I. BACKGROUND...357
A. PLAINTIFFS' ADMINISTRATIVE COMPLAINT TO THE FEC...357
B. FEC'S DISMISSAL OF PLAINTIFFS' ADMINISTRATIVE COMPLAINT...360
C. THE INSTANT LITIGATION...364
II. LEGAL STANDARDS...365
A. SUMMARY JUDGMENT UNDER THE APA...365
B. SUMMARY JUDGMENT UNDER THE FECA...366
III. DISCUSSION...367
A. STATUTORY AND REGULATORY FRAMEWORK...367
1. Statutory Disclosure Requirements for Not-Political Committees Making Independent Expenditures...368
2. The Challenged FEC Regulation...377
B. THE PLAINTIFFS' CHALLENGE TO THE REGULATION IS JUSTICIABLE...381
1. Count II Is Not Time-Barred...381
2. Plaintiffs Have Standing to Bring Count II...383
3. Plaintiffs Have Exhausted Administrative Remedies for Counts II and III...384
C. FEC'S CHALLENGED REGULATION IS INVALID AND VACATED...386
1.52 U.S.C. §§ 30104 (c)(1) and (c)(2)(C) Are Unambiguous...387
2. The Defendants' Alternative Construction of § 30104(c) Is Unsupported...395
3. Vacatur Is Appropriate Remedy for Invalid Regulation...411
D. FEC'S DISMISSAL OF THE PLAINTIFFS' AMENDED ADMINISTRATIVE COMPLAINT WAS CONTRARY TO LAW AND WARRANTS REMAND...415
1. Legal Standard Applicable to Review of FEC Enforcement Actions...416
2. OGC's First Recommendation at Issue in Counts I and II...417
3. OGC's Second Recommendation at Issue in Count III...418
IV. CONCLUSION...422
MEMORANDUM OPINION
Campaign finance law has long recognized the value of disclosure as a means of enabling the electorate to make informed decisions about candidates, to evaluate political messaging, to deter actual, or the appearance of, corruption, and to aid in enforcement of the ban on foreign contributions, which may result in undue influence on American politicians. See Citizens United v. FEC ,
The plaintiffs, Citizens for Responsibility and Ethics in Washington ("CREW") and Nicholas Mezlak, a registered voter in Ohio, initiated this action under the Federal Election Campaign Act of 1971 ("FECA"),
Now pending before the Court are the parties' cross-motions for summary judgment. See generally Pls.' Mot. Summ. J. ("Pls.' Mot."), ECF No. 27; CGPS's Cross-Mot. Summ. J. ("CGPS's Cross-Mot."), ECF No. 28; FEC's Cross-Mot. Summ. J. ("FEC's Cross-Mot."), ECF No. 30. For the reasons set forth below, the plaintiffs' motion is granted, and the FEC's and Crossroads GPS's cross-motions are denied. Accordingly, subsection (vi) of
I. BACKGROUND
Much of the factual and procedural background for this case is set out in this Court's prior Memorandum Opinion resolving the FEC's Partial Motion to Dismiss and Crossroads GPS's Supplemental Motion to Dismiss, CREW ,
A. PLAINTIFFS' ADMINISTRATIVE COMPLAINT TO THE FEC
CREW is a non-profit watchdog organization "committed to protecting the rights of citizens to be informed about the activities of government officials, ensuring the integrity of government officials, protecting our political system against corruption, and reducing the influence of money in politics." Compl. ¶¶ 7-8. In furtherance of this mission, "CREW monitors the activities of those who run for federal office as well as those groups financially supporting candidates for office or advocating for or against their election." Id. ¶ 10. Nicholas Mezlak is a U.S. citizen registered to vote in Ohio. Id. ¶ 17.
On November 14, 2012, CREW and two individual plaintiffs, other than Mezlak, filed an administrative complaint with the FEC, claiming that Crossroads GPS and its agents failed properly to report contributions
Karl Rove, an unpaid advisor to Crossroads GPS and American Crossroads, see AR 94 (CGPS's Admin. Resp., Attach. 1, Karl Rove Affidavit, dated Jan. 17, 2013 ("Rove Aff.") ¶ 2), briefed the Tampa event attendees on a call he received in the spring of 2012 "from an unnamed out-of-state donor," regarding the 2012 Ohio Senate race between the incumbent Democratic Senator Sherrod Brown and his Republican challenger, Josh Mandel, the Ohio State Treasurer. AR 103-04 (Am. Admin. Compl. ¶¶ 22-23) (citing id. , Ex. D, Sheelah Kolhatkar, Exclusive: How Karl Rove's Super PAC Plays the Senate , Bloomberg Businessweek, Sept. 4, 2012 ("Kolhatkar, Rove's Super PAC ") ); AR 94 (Rove Aff. ¶¶ 1, 3-4). During the conversation, as Rove recalled, the donor, who remains unidentified, stated, "I really like Josh Mandel," and "I'll give ya 3 million, matching challenge" to use toward Crossroads GPS's $6 million budget in the State of Ohio. AR 103-104 (Am. Admin. Compl. ¶¶ 23-24) (quoting Kolhatkar, Rove's Super PAC ); AR 94 (Rove Aff. ¶ 3) (stating Rove's "recollection of a conversation ... with a donor ... that is recounted by Sheelah Kolhatkar ... is substantially accurate"). Rove maintains that the conversation did not entail any discussion of spending the pledged funds "in any particular manner or on any particular or specific efforts or projects," but Rove understood that the contributions were intended "to be used in some manner that would aid the election of Josh Mandel." AR 95 (Rove Aff. ¶ 10).
The unnamed donor "subsequently contributed a larger amount to Crossroads GPS that was not in any way earmarked for any particular use." Id. (Rove Aff. ¶ 14). Crossroads GPS ultimately reported spending $6,363,711 in independent expenditures in the 2012 Ohio race opposing Senator Brown, and none of the ten reports detailing these independent expenditures identified the anonymous donor who pledged "a larger amount" than $3 million or the individuals who contributed "matching" funds. AR 104 (Am. Admin. Compl. ¶¶ 24-25); see also Compl. ¶ 53 (citing Compl., Ex. A, CGPS, FEC Form 5, 2012 Year-End Report, dated Jan. 31, 2013 ("CGPS, FEC Form 5, 2012 Year-End Rept."), ECF No. 1-1).
In addition, at the Tampa event, fourteen television advertisements were shown, eleven of which advertisements were produced by Crossroads GPS. AR 104-05 (Am. Admin. Compl. ¶ 27) (citing Kolhatkar, Rove's Fundraiser ); AR 77-78 (CGPS's Admin. Resp. at 5-6). The advertisements apparently targeted Democratic Senate candidates in at least four states (Ohio, Virginia, Montana, and Nevada), where Crossroads GPS ran broadcast advertisements that were later included in reports filed with the FEC by Crossroads GPS disclosing independent expenditures after August 30, 2012. AR 112-13 (Am. Admin. Compl. ¶¶ 58-60). Event attendees were also solicited for contributions to Crossroads GPS, after being shown these advertisements-thirteen of which had been paid for and aired, and the fourteenth of which never aired-as a demonstration of "the quality and range of the two entities' activities." CGPS's Opp'n at 16-17; see also AR 103-05 (Am. Admin. Compl. ¶¶ 20, 27); AR 77-78 (CGPS's Admin. Resp. 5-6).
The plaintiffs indicate, without dispute from Crossroads GPS, that Crossroads GPS reported spending over $17 million in independent expenditures reflected in reports filed in 2012, without identifying the names of donors providing those funds. AR 106 (Am. Admin. Compl. ¶ 31); Compl. ¶ 53 (citing CGPS, FEC Form 5, 2012 Year-End Rept.; Compl., Ex. B, CGPS, FEC Form 5, 2012 October Quarterly Report, dated Oct. 15, 2012, ECF No. 1-2); CGPS's Answ. ¶ 53, ECF No. 14 (denying only "that Crossroads GPS's independent expenditure reports filed with the FEC failed to disclose the names of any donors that were required to be disclosed by relevant FEC regulations and precedent," and stating "Crossroads GPS'[s] independent expenditure reports filed with the FEC speak for themselves and require no response").
