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On December 16, 1980, the U.S. District Court for the District of Columbia dismissed International Association of Machinists and Aerospace Workers (IAM) v. FEC (Civil Action No. 80-0354). The court's decision upheld an FEC determination dismissing an administrative complaint that IAM and six other parties had filed with the Commission. The court granted, however, plaintiffs' motion to have the court certify constitutional challenges raised in the suit to an en banc appeals court, pursuant to 2 U.S.C. §437h. Accordingly, on June 3, 1981, the district court certified to the U.S. Court of Appeals for the District of Columbia Circuit three questions as to the constitutionality of 2 U.S.C. §441b(b)(3). The FEC filed a motion to dismiss the claims on July 15, 1981.
In their suit, plaintiffs claimed that the FEC had acted contrary to law in dismissing an administrative complaint filed by plaintiffs on October 9, 1979. The complaint alleged that eleven corporations had systematically violated 2 U.S.C. §441b(b)(3) by soliciting contributions to their separate segregated funds (political action committees or PACs) from “unprotected” administrative personnel under “inherently coercive” conditions. Citing the Supreme Court's ruling in Civil Service Commission v. National Association of Letter Carriers (413 U.S. 548 (1973)), plaintiffs claimed that the corporate solicitation methods were coercive because immediate supervisors approached their employees for contributions at work. Plaintiffs cited a number of examples as evidence of coercion, including the fact that employees had made larger contributions, on the average, than members of the general public with comparable incomes and the fact that some of the PAC contributions were made to out-of-state candidates and to candidates whose party affiliation differed from that of the employees.
District Court Ruling: Merits of the Case
In reviewing plaintiffs' claims, the district court recognized the deference to be accorded the FEC's determination and concluded that the Commission's dismissal of IAM's complaint was not arbitrary, capricious or contrary to law. Applying the standard for permissible corporate solicitations set forth in Pipefitters Local Union No. 562 v. U.S. (407 U.S. 385 (1972)), and later codified in §441b(b)(3) of the Act, the court stated: “[N]owhere does FECA [Federal Election Campaign Act] forbid corporate supervisors from asking their subordinates for contributions as long as they comply with the provisions of Section 441b(b)(3).”1 The court concluded that “[p]laintiffs' presentation to the FEC, although detailed, is composed entirely of circumstantial evidence. Neither the administrative complaint nor the complaint in this Court, offers direct evidence of wrongdoing.”
District Court Ruling: Constitutional Issues
Plaintiffs had also asked the district court to certify to the appeals court three constitutional challenges to Section 441b(b)(3) if the court upheld the FEC's determination to dismiss plaintiffs' administrative complaint. Plaintiffs claimed that the corporate solicitations described in its complaint violated:
- First Amendment rights of free speech by sanctioning “coercive” solicitations of employees;
- Fifth Amendment rights of equal protection by denying labor unions “...comparable economic power over thousands of career employees....”; and
- First Amendment rights of shareholders by compelling them to finance coercive political solicitations.
The FEC moved that these challenges be dismissed on grounds that they failed to state a claim on which relief could be granted and plaintiffs lacked standing to raise the issues. The court found, however, that “...plaintiffs' claims are neither frivolous nor so insubstantial as to warrant dismissal for failure to state a claim.” As to plaintiffs' standing to raise the constitutional issues, the court held that “...the plaintiffs have made a threshold showing of a ‘distinct and palpable injury' of a level sufficient to satisfy Article III [of the Constitution].”
Appeals Court Ruling
On April 6, 1982, the U.S. Court of Appeals for the District of Columbia Circuit, sitting en banc, issued an opinion that rejected the three constitutional challenges to Section 441b(b)(3) of the election law. (Civil Action No. 81-1664) In separate decisions, the appeals court affirmed the district court's decision that the Commission's dismissal of the complaint was not contrary to law, and also ruled on each of plaintiffs' constitutional questions, as summarized below:
Is the asserted imbalance between corporations and labor unions under the 1976 FECA amendments [codified at 2 U.S.C. §441b(b)(3)] unconstitutional? Plaintiffs claimed that, in permitting corporate PACs to solicit their executive and administrative personnel in addition to their shareholders, the 1976 amendments had violated Fifth Amendment rights of equal protection and First Amendment rights of free speech by upsetting the long-standing balance in political power that had existed between corporations and labor organizations prior to enactment of the 1976 amendments. They argued that Congress had not intended to tip this balance in favor of corporations; rather, Congress had not foreseen the effect of the amendments, namely, the proliferation of corporate PACs and their disproportionate influence on federal elections. Since there are many more corporations than labor organizations, plaintiffs claimed the imbalance is institutional and, consequently, cannot be corrected by labor organizations.
