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

United States District Court, District of Columbia

February 22, 2017

FEDERAL ELECTION COMMISSION, Defendant. Re Document Nos. 19, 20


          RUDOLPH CONTRERAS United States District Judge.


         The parties agree that the Federal Election Commission had strong grounds to prosecute the Commission on Hope, Growth and Opportunity under the Federal Election Campaign Act, but declined to do so. The parties' main source of disagreement is the extent to which the FEC can decline to prosecute after receiving a citizen complaint. Citizens for Responsibility and Ethics in Washington contends that the FEC relied on improper legal grounds when it dismissed its complaint against the Commission on Hope, Growth and Opportunity. The FEC responds by noting that its dismissal was not primarily based on legal interpretations, but rather the agency's discretion in deciding which cases it wishes to pursue. Specifically, the commissioners who voted to dismiss Plaintiffs' complaint note that, by the time the FEC could have moved forward with prosecuting the case, the statute of limitations on the “obvious” violations had run, the other violations were not clear-cut from a legal perspective, and the group had dissolved and had no identifiable agents or assets. Because any further prosecution would have cost the FEC more than any benefit it calculated that it could derive, the FEC argues that its dismissal was within the scope of its prosecutorial discretion. Concluding that the FEC rationally dismissed Plaintiffs' complaint as an exercise of its prosecutorial discretion, the Court will grant summary judgment for Defendant.


         A. The Federal Election Commission

         The Federal Election Commission (“FEC”) is a six-member, independent agency charged with administering the Federal Election Campaign Act (“FECA”). 52 U.S.C. § 30106(a)-(b). The FEC has the power to “administer, seek to obtain compliance with, and formulate policy with respect to” FECA, and has exclusive jurisdiction to civilly enforce FECA. Id. § 30106(b)(1). The votes of four commissioners are required for the FEC to pursue enforcement proceedings, civil actions, or even voluntary compliance with FECA. See Id. §§ 30106(c), 30107(a)(6)-(9). Third parties who believe that a violation of FECA has occurred may file a “citizen complaint” with the FEC. Id. § 30109(a)(1). After the FEC receives a citizen complaint and any response from the alleged violator, if it determines by a vote that it has “reason to believe” that a violation has occurred, FECA states that the FEC “shall . . . notify the person of the alleged violation . . . [and] shall make an investigation of such alleged violation.” See Id. § 30109(a)(2). At that point, the FEC's Office of General Counsel (“OGC”) is charged with preparing a brief outlining OGC's position on the law and facts of the case. Id. § 30109(a)(3). OGC's brief, along with a reply brief from the respondent, are then considered by the FEC in a vote on whether probable cause exists to believe that a violation has occurred. Id. If the FEC determines that probable cause exists, it must attempt to informally and privately resolve the dispute. See Id. §§ 30109(a)(4)(A)(i)-(B)(i). If those attempts fail, the FEC may, by vote, determine whether to institute a civil action. Id. § 30109(a)(6)(A). A third party who is “aggrieved” by an FEC decision to dismiss a complaint may seek judicial review of the FEC decision. Id. § 30109(a)(8)(A). The statute of limitations for FECA actions is five years. See 28 U.S.C. § 2462.

         B. The Federal Election Campaign Act

         FECA was enacted to limit spending in federal campaigns and eliminate the perceived or actual influence that wealthy individuals can have over elections based on their capacity to bankroll campaigns. See Orloski v. FEC, 795 F.2d 156, 163 (D.C. Cir. 1986). Accordingly, FECA imposes several limitations on campaign contributions and expenditures, often based on the source of the contributions and expenditures. See generally 52 U.S.C. §§ 30101-30126. Several of those limitations are relevant here.