The FEC sent two letters to Crossroads GPS on October 25, 2012, and April 9, 2013, citing deficiencies in Crossroads GPS's reporting of its independent expenditures in 2012, including failing to disclose the required identification information for the individuals making donations used to fund the independent expenditures, as required by
In response to the FEC's deficiency letters, Crossroads GPS asserted that the FEC had "misstate[d]" the requirements of the regulation, and that disclosure was only required if those contributions were "given 'for the purpose of furthering the reported independent expenditure.' " AR 146 (Am. Admin. Compl., Ex. J, CGPS Counsel's Resp., dated July 19, 2011 ("CGPS July 2011 Resp.") ); AR 154 (Am. Admin. Compl., Ex. L, CGPS Treasurer's Resp., dated Nov. 29, 2012) (same) ). In the view of Crossroads GPS, "[t]he question is not how an organization subsequently chooses to use a contribution, but whether the donor's contribution was given 'for the purpose of furthering the reported independent expenditure' " and, under this reasoning, since "[n]o contributions accepted by [CGPS] were solicited or received 'for the purpose of furthering the reported independent expenditure' ... no contributions were required to be reported under the regulations." AR 146-47 (CGPS's July 2011 Resp.) (emphasis in original) (citing "Statement of Reasons of Chairman Matthew S. Peterson and Commissioners Caroline C. Hunter and Donald F. McGahn in MUR 6002 (Freedom's Watch, Inc.) at 5 ('In other words, a donation must be itemized on a non-political committee's independent expenditure report only if such donation is made for the purpose of paying for the communication that is the subject of the report ' (emphasis in original) ).").
B. FEC'S DISMISSAL OF PLAINTIFFS' ADMINISTRATIVE COMPLAINT
The plaintiffs' administrative complaint alleged that Crossroads GPS's failure to disclose the names of (1) the anonymous donor who promised a $3 million contribution in the spring of 2012, (2) the other contributors to the "matching challenge" triggered by the anonymous donor, and (3) the contributors solicited at the Tampa, Florida event, constituted "direct and serious violations of the [FECA]," citing "
The FEC's Office of General Counsel's ("OGC"), after review of the plaintiffs' administrative complaint in MUR 6696, recommended, in pertinent part, that (1) the FEC "find no reason to believe that Crossroads [GPS] violated
In making these recommendations, OGC relied on the challenged regulation,
At the same time, however, OGC addressed two separate issues about the sufficiency of the FEC's challenged regulation in capturing fully the disclosure obligations mandated by the statute, in both subsections (c)(1) and (c)(2) of
In other words, the challenged implementing regulation narrows the statutory disclosure requirement in § 30104(c)(2) by substituting the phrase "the reported independent expenditure," for the statutory term "an independent expenditure."
OGC observed that this discrepancy between the scope of disclosure required by the statute and the implementing regulation had previously been identified in a prior FEC matter, as well as in a 2011 rulemaking petition by then-Congressman Chris Van Hollen. AR 172 & n. 48 (FGCR at 9 & n. 48). The rulemaking petition asked the FEC to revise the regulation,
The FEC Commissioners deadlocked three-to-three on OGC's recommendations, AR 193 (Certification of FEC Votes in MUR 6696 (dated Nov. 19, 2015) ), which resulted in a six-to-zero vote to dismiss the plaintiffs' administrative complaint, AR 195 (Certification of FEC Votes in MUR 6696 (dated Dec. 18, 2015) ). While four Commissioners, including the three who voted against opening an investigation, issued no explanation of their vote, two Commissioners, who voted to find reason to believe Crossroads GPS failed to disclose contributors as required by law, issued a Statement of Reasons. See AR 198-99 (Stmt. of Reasons, FEC Comm'rs Ann M. Ravel & Ellen L. Weintraub at 1 (dated Jan. 22, 2016) ) (focusing on FEC's prior inaction in failing to find that Crossroads GPS was a "political committee" subject to "making full disclosures on every expenditure and of every contributor of $200 or more") (emphasis in original).
Three months after the FEC dismissed the administrative complaint, the plaintiffs initiated the instant action, on March 16, 2016, asserting three claims under both the APA and the FECA, alleging that the FEC's finding of no "reason to believe" a violation had occurred was "arbitrary, capricious, an abuse of discretion, and contrary to law" because: (1) the FEC ignored undisputed evidence that Crossroads GPS had violated
The FEC moved to dismiss Count II under Rule 12(b)(1) on the ground that the plaintiffs' challenge to § 109.10(e)(1)(vi) was untimely because the regulation was promulgated in 1980, and the lawsuit was therefore brought outside the applicable statute of limitations of six years, under
The FEC's partial motion to dismiss was denied, CREW ,
II. LEGAL STANDARDS
A. SUMMARY JUDGMENT UNDER THE APA
Pursuant to Federal Rule of Civil Procedure 56, summary judgment may be granted when the court finds, based on the pleadings, depositions, affidavits, and other factual materials in the record, "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a), (c) ; see also Tolan v. Cotton ,
The reviewing court is required to "hold unlawful and set aside agency action" that is "found to be," inter alia , "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,"
"[I]f the statute is silent or ambiguous with respect to the specific issue" under consideration, the analysis shifts to Chevron step two, where "the question for the court is whether the agency's answer is based on a permissible construction of the statute," City of Arlington ,
Further, "[o]f course, agency action is always subject to arbitrary and capricious review under the APA, even when it survives Chevron Step Two ...." Confederated Tribes ,
B. SUMMARY JUDGMENT UNDER THE FECA
Summary judgment is granted to a party challenging an FEC dismissal decision, under
Whether the FEC's decision is unanimous or deadlocks in an evenly divided vote, the same standard for judicial review applies. See FEC v. Nat'l Republican Senatorial Comm. ("NRSC "),
III. DISCUSSION
Each party has moved for summary judgment on two issues: (1) whether the FEC's regulation,
For its part, Crossroads GPS contends that the plaintiffs' action "comes 30 years too late" and, if the plaintiffs were to prevail, "CGPS's statutory and constitutional right to rely on a long-accepted regulation" would be violated, and the plaintiffs would be permitted "to subvert congressional intent and the FEC's considered judgment on this regulatory issue." CGPS's Reply Mem. Supp. Cross-Mot. ("CGPS's Reply") at 1, ECF No. 36. Finally, the FEC echoes Crossroad GPS's argument that the agency properly dismissed the plaintiffs' administrative complaint because the agency's "interpretation of the statute is permissible, particularly given the highly deferential standard of review that applies to agency decisions like this." FEC's Reply Mem. Supp. Mot. Summ. J. ("FEC's Reply") at 1, ECF No. 37.
The statutory and regulatory provisions at issue may be properly construed only in the context of the FECA's disclosure regime, which is described below, followed by analysis of the parties' arguments regarding the challenged regulation and the FEC's dismissal decision. As more fully discussed below, the unambiguous language of
A. STATUTORY AND REGULATORY FRAMEWORK
The FECA was originally enacted in 1972 and, as amended over time, continues to regulate federal political campaign financing, inter alia , by imposing limitations on contributions and requiring disclosure
1. Statutory Disclosure Requirements for Not-Political Committees Making Independent Expenditures
At issue in this case are the disclosure requirements imposed on persons "other than political committees" ("not-political committees") that make independent expenditures.
The FECA also regulates federal campaign activities of persons "other than political committees," see
a) Legislative History of § 30104(c)
When enacted, the FECA required political committees and candidates for federal office to report, in relevant part, "the full name and mailing address (occupation and the principal place of business, if any) of each person who has made one or more contributions to or for such committee ... within the calendar year in an aggregate amount or value in excess of $100, together with the amount and date of such contributions."
(i) 1974 and 1976 Amendments
Congress first amended the FECA in 1974, largely in response to the election abuses that surfaced in 1972. FECA Amendments of 1974, Pub. L. No. 93-443,
At the same time, noting a vagueness within § 434(e), the Court stated that, because " '[c]ontributions' and 'expenditures' are defined in parallel provisions in terms of the use of money or other valuable assets 'for the purpose of ... influencing' the nomination or election of candidates for federal office," id. at 77,
The Court summarized that the provision then-codified at § 434(e) was "constitutional," as long as it was construed to impose "independent reporting requirements on individuals and groups that are not candidates or political committees" in only two circumstances: "(1) when they make contributions earmarked for political purposes or authorized or requested by a candidate or his agent, to some person other than a candidate or political committee, and (2) when they make expenditures for communications that expressly advocate the election or defeat of a clearly identified candidate." Id. at 80,
After Buckley, in 1976, Congress amended § 434(e) in an effort to conform to the constitutional boundaries set by the Supreme Court. See FECA Amendments of 1976, Pub. L. 94-283, § 104(e),
(ii) 1979 Amendments
Three years later, the text of the statutory provision pertaining to the disclosure requirements for not-political committees was amended for the last time in the 1979 FECA Amendments, which recodified § 434(e) at § 434(c).
The relevant committee report explaining the FECA Amendments of 1979, outlined two over-arching goals for the amendments: "(1) [t]o simplify reporting requirements for candidates and committees under the [FECA], and (2) to encourage grass roots participation in Federal election campaigns." S. REP. NO. 319, 96th Cong., 1st Sess. at 1 (1979).
