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FEC v. NRA OF AMERICA

January 6, 1983

FEDERAL ELECTION COMMISSION, Plaintiff,
v.
NATIONAL RIFLE ASSOCIATION OF AMERICA, et al., Defendants



The opinion of the court was delivered by: HOGAN

 THOMAS F. HOGAN, District Judge.

 I. INTRODUCTION

 This case is before the Court on a motion to dismiss by defendants *fn1" under Rule 12(b)(1) for lack of subject matter jurisdiction. In a Memorandum Opinion and Order, dated November 18, 1982, and attached as an Appendix hereto, this Court was, based on the record before it at that time, unable to decide whether the Federal Election Commission ("FEC") had adequately performed its statutorily mandated presuit enforcement duties under the Federal Election Campaign Act, as amended ("FECA" or the "Act"), 2 U.S.C. §§ 431-55, with respect to the present action against the defendants in this suit, and whether said (failures), if any, on the part of the FEC, posed a jurisdictional bar to suit under the Act. In response to the Court's Order, the parties filed affidavits attesting to the procedures adhered to by the FEC, submitted supplemental legal argument on the jurisdictional nature of the alleged defects, and appeared before the Court, on December 16, 1982, to present additional evidence and further argue their respective positions.

 In the November 18, 1982 Memorandum, the Court set forth the respective claims and arguments of the parties in detail, and it is not necessary to repeat those positions herein. *fn2" The Court explained therein the clear and unmistakable duty of the FEC to follow certain procedures prior to instituting suit under the Act. As the Court noted, four steps are required under Section 437g of the Act, including:

 
(1) a determination that reasonable cause to believe a violation has occurred or is about to occur, and the provision of notice and an opportunity to comment to the respondent;
 
(2) an investigation of the allegations by the FEC;
 
(4) an attempt for at least 30 days to correct or prevent the alleged violations by informal means of "conference, conciliation, and persuasion."

 Then, only after the FEC exhausts these steps, and affirmatively votes, by at least 4 of its members, may the FEC "institute a civil action for relief, including a permanent or temporary injunction, restraining order, or any other appropriate order." 2 U.S.C. § 437g(a)(6).

 The express intent of these procedures is to guide the FEC in its role as the "exclusive" administrator and enforcer of the Act. See In re Carter-Mondale Reelection Committee, Inc., 206 U.S. App. D.C. 133, 642 F.2d 538, 543 & n. 6, 545 & n. 9 (D.C.Cir.1980); In re Federal Election Campaign Election Act Litigation, 474 F. Supp. 1051, 1053 (D.D.C.1979). And, while our circuit has noted in a similar context that FEC determinations which construe FECA "are entitled to great respect by the courts because of the extremely delicate nature of the tremendous power entrusted to it," *fn3" this broad grant of discretion also assumes that the FEC will "be sensitive to the great trust imposed on it to not overstep its authority by interfering unduly in the conduct of elections. The statute has its own penalties, procedures, remedies and time schedules and these should be observed." *fn4" Accordingly, where the FEC fails or has not been afforded an opportunity to comply with the mandatory prerequisites to suit, an enforcement suit is premature, *fn5" and the court, at a minimum, must stay the action pending cure by the FEC, or in certain cases dismiss the suit for want of subject matter jurisdiction. *fn6"

 II. DISCUSSION

 A. Introduction

 By their motion to dismiss, defendants contend first that the FEC failed to affirmatively find probable cause, attempt conciliation, or vote to initiate this action with respect to the charges raised in paragraphs 13, 15, 18 and 22 through 36 of the Complaint, and that said failures are jurisdictional defects requiring the dismissal of these charges. Second, defendants contend that the entire suit must be dismissed, in any event, because with respect to those paragraphs in the Complaint over which the FEC found probable cause, and voted to initiate suit, its efforts to informally engage in conciliation and reconcile any differences of opinion with defendants were statutorily deficient.

 The FEC concedes it failed to specifically refer to the facts supporting the violations of law alleged in paragraphs 13, 15, 18, and 22 through 36 of the Complaint in its determination of probable cause or conciliation efforts. It asserts that the omission was harmless, however, for two reasons: (1) because the charges were part and parcel of, and similar in nature to, the other allegations in the Complaint; and (2) because the defendants do not deny the factual occurrence of the acts, but simply that the alleged activities were not unlawful and do not form the basis of a violation under FECA. *fn7" The FEC further contends that it properly complied with all of the prerequisites to suit under the Act, with respect to the other paragraphs in the Complaint, and that the only reason the parties were unwilling to resolve their differences informally was the intransigence of the defendants.

 B. The Administrative Proceedings Below

 Before addressing the two challenges raised by defendants, a brief review of the allegations in the Complaint and a review of the procedural background of the case is in order. In Count I, the FEC alleges that the NRA and the NRA-ILF made "expenditures totalling $37,126.05 in connection with the general and primary elections of 1978 and 1980" in violation of 2 U.S.C. § 441b(a). See Complaint PP 12-37. In Count II, the FEC alleges that the NRA-PVF received advances or contributions from the NRA and NRA-ILF in the amount of $37,126.05 in violation of 2 U.S.C. § 441b(a). The FEC seeks a declaration that the alleged activity was unlawful, a permanent injunction prohibiting defendants from engaging in the alleged activity in the future and the imposition of civil penalties on the defendants.

