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Citizens for Responsibility and Ethics in Washington v. Federal Election Commission

United States District Court, District of Columbia

September 19, 2016



          CHRISTOPHER R. COOPER United States District Judge

         In 2010, American Action Network ("AAN")-a tax-exempt section 501(c)(4) organization-spent $1, 065, 000 on three versions of the following television advertisement, which ran in the districts of three different candidates for Congress in the lead-up to that year's election:

[On-screen text:] Congress doesn't want you to read this. Just like [candidate]. [Candidate] & Nancy Pelosi rammed through government healthcare. Without Congress reading all the details. $500 billion in Medicare cuts. Free healthcare for illegal immigrants. Even Viagra for convicted sex offenders. So tell [candidate] to read this: In November, Fix the healthcare mess Congress made.

A.R. 1722. The Federal Election Commission ("FEC") reviewed this ad, along with nineteen other AAN-sponsored communications and nine similar "electioneering communications" sponsored by another non-profit, Americans for Job Security ("AJS"). Three Commissioners concluded that the organizations' spending on these ads should not be considered in evaluating whether either entity's "major purpose" was "the nomination or election of a candidate." Buckley v. Valeo, 424 U.S. 1, 79 (1976). On the basis of that analysis, the FEC-in accordance with the controlling votes of the three Commissioners-dismissed complaints against AJS and AAN, concluding that neither organization was an unregistered political committee in violation of the Federal Election Campaign Act ("FECA").

         Plaintiff, Citizens for Responsibility and Ethics in Washington ("CREW"), which lodged the complaints, now challenges those dismissal decisions. This Court previously dismissed CREW's claims to the extent that they relied on the Administrative Procedure Act ("APA"), but that same opinion recognized that CREW had an "adequate, alternative means to challenge" the FEC's decision through FECA's particularized judicial review mechanisms. See CREW v. FEC, __ F.Supp.3d __, 2015 WL 10354778, at *1 (D.D.C. Aug. 13, 2015). The Court now considers cross-motions for summary judgment, the central dispute in which is whether the FEC's conclusion-that there was no "reason to believe" the organizations in question had as their "major purpose" the "nomination or election of a candidate"-was "contrary to law, " 52 U.S.C. § 30109(a)(8)(C). Finding that the controlling Commissioners premised their conclusion on an erroneous interpretation of Supreme Court precedent and the First Amendment, the Court agrees with CREW that the dismissals were contrary to law. It will, accordingly, grant CREW's motion for summary judgment, deny the FEC's and AAN's cross-motions, and remand the case to the FEC for further proceedings consistent with this Opinion.

         I. Background

         A. Statutory and Regulatory Framework

         The FEC is a six-member, independent agency charged with administering FECA. See 52 U.S.C. § 30106(b)(1) (tasking the Commission with "administering], seek[ing] to obtain compliance with, and formulating] policy with respect to" FECA). Any person or entity may file a complaint with the Commission asserting a FECA violation, following which the alleged violator is given an opportunity to respond in writing. Id. § 30109(a)(1). If four or more Commission members subsequently find there is "reason to believe" that FECA was or will soon be violated, then the FEC must investigate. Id. § 30109(a)(2). Otherwise-i.e., where three or fewer Commission members have "reason to believe" FECA has been violated-the complaint is dismissed. See id § 30106(c) ("[T]he affirmative vote of 4 members of the Commission shall be required in order for the Commission to take any [enforcement or other authoritative] action."). In the event of dismissal, the controlling group of Commissioners-here, those voting against enforcement-must provide a statement of reasons explaining the dismissal decision. See FEC v. Nat'l Republican Senatorial Comm. (NRSC), 966 F.2d 1471, 1476 (D.C, Cir. 1992). Any "party aggrieved" by an FEC dismissal decision "may file a petition" for this Court's review. Id. § 30109(a)(8)(A).

         One way that FECA regulates federal campaign financing is by requiring disclosures for certain types of election-related communications. The Supreme Court has repeatedly recognized that such disclosure regimes accomplish much while costing relatively little. On the one hand, disclosure "open[s] the basic process of our federal election[s] to public view, " Buckley, 424 U.S. at 82, by "provid[ing] the electorate with information" concerning the sources and outlets for campaign money, Id. at 66, and thus "minimizing] the potential for abuse of the campaign finance system, " McCutcheon v. FEC, 134 S.Ct. 1434, 1459 (2014). On the other hand, disclosure imposes a relatively "less restrictive"-though not negligible-First Amendment burden on those subject to its requirements. McCutcheon, 134 S.Ct. at 1460; see also Citizens United v. FEC, 558 U.S. 310, 369 (2010); FEC v. Massachusetts Citizens for Life. Inc., (MCFL), 479 U.S. 238, 262(1986).