         1. Political Committees

         FECA requires noncandidate “political committees” to register with the FEC, keep records of the names and addresses of contributors, and periodically file reports identifying their contributors, among other requirements. See 52 U.S.C. §§ 30102-30105. Thus, whether a group is legally classified as a political committee has significant practical consequences. Under FECA, a political committee is “any committee, club, association, or other group of persons which receives contributions aggregating in excess of $1, 000 during a calendar year or which makes expenditures aggregating in excess of $1, 000 during a calendar year.” Id. § 30101(4)(a). Although this definition appears broad at first glance, it is limited by FECA's definitions of “contributions” and “expenditures, ” which require an intent to “influenc[e] any election for Federal office.” See Id. §§ 30101(8)(A), 30101(9)(A). Out of concern for overbreadth of this definition, which could be construed to reach “groups engaged purely in issue discussion, ” the Supreme Court has limited this definition further, effectively restricting FECA's rules governing political committees to “organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate.” Buckley v. Valeo, 424 U.S. 1, 79 (1976). The FEC determines a group's “major purpose” on a case-by-case basis, taking into account the group's allocation of spending, public and private statements, and overall conduct. See 72 Fed. Reg. 5595, 5601 (Feb. 7, 2007); Shays v. FEC, 511 F.Supp.2d 19, 23, 30 (D.D.C. 2007).

         2. Expenditure-Related Reporting Requirements

         In addition to regulating political committees, FECA requires anyone who makes “independent expenditures” of more than $250 over the course of a calendar year to publicly disclose certain information by filing with the FEC. See 52 U.S.C. § 30104(c)(1). Among the information provided, the person making the independent expenditure must disclose the identity “of each person who made a contribution in excess of $200 to the person filing such report [if the] contribution was made for the purpose of furthering the reported independent expenditure.” See 11 C.F.R. § 109.10(e)(vi). Like the definition of “political committee, ” whether an expenditure is an “independent expenditure” has significant implications. An “independent expenditure” is an expenditure made by a person “expressly advocating the election or defeat of a clearly identified candidate” that is not made in coordination with a candidate, party, or political committee. See 52 U.S.C. § 30101(17). “Clearly identified” means that the name or photograph of the candidate appears, or “the identity of the candidate is apparent by unambiguous reference.” Id. § 30101(18). “Express advocacy” includes phrases like “vote for the President, ” “re-elect your Congressman, ” “support the Democratic nominee, ” and “Smith for Congress.” See 11 C.F.R. § 100.22(a).

         FECA also requires those engaged in certain “electioneering communications” to disclose the identities of major contributors. See 52 U.S.C. § 30104(f). An electioneering communication is a mass broadcast targeting a relevant electorate that refers to a clearly identified candidate for federal office and is made within 60 days of a general election or 30 days of a primary election. See 11 C.F.R. § 100.29(a). Such communications must include disclaimers with information like the person who paid for the communication and whether it is authorized by the candidate. See Id. § 110.11.


         Citizens for Responsibility and Ethics in Washington and its former executive director Melanie Sloan (collectively “CREW”) take issue with the FEC's handling of a case involving the Commission for Hope, Growth and Opportunity (“CHGO”). Thus, this case involves both the substantive matter that was before the FEC and the FEC's handing of it. There are few factual disputes. The Court first outlines the formation and operation of CHGO, then moves to the FEC's investigation before detailing the FEC's ultimate decision to dismiss the case against CHGO.

         A. CHGO

         According to Michael Mihalke, the president of Meridian Strategies, LLC, Scott Reed, a political consultant, approached him about forming CHGO in early 2010. See Joint Appendix (“J.A.”) 327, 332, ECF No. 25. Mr. Mihalke apparently recruited James Powell to be CEO and William Canfield to be CHGO's legal counsel. See J.A. 363-64. Although Mr. Powell was CEO in form, is his view he was only the “creative” person, responsible for the content of the advertisements that CHGO developed. See J.A. 365.