 As a result of its internal review of reports filed by the NRA-PVF, the FEC sent a form letter on May 16, 1979, requesting the NRA-PVF to supply further information in connection with its February, 1979 report to the FEC. Affidavit of Kenneth A. Gross, Plaintiff's Exhibit 1, para. 4; Plaintiff's Exhibit 5. Specifically, the NRA-PVF was asked to explain in detail the independent expenditures reported on Schedule E, Line 23. Id. On May 31, 1979, James J. Featherstone, as Treasurer of the NRA-PVF, responded. Plaintiff's Exhibit 6. The letter described numerous expenditures made in connection with the election or defeat of several federal candidates, and included a description of some of the expenditures (at page 4) covered by the allegations in paragraph 13, 15, 18 and 22 of the Complaint. At this point in time, however, the FEC concedes that it had not yet begun an investigation pursuant to 2 U.S.C. § 437g, but was simply engaged in a routine review of FEC reports pursuant to 2 U.S.C. §§ 432-34. Affidavit of Kenneth A. Gross, Plaintiff's Exhibit 1, para. 4.

 It was not until February 27, 1980, that the FEC found by a vote of 6-0 that it had "reason to believe" the defendants in this suit had violated the Act. In the Matter of National Rifle Association Political Victory Fund, et al., MUR 1110 (Feb. 27, 1980), Plaintiff's Exhibit 7. On March 7, 1980, in accordance with 2 U.S.C. § 437g(a)(2), the FEC sent the NRA-PVF notice of its finding and a copy of a Staff Memorandum describing the factual and legal basis for the finding. Plaintiff's Exhibits 7, 8, and 8A. The cover letter advised the NRA-PVF of its right to submit any factual or legal materials relevant to the finding and noted that:

 
In the absence of any information which demonstrates that no further action should be taken against your committee, the Commission may find probable cause to believe that a violation has occurred, and proceed with formal conciliation. Of course, this does not preclude the settlement of this matter through informal conciliation prior to a finding of probable cause to believe if you so desire . . . .

 and

 
If you have any questions, please contact Judy Thedford at (202) 503-5071.

 Plaintiff's Exhibit 8. *fn8" The Staff Memorandum cited two groups of independent expenditures in the amounts of $1932.75 and $3815.00 which were paid to NRA-ILF to pay for "travel to disseminate communications," "the printing of post cards" and "to assist a campaign." Plaintiff's Exhibit 8A.

 The NRA-PVF responded on March 28, 1980, with a detailed letter describing the nature of each payment comprising the respective expenditure totals referred to in the Staff Memorandum, including the check number, amount, date, and purpose of the expenditure. Plaintiff's Exhibit 9. Each expenditure involved the reimbursement of the NRA-ILF by the NRA-PVF for expenses which the NRA-PVF charged to the Beeson Travel Agency, and in one instance to National Creative Printing on NRA-ILF's account (hereinafter collectively referred to as the "Beeson Expenditures"). *fn9" Id.; Affidavit of James J. Featherstone ("Featherstone Affidavit") at page 5.

 As of March 28, 1980, and as James J. Featherstone both testified and attested to in his affidavit, neither he nor the defendants had any indication from the FEC that the scope of the investigation included any possible violations other than those encompassed by the $1932.75 and $3815.00 figures referred to by the FEC and explained by him in his March 28, 1980 letter. Id. at 4-5. The Court agrees with the defendants that it would be reasonable to conclude that those matters which came up prior to the initiation of the investigation and were not encompassed by the finding of reason to believe had been dropped, or at most were undergoing further study.

 On June 16, 1980, the FEC General Counsel advised the defendants of its decision to "recommend that the Commission find probable cause to believe that a violation had occurred," Plaintiff's Exhibit 10, and enclosed a copy of its brief to the FEC, to which the defendants had 15 days to respond under 2 U.S.C. § 437g(a)(3). The brief, as required, set forth the legal and factual basis for the finding, but was limited in scope, as was the finding of reason to believe, to the Beeson Expenditures. *fn10" Plaintiff's Exhibit 10A, at 2-3. The FEC concedes that the "brief did not detail the specific facts that are alleged in paragraphs 13, 15, 18, and 22-36 of the Complaint" (i.e., the alleged non-Beeson violations). Affidavit of Kenneth A. Gross, Plaintiff's Exhibit 1, para. 6. *fn11" Thereafter, on August 13, 1980, the defendants filed a response as provided for in the Act contending that the reimbursements by the NRA-PVF of expenses charged for travel in NRA-ILF's name were not violations of law and the factual question of whether the acts alleged were more than a de mimimus infraction. *fn12" Id. Nowhere in the response does it appear that any violations, other than the Beeson Expenditures, were at issue.

 Finally, on September 23, 1980, the FEC voted 4-2 to find probable cause that the NRA-ILF and NRA-PVF violated the Act and that a civil penalty of $100 be imposed on each. Plaintiff's Exhibit 13. The record before the FEC consisted of the General Counsel's brief, and the defendants' response, and the FEC conceded at oral argument that the non-Beeson allegations and facts were not explicitly presented to the Commission.

 In accordance with 2 U.S.C. § 437g(a)(4), on October 1, 1980, the FEC notified the defendants of the decision and proffered a conciliation agreement under which the defendants would admit to the alleged violations of the Act in connection with the Beeson Expenditures and agree to pay a $100.00 civil penalty. Plaintiff's Exhibits 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. *fn13"

 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 ...


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