The FECA Amendments of 1979 applicable to not-political committees and their contributors, codified at
The provisions codified at
b) Summary of Current § 30104(c)
Like the predecessor statutes dating back to the 1976 FECA amendments, the disclosure obligations under
Next, subsection (c)(2) opens by directing that "[s]tatements required to be filed by this subsection ... be filed in accordance with subsection (a)(2),"
The last paragraph (C) of subsection (c)(2), which is at issue here, requires "[s]tatements" to include "the identification of each person who made a contribution in excess of $200 to the person filing such statement which was made for the purpose of furthering an independent expenditure."
Finally, the third part of
2. The Challenged FEC Regulation
As part of the FECA Amendments of 1979, Congress directed the FEC to "transmit to the Congress proposed rules and regulations necessary for the purpose of implementing the provisions of [the FECA Amendments of 1979], prior to February 29, 1980," Pub. L. 96-187, § 303(a),
The FEC published proposed rules on January 23, 1980, and required that all comments be submitted by February 7, 1980, only fifteen days later. AR 1057-80 (Draft Regulations to Implement 1979 Amendments to FECA,
The FEC's second draft of the proposed regulations, which was initially circulated internally on February 11, 1980, included a reworked version of proposed
The FEC provided a single sentence explanation for new regulation § 109.2, stating that: "This section has been amended to incorporate the changes set forth at 2 U.S.C. [§] 434(c)(1) and (2) regarding reporting requirements for persons, other than a political committee, who make independent expenditures." AR 1503
On April 1, 1980, the rules implementing the FECA Amendments of 1979 went into effect, including
The regulation now codified at
As a straight-forward textual comparison reveals, the regulation differs from the statutory provision that the regulation was intended to implement in two ways. First, the statutory purpose clause, "for the purposes of furthering an independent expenditure,"
Reading subsection (c)(1) out of the statute makes a difference. By contrast to the donors covered in subsection (c)(2)(C), who contributed to support the not-political committee's independent expenditures (e.g. , paying for television commercials, pamphlets, documentaries, or other advertisements, expressly appealing for votes for or against a specific federal candidate), the donors covered in subsection (c)(1) contributed to not-political committees to support political efforts in connection with federal elections, which contributions may be used by the not-political committee, in some cases, to contribute directly to candidates or political committees, including to fund super PACs. For example, super PACs set up only to make independent expenditures, may receive unlimited contributions from donors, including not-political committees, to fund their independent expenditure activity. See McCutcheon v. FEC ,
Indeed, super PACs are often affiliated with not-political committees, such as 501(c)(4) organizations, because, as a political committee and not-political committee, respectively, each entity "abides by a particular set of rules, enjoys distinct opportunities, and is subject to different restraints." Richard Briffault, Super PACS , 96 MINN. L. REV. 1644, 1650 (2012) (noting the pairing of American Crossroads and Crossroads GPS as an example of a super PAC and 501(c)(4) organization that are closely connected); see also 2016 CRS REPORT at 19 & n. 58 (same). Allowing not-political committees to mask donors, who otherwise are subject to disclosure under subsection (c)(1), facilitates the role of these organizations as pass-throughs, enabling donors to contribute to super PACs without being identified by routing their contributions through affiliated 501(c)(4) organizations or other types of not-political committees. See 2016 CRS REPORT at 19
B. THE PLAINTIFFS' CHALLENGE TO THE REGULATION IS JUSTICIABLE
Before turning to the substantive arguments presented by the parties regarding the validity of the challenged regulation, the threshold justiciability issues raised by the defendants are addressed. Crossroads GPS and the FEC contend that the plaintiffs' claims in Counts II and III are not justiciable for three reasons. First, with respect to the claim in Count II that
1. Count II Is Not Time-Barred
According to the defendants, the claim in Count II that the challenged regulation is invalid because "[t]he FEC provided no explanation for drafting
In any event, the defendants' timeliness argument rests on extrapolated reasoning from dicta in Encino Motorcars, LLC v. Navarro , --- U.S. ----,
Specifically, the Encino Court observed that "[o]ne of the basic procedural requirements of administrative rulemaking is that an agency must give adequate reasons for its decisions," and "where the agency has failed to provide even that minimal level of analysis, its action is arbitrary and capricious and so cannot carry the force of law." Encino ,
Set against this well-settled law, the Encino Court held that a Department of Labor regulation concerning overtime compensation was not entitled to Chevron deference because the agency "offered barely any explanation" for a regulation reflecting a "change in position." Id. at 2126 ; see also id. ("[T]he explanation fell short of the agency's duty to explain why it deemed it necessary to overrule its previous position."). Consequently, the Supreme Court remanded the case, with directions to the Ninth Circuit to construe the statute at issue "without placing controlling weight on the" agency's regulation. Id. at 2127. In other words, Encino made clear that an agency's inadequate explanation for a regulation purportedly implementing a statutory requirement is both relevant and probative of the deference owed to the agency's interpretation, reflected in a regulation, of that statutory requirement. Thus, contrary to the defendants' position that any inadequacy in the FEC's 1980 explanation for the challenged regulation may not be considered in evaluating this regulation's validity, the Encino Court appears to have held directly the opposite.
The defendants' effort to compress the plaintiffs' criticism of the challenged regulation into a procedural box is therefore unavailing. The plaintiffs are not using any
2. Plaintiffs Have Standing to Bring Count II
Crossroads GPS argues that the plaintiffs do not have "a redressable injury in this matter" and therefore lack standing. CGPS's Reply at 21-22, 22 n. 16.
A party's good faith reliance on a regulation, which is later held invalid, may have a bearing on any accrued penalties to be imposed due to noncompliance with statutory requirements, but does not operate to bar a challenge to the validity of the regulation itself. Indeed, the law is clear that the plaintiffs may bring a facial challenge to the regulation as a component of an as-applied challenge by seeking relief to invalidate and vacate § 11 C.F.R. 109.10(e)(1)(vi). See Weaver ,
In short, regardless of whether enforcement against Crossroads GPS of "a new reporting burden" is available on remand, CGPS's Reply at 21, the plaintiffs have demonstrated a redressable injury and, as a result, Crossroads GPS's new standing argument fails.
3. Plaintiffs Have Exhausted Administrative Remedies for Counts II and III
Both defendants contend that the plaintiffs failed to exhaust administrative remedies because the administrative complaint did "not squarely challeng[e] the validity of
The defendants rely on Coburn , which Crossroads GPS argues is "[e]xactly like"
Here, by contrast, the plaintiffs challenged as part of the administrative proceedings the FEC's interpretation of both the first and second sections of
OGC also expressly addressed the provision now-codified at
In short, unlike Coburn, where the plaintiff entirely failed to raise a challenge to a particular administrative decision during the administrative appeals leading to the court case, the plaintiffs here raised the issue of whether the FEC's regulation fully comported with the statutory text in its administrative complaint, prompting the opposing party and the agency to address
C. FEC'S CHALLENGED REGULATION IS INVALID AND VACATED
The parties' dispute over the validity of the FEC's challenged regulation,
Determining whether the challenged regulation "conflicts" with
Here, the "precise issue" at stake concerns what must be disclosed in reports filed with the FEC by a not-political committee making independent expenditures in excess of $250 in a calendar year. As explained below, analysis at Chevron step one demonstrates that the challenged regulation conflicts with the unambiguous terms of both
1.
To determine the plain meaning of a statute, the court must look not only to "the particular statutory language at issue," but also to "the language and design of the statute as a whole." K Mart Corp. v. Cartier, Inc. ,
Subsection 30104(c)(1), which, as already noted, is the first of three parts in
While the plaintiffs are incorrect that the reporting of contributors under subsection (c)(1) is "unbounded," Pls.' Reply at 30 n. 19, the defendants are likewise
This plain meaning of subsection (c)(1) is bolstered by the cross-references in the text of paragraphs in subsection (c)(2) that imposes on reporting not-political committees additional, similar disclosure requirements as imposed on political committees. For example, subsection (c)(2), requires reporting not-political committees to file statements with the FEC "in accordance with subsection (a)(2)," which applies to political committees.
Finally, subsection (c)(2)(C) requires reporting not-political committees to identify those donors of over $200 who contribute "for the purpose of furthering an independent expenditure."
