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FEC v. LEGI-TECH

May 30, 1997

FEDERAL ELECTION COMMISSION, Plaintiff,
v.
LEGI-TECH, INC., Defendant.



The opinion of the court was delivered by: GREEN

 I. Background

 The following facts are either not in dispute or are not reasonably disputed. Defendant Legi-Tech is a for-profit California corporation, wholly owned by McClatchy Newspapers, Inc., a diversified media company. Operating under the trade name of "Washington On-Line," Legi-Tech opened an office in Washington, D.C., in 1985 and began marketing databases of legislative and other information regarding the United States Congress. From October 1, 1985 until December 31, 1988, Legi-Tech sold access to four databases: the Bill Text Tracking System, the Congressional Bill Track System, the Congressional Vote Tracking System, and the Campaign Contribution Tracking System ("CCTS"). The CCTS is the database at issue in this suit.

 Under the Federal Election Campaign Act of 1971 ("FECA" or the "Act"), political committees are required to report the "identification" of each person who makes contributions to the reporting committee within a calendar year in an aggregate amount in excess of $ 200, together with the date and amount of each such contribution. See 2 U.S.C. § 434(b)(3). In the case of an individual contributor, the term "identification" is defined to mean the individual's name, mailing address, occupation, and the name of the individual's employer. Id. § 431(13)(A). See generally Buckley v. Valeo, 424 U.S. 1, 46 L. Ed. 2d 659, 96 S. Ct. 612 (1976).

 Another provision of the statute requires the FEC to make all such reports and statements filed with the Commission "available for public inspection, and copying, at the expense of the person requesting such copying" within 48 hours of the FEC's receipt of those documents. While § 438(a)(4) provides the public with access to this information, it also limits how that information may be used:

 
information copied from such reports or statements may not be sold or used by any person for the purpose of soliciting contributions or for any commercial purposes, other than using the name and address of any political committee to solicit contributions from such committee.

 2 U.S.C. § 438(a)(4) (emphasis added).

 Through its CCTS, Legi-Tech provided subscribers with information regarding contributors and their contributions, including the contributors' telephone numbers and street addresses, beginning with the 1983-1984 election cycle. Except for the contributors' telephone numbers, which were obtained from an outside vendor, the information was copied directly from the disclosure reports on file with the Commission, entered into the CCTS database and sold to Legi-Tech's CCTS customers through subscriptions providing access to the database. *fn2"

 When Legi-Tech developed the CCTS, it was aware that the sale of individual contributor information obtained from the FEC's files was "probing the edges of the law." FEC Ex. 43 at 1. Legi-Tech planned to "challenge the various federal laws against commercial use of this information" as a central part of its marketing strategy, hoping that "the ensuing controversy regarding the campaign contribution laws and our open disregard for them will provide for an extremely quick market identification." Id. at 2. Simply put, Legi-Tech invited this suit as a central component of its marketing strategy:

 
It is important to recognize the extent of the controversy Legi-Tech will be involved [in] with campaign contributions. We would expect to be sued by the government almost immediately after we begin selling the service. The suit will draw immediate attention to the firm and what we are doing. None of this attention will be negative. I think we can expect the press to immediately understand the issues as First Amendment based and will be rather supportive of us. Therefore, it is in Legi-Tech's commercial interest to encourage the government to take swift action against us.

 Id. at 10.

 Legi-Tech marketed the CCTS to potential customers by direct mail and by advertisements in newspapers, magazines and through radio "spots." With the assistance of an advertising and market research firm, Legi-Tech defined a target market for the CCTS consisting of four major groups: the media, corporate groups, special interest groups and the political establishments. The promotional literature mailed to its prospective CCTS customers contained a statement that "it is a violation of federal law to sell or use information copied from [FEC] reports for the 'purpose of soliciting contributions from other than political committee.' " FEC Ex. 3.

 Legi-Tech entered into written agreements with its customers in which they agreed to pay either fixed amounts for unlimited access to the CCTS during predetermined periods of time or a combination of hourly rates. At least 51 persons purchased access to the CCTS. Of 42 customers who purchased access to the CCTS alone, Legi-Tech received at least $ 273,869.87. See FEC Ex. 42.

 The agreements with CCTS customers contained the following statement:

 
information contained in the Campaign Contribution Tracking System has been copied by [Legi-Tech] from reports filed with the Federal Election Commission. It is a violation of federal law to sell or use information copied from such reports for the purpose of soliciting contributions from other than political committees.

 FEC Exs. 7-8.

 Additionally, when CCTS customers would log onto the CCTS system, a standard information screen appeared on their computer monitors which included the following sentence: "Any information copied from FEC reports or statements may not be sold or used by any person for the purpose of soliciting contributions or for commercial purposes."

 Despite these statements, at the time it entered into or renewed customer agreements providing access to the CCTS database, Legi-Tech had actual or constructive knowledge that at least some of its customers planned to use or had already used the CCTS information to solicit funds from contributors. For example, Legi-Tech was advised, and its staff memorialized in internal memoranda, that the International Brotherhood of Teamsters used the CCTS as part of its contribution solicitation program. *fn3" The Teamsters used the CCTS to monitor contributions by its membership and, when it perceived "the possibility of getting more contributions" from certain of its members, it would solicit contributions from those members.

 Legi-Tech was also aware that other CCTS customers used the CCTS for soliciting contributions. At the time that it sold CCTS access to the Freedom Policy Foundation (under the name "National Endowment for the Preservation of Liberty"), it knew that this organization had used CCTS information in the past for soliciting contributions. *fn4" And, despite knowing that the Democratic Congressional Campaign Committee ("DCCC") planned to use CCTS information to monitor contributions and solicit the same from contributors who had not exhausted their contribution limits, Legi-Tech twice renewed its contract with the DCCC. *fn5" Legi-Tech renewed its agreement with the National Association of Independent Schools under similar circumstances. *fn6"

 One of Legi-Tech's CCTS customers, the International Funding Institute, Inc. ("IFI"), used the CCTS information to create and market a solicitation list. IFI, a political and managerial consulting firm that engaged in fundraising, advertising, public relations, marketing and other commercial activities, subscribed to the CCTS in May of 1986. One mailing list, entitled "Active Republican Donors," was compiled exclusively from information provided to IFI through its subscription to the CCTS database. *fn7" During September of 1986, IFI marketed the "Active Republican Donors" list to at least five different organizations, at least four of which used the information to solicit contributions. One such organization was the American Citizens for Political Action, Inc. ("ACPA"). *fn8"

  On October 24, 1985, the NRCC filed an administrative complaint against Legi-Tech pursuant to 2 U.S.C. § 437g(a)(1), alleging that Legi-Tech had violated the Act. *fn9" The NRCC is a political committee whose "primary activity is fundraising" and whose "principal business asset is its list of donors, created through an expensive and laborious process of targeting and soliciting likely contributors." ...


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