14 and 14A. The cover letter advised the defendants of the FEC's duty to attempt to correct the violations by informal means for a period of 30-90 days. Id. The defendants replied by letter dated October 7, 1980, that it still believed no violation had occurred, that it could not admit to a violation, and that it was prepared to defend its position in court. Plaintiff's Exhibit 15. The FEC sent the defendants a revised conciliation agreement on January 22, 1981. Plaintiff's Exhibits 16 and 17. The revised agreement was intended to satisfy the defendants' objections by: (1) including language stating that the defendants had altered their billing practices; and (2) replacing the admission of the violation with a statement that the FEC has alleged the violations occurred and in the interest of settlement and avoidance of litigation the defendants would not contest the allegations. Id. Again, there is no evidence that any charges emanating from other than the Beeson Expenditures were raised or considered. On January 28, 1981, the defendants again rejected the offer and stated that it viewed the agreement as one "couched in nolo contendere terms," and thus, tantamount to an admission. Plaintiff's Exhibit 18. The defendants then requested that the FEC reconsider its August 13, 1980 reply brief and recognize that its allegations were both de minimus in nature and raised substantial legal and constitutional questions. Id. The defendants made no counter offer in writing, nor did they call the FEC staff to discuss the matter as requested in both of the Commission's cover letters. Affidavit of Kenneth A. Gross, Plaintiff's Exhibit 1, paras. 8, 9.
By letter dated March 23, 1981, the FEC General Counsel informed the defendants of the FEC's March 17, 1981 decision, by a vote of 4-1, to file suit as a result of the staff's inability to settle the matter through conciliation. Plaintiff's Exhibits 19 and 20. The letter invited the defendants to contact Gary Johansen should they have any questions or wish to settle the matter prior to suit. Id. It is not disputed, and the FEC conceded at oral argument that only the Beeson Expenditures were before the FEC when it voted to initiate legal action. On April 8, 1981, Mr. Featherstone, on behalf of defendants, responded that he did not believe they violated the Act and cannot admit a violation, that it is undisputed that defendants have changed their bookkeeping system and now issue separate checks in payment of bills, and that while settlement would be desirable, "I am, however, unable to perceive that there is a case or controversy to settle." Defendants' Exhibit T. The present suit, including the Beeson and non-Beeson allegations, was filed on May 26, 1981.
C. The Non-Beeson Allegations
The defendants contend that this Court is without subject matter jurisdiction under 2 U.S.C. § 437g(a)(6) to entertain suit on the allegations raised in paragraphs 13, 15, 18 and 22-36 of the Complaint filed herein, as a result of the FEC's failure to investigate, provide notice of probable cause, conciliate, or even vote to initiate this suit with respect to these allegations. In support of this argument, defendants explain that the factual and legal basis of the violations alleged in these paragraphs are not related to the Beeson Expenditures, which alone were the subject of the FEC's investigation, conciliation, and vote, and thus the statutory prerequisites to suit with respect to these charges remain unfulfilled. The defendants note that the violations alleged in these paragraphs concern the arms-length purchase of goods and services by the NRA-PVF from the NRA and the NRA-ILF, and do not, like the Beeson Expenditures, involve the use of the NRA-ILF's charge accounts by the NRA-PVF.
The FEC responds that the defendants were aware that the investigation included these allegations, but concedes, as noted above, that it "inadvertently and unintentionally" left the factual and legal support for these allegations out of its brief in support of probable cause. The FEC also claims that it could not have investigated, provided notice, or conciliated the allegations raised in paragraphs 23-36 of the Complaint because they were continuing violations of the allegations raised in paragraphs 13, 15, 18 and 22.
The FEC, as noted in the November 15, 1982 Memorandum Opinion, relies on its contentions that the allegations were "part and parcel" of the Beeson Expenditures to which the defendants have only raised legal, not factual defenses, and that there is no prejudice to the defendants because they have been afforded notice and an opportunity to settle since the filing of suit and that the Court could avoid a waste of judicial resources, a second lawsuit, by staying the present action pending a complete investigation of these allegations under 2 U.S.C. § 437g(a).
The defendants respond that they are prejudiced by the FEC's failure to follow the statutory prerequisites to suit with respect to these charges. They note that if they had been presented with the entire set of charges, they may have acted differently during conciliation, and that it is even more of a waste of judicial resources for the Court to hear a suit on issues which have not been subjected to the full panoply of presuit procedures enacted by Congress.
As noted above, and as more fully discussed in the Court's November 18, 1982 Memorandum Opinion and Order, this Court is convinced that the statutory prerequisites to suit play an essential role in the resolution of FEC violations.
Congress expressly provided that the statutorily prescribed notice of charges, the "reason to believe" finding and subsequent General Counsel brief to the FEC set forth the "factual" and "legal" basis for the allegations. 2 U.S.C. § 437g(a)(1), (2), (3).
