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Stop This Insanity, Inc. Employee Leadership Fund v. Federal Election Com'n

United States District Court, District of Columbia

November 5, 2012

STOP THIS INSANITY, INC. EMPLOYEE LEADERSHIP FUND, et al., Plaintiffs,
v.
FEDERAL ELECTION COMMISSION, Defendant.

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Stephen Michael Hoersting, DB Capitol Strategies PLLC, Dayton, OH, Dan Backer, Washington, DC, for Plaintiffs.

Adav Noti, Erin R. Chlopak, Federal Election Commission, Washington, DC, for Defendant.

MEMORANDUM OPINION

BERYL A. HOWELL, District Judge.

Plaintiffs Stop This Insanity, Inc. Employee Leadership Fund (" the Leadership Fund" ), Stop This Insanity, Inc. (" STI" ),[1] Glengary LLC, Todd Cefaratti, and Ladd Ehlinger bring this as-applied First Amendment challenge against three provisions of the Federal Election Campaign Act (" FECA" ), namely 2 U.S.C. §§ 441a(a)(1)(C) and 441a(a)(3) (which limit the dollar amount of contributions to political committees); and 441b(b)(4)(A)(i) (which restricts the pool of citizens from which connected political committees established by a corporation may solicit contributions). [2] The Leadership Fund is a " connected" political action committee (" PAC" ) [3] or " separate segregated fund" of the corporation STI. Compl. ¶ 17, ECF No. 1. The Leadership Fund seeks declaratory and injunctive relief that would allow it to solicit and accept unlimited contributions

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to finance unlimited independent political expenditures through an independent expenditure-only account not subject to the restrictions set forth in §§ 441a(a)(1)(C), 441a(a)(3), and 441b(b)(4)(A)(i). Id. ¶ 1. In their three-count Complaint, the plaintiffs seek a declaratory judgment that the prohibitions contained in these portions of the FECA are unconstitutional as applied to their proposed solicitation and contribution activities. Id. at 20-22. The plaintiffs also seek preliminary and permanent injunctive relief that would prohibit the defendant Federal Election Commission (" FEC" ) from enforcing §§ 441a(a)(1)(C), 441a(a)(3), and 441b(b)(4)(A)(i) against the Leadership Fund and any individual or corporate contributors to an independent expenditure-only account established by the Leadership Fund. See id.

I. BACKGROUND

STI is a not-for-profit social welfare organization, incorporated in Arizona, which is currently seeking tax-exempt status under § 501(c)(4) of the Internal Revenue Code. See Compl. ¶ 18.[4] The Leadership Fund is a separate segregated fund (" SSF" ) that was established by and connected to STI and registered with the FEC as a political committee on January 4, 2012. Compl. Ex. B at 3, ECF No. 1-1. Under the FECA, a corporation may establish an SSF to engage in political activities, see 2 U.S.C. § 441b(b)(2)(C), and " [s]uch a PAC ... may be wholly controlled by the sponsoring corporation," FEC v. Beaumont, 539 U.S. 146, 149, 123 S.Ct. 2200, 156 L.Ed.2d 179 (2003). All SSFs, however, must register as " political committees" under the FECA. See 2 U.S.C. §§ 431(4)(B), 433.[5] Likewise, all political committees, including SSFs, are required to abide by certain organizational, record-keeping, and reporting requirements, see 2 U.S.C. §§ 432, 433, 434, as well as contribution limits, see id. § 441a. Under the contribution limits, no person is allowed to make " contributions" to any " other political committee" (which includes SSFs) " in any calendar year which, in the aggregate, exceed $5,000." Id. § 441a(a)(1)(C). Additionally, SSFs are uniquely required to observe certain limits upon the universe of people from whom they solicit contributions. Specifically, subject to certain limited exceptions, it is unlawful " for a corporation, or a separate segregated fund established by a corporation, to solicit contributions to such a fund from any person other than its stockholders and their families and its executive or administrative personnel and their families." Id. § 441b(b)(4)(A)(i).[6] The Leadership Fund asserts that these restrictions on the solicitations and contributions of connected PACs are unconstitutional as

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applied to it, in light of recent developments in the law of campaign finance and the First Amendment.

Currently, the Leadership Fund maintains a single bank account into which it receives " hard money" [7] contributions that are subject to the contribution limits, solicitation restrictions, and reporting and disclosure requirements of the FECA. Compl. Ex. A at 2, ECF No. 1-1.[8] The Leadership Fund wants to use the funds from this bank account to make direct contributions to candidates for federal political office. Compl. ¶ 23. The Leadership Fund, however, would also like to expand its political activities to include " independent expenditures," id., which are expenditures " expressly advocating the election or defeat of a clearly identified candidate" but that are " not made in concert or cooperation with or at the request or suggestion of such candidate, the candidate's authorized political committee, or their agents, or a political party committee or its agents," 2 U.S.C. § 431(17). Since independent expenditures currently enjoy fewer restrictions than direct contributions to candidates, the Leadership Fund would like to establish a second, separate bank account, for which it would like to solicit unlimited contributions from the general public in order to finance its " independent expenditures." Compl. Ex. A at 2; see also Carey v. FEC, 791 F.Supp.2d 121, 130-32 (D.D.C.2011) (approving " separate accounts for hard-money and soft-money contributions and expenditures" ). This separate account would not be used to contribute directly to candidates, political parties, or other political committees, and is therefore sometimes referred to as a " non-contribution" account or, more accurately, an " independent expenditure-only account."