Not only do the parties dispute whether subsections (c)(2)(C) and (c)(1) set out separate donor disclosure obligations, which they do, but also the scope of subsection (c)(2)(C). To interpret the scope of the purpose clause in subsection (c)(2)(C), the word "an" must be attributed its plain and ordinary meaning because Congress has not specified otherwise. Asgrow Seed Co. v. Winterboer ,
As relevant here, the term "an," like the term "a," is an "[i]ndefinite article" that ordinarily refers to "one, some, any" with "the oneness, or indefiniteness, being implied rather than asserted," OED 4 (2d ed. 1989). At the time the FECA Amendments of 1979 were enacted, "an" possessed just this meaning. See, e.g. , AMERICAN HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE 1 (New College ed. 1976) (providing "a" is an "[i]ndefinite article" "[u]sed before nouns and noun phrases that denote a single, but unspecified, person or thing"); THE RANDOM HOUSE COLLEGE DICTIONARY 1 (Rev. ed. 1980) (defining "a" as "any one of some class or group"); BLACK'S LAW DICTIONARY 77 (5th ed. 1979) (explaining "an" as "[t]he English indefinite article, equivalent to 'one' or 'any' ..."); see also Antonin Scalia & Bryan A. Garner, A Note on the Use of Dictionaries, 16 GREEN BAG 2D 419, 423, 427-28 (2013) (identifying, inter alia, American Heritage Dictionary of the English Language, The Random House Dictionary of the English Language, The Oxford English Dictionary , and Black's Law Dictionary as amongst "the most useful and authoritative" English language dictionaries for the period 1951-2000 to understand "meanings current at a given time"). In short, "an independent expenditure" means-and has meant since before the enactment of the FECA Amendments of 1979-an unspecified one. See WEBSTER'S NEW COLLEGIATE DICTIONARY 1 (1977) (explaining the indefinite article is "used as a function word before singular nouns when the referent is unspecified"); WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1 (1976) (providing that "a" is used "before most singular nouns ... when the individual in question is undetermined, unidentified, or unspecified").
This reading is further supported by the fact that, in subsection (c)(2)(C), "an" modifies a singular noun in an "affirmative context." See
Consequently, subsection (c)(2)(C) requires reporting not-political committees to supplement the disclosure mandated in (c)(1) by identifying each donor who contributed over $200 for the purpose of furthering the entity's independent expenditures "expressly advocating the election or defeat of a clearly identified candidate" for federal office.
This close examination of the text of subsections (c)(1) and (c)(2)(C) demonstrates that the plaintiffs are generally correct: these subsections "target two complimentary [sic] sets of contributors," which are important to ensuring that "contributor reporting is not under-inclusive." Pls.' Reply at 29.
In MCFL , the Supreme Court allayed fears that not-political committees, if not subject to the same expenditure limitations imposed on political committees, would engage in "massive undisclosed political spending." MCFL ,
Reading the provisions as complementary, as the MCFL Court presciently did, is essential to ensuring meaningful disclosure because not-political committees may use contributions received for political purposes to influence federal elections through "express-advocacy expenditures" or, in some cases, by "making contributions to candidates or parties or to finance express-advocacy expenditures." See Bluman ,
To avoid the Supreme Court's plain reading of the very statutory provision at issue here, the defendants counter that the "few sentences" about disclosure in MCFL were "peripheral to the decision in MCFL , were not contested by the parties there, and do not appear to have made a significant difference in the case's outcome." FEC's Reply at 28; see also id. at 27 (noting that "neither the parties nor the Court paid much attention to what MCFL's disclosure requirements would look like if it were permitted to make such expenditures," and "[n]either the FEC's initial brief in that case nor any of the four amicus briefs even mentioned the provision at issue in this case"); CGPS's Opp'n at 50 ("[N]on-essential portions of MCFL are dicta."). The defendants' point that construction of the provision then-codified at
In a last gasp effort to avoid the Supreme Court's plain reading of the statutory disclosure requirements on not-political committees, the defendants also argue that " MCFL is not controlling authority on this issue" because the "language from a 32-year-old case ... has not been followed or definitively explained in the intervening time." FEC's Reply at 14; see also CGPS's Opp'n at 50. As support, the defendants point to FEC v. Furgatch ,
Crossroads GPS also discounts MCFL ' s description of subsections (c)(1) and (c)(2)(C) disclosure requirements by pointing to SpeechNow.org v. FEC , where the D.C. Circuit stated, in a parenthetical, that subsection (c)(2)(C) "requir[es] only the reporting of contributions 'made for the purpose of furthering an independent expenditure.' " CGPS's Reply at 12 (quoting SpeechNow.org ,
In any event, in context, the D.C. Circuit's parenthetical reference to subsection (c)(2)(C) served to contrast the FECA disclosure requirements applicable to political committees, noting that "[i]f SpeechNow were not a political committee, it would not have to report contributions made exclusively for administrative expenses," SpeechNow.org ,
By contrast to the statutory disclosure requirements in
The FEC's construction requires significantly less disclosure than the statutory subsections at issue in
Thus, the regulation's implementation of the FECA Amendments of 1979 clearly ignores the requirement in subsection (c)(1) and substantially narrows subsection (c)(2).
2. The Defendants' Alternative Construction of § 30104(c) Is Unsupported
The defendants dispute the plain meaning of
a) § 30104(c)(1) Imposes Separate Disclosure Requirement
The defendants make four arguments to support their view that subsection (c)(1) does not require reporting not-political committees to disclose their non-trivial donors annually whose contributions are earmarked for political purposes to influence any election for federal elections, see
(i) Heading for § 30104(c)
The defendants contend that subsection (c)(1) is "an ambiguous statutory provision that can be read in multiple ways," including "as a description of who should file independent expenditure statements rather than an independent requirement about the content of those statements." FEC's Reply at 33; see also CGPS's Opp'n at 7-8. As support for this preferred reading, the defendants look outside the actual text of the two subsections at issue to the heading of § 30104(c), which describes the section as follows: "Statements by other than political committees; filing; contents; indices of expenditures."
Certainly, headings of statutory provisions may be a helpful interpretive tool, but, as the FEC acknowledges, "the title of a statute and the heading of a section cannot limit the plain meaning of the text." FEC's Reply at 34 (citing Pls.' Reply at 26 (quoting Bhd. of R.R. Trainmen v. Balt. & Ohio R.R. Co. ,
Here, the defendants' effort to squeeze the scope of each subsection of § 30104(c) into only part of a general heading falls flat since the wording of the heading actually describes an aspect of more than a single subsection. Thus, three of the four parts of § 30104(c)'s heading, with each separated by semicolons, regarding "Statements by other than political committees," "filings" and "contents" are referenced in both subsections (c)(1) (including "... shall file a statement containing "), and (c)(2) ("Statements required to be filed by this subsection ... shall include ....").
(ii) Cross-reference in § 30104(c)(1)
Next, the FEC contends that "the cross-reference in
The FEC's focus on this phrase containing the word "reporting" in subsection (b)(3)(A) loses sight of the forest for the trees. The gist of subsection (b)(3)(A)-requiring identification by the reporting committee of any donor who makes contributions "in excess of $200 within the calendar year ... or in any lesser amount if the reporting committee should so elect, together with the date and amount of any such contribution"-appears easily applicable to not-political committees, even if those entities "file a statement,"
The FEC further argues that if "Congress [had] been solely interested in providing the public with the greatest amount of information about the sources of funding used by [not-political committees], it could have drafted the statute in a manner similar to the requirement that political committees identify all their contributors on a regular basis," which "[i]t did not do." FEC's Opp'n at 42. Yet, just because Congress did not treat not-political committees exactly the same way as political committees proves little. Instead, the statutory regime provides for significant parallel disclosure obligations between political and not-political committees, as reflected in the multiple cross-references contained in § 30104(c) that incorporate and apply some-not all-of the same reporting requirements applicable to political committees to not-political committees. The cross-reference in subsection (c)(1) to subsection (b)(3)(A) does not create "confusion" but merely detracts from the defendants' preferred construction that this subsection imposes no disclosure obligation at all. To the contrary, the plain text of this subsection imposes similar disclosure requirements as those imposed on political committees "under subsection (b)(3)(A) for all contributions received" by the reporting not-political committee, which must identify contributors of funds for political purposes to influence elections for federal office.
(iii) Filing "A Statement" Under § 30104(c)(1)
The FEC argues that construing subsection (c)(1) as written and as imposing a
First, if this were the intent, the FEC raises the rhetorical question, asking why Congress did not "draft[ ] a single statutory provision stating clearly that all contributions should be reported and those made for the purpose of furthering an independent expenditure should be separately designated."
Moreover, the manner in which Congress crafted § 30104(c), with multiple cross-references to disclosure requirements applicable to political committees, makes the point clearly that not-political committees engaged in making independent expenditures are subject to a disclosure regime that is parallel, but not identical, to the obligations imposed on political committees with respect to contributions for political purposes. The differences in disclosure requirements for not-political committees, as reflected in subsections (c)(1) and (c)(2)(C), stems from a recognition that such entities, unlike political committees, may have non-political goals or missions, and therefore attract a broader group of donors than political committees, with the required disclosure targeted only at those donors who want to fund political activities to influence federal elections or independent expenditures.