         FECA's disclosure requirements can be triggered by one-time events. When any entity spends more than $250 on an "independent expenditure"-a communication not coordinated with a candidacy but "expressly advocating the election or defeat of a clearly identified candidate, " 52 U.S.C. § 30101-the organization must disclose the date and amount of that expenditure, as well as the identities of those who contributed and earmarked more than $200 for the communication. Similar reporting requirements apply when an entity spends more than $10, 000 on "electioneering communications, " a broader category including "broadcast, cable, or satellite" communications that "occur less than 60 days before a general [election or] 30 days before a primary, " are "targeted to the relevant electorate, " and which "refer[J" without expressly advocating for or against, "a clearly identified [federal] candidate." Id., § 30104(f)(1)-(3). For expenditures on electioneering communications meeting the $10, 000 threshold, the entity must disclose the identities of those who contributed and earmarked an aggregate of $1, 000 or more for that expenditure. 52 U.S.C. § 30104(f)(2)(F).

         More extensive disclosure rules govern "political committees." 52 U.S.C. § 30101. Political committees must, for example, appoint a treasurer, keep records with the names and addresses of contributors, and file with the FEC regular reports during a general election year with certain accounting information, including amounts spent on contributions and expenditures. Id. §§ 30102-04. An entity must register as a political committee when it satisfies two separate conditions. The first is straightforwardly spelled out in FECA: The entity in question must contribute or expend more than $1, 000 in a calendar year for the purpose of influencing a federal election. Id. § 30101(4)(A). The second condition, imposed pursuant to a Supreme Court-authored narrowing construction, is at issue here and has previously been the subject of much dispute: If not controlled directly by a political candidate, the entity's "major purpose" must be "the nomination or election of a candidate." Buckley, 424 U.S. at 79; see also MCFL, 479 U.S. at 262.

         Rather than adopt a rule specifically defining the contours of this "major purpose" limitation, the FEC has pursued an adjudicative, case-by-case approach, an implementation choice which has been litigated, scrutinized, and ultimately validated by a fellow court in this District. Shavs v. FEC, 424 F.Supp.2d 100 (D.D.C. 2006). In response to a remand for further explanation regarding why adjudication and not rulemaking was the proper enforcement method, see id. at 108, the Commission explained in a notice published in the Federal Register that "determining political committee status . . . requires" a fact-intensive analysis of an organization's "overall conduct, " meaning "whether its major purpose is Federal campaign activity (i.e., the nomination or election of a Federal candidate)." Political Committee Status, 72 Fed. Reg. 5595, 5597 (Feb. 7, 2007) (Supplemental Explanation and Justification ("SE & J")). The court accepted that explanation, deferring to the FEC's judgment that evaluating an organization's major purpose required "a very close examination of various activities and statements." Shays v. FEC, 511 F.Supp.2d 19, 30 (D.D.C. 2007).

         B. Factual and Procedural History

         AJS, one of two organizations alleged by CREW to be an unregistered political committee, was founded as a tax-exempt section 501(c)(6) organization, or "[b]usiness league, " in 1997. A.R. 48-50; 26 U.S.C. § 501(c)(6). Since then, as AJS explained in its response to CREW's administrative complaint, the organization's consistent "message has been a simple one: free markets and pro-paycheck public policy are fundamental to building a strong economy and creating more and better paying jobs." A.R. 50, 98 (citing AJS's website). To spread that message, AJS spent millions on "television, radio, newspaper[, ] and direct mail advertising[, ] amongst other forms" of communication. A.R. 19 (2009 Form 990 Tax Return). During its early years, AJS's efforts were not closely tied to elections: For instance, between 2004 and 2006, AJS ran a series of advertisements, none published or broadcast in the 30- or 60-day lead-up to primaries or elections, promoting the repeal of the estate tax, and others advocating against an asbestos trust fund. A.R. 50-52. However, over time, AJS shifted to a more election-focused approach: In 2008, the organization started funding "electioneering communications, " and in 2010, it started funding "independent expenditures, " i.e., express advocacy for or against certain candidates. A.R. 52, 1393. Indeed, in 2010, out of roughly $12.4 million in overall expenditures, [1] AJS spent approximately $4.9 million on express advocacy advertising and an additional $4.5 million on electioneering communications, meaning that over three-fourths of its spending was in some way tied to elections. A.R. 1393-94.