To that end, the Leadership Fund submitted an advisory opinion request to the FEC on January 4, 2012, asking the FEC " whether it may open a[n] [independent expenditure-only] account ... to accept contributions from individuals, corporations, and unions that is not subject to the limitations and prohibitions of 2 U.S.C. § 441a(a)(1)(C) or § 441b ... to conduct Independent Expenditures and proportionally pay[ ] an appropriately tailored share of administrative expenses." Compl. Ex. A at 1; see also 2 U.S.C. § 437f(a) (requiring the FEC to render a written advisory opinion in response to a " complete written request concerning the application of [the FECA] or a rule or regulation prescribed by the [FEC], with respect to a specific transaction or activity by the person" ).

On February 17, 2012, the FEC issued two draft advisory opinions in response to the Leadership Fund's request. The first draft advisory opinion (" Draft A" ) concluded that the Leadership Fund " may establish a[n] [independent expenditure-only] account and solicit and accept unlimited contributions from individuals, other political committees, corporations, and labor organizations, STI itself, and STI's restricted class" for the purpose of financing independent expenditures. Compl. Ex. B at 2. The second draft advisory opinion

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(" Draft B" ), however, reached the opposite conclusion: " the [FECA] and [FEC] regulations prohibit [the Leadership Fund] and STI from establishing a[n] [independent expenditure-only] account for [the Leadership Fund] that would receive unlimited contributions solicited from all STI employees and the general public for the purpose of financing independent expenditures." Id. Ex. C at 4, ECF No. 1-1. Both of these advisory opinions recognized that none of the recent judicial decisions issued in the realm of campaign finance and the First Amendment directly address whether FECA's contribution limits and solicitation restrictions are constitutional as applied to an SSF, i.e., a political committee connected to a corporation or labor organization. Id. Ex. B at 7; id. Ex. C at 6-7.

On March 2, 2012, the FEC certified that it had failed on a vote of 3-3 to approve either draft advisory opinion. See Compl. Ex. D at 1, ECF No. 1-1. [9] Without the FEC's blessing, the Leadership Fund was (and continues to be) unable to solicit contributions for independent expenditures without being subject to the contribution limits in § 441a(a) or the solicitation restrictions in § 441b(b)(4)(A) because the Leadership Fund alleges that it " will face a credible threat of prosecution if it solicits or accepts contributions to a[n] [independent expenditure-only] account in excess of the limits contained in 2 U.S.C. §§ 441a(a)(1)(C) and 441a(a)(3)" or " in derogation of the restriction at 2 U.S.C. § 441b(b)(4)(A)(i)." Compl. ¶¶ 51, 52. Feeling " required to mute itself and curtail its activities" during the 2012 election cycle, id. ¶ 37, the Leadership Fund— along with its connected corporate entity (STI) and three potential donors who wish to make contributions to the Leadership Fund but are currently prohibited by the FECA from doing so (Glengary LLC, Todd Cefaratti, and Ladd Ehlinger)— filed the Complaint in the instant action on July 10, 2012. Pending before the Court are the plaintiffs' Motion for Preliminary Injunction and the FEC's Motion to Dismiss.[10] For the reasons discussed below, the Court will deny the plaintiff's Motion for Preliminary Injunction and will grant the FEC's Motion to Dismiss.

II. LEGAL STANDARDS

A. Preliminary Injunction

The purpose of a preliminary injunction " is merely to preserve the relative positions of the parties until a trial on the merits can be held." Univ. of Tex. v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981). It is " an extraordinary and drastic remedy" and " should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) (emphasis and internal quotation mark omitted). Plaintiffs seeking a preliminary injunction must establish that (1) they are likely to succeed on the merits of their claims; (2) they are likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tip in their favor; and (4) and injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008); accord Gordon v. Holder, 632 F.3d 722, 724 (D.C.Cir.2011).