Second, the FEC raises the practical concern that reading subsection (c)(1) and subsection (c)(2) as complementary, separate reporting requirements would lead to "multiple statements." FEC's Reply at 35. This concern is overblown. The two subsections (c)(1) and (c)(2)(C), together, merely mandate the disclosures required to be made without dictating the number of statements to be filed. Indeed, the disclosures under these two subsections are meant to be read together since subsection (c)(1) requires "the identification" of non-trivial donors for political purposes in influencing any federal election, with "the date and amount of any such contribution,"
Both defendants further contend that the plaintiffs' "reading of the statute would
This reading of the two subsections as complementary is supported by the structure of § 30104(c). Comparison of the reporting requirement of § 30104(c), with that of neighboring provisions confirms that Congress meant what it said in subsections (c)(1) and (c)(2)(C). See NLRB v. SW Gen., Inc. , --- U.S. ----,
For example, the disclosure requirements imposed on persons engaged in "electioneering communications,"
(iv) Unwarranted Regulation of Not-Political Committees
Notwithstanding the plain text and structure of § 30104(c), the defendants strongly dispute interpreting subsection (c)(1) as imposing a separate, complementary disclosure requirement on not-political committees, and present several policy arguments against such a construction.
First, the defendants raise somewhat different concerns about the comparative disclosure obligations of not-political committees and political committees if subsection (c)(1) is construed as written. For its part, the FEC asserts that a "problem with plaintiffs' preferred interpretation of
The FEC's comparison of the disclosure requirements imposed on political versus not-political committees has several flaws. First, this argument embraces as a predicate the plaintiffs' erroneous view of the scope of subsection (c)(1) as requiring identification of all contributors over $200 to a not-political committee, when only those donors contributing over that threshold amount for political purposes to influence any federal election are covered, requiring less disclosure than that imposed on political committees. Further, the FEC's argument ignores the fact that political committees are subject to more administrative, operational, and record-keeping requirements, beyond any disclosure requirements. Finally, more importantly, interpreting subsection (c)(1) as including a separate disclosure requirement for non-trivial donors seeking to influence federal elections comports with the plain text of the statute and the levels of disclosure contemplated by the 1979 FECA Amendments-and this interpretation makes sense. While political committees have, by definition, clear political agendas, reporting not-political committees, which may include social welfare organizations making annual independent expenditures over $250, may have non-political primary missions. Thus, donors to not-political committees, who want to fund only the organization's administrative expenses or
For its part, Crossroads GPS complains about not-political committees being subject to the same (as opposed to more, as the FEC contends) disclosure obligations as political committees because "not all donors to such entities may be presumed to have given for a purpose justifying their inclusion on IE reports." CGPS's Reply at 36. Reflected in this argument is Crossroads GPS's contention that
Second, the defendants contend that construing subsection (c)(1) as written contravenes the purposes of the 1979 FECA Amendments because Congress did not intend for not-political committees to be regulated in the same way as political committees, or to make "maximum disclosure." FEC's Opp'n at 42 ("Congress did not intend to pursue maximum disclosure at the expense of all other interests."); CGPS's Opp'n at 46 (rejecting the plaintiffs' "dogmatic voyeurism" in "attempt[ing] to convert the 1979 FECA amendments into a 'disclosure at all costs' directive"). The defendants are correct that not-political committees are not regulated the same as political committees with respect, for example, to organizational structure, record-keeping, or even disclosure requirements. At the same time, the statutory disclosure requirements applicable to both types of entities are closely aligned, as reflected by the multiple cross-references in the FECA provisions requiring disclosures by not-political committees to statutory provisions applicable to political committees. See, e.g. ,
Finally, the FEC contends that construing subsection (c)(1) as written "to require disclosure of all those who contribute over a certain threshold" would mean that the 1979 FECA Amendments "made a very significant change-one reporting requirement was replaced with two reporting requirements of different and overlapping information." FEC's Reply at 36 n.12. Alternatively, "if (c)(1) is not read as a separate reporting requirement, then the overall change to reporting is far less significant because in that event it merely clarified the type of contributions that persons other than political committees need to report."
The more significant flaw in this particular argument is that the alternative reading of § 30104(c) urged by the defendants would essentially read out of § 30104(c) the portion of subsection (c)(1) imposing the disclosure requirement by construing it as entirely subsumed by, as opposed to supplemented with, the disclosure required in subsection (c)(2)(C). As already explained, had Congress intended such a reading, subsections (c)(1) and (2) could have been crafted to express that intent, as Congress accomplished in § 30104(f)(1) and (2), but this is not how these statutory provisions are written.
b) § 30104(c)(2)(C) Is Not Ambiguous
The parties spill significant ink regarding the proper scope of subsection (c)(2)(C). At the outset, before addressing those arguments, it bears noting that even if the defendants' preferred interpretation of subsection (c)(2)(C) were accepted, the challenged regulation would still be deficient by not capturing the disclosures required under subsection (c)(1). In other words, the complementary disclosure mandates of both subsections require greater disclosure than called for by the challenged regulation, no matter how subsection (c)(2)(C) is construed.
(i) The Indefinite Article "An"
The defendants argue that the use of the indefinite article "an" in subsection (c)(2)(C) renders the provision ambiguous. In their view, "the requirement in the statute that a specific report filed with the FEC identify contributions 'made for the purpose of furthering an independent expenditure' is inherently ambiguous because the scope of independent expenditures contemplated by the word 'an' is undefined." FEC's Reply at 23-24 (emphasis in original) (quoting
As support for their preferred interpretation, first, the FEC contends that the use of the word "an" in subsection (c)(2)(C) is ambiguous because "an indefinite article ... only indicates '[s]ome undetermined or unspecified particular.' " FEC's Opp'n at 36 (second alteration in original) (quoting McFadden v. United States , --- U.S. ----,
The FEC relies on the definition of "an" discussed by the Supreme Court in McFadden , but this case actually counsels against the FEC's preferred reading of subsection (c)(2)(C). In McFadden, the Supreme Court interpreted the Controlled
For its part, Crossroads GPS argues that subsection (c)(2)(C) can be interpreted to "only require[ ] reporting of those contributors who gave for the purpose of furthering the reported independent expenditure," CGPS's Opp'n at 40 (emphasis added), because "the term 'an' means 'one,' "
For instance, in Caraco , at issue was the proper construction of a provision authorizing a counterclaim in a patent infringement suit "on the ground that the patent does not claim ... an approved method of using the drug,"
The unambiguous disclosure obligation in subsection (c)(2)(C) requires "identification of each" donor of over $200 when the contribution was made for the purpose of furthering an independent expenditure that expressly advocated for or against the election of a particular candidate, without any further requirement that the donor had to know precisely the form the expenditure would take or the manner the expenditure would be described in the filed statement. See Mylan Pharm., Inc. v. Shalala ,
Crossroads GPS presses its point about ambiguity in the article "an," arguing that, if "Congress intended a broader level of contributor-related reporting for IEs, it easily could have said so, beginning with a reference to giving 'for the purpose of furthering any independent expenditure s." CGPS's Opp'n at 40-41 (emphases in original). This argument misconstrues the meaning of subsection (c)(2) to set up a proverbial "straw man," and demonstrates, again, the importance of context. Identifying the names of donors funding "any independent expenditures" by a reporting not-political committee, in Crossroads GPS's obfuscation, would not serve the purpose of disclosure to inform voters about the source of funds for a particular candidate. This provision therefore requires identification of "each person" contributing "for the purpose of furthering an independent expenditure," thereby associating each donor to an expenditure and revealing the source of funds for or against a particular candidate, without also requiring the donor to have the additional specific purpose of funding the expenditure in "the reported" form.
(ii) Articles Used in Subsection (c)(2)
The defendants point to the use of other articles in
These two paragraphs, (A) and (B), which use the definite article, "the," or the term "such," to modify "independent expenditure" stand in stark contrast to the third paragraph (C), which uses the indefinite article "an" to modify independent expenditures. Compare, e.g. , MERRIAM-WEBSTER.COM (n.d., Aug. 2018), https://www.merriam-webster.com/dictionary/indefinite%20article (all Internet materials as last visited Aug. 3, 2018) (defining "indefinite article" as "the word a or an used in English to refer to a person or thing that is not identified or specified") (emphasis in original), with MERRIAM-WEBSTER.COM , https://www.merriam-webster.com/dictionary/definite%20article (defining "definite article" as "the word the used in English to refer to a person or thing that is identified or specified") (emphasis in original), and MERRIAM-WEBSTER.COM , https://www.merriam-webster.com/dictionary/such (defining "such" as "of the character, quality, or extent previously indicated or implied"). Had Congress intended subsection (c)(2)(C) to refer to a specified independent expenditure, as Congress intended with (c)(2)(A) and (B), Congress would have used the definite article or another more specific term. See Pillsbury v. United Eng'g Co. ,
The defendants, nonetheless, argue that, because "the statute at issue ... contains both definite and indefinite articles," "[i]t is therefore reasonable to interpret 'an independent expenditure' in subsection 30104(c)(2)(C) to be constrained by 'the independent expenditure' in 30104(c)(2)(A) and 'such independent expenditure' in 30104(c)(2)(B)." FEC's Reply at 25; see CGPS's Opp'n at 40 (arguing that "where 'the rest of the statute is written using definite articles,' it indicates specificity of the modified item" (quoting United States v. Hagler ,
(iii) Timing of Independent Expenditure Reports
The FEC also argues that "interpret[ing] the statutory term 'an' to envision a match between the independent expenditure(s) reported in a filed statement and the contributors listed on that statement" is "reasonable" based on the "event-driven" nature of the reports that not-political committees making independent expenditures must file. FEC's Opp'n at 38-39. According to the FEC, "while Congress intended the regular reports filed by a political committee to display all of that committee's activities during a certain period, the event-driven independent expenditure reports filed by [not-political committees] are intended to provide information only about the reported expenditure, not a wider range of activity."
