell [v. FEC, 540 U.S. 93 (2003),] do not have the right to raise and spend unlimited soft money)." The court then made a distinction between three different types of non-profits and stated how their contributions and expenditures can be regulated.
First, the court stated, there are non-profits that make no contributions, but only expenditures for political activities such as advertisements and GOTV activities. In the decision, the court stated that "non-profit entities, like individual citizens, are constitutionally entitled to raise and spend unlimited money in support of candidates for elected office—with the narrow exception that, under Austin, the Government may restrict to some degree how non-profits spend donations received from the general treasuries of forprofit corporations or unions."
The court stated that a second category of non-profits are those that make contributions to candidates, but no expenditures. The court stated that these groups can be limited in the contributions they receive.
The court stated that a third category, which includes EMILY’s List, consists of those non-profits that make both contributions and expenditures. According to the court, such groups "are entitled to make their expenditures…out of a soft-money or general treasury account that is not subject to source and amount limits," as long as they make their contributions from a hard-money account. The court did not interpret McConnell as permitting the types of soft-money restrictions currently placed on political parties to be applied to non-profits like EMILY’s List.
The court then held that sections 106.6(c), 106.6(f) and 100.57 are not closely drawn to meet an important government interest and would, therefore, be struck down. Among other things, the court stated that "non-profits are constitutionally entitled to pay 100 percent of the costs of…voter drive activities [and generic campaign activity] out of their soft-money accounts."1 The court reached the same conclusion for ads that refer to a federal candidate.2 It further stated that the solicitation regulation unconstitutionally prohibits a non-profit from stating that the money it is raising will be used to support its preferred candidate.3 The court also held that the regulations exceeded the Commission’s statutory authority because, the court said, they required non-profits to use hard money for activities that were exclusively non-federal. The court found the regulations to be invalid and ordered the district court to vacate the challenged regulations.
Judge Brown concurred in the result reached by the two judges in the majority because she agreed that the regulations exceeded the Commission’s authority under the Act. However, she disagreed with the majority’s First Amendment analysis, and she stated that the court’s decision to reach the constitutional questions was unnecessary.
1 11 CFR 106.6(c) requires that nonconnected political committees maintaining both a federal and a nonfederal account allocate administrative expenses, costs of generic voter drives and costs of public communications that refer to a political party, but not to a specific candidate, with a minimum of 50 percent federal funds.
2 11 CFR 106.6(f)(1) requires that public communications and voter drives that refer to one or more clearly identified federal candidates, but not to any nonfederal candidates, must be financed with 100 percent federal funds.
3 11 CFR 100.57 states that funds received in response to a solicitation must be considered federal "contributions" under the Act if the communication indicates that any portion of the funds received will be used to support or oppose the election of a clearly identified federal candidate.
On September 23, 1981, the U.S. District Court for the District of Columbia issued an order in Jon Epstein v. FEC (Civil Action No. 81-0336) upholding the Commission's determination in an administrative complaint that plaintiff had brought against the Reader's Digest Assoc., Inc. in March 1981. Plaintiff's suit sought review of the FEC's dismissal of his complaint (Matter Under Review [MUR] 1283), pursuant to 2 U.S.C. §437g. In the complaint, he alleged that an ad Reader's Digest had placed in the August 27, 1980, edition of the Washington Post constituted illegal corporate contributions to the campaigns of the Democratic and Republican Congressmen whose excerpted articles had appeared in the ad (in violation of 2 U.S.C. §441b). Introductory and concluding copy in the ad had also promoted Reader's Digest as a "forum for ideas." Plaintiff claimed the FEC's dismissal of his complaint was contrary to law.
The court found that the standard used by the FEC in dismissing the complaint was not arbitrary or otherwise contrary to law. The court held that the "...Commission may reasonably determine that expenditures on publicity that have a purpose other than assistance of political candidates...were not intended by Congress to be" regulated by the Act. This is particularly true, the court said, when the "major purpose" of the publicity is "not to advocate the election of candidates, but to promote the organization paying for the publicity." The court further noted that, in making this determination, the FEC had "relied upon a growing body of decisions...that remove advertisements and other forms of publicity from the Act's prohibition" on corporate expenditures, even though the advertisements" may have political aspects."
Moreover, the court found no merit in plaintiff's argument that the General Counsel's Report did not explain the Commission's decision to dismiss the complaint. "The General Counsel's Memorandum alone, if it is complete enough to have provided a basis for the Commission decision to accept the General Counsel's recommendation, will be adequate for judicial review under section 437g(a)(8)." Nor did the court find merit in plaintiff's contention that the ad was partisan because it offered commentary only by representatives of the two major parties. The court held that the issue was not "the narrowness, or diversity, of the political views" represented in the ad but rather whether the ad served a "partisan purpose."
Source: FEC Record -- November 1981, p. 4.
Epstein v. FEC, 2 Fed. Elec. Camp. Fin. Guide (CCH) 9161 (D.D.C. 1981), aff'd mem., 684 F.2d 1032 (D.C. Cir. 1982).