Historically, these four factors have been evaluated on a " sliding scale" in this Circuit, such that " [i]f the movant makes an unusually strong showing on one of the factors, then it does not necessarily have

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to make as strong a showing on another factor." Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1291-92 (D.C.Cir.2009). Recently, however, the continued viability of that approach has been called into some doubt, as the D.C. Circuit has suggested, without holding, that a likelihood of success on the merits is an independent, free-standing requirement for a preliminary injunction. See Sherley v. Sebelius, 644 F.3d 388, 392-93 (D.C.Cir.2011) (" [W]e read Winter at least to suggest if not to hold ‘ that a likelihood of success is an independent, free-standing requirement for a preliminary injunction.’ " (citation omitted) (quoting Davis, 571 F.3d at 1296 (Kavanaugh, J., concurring))). Absent binding authority or clear guidance from the Court of Appeals, however, the Court finds that the most prudent course is to bypass this unresolved issue and proceed to explain why a preliminary injunction is not appropriate under the " sliding scale" framework. If the plaintiffs cannot meet the less demanding " sliding scale" standard, then they cannot satisfy the more stringent standard alluded to by the Supreme Court and the Court of Appeals.

That being said, in meeting the requisite burden for injunctive relief, " [i]t is particularly important for the movant to demonstrate a likelihood of success on the merits." Konarski v. Donovan, 763 F.Supp.2d 128, 132 (D.D.C.2011). Indeed, " absent a ‘ substantial indication of probable success [on the merits], there would be no justification for the court's intrusion into the ordinary processes of administration and judicial review.’ " Am. Bankers Ass'n v. Nat'l Credit Union Admin., 38 F.Supp.2d 114, 140 (D.D.C.1999) (alteration in original) (quoting Wash. Metro. Area Transit Comm'n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C.Cir.1977)). Assessing the likelihood of success on the merits " does not involve a final determination of the merits, but rather the exercise of sound judicial discretion on the need for interim relief." Nat'l Org. for Women v. Soc. Sec. Admin., 736 F.2d 727, 733 (D.C.Cir.1984) (internal quotation marks omitted). " As an extraordinary remedy, courts should grant such relief sparingly." Konarski, 763 F.Supp.2d at 133 (citing Mazurek, 520 U.S. at 972, 117 S.Ct. 1865); see also Dorfmann v. Boozer, 414 F.2d 1168, 1173 (D.C.Cir.1969) (" The power to issue a preliminary injunction, especially a mandatory one, should be sparingly exercised." (internal quotation marks omitted)).

B. Motion to Dismiss

To survive a motion to dismiss under Rule 12(b)(6), a plaintiff need only plead " enough facts to state a claim to relief that is plausible on its face" and to " nudge[ ] [his or her] claims across the line from conceivable to plausible." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); see also FED.R.CIV.P. 12(b)(6). " [A] complaint [does not] suffice if it tenders ‘ naked assertion[s]’ devoid of ‘ further factual enhancement.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (alteration in original) (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). Instead, the complaint must plead facts that are more than " ‘ merely consistent with’ a defendant's liability" ; " the plaintiff [must] plead[ ] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955); accord Rudder v. Williams, 666 F.3d 790, 794 (D.C.Cir.2012). The Court " must assume all the allegations in the complaint are true (even if doubtful in fact) ... [and] must give the plaintiff the benefit of all reasonable inferences derived from the facts alleged." Aktieselskabet AF 21. November 2001 v. Fame Jeans Inc., 525 F.3d 8, 17 (D.C.Cir.2008) (citations and internal quotation marks omitted).

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III. DISCUSSION

This is the most recent attempt by a non-profit entity to invalidate, on First Amendment grounds, federal regulations related to independent political expenditures. Such challenges within this Circuit and before the Supreme Court have enjoyed almost universal success in recent years on the premise that " independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption." Citizens United v. FEC, 558 U.S. 310, 130 S.Ct. 876, 909, 175 L.Ed.2d 753 (2010); see also SpeechNow.org v. FEC, 599 F.3d 686, 696 (D.C.Cir.2010) (" [T]he government can have no anti-corruption interest in limiting contributions to independent expenditure-only organizations." ); EMILY's List v. FEC, 581 F.3d 1, 12 (D.C.Cir.2009) (" [L]imiting donations to and spending by non-profits in order to prevent corruption of candidates and officeholders represents a kind of ‘ prophylaxis-upon-prophylaxis' regulation to which the Supreme Court has emphatically stated, ‘ Enough is enough.’ " (quoting FEC v. Wis. Right to Life, Inc. (" WRTL " ), 551 U.S. 449, 478-79, 127 S.Ct. 2652, 168 L.Ed.2d 329 (2007))). It is of course not the Court's prerogative to question the authority of these decisions, but as the following discussion makes clear, the implications of Citizens United and its progeny do not compel the relief the plaintiffs seek. The Court will first assess the plaintiffs' probability of success on the merits before evaluating the plaintiffs' showing on the other three preliminary injunction factors.

A. Probability of Success on the Merits

In assessing the viability of the plaintiffs' as-applied constitutional challenge, it is critical to observe that this is a case about regulating the solicitation and fundraising activities of " connected" SSFs— PACs that are established, administered, and subsidized by corporations. SSFs ...


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