To bolster the defendants' position, the FEC relies on the "contrasting structures" of the statutory reporting requirements for political committees and not-political committees, FEC's Opp'n at 36, explaining that, while political committees are obligated to file "regular reports at specific times, either monthly or quarterly, with additional pre-election and post-election reports,"
The FEC persists that, based on the language and event-driven nature of statements required under
Finally, the FEC relies on Ctr. for Individual Freedom v. Van Hollen ("Van Hollen I "),
The D.C. Circuit found that the regulation survived Chevron step one because Congress did not speak plainly in enacting subsection (f), and thus "regulatory construction of the statute by the FEC" was not foreclosed. Van Hollen I ,
As noted, supra Part III.C.2.b.i, context is crucial in interpreting a statute and subsection (c)(2)(C) has critical differences from subsection (f). First, unlike the competing dictionary definitions of "contribute" highlighted by the D.C. Circuit in Van Hollen I , dictionaries consistently and uniformly define "an"-the word at issue in subsection (c)(2)(C)-as an indefinite article used when referring to one of a group or type of a thing rather than a specific, when the article "the" is usually used. See supra Part III.C.1 (collecting definitions). This is a far cry from the differing definitions leading to the ambiguity about a purposive requirement found by the D.C. Circuit in the statutory words used in subsection (f).
Second, the D.C. Circuit in Van Hollen I , found that Congress, in enacting BCRA, did not have an intention as to the precise issue presented because "it is doubtful that ... Congress even anticipated the circumstances that the FEC faced when it promulgated
* * *
In sum,
3. Vacatur Is Appropriate Remedy for Invalid Regulation
As detailed above, the deficiencies in the challenged regulation are such that this regulation is invalid and must be vacated. This remedy comports with precedent in this Circuit, which has announced that "[a] common remedy when we find a rule is invalid is to vacate." Humane Soc'y of U.S. v. Zinke ,
Although vacatur is a "common remedy" for an invalid regulation, remedies short of complete vacatur may be appropriate in certain circumstances. The D.C. Circuit has provided a well-established framework for analyzing parties' disputes over whether an invalid regulation should be vacated or remain effective pending agency review on remand. See Allied-Signal, Inc. v. Nuclear Regulatory Comm'n ,
In this case, application of these factors militates strongly in favor of vacatur, as requested by the plaintiffs. The defendants argue otherwise, but their efforts are unavailing. First, the defects in the challenged regulation, 11 C.F.R. 109.10(e)(1)(vi), go far beyond a mere failure in explanation. Cf. Heartland Reg'l Med. Ctr. ,
Furthermore, as explained above, the regulation reflects an interpretation of the FECA Amendments of 1979 that is contrary to the statute's purposes of ample disclosure. Id. As a result, the FEC will not be able "easily" to fix any defect in the rule if the rule is remanded without vacatur. United Mine Workers of Am., Int'l Union v. Dole ,
The defendants urge that, if the challenged regulation is invalid, rather than vacatur, the case should be merely remanded. FEC's Opp'n at 50; FEC's Reply at 42-43; CGPS's Reply at 43-45. As support for a remand-only remedy, Crossroads GPS warns that vacating the regulation would "open up a Pandora's Box" of problems, noting that "a Republican who donated to the Sierra Club or a Democrat who donated to the National Rifle Association ["NRA"] for those organizations' general programs will suddenly find themselves involuntarily identified on public campaign finance reports" and "the political and non-profit worlds would be thrown into chaos the moment a vacatur takes effect" because they "could immediately find itself the subject of an FEC complaint." CGPS's Reply at 44-45. This argument is predicated on the plaintiffs' erroneous construction of
Moreover, the fact that not-political committees have been permitted to under-disclose by virtue of the flawed challenged regulation and may now have to increase their contributor disclosures to meet statutory requirements is not a consequence that, in the Court's view, is so disruptive or chaotic that vacatur should be avoided. To the contrary, by failing to implement congressional mandates, the challenged regulation has deprived the electorate of
To the extent that non-trivial donors to reporting not-political committees, such as the NRA and the Sierra Club mentioned by Crossroads GPS, contributed for purposes requiring disclosure of their identities, are concerned about such disclosure, this concern is generally trumped by the congressional policy choice. As the Supreme Court has long recognized, "public disclosure of contributions to candidates and political parties will deter some individuals who otherwise might contribute [and i]n some instances ... may even expose contributors to harassment or retaliation," but nonetheless "appear[s] to be the least restrictive means of curbing the evils of campaign ignorance and corruption that Congress found to exist." Buckley,
Similarly to Crossroads GPS, the FEC recommends the remand-only remedy, stating that "[t]he 2018 elections are approaching and, if there were no regulation for any significant time, entities engaged in independent expenditures might have inadequate guidance." FEC's Opp'n at 50. This is not a trivial concern. Yet, as one Judge on the D.C. Circuit has observed, "[a] remand-only disposition is, in effect, an indefinite stay of the effectiveness of the court's decision and agencies naturally
Given the length of time this invalid regulation has persisted, particularly in the face of internal acknowledgement by OGC of potential shortfalls, inaction by the FEC to address its flaws is inevitably a significant concern with a remand-only remedy. At the same time, to ensure that not-political committees benefit from regulatory guidance and that the flaws in the challenged regulation are promptly addressed, the Court will stay the vacatur for 45 days to provide time for the FEC to issue interim regulations that comport with the statutory disclosure requirement of
D. FEC'S DISMISSAL OF THE PLAINTIFFS' AMENDED ADMINISTRATIVE COMPLAINT WAS CONTRARY TO LAW AND WARRANTS REMAND
The parties dispute whether the FEC's dismissal decision must be set aside as "contrary to law." The plaintiffs argue that, because the FEC's dismissal of their amended administrative complaint "rests on impermissible constructions of law and arbitrary and capricious analyses of facts, the dismissal of each and every claim raised in [the plaintiffs' administrative] complaint is contrary to law and warrants reversal." Pls.' Reply at 41; see also Pls.' Mem. at 38-45. The defendants counter that, even if the challenged regulation is invalid, the decision deserves a "highly deferential standard of review," FEC's Reply at 1-5; see also CGPS's Opp'n at 1-2, and should be upheld because: (1) Crossroads GPS was entitled to rely on the challenged regulation and did so in good faith under the FECA's safe harbor provision, FEC's Opp'n at 20 (citing
To recap, the FEC dismissed the plaintiffs' amended administrative complaint after the six members deadlocked three-to-three on OGC's two recommendations: first, to "[f]ind no reason to believe that Crossroads [GPS] violated
1. Legal Standard Applicable to Review of FEC Enforcement Actions
Under
When evaluating whether an FEC dismissal decision is "contrary to law," the court considers, under the Chevron framework, whether the dismissal was "arbitrary or capricious, or an abuse of discretion." Orloski ,
The FEC, when considering whether to commence enforcement proceedings based
2. OGC's First Recommendation at Issue in Counts I and II
OGC's first recommendation-to find no reason to believe that Crossroads GPS violated
For the reasons amply detailed above, see supra Part III.C,
The defendants defend OGC's first recommendation to find "no reason to believe" that Crossroads GPS violated
The OGC Report reviewed the facts presented in both the amended administrative complaint and other record evidence, such as the Rove Declaration, through the prism of the regulatory test requiring "an express link between the receipt and the independent expenditure," AR 173 (FGCR at 10), rather than just "a donor's general purpose to support an organization in its efforts to further the election of a particular federal candidate ...," AR 174 (FGCR at 11). Application of this regulatory test to the factual record was contrary to law and clearly conflicts with the FEC's statutory mandate. See Orloski ,
3. OGC's Second Recommendation at Issue in Count III
OGC's second recommendation-that the FEC "[d]ismiss in the exercise of prosecutorial discretion the allegation that Crossroads [GPS] violated [
Both echoing and substantially supplementing OGC's reasoning for not finding any violation by Crossroads GPS of subsection (c)(1), the defendants argue that, even if the FEC's dismissal decision was based on an invalid regulation, the decision should not be set aside because (1) Crossroads GPS was "entitled to rely" on the regulation under the FECA's safe harbor provision,
FECA's safe harbor provision, on which the defendants rely, provides that "any person who relies upon any rule or regulation prescribed by the Commission ... and who acts in good faith in accordance with such rule or regulation shall not, as a result of such act, be subject to any sanction provided by this Act ...."