         AAN, the other organization challenged by CREW, is a tax-exempt section 501(c)(4) "[c]ivic" organization, founded in 2009. A.R. 1490-91, 1562; 26 U.S.C. § 501(c)(4). The organization's stated mission is to "create[], encourage[, ] and promote center-right policies based on the principles of freedom, limited government, American exceptionalism, and strong national security." A.R. 1490. To advance that mission, AAN has sponsored "educational activities" and "grassroots policy events, " A.R. 1563, but the majority of its spending throughout the period in question-mid-2009 through mid-2011-was on election-related advertising. Over those two years, AAN spent roughly $27.1 million in total; of that, a little more than $4 million was devoted to independent expenditures (i.e., express advocacy for or against political candidates), and an additional $13.7 million was devoted to electioneering communications. A.R. 1638. In other words, well over half of its spending during the period was election-related.

         Neither AJS nor AAN registered with the FEC as a "political committee." CREW filed a complaint with the FEC against AJS in March 2012 alleging that due to AJS's extensive campaign-related spending, primarily leading up to the 2010 federal election, the organization was an unregistered political committee in violation of FECA. A.R. 1-39. In June 2012, CREW filed a complaint with the FEC against AAN, similarly alleging that its predominantly campaign-related spending between 2009 and 2011 made it an unregistered political committee. A.R. 1480-1552. The FEC's Office of General Counsel separately reviewed the complaints, as well as answers from AJS and AAN, and recommended concluding that there was "reason to believe" both organizations were political committees, having as their "major purpose federal campaign activity, " and therefore in violation of FECA. A.R. 1411, 1659. Nevertheless, in June 2014, the Commissioners deadlocked 3-to-3 with respect to both AJS and AAN on whether to commence an investigation, dismissing CREW's complaints accordingly. A.R. 1434-35, 1686-87.

         The controlling group of Commissioners issued separate but similar statements, for both AJS and AAN, explaining their conclusions that there was no "reason to believe" either organization was an unregistered political committee. A.R. 1438-69 (Controlling Commissioners' Statement of Reasons Regarding Dismissal of Complaint Against AJS) ("AJS SOR"); A.R. 1690-1723 (Controlling Commissioners' Statement of Reasons Regarding Dismissal of Complaint Against AAN) ("AAN SOR"). First, the Commissioners found-and no party here contests-that both organizations "crossed the statutory threshold for political-committee status by making over $1, 000 in independent expenditures" in at least one calendar year. A.R. 1454, 1706. However, after considering each organization's statements of purpose and evaluating each entity's "spending on campaign activities [as compared to] its spending on activities unrelated to the election or defeat of a federal candidate, " the Commissioners concluded that neither organization's "major purpose" was the "nomination or election of a federal candidate." A.R. 1455, 1706.

         To reach those conclusions, the Commissioners made two key analytical decisions. First, they excluded from their "major purpose" inquiry all of AJS's and AAN's spending on electioneering communications, considering all of those communications to be "genuine issue advertisements" unrelated to the election of candidates. A.R, 1457-58, 1709-I0.[2] As a result, only spending on express advocacy was considered indicative of the relevant "major purpose." Id. Second, the Commissioners considered spending only over the "lifetime" of the organization in question, which for AJS implicated a span of fifteen years. A.R. 1457-58, 1708-09. Together, these choices left the Commissioners, when calculating the overall proportion of spending reflecting the groups' relevant "major purpose, " with a relatively small numerator and a relatively large denominator. Thus, the Commissioners calculated that "during the course of its history dating back to 1997, AJS spent over $50 million [to support its mission generally] but only $4.9 million-or a mere 9.8 percent-of that spending was on express advocacy." A.R. 1458. Similarly, the Commissioners concluded that the "roughly $4.1 million that AAN spent on independent expenditures [i.e., express advocacy] between [its founding in] 2009 and 2011 was the totality of its spending . . . for the purpose of nominating or influencing the election of a federal candidate and represented [only] approximately 15% of its total expenses during the same period." A.R. 1709.

         Following the FEC's dismissal of the above complaints, CREW filed a four-count complaint in this Court alleging violations of FECA and the APA, and seeking a declaration that the FEC's dismissal decisions were contrary to law because they applied an incorrect interpretation of the "major purpose" test. Compl. at 28-33. Mainly, CREW challenged the Commissioners' decision to exclude on First Amendment grounds an organization's expenditures that were not express advocacy from the category of spending indicating a campaign-related "major purpose." CREW also challenged the Commissioners' consideration of relative spending over the course of an organization's lifetime-as opposed to within the most recent calendar year-as well as the Commissioners' purported application of a 50%-plus spending threshold for relevant expenditures.

         This Court subsequently granted the FEC's Motion to Dismiss all APA-related counts, and granted AAN's Motion to Intervene as an additional Defendant. CREW has now moved and Defendants have cross-moved for summary judgment on the remaining, FECA-related counts.[3] ...

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