The appeals court found, however, that Congress had attempted to treat labor organizations and corporations in a comparable manner in both the 1971 and 1976 amendments, while taking into account the structural differences between them. By restricting corporate PAC solicitations to administrative and executive employees and shareholders in the 1976 amendments, Congress had restored a similar, if not identical, balance to that which had existed prior to the FEC's 1975 ruling in the SUNPAC advisory opinion (AO 1975-23). (The SUNPAC opinion permitted corporations to solicit not only their shareholders but all their employees as well.)
By including executive and administrative personnel in a corporation's solicitable personnel, Congress had taken into account the structural differences between labor organizations and corporations, while applying the standard for solicitable personnel even handedly. The appeals court noted that, in this regard, “it is...more likely that a corporation's career employees will identify with the corporate direction, purpose, and welfare than will a shareholder who does not own a controlling interest.”
In affirming Congress' decision to shape the solicitation procedures of the election law to reflect differences in organizational structure, the appeals court cited recent rulings of the U.S. Court of Appeals for the Seventh Circuit that upheld the constitutionality of other solicitation arrangements. For example, in Bread PAC v. FEC, the court rejected a Fifth Amendment challenge to restrictions placed on a trade association seeking to solicit the solicitable personnel of its member corporations. Similarly, in California Medical Association v. FEC, the court rejected an equal protection challenge to a provision which prohibits unincorporated associations, unlike corporations and labor organizations, from spending unlimited funds to establish and administer a political action committee.
Furthermore, the appeals court cautioned that “the Constitution, as historically and currently interpreted, does not afford any guarantee against one person's or group's ability to fund more speech than can another. In fact, far from imposing on Congress an obligation to equalize the voices of corporate and labor PACs, the Constitution, as the Supreme Court now reads it, may forbid Congress to act in such a manner. See Buckley v. Valeo, 424 U.S. at 48-49.”
Plaintiffs alleged that, even though Section 441b(b)(3) sanctions corporate PAC solicitations of executive and administrative personnel, these solicitations are inherently coercive, in violation of First Amendment free speech rights. As evidence of this coercion, plaintiffs pointed out that executive and administrative employees “give to the corporate political fund at rates and in amounts far beyond those which obtain when donors are not solicited to give to the institution that employs them.” The appeals court said, however, “One could argue with equal force that career employees contribute to their corporate PACs out of a desire to further what they perceive to be their own best interests or the best interests of the corporation, and because they have the wherewithal to do so, not because they are coerced or intimidated.”
Deferring to Congress' judgment, the appeals court further held that the 1976 amendments extended the same protections against coercion to corporate executive and administrative personnel that had been provided to union members and shareholders in the 1971 amendments. It had no “evident reason to believe that protections... relied upon to secure union members against union pressure would be less adequate in securing career employees against corporate pressure.” The appeals court reasoned that a more important consideration was the risk of coercion that corporate solicitations posed for a corporation's hourly wage earners. “The statutory language plainly demonstrates that concern: solicitation of hourly employees is severely restricted; solicitation of career employees is generally permitted, but is brigaded with protections designed to prevent overreaching.”
Nor did the court find any merit to plaintiffs' contention that the 1976 amendments constituted a form of government-compelled activism on the part of PAC contributors.
Does the use of general corporate assets to establish and support a corporate PAC violate the First Amendment rights of dissenting shareholders? Plaintiffs claimed that the FECA provision permitting corporations to use treasury funds to establish and administer a PAC abridge the free speech rights of shareholders who objected to such use of corporate assets. The court found that the chief case cited by plaintiffs in support of their claim, Abood v. Detroit Board of Education, was not applicable. The appeals court pointed out that “in Abood the [Supreme] Court had held that the First Amendment prohibited a public employee union from requiring any employee ‘to contribute to the support of an ideological cause he may oppose as a condition of holding a job.” A corporate shareholder, the court reasoned, is under no such compulsion. Citing the Supreme Court's decision in First National Bank of Boston v. Bellotti, the appeals court said “[T]he shareholder invests in a corporation of his own volition and is free to withdraw his investment at any time and for any reason.” 435 U.S. at 794 n. 34.
Supreme Court Ruling
On November 8, 1982, the Supreme Court issued a summary judgment affirming the April 6 decision by the U.S. Court of Appeals for the District of Columbia Circuit. (U.S. Supreme Court No. 82-284)
1 Under this provision of the election law, solicitations are considered noncoercive if they inform employees of: (1) the political purposes for which contributions will be used and (2) of their right to refuse to contribute without reprisal.
Source: FEC Record -- September 1981, p. 3; September 1982, p. 4; and January 1983, p. 6.
International Association of Machinists v. FEC, 678 F.2d 1092 (D.C. Cir. 1982) (en banc), aff'd mem., 459 U.S. 983 (1982).