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Utility Workers Union of America, Local 369, AFL-CIO v. Federal Election Commission

March 8, 2010

UTILITY WORKERS UNION OF AMERICA, LOCAL 369, AFL-CIO, PLAINTIFF,
v.
FEDERAL ELECTION COMMISSION, DEFENDANT.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

Plaintiff ("Local 369"), a labor organization representing employees of Covanta Energy Corporation, seeks judicial review of a Federal Election Commission ("FEC") order that dismissed its administrative complaint alleging that Covanta unlawfully solicits contributions to its federal political action committee in its employee handbook. The FEC has moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6), on the ground that it reasonably determined that the handbook language at issue is not a "solicitation" under its interpretation of that term. A hearing was held on the motion on February 3, 2010. At that time, plaintiff made an oral motion for summary judgment based on the existing record or, in the alternative, for remand to the FEC for further explanation. For the reasons explained below, the Court will deny the FEC's motion and grant plaintiff's request to remand this action to the FEC for further explanation.*fn1

BACKGROUND

Local 369 filed an administrative complaint with the FEC on October 20, 2008, alleging that Covanta violated the Federal Election Campaign Act ("FECA"), 2 U.S.C. § 431 et seq., by including language in its employee handbook that solicited contributions from employees to Covanta's federal political action committee ("PAC") -- a "separate segregated fund" set up pursuant to 2 U.S.C. § 431(4)(b).*fn2 Compl. ¶¶ 1, 5-6. Under § 441b(b) of FECA, companies and their federal PACs may only solicit contributions from the corporation's "restricted class," which consists of stockholders, executive and administrative personnel, and their families. Additionally, if a company makes such a "solicitation" without following the FEC's regulations, § 441b(b) requires it to afford a labor union representing its employees a similar opportunity to make a solicitation. See 11 C.F.R. § 114.5(k). Local 369 alleges that the Handbook section entitled "Political Contributions/Lobbying" violated FECA by impermissibly soliciting all Covanta employees and by not following other requirements. Compl. ¶ 6. The contested language in the Covanta Handbook states:

Federal, state, and local laws impose various restrictions on political campaign contributions. Under federal law a corporation may not make political contributions to federal political candidates or campaign committees. The extent to which corporations are permitted to contribute to state political candidates or campaign committees varies from state to state.

We will only make political contributions and expenditures if it is in our best interest and we determine that the proposed contribution or expenditure is legal....

In general, employees are free to make a personal contribution to any political candidates or committees as an individual and not as a representative of Covanta, subject to the individual limitations under state or federal law....

The regulations relating to political contributions are complex and changing. Prior to making or authorizing a corporate contribution or authorizing the use of a Covanta facility or resources for political purposes, please consult our Director of Governmental Affairs and our General Counsel. If you have any questions concerning a personal contribution, please contact our General Counsel.

Primarily in order to make contributions to federal political candidates or committees, we have established a federal political action committee (or "PAC"). Contributions to the PAC by eligible employees are voluntary.

Whether an employee contributes or not results in no favor, disfavor or reprisal from Covanta. The PAC will comply with all related federal and state laws.

Handbook at 11 (emphasis added). Local 369 believes several clauses in the Handbook evidence a "solicitation," but focuses primarily on the underscored language. Local 369's administrative complaint was filed under 2 U.S.C. § 437g(a)(1), which states: "Any person who believes a violation of this Act... has occurred, may file a complaint with the Commission."

The FEC dismissed Local 369's complaint, stating that the Handbook language was not a solicitation because it "does not encourage support for the PAC or facilitate the making of contributions to the PAC," as past FEC advisory opinions require, but rather "merely convey[s] information that might engender inquiry." See FEC Order at 4. The FEC reviewed its advisory opinions and noted that it found the "encourage" or "facilitate" standard triggered where, for example, a labor organization's magazine article described the process for establishing an automatic monthly deduction to its PAC, or where a corporate newsletter described the PAC's fundraising activities and commended the enthusiasm of employees who had participated; in contrast, it did not find the standard met where companies provided "informational statements without additional encouragement" on internal intranet sites or in newsletters. Id. at 4 (citing Advisory Opinion 1999-06 (Apr. 30, 1999), Advisory Opinion 1979-13 (May 25, 1979), Advisory Opinion 2000-7 (May 31, 2000), and Advisory Opinion 1983-38 (Dec. 16, 1983)).*fn3

The FEC then concluded that, in light of those opinions, the Handbook did not "encourage support for the PAC" or "facilitate contributions," but instead was "merely a statement that the PAC exists, not a solicitation." FEC Order at 4-5.

Local 369 brings the instant suit challenging the FEC's dismissal of its administrative complaint under 2 U.S.C. § 437g(a)(8)(A), which states: "Any party aggrieved by an order of the Commission dismissing a complaint... may file a petition with the United States District Court for the District of Columbia." FECA requires Local 369 to establish that the FEC's dismissal of its complaint was "contrary to law." 2 U.S.C. § 437g(a)(8)(C). For purposes of § 437g(a)(8)(C), "contrary to law" means "arbitrary or capricious, or an abuse of discretion." Hagelin v. FEC, 411 F.3d 237, 242 (D.C. Cir. 2005) (internal quotation marks and citation omitted). Although Local 369 contends that the FEC Order is flawed in several respects, supplemental briefing and the motions hearing have focused on an FEC interpretative guidance concerning the meaning of "solicitation" that, on its face, throws the reasonableness of the FEC resolution into question.*fn4 The interpretive guidance, known as an "Explanation and Justification" -- or "E&J" -- is an explanatory document that is submitted to Congress when the FEC proposes a new regulation or an amendment to an existing regulation. See Def.'s Supp'l Mem. at 1-2. This particular E&J accompanies the regulation captioned "Separate Segregated Funds," 11 C.F.R. ยง 114.5, ...


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