         Mr. Canfield, in comparison, was quite active in the formation of CHGO. After helping to form CHGO, Mr. Canfield applied for its § 501(c)(4) tax exempt status from the IRS, and in doing so certified, under penalty of perjury, that CHGO was a “public welfare organization created to advance the principle that sustained and expanding economic growth is central to America's economic future.” See J.A. 1548-49. Mr. Canfield further stated that the group would “engage economists and other business experts to inform its understanding of the necessity for sustained economic growth and [would] bring the fruits of this expertise and research directly to the attention of decision makers at all levels of government.” J.A. 1549. And, in responding to the question “[D]oes [CHGO] plan to spend any money attempting to influence the selection, nomination, election, or appointment of any person to any . . . public office or to an office in a political organization?, ” Mr. Canfield checked the box for “No.” J.A. 1551. The IRS granted CHGO § 501(c)(4) tax-exempt status-which is reserved for nonprofit groups operated “exclusively for the promotion of social welfare, ” see 26 U.S.C. § 501(c)(4)- based on Mr. Canfield's application. See J.A. 114-15; 1549. Having 501(c)(4) status was important to CHGO because it meant that it would not have to disclose its donors, see 26 U.S.C. 6104(d)(3)(A). In a slideshow, CHGO stated that 501(c)(4) status was the “most advantageous vehicle for donor activity” because “donor names [are] never made available to the public under law.” J.A. 336. If CHGO stated that it did plan to influence elections, it would have needed to seek tax-exempt status under § 527, which would have required it to disclose the names of its donors. See 26 U.S.C. § 527(j)(2)-(3).

         Despite CHGO's representations to the IRS, the record reveals significant evidence that CHGO actually was created and operated for the purpose of influencing several federal elections. See Pls.' Mem. P. & A. Supp. Pls.' Mot. Summ. J. (“Pls.' Mot. Summ. J.”) at 7-9, ECF No. 19; Def.'s Mem. Supp. Mot. Summ. J. & Opp'n Pl's Mot. Summ. J. (“Def.'s Mot. Summ. J.”) at 18- 26, ECF No. 20. In the slideshow mentioned above, CHGO asserted that Citizens United “create[d] [an] [u]nprecendented [o]pportunity [a]llow[ing] corporations, labor unions[, ] and individuals to engage in direct, express advocacy for [the] election or defeat of candidate(s).” See J.A. 335. CHGO further stated that it had a “[s]imple mission with all decisions guided by [the] best use of funds to win Senate seats.” J.A. 337. To win Senate seats, CHGO stated that it would use “all options available to it for direct, express advocacy under [Citizens United], ” and aimed its resources at specific states. J.A. 332-33.[1]

         In furtherance of its “simple mission, ” CHGO ran television advertisements in at least fifteen markets. See J.A. 1496-1500. One such advertisement, entitled “Song and Dance, ” featured specific 2010 candidates for federal office in a variety of congressional districts. See J.A. 213. An iteration of the commercial featured Democratic incumbent Representative Allen Boyd and his Republican challenger Steve Southerland. A voiceover in the ad states:

It's the worst economy in decades. And the folks in Washington are living it up, spending our tax dollars like there's no tomorrow. Leading this big song and dance: Obama, of course, and Nancy Pelosi. But there's one face you might not expect to see-our old friend Allen Boyd. Instead of looking out for us, Boyd approved billions in deficit spending without missing a beat. Let's pull the plug on this song and dance once and for all.

         J.A. 213. Then, the screen fades to black, an image of Steve Southerland appears, then the following text appears on the screen: “Fight back. Join Steve Southerland. Stop the Big Spenders in Congress.” J.A. 213. While that text is on the screen, the voiceover says “Join Steve Southerland's fight against the big spenders in Washington.” J.A. 213-14. CHGO ran a similar ad entitled “Collectible Coin, ” a tongue-in-cheek commemoration of national debt levels, once again advocating for the election or defeat of specific candidates for federal office. J.A. 209-11. The messages contained the following disclaimers: “Paid for by the Commission on Hope, Growth, and Opportunity, a tax-exempt 501c4 organization and not a federal political committee. This message is not coordinated with any federal candidate or committee.” J.A. 48.

         B. Complaints and ...

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