Mention of the FECA's safe harbor provision made its first appearance in this litigation, since it was not "specifically cite[d]" in the OGC Report. FEC's Reply at 12. Nevertheless, the FEC contends this provision is "based on the same rationale" as the "equitable concerns" actually referenced in the OGC Report.
The defendants also contend that OGC's reference to "prosecutorial discretion" for recommending no enforcement action against Crossroads GPS for allegedly violating subsection (c)(1), renders the administrative decision unreviewable under Heckler v. Chaney ,
Without question, Chaney has been applied to afford FEC dismissal decisions great deference and even to preclude judicial review of such dismissal decisions under the FECA. See, e.g., CREW ,
The D.C. Circuit, however, has identified two instances where the "presumptively unreviewable" expression of prosecutorial discretion may be rebutted under Chaney . First, " Chaney left open the possibility that an agency nonenforcement decision may be reviewed if 'the agency has "consciously and expressly adopted a general policy" that is so extreme as to amount to an abdication of its statutory responsibilities.' " CREW ,
As to the first exception, the FEC deadlocked on taking any enforcement action in the face of the OGC Report pointing out discrepancies between the challenged regulation compared to the statutory disclosure obligations imposed on reporting not-political committees. These discrepancies had been acknowledged without remedial action by the FEC for years prior to dismissal of the plaintiffs' amended administrative complaint, raising the issue whether the FEC had intentionally "abdicat[ed] ... its statutory responsibilities." See CREW ,
On remand, the FEC will have the opportunity to explain, in light of these considerations, whether a non-enforcement decision would be entitled to deference.
IV. CONCLUSION
The challenged regulation at issue in this case,
In contravention of the broad disclosure that Congress intended when enacting the 1979 FECA Amendments, this regulation falls short in two distinct ways. First, the challenged regulation wholly fails to implement another disclosure requirement, mandated in
The Supreme Court presciently stated over forty years ago, during part of which period the challenged regulation has been in effect, that the predecessor to the statutory disclosure provision at issue "is responsive to the legitimate fear that efforts would be made, as they [have] been in the past, to avoid the disclosure requirements by routing financial support of candidates through avenues not explicitly covered by the general provisions of the Act." Buckley ,
Accordingly, the plaintiffs' Motion for Summary Judgment, ECF No. 27, is GRANTED . In particular, the FEC regulation,
Crossroads GPS's Cross-Motion for Summary Judgment, ECF No. 28, and the FEC's Cross-Motion for Summary Judgment, ECF No. 30, are DENIED .
A separate Order consistent with this Memorandum Opinion is filed contemporaneously.
Notes
Crossroads GPS is a tax-exempt organization, which funds independent expenditures and is organized under Section 501(c)(4) of the Internal Revenue Code ("IRC"). CGPS's Mem. Supp. Cross-Mot. Summ. J. & Opp'n Pls.' Mot. ("CGPS's Opp'n") at 6, ECF No. 28.
The plaintiffs and Crossroads GPS have each requested oral argument on the pending motions, Pls.' Mot. at ii; CGPS's Cross-Mot. at i, but given the sufficiency of the parties' written submissions to resolve the pending motions, this request is denied. See LCvR 7(f) (allowance of oral hearing is "within the discretion of the Court").
The AR totals over 700 pages and contains documents from both (1) the administrative proceeding initiated by the plaintiffs before the FEC, designated as Matter Under Review ("MUR") 6696, and (2) the FEC's rulemaking for the challenged regulation as part of the agency's implementation the 1979 FECA Amendments. FEC's Not. Filing Cert. List of AR at 1, ECF No. 25. The portions of the AR cited or otherwise relied upon in the parties' briefing have been docketed in a two-part Joint Appendix, with consecutive pagination. See Jt. App'x, Part 1, ECF No. 38 (AR pages 1-199, 1001-1084); Jt. App'x Part 2, ECF No. 38-1 (AR pages 1085-1554). The administrative record for MUR 6696 appears at AR 1-199, and the rulemaking record makes up the remainder of the AR. For clarity, citations are to pages of the AR, without distinguishing Parts I and II of the Joint Appendix. Not all portions of the AR contained in the Joint Appendix are cited herein, but they have been reviewed in resolving the pending motions.
The administrative complaint was amended, on April 24, 2013, to substitute Nicholas Mezlak for one of the originally named complainants. See AR 98-117 (Am. Admin. Compl. 1-20).
Crossroads GPS and American Crossroads are "legally distinct affiliated entit[ies]," and only American Crossroads is "registered with the FEC as a 'super PAC.' " CGPS's Opp'n at 6-7; see also McCutcheon v. FEC ,
The plaintiffs also alleged that four individuals associated with Crossroads GPS violated the federal criminal conspiracy statute,
In making these observations, OGC referenced an earlier FEC decision to take no action in another matter, for which identifying information was redacted, where the difference in the scope of disclosure under "Section 434(c) [§ 30104(c) ] of the Act and Section 109.10(e)(1)(vi) of the Commission's implementing regulation" was also at issue. AR 172-73 (FGCR at 9-10).
The Draft Notice of Proposed Rulemaking submitted by OGC to the Commission on December 14, 2011, states that "[i]n its current form, 2 U.S.C. 434(c) contains two provisions that require persons other than political committees to disclose the identification of persons from whom they received contributions," citing (c)(1) and (c)(2)(C), noting that "[t]he text of the statute does not specify how, if at all, this requirement [referring to (c)(2)(C) ] interacts with the requirement in 2 U.S.C. 434(c)(1)." Draft Notice of Proposed Rulemaking for Independent Expenditure Reporting (dated Dec. 14, 2011) at 4-5 & n. 5. The FEC's vote to publish a notice of proposed rulemaking to correct and bring the challenged regulation, § 109.10(e)(1)(vi), in accord with the statutory provision, as requested in the rulemaking petition, was evenly divided, three-to-three, and therefore failed. See Certification In Matter of Draft Notice of Proposed Rulemaking for Independent Expenditure Reporting by Persons Other Than Political Committees (dated Dec. 16, 2011) ("Certification in Draft Rulemaking Dec. 16, 2011") ("Commissioners Bauerly, Walther and Weintraub voted affirmatively for the motion. Commissioners Hunter, McGahn II and Petersen dissented.").
The laws barring foreign contributions, including
"The term 'person' includes an individual, partnership, committee, association, corporation, labor organization, or any other organization or group of persons, but such term does not include the Federal Government or any authority of the Federal Government."
The definition of "contribution" also includes "payment by any person of compensation for the personal services of another person which are rendered to a political committee without charge for any purpose,"
The phrase "clearly identified" used in the FECA definition of "independent expenditure" is defined to mean "the name of the candidate involved appears; [ ] a photograph or drawing of the candidate appears; or [ ] the identity of the candidate is apparent by unambiguous reference."
Like the definition of "contribution," the definition of "expenditure" includes an additional category of spending, see
When the FECA was first enacted,
FECA originally required that the reports "shall [be] file[d] with the supervisory officer," which officer varied, depending on whether the report was connected to Senate, House of Representatives, or other federal elections.
The Buckley Court held that limitations on contributions to candidates and political campaigns "are constitutionally valid,"
The 1976 FECA amendment applicable to not-political committees and individual donors,
(1) Every person (other than a political committee or candidate) who makes contributions or independent expenditures expressly advocating the election or defeat of a clearly identified candidate, other than by contribution to a political committee or candidate, in an aggregate amount in excess of $100 during a calendar year shall file with the Commission, on a form prepared by the Commission, a statement containing the information required of a person who makes a contribution in excess of $100 to a candidate or political committee and the information required of a candidate or political committee receiving such a contribution.
(2) Statements required by this subsection shall be filed on the dates on which reports by political committees are filed. Such statements shall include (A) the information required by subsection (b)(9) of this section, stated in a manner indicating whether the contribution or independent expenditure is in support of, or opposition to, the candidate; and (B) under penalty of perjury, a certification whether such independent expenditure is made in cooperation, consultation, or concert with, or at the request or suggestion of, any candidate or any authorized committee or agent of such candidate. Any independent expenditure, including those described in subsection (b)(13) of this section, of $1,000 or more made after the fifteenth day, but more than 24 hours, before any election shall be reported within 24 hours of such independent expenditure.
(3) The Commission shall be responsible for expeditiously preparing indices which set forth, on a candidate-by-candidate basis, all expenditures separately, including those reported under subsection (b)(13) of this section, made with respect to each candidate, as reported under this subsection, and for periodically issuing such indices on a timely preelection basis.