On the basis of the record before it, as described above, it is clear that the FEC did not include any of the detailed facts supporting the allegations in paragraphs 13, 15, 18, and 22-36 in its notice to the defendants or in the General Counsel's brief, and defendants' responses, which discuss only the Beeson Expenditures, corroborate this fact. Moreover, the failure to include these charges eliminated any possibility of ensuring the defendants a fair opportunity to demonstrate that no action should be taken or otherwise respond to the FEC's charges.
As a result of these defects, the defendants were also denied an opportunity to informally conciliate these allegations. Notably, the FEC introduced no evidence to the contrary, i.e., that at the time conciliation took place the defendants were aware of these allegations. The conciliation agreements themselves only referred to the Beeson Expenditures. The FEC merely concludes by way of argument that the charges were part and parcel of the Beeson Expenditures allegations and that the conciliation efforts made with respect to those allegations were sufficient to comply with 2 U.S.C. § 437g(a)(4). This Court disagrees.
Finally, and the Court views this as fatal to the FEC's position, the FEC concedes that when it voted to initiate this action under 2 U.S.C. § 437g(a)(6), the Commissioners had no papers before them describing, nor were they aware of, the alleged non-Beeson violations. Thus, the FEC has not yet voted to initiate an action with respect to paragraphs 13, 15, 18 and 22-36 of the Complaint.
In light of the foregoing, the Court finds it is unnecessary to consider whether the FEC is entitled to a stay pending cure of the pre-suit defects. Unlike the cases discussed in the November 18, 1982 Memorandum, which found it was permissible under Title VII of the Civil Rights Act (42 U.S.C. § 2000e-5(b)) and the Age Discrimination and Employment Act of 1967 (29 U.S.C. § 626(b)) -- statutes which have similar presuit notice, investigation and conciliation procedures, defendants do not merely claim that notice of the claim was defective or untimely or that conciliation was inadequate, but rather a total failure on the part of the FEC to comply with the statutory prerequisite to suit with respect to these allegations. In addition, without an affirmative vote of four members of the Commission to initiate suit with respect to these allegations, a critical check and internal review of the FEC administrative process is obviated.
Therefore, given the unusual circumstances of this case, this Court holds that it is without subject matter jurisdiction to hear the allegations raised in paragraphs 13, 15, 18 and 22-36 of the Complaint and that such allegations be dismissed without prejudice.
D. The Beeson Expenditures Allegations
The defendants next contend that the remaining allegations in the Complaint which concern the Beeson Expenditures should also be dismissed on the grounds that the conciliation efforts on the part of the FEC were inadequate. The defendants concede, as the Court agrees they must, that the notice, reason to believe, and probable cause determinations complied with the letter and spirit of the FECA. The gravamen of their assertions is that the FEC has an affirmative duty to do more than mail two conciliation offers to the defendants, prior to recommending suit. The Court disagrees.
The Act explicitly requires, and the legislative history demands that the FEC devote its resources to engage in "informal methods of conference, conciliation and persuasion." Only if the FEC is unable to resolve, correct, or otherwise prevent the alleged violations -- violations which the FEC has found probable cause to believe occurred -- is it authorized to file suit to enforce the Act and seek relief. Memorandum Opinion and Order, infra, at 1342-1343 & n. 5, 1344-1345; see In re Carter-Mondale Reelection Committee, Inc., supra, 642 F.2d at 543; Gabauer v. Woodcock, supra, 594 F.2d at 673. In the November 18, 1982 Memorandum and Opinion (at page 1345), this Court explained:
Because voluntary conciliation is the preferred method of dispute resolution under FECA, it is essential that the Court take a hard look at the FEC's efforts to notify the defendants of the charges and the FEC's attempts to conciliate with them. The defendants must have a fair opportunity to review and respond to the FEC's findings and have notice of precisely what activities have been found to be violations of the Act. Without such notice, the defendants are unable to adequately assess their situation and determine whether conciliation is in their best interest. Furthermore, assuming there is adequate notice of the charges, there must be a good faith, affirmative attempt to conciliate every allegation included in the judicial complaint.
At the same time, the FEC is not bound to accept a conciliation agreement which it finds unacceptable or inconsistent with the fair administration of the Act. Congress delegated exclusive enforcement to the FEC because it found expert, uniform enforcement essential to the administration of FECA. Where the FEC acts in good faith and reasonably responds to the position of a defendant during conciliation, it satisfies its obligation to attempt conciliation. Where, for example, a defendant repeatedly refuses to negotiate, concede culpability, or respond to the FEC's conciliation attempts, it is not improper for the FEC to suspend conciliation efforts and file suit. Finally, even where the FEC may be found to have inadequately performed or omitted one or more of its notice or conciliation obligations, such error may be excused where the act or omission was not intentional and where it caused no harm or prejudice to the defendants with respect to their participation in the pre-suit and conciliation process. (Footnotes and citations omitted.)