Other changes to
The information "required" to be disclosed about contributors, for example, by political committees, under
The FEC recommendations made at the Senate hearing were outlined in the FEC's 1978 Annual Report, which emphasized the need to "simplify reporting and maintain a high level of public disclosure" and proposed changes to the provision then-codified at
The Senate-passed version of the bill was substituted for, and passed by, the House in H.R. 5010, see 125 Cong. Rec. 36744, 37187, 37197 (1979), which bill was signed into law on January 8, 1980, Presidential Statement Upon Signing H.R. 5010, Office of the White House Press Secretary (Jan. 8, 1980).
The cross-referenced subsection,
The proposed regulation largely retained the prior regulation, at
The other five required contents are: (1) "[t]he reporting person's name, mailing address, occupation, and the name of his or her employer,"
The Supreme Court cites two cases as reflecting instances where a procedural challenge to a regulation may be barred: Auer v. Robbins ,
The defendants also rely on a non-binding, out-of-circuit case, Perez-Guzman v. Lynch ,
Crossroads GPS raises this standing argument for the first time. During consideration of the defendants' motions to dismiss the complaint, Crossroads GPS sought dismissal only of the plaintiffs' APA claims and, "in the interest of efficiency," did "not duplicate the FEC's various arguments," CGPS's Reply Mem. Supp. Defs.' Partial Mots. Dismiss at 1, ECF No. 19, including the FEC's unsuccessful argument that the plaintiffs lack standing because they "have not been 'personally injured,' " FEC's Reply Supp. Partial Mot. Dismiss at 2-8, ECF No. 20.
Crossroads GPS also asserts that the plaintiffs should have raised their challenge in a rulemaking petition, CGPS's Reply at 19-20, by petitioning "the [FEC] directly for the relief [CREW] seek[s] in this lawsuit" since "the [FEC]'s discretion to issue [or amend or repeal] regulations is left in the first instance to the [FEC], not the federal courts," and thus "[CREW] must first challenge the [FEC]'s exercise of that discretion before the agency." CGPS's Reply at 20 (alterations in original) (quoting Ass'n of Flight Attendants-CWA v. Chao ,
The defendants contend that "simple fairness" does not allow the plaintiffs to challenge the regulation where the "specific arguments" and "not merely the same general legal issue[s]," were not raised in administrative proceedings. FEC's Reply at 8-9 (internal citations omitted); see also CGPS's Opp'n at 34. Yet, the cases cited by the defendants for this contention are distinguishable because the claims rejected in each of those cases had not been addressed at all during administrative proceedings by either the plaintiff or the agency. See, e.g., Gill v. U.S. Dep't of Justice ,
Count II, which asserts the only remaining APA challenge, see supra Part I.C, alleges that
Recent Supreme Court cases suggest a retreat from Chevron , but the Supreme Court has not abandoned the framework. SAS Inst. ,
As discussed supra Part III.A.1,
Indeed, since enactment and through various amendments, the FECA provision governing the disclosure obligations of reporting not-political committees has consistently imposed closely analogous requirements about identifying contributors as those imposed on political committees. See, e.g. ,
As part of their argument for interpreting the provisions in
The Supreme Court cites these disclosure requirements for reporting not-political committees twice: once in a portion of the opinion that five justices signed, MCFL ,
Donations to not-political committees may also be used to engage in issue advocacy, as opposed to express advocacy. Donors for issue advocacy may not need to be disclosed. See FEC v. Wisconsin Right To Life, Inc. ("WRTL "),
Crossroads GPS digs in on this argument to disregard as "dicta " the Supreme Court's reading of the statutory provision at issue, citing Justice Rehnquist's dissent and a case from another district, CGPS's Opp'n at 50 (citing MCFL ,
Furthermore, the plaintiffs raise legitimate concern that, if the FEC and Crossroads GPS's view of the "direct link" is what they say it is, Pls.' Mem. at 35, then the donor may not have sufficiently "relinquish[ed] control" over the use of the donated funds to qualify as a "contributor" under the relevant FECA regulation,
The FEC also disputes the plaintiffs' construction of subsection (c)(1), stating that "[i]f Congress's intent was to make subsection (c)(1) a reporting requirement to identify all persons who made over $200 in contributions, it is not clear why it would do so by cross-referencing a provision that contains inapplicable language instead of by simply describing the requirements directly." FEC's Reply at 35; see also Pls.' Reply at 28 (asserting that "[b]y explicitly incorporating those same reporting requirements for non-political committees, the statute clearly mandates those making independent expenditures to disclose the 'information ... for all contributions' that political committees are to report under subsection (b)(3)(A): i.e. , their identities, with the date and amount of the contributions" (second alteration in original) );
Subsection (a)(2) provides, in relevant part, that "[i]f the political committee is the principal campaign committee of a candidate for the House of Representatives or for the Senate ... in any calendar year during which there is [a] regularly scheduled election for which such candidate is seeking election, or nomination for election, the treasurer shall file" three types of enumerated reports: "a pre-election report," "a post-general election report," and "additional quarterly reports,"
Crossroads GPS also relies on FEC v. Survival Educ. Fund ,
The cases cited by Crossroads GPS addressing the definition of "an" merely underscore the importance of context. CGPS'S Reply at 25-26 (citing, e.g., N.H. Motor Transp. Ass'n ,
Crossroads GPS cites to language from the legislative history to argue that "the Senate Committee's report confirm[s] that the statute targets reporting of contributions received for 'the independent expenditure,' " see, e.g. , CGPS's Opp'n at 40 (emphasis in original) (citing S. Comm. Hearing 1979, at 139 ( Staff of S. Comm. on Rules & Admin., 96th Cong., Summary of Committee Working Draft No. 2-FECA Amendments ), but the same report discussed Congress's intent to "[s]implif[y] reporting without affecting meaningful disclosure," and, to the extent the cited legislative history used the term "the" to modify "independent expenditure," the context was in discussing the elimination of contributor reporting-not to go against Congress's stated goal, see S. Comm. Hearing 1979, at 139.
The plaintiffs note that, when implementing
Crossroads GPS argues that "Congress's longstanding acquiescence in the FEC's 1980 rulemaking" shows "ratifi[cation]" of the interpretation of
The challenged regulation is also defective under the overlapping "arbitrary and capricious" inquiry to determine "if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, [or] offered an explanation for its decision that runs counter to the evidence before the agency.' " ALDF,
The FEC contends that vacatur is an "unusual remedy," FEC's Opp'n at 50; see also CGPS's Reply at 43 ("[T]he proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation." (quoting Banner Health v. Price ,
Vacatur of a rule may, in some circumstances, result in a predecessor rule regaining effectiveness, see Envtl. Def. v. Leavitt ,
Prior to July 16, 2018, IRS regulations required tax-exempt organizations, other than entities organized under 501(c)(3), to report "the names and addresses of all persons who contributed ... $5,000 or more ... during the taxable year."
The concern about an agency "dragging its feet" is singularly apropos here. The FEC, despite acknowledging the discrepancies between the challenged regulation and the plaintiffs' version of the statutory disclosure regime, has been unable to remedy the situation, frequently due to deadlocked decisions, as in this case. See Part I.B; see also Certification in Draft Rulemaking Dec. 16, 2011.
Whether
Crossroads GPS contends that the plaintiffs cannot argue "unreasonable reliance" on the regulation because CREW submitted a comment to the FEC in 2015 "espousing [Crossroads GPS's] position regarding the regulation at issue well after the conduct giving rise to this case" and actually "conceded ... that the regulation purports to implement both statutory provisions." CGPS's Reply at 7 & n. 2 (citing Comments in Response to Advance Notice of Proposed Rulemaking on Earmarking, Affiliation, Joint Fundraising, Disclosure, and Other Issues (Jan. 15, 2015) ("CREW's Comment, Jan. 15, 2015") at 3, available at http://sers.fec.gov/fosers/showpdf.htm?docid=312990); see also CGPS's Opp'n at 28-29. The CREW comment targeted by Crossroads GPS is that, under
The parties devote significant space to debating whether these potential forms of "notice" demonstrate a lack of "good faith" on the part of Crossroads GPS, such that the safe harbor provision cannot apply. See Pls.' Reply at 36-38 (" '[G]ood faith' is a factual question, and there are significant reasons to believe Crossroads GPS's reliance is not in good faith."); CGPS's Reply at 6-9 ("[The plaintiffs'] attacks on [Crossroads GPS's] good faith ring hollow because [Crossroads GPS] complied with the regulation as it was universally understood."); FEC's Reply at 12-14 (arguing, "the FEC has never interpreted
The D.C. Circuit's CREW opinion affirmed a grant of summary judgment to the FEC after the FEC deadlocked three-to-three and consequently voted not to begin an enforcement proceeding, based on, as noted, the plaintiff's allegations that an unincorporated association had violated the FECA. CREW ,
After briefing on the pending cross-motions for summary judgment concluded, the FEC filed a supplemental notice regarding CREW ,