Case Information
*1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA STOP THIS INSANITY, INC. EMPLOYEE
LEADERSHIP FUND, et al .,
Plaintiffs, Civil Action No. 12-1140 (BAH) v. Judge Beryl A. Howell FEDERAL ELECTION COMMISSION,
Defendant. MEMORANDUM OPINION
Plaintiffs Stop This Insanity, Inc. Employee Leadership Fund (“the Leadership Fund”), Stop This Insanity, Inc. (“STI”), [1] Glengary LLC, Todd Cefaratti, and Ladd Ehlinger bring this as-applied First Amendment challenge against three provisions of the Federal Election Campaign Act (“FECA”), namely 2 U.S.C. §§ 441a(a)(1)(C) and 441a(a)(3) (which limit the dollar amount of contributions to political committees); and 441b(b)(4)(A)(i) (which restricts the pool of citizens from which connected political committees established by a corporation may solicit contributions). [2] The Leadership Fund is a “connected” political action committee (“PAC”) [3] or *2 “separate segregated fund” of the corporation STI. Compl. ¶ 17, ECF No. 1. The Leadership Fund seeks declaratory and injunctive relief that would allow it to solicit and accept unlimited contributions to finance unlimited independent political expenditures through an independent expenditure-only account not subject to the restrictions set forth in §§ 441a(a)(1)(C), 441a(a)(3), and 441b(b)(4)(A)(i). Id. ¶ 1. In their three-count Complaint, the plaintiffs seek a declaratory judgment that the prohibitions contained in these portions of the FECA are unconstitutional as applied to their proposed solicitation and contribution activities. Id. at 20–22. The plaintiffs also seek preliminary and permanent injunctive relief that would prohibit the defendant Federal Election Commission (“FEC”) from enforcing §§ 441a(a)(1)(C), 441a(a)(3), and 441b(b)(4)(A)(i) against the Leadership Fund and any individual or corporate contributors to an independent expenditure-only account established by the Leadership Fund. See id.
I. BACKGROUND
STI is a not-for-profit social welfare organization, incorporated in Arizona, which is
currently seeking tax-exempt status under § 501(c)(4) of the Internal Revenue Code.
See
Comрl.
¶ 18. The Leadership Fund is a separate segregated fund (“SSF”) that was established by and
connected to STI and registered with the FEC as a political committee on January 4, 2012.
Compl. Ex. B at 3, ECF No. 1-1. Under the FECA, a corporation may establish an SSF to
engage in political activities,
see
2 U.S.C. § 441b(b)(2)(C), and “[s]uch a PAC . . . may be
wholly controlled by the sponsoring corporation,”
FEC v. Beaumont
,
and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes,” is exempt from taxation under § 501(c)(4). According to its Articles of Incorporation, STI is a “ political non-partisan non- profit organization” that “will not represent any candidate or party” and “gather[s] donations and donate[s] to any candidate or party that represents original US Constitutional principles.” Articles of Incorporation, http://images.azcc.gov/scripts/cgi/dwispart2.pl (filed Feb. 25, 2010) (emphasis added).
All SSFs, however, must register as “political committees” under the FECA. See 2 U.S.C. §§ 431(4)(B), 433. [5] Likewise, all political committees, including SSFs, are required to abide by certain organizational, record-keeping, and reporting requirements, see 2 U.S.C. §§ 432, 433, 434, as well as contribution limits, see id. § 441a. Under the contribution limits, no person is allowed to make “contributions” to any “other political committee” (which includes SSFs) “in any calendar year which, in the aggregate, exceed $5,000.” Id. § 441a(a)(1)(C). Additionally, SSFs are uniquely required to observe certain limits upon the universe of people from whom they soliсit contributions. Specifically, subject to certain limited exceptions, it is unlawful “for a corporation, or a separate segregated fund established by a corporation, to solicit contributions to such a fund from any person other than its stockholders and their families and its executive or administrative personnel and their families.” Id. § 441b(b)(4)(A)(i). [6] The Leadership Fund asserts that these restrictions on the solicitations and contributions of connected PACs are unconstitutional as applied to it, in light of recent developments in the law of campaign finance and the First Amendment.
Currently, the Leadership Fund maintains a single bank account into which it receives
“hard money”
[7]
contributions that are subject to the contribution limits, solicitation restrictions,
and reporting and disclosure requirements of the FECA. Compl. Ex. A at 2, ECF No. 1-1.
[8]
The
*4
Leadership Fund wants to use the funds from this bank account to make direct contributions to
candidates for federal political office. Compl. ¶ 23. The Leadership Fund, however, would also
like to expand its political activities to include “independent expenditures,”
id.
, which are
expenditures “expressly advocating the election or defeat of a clearly identified candidate” but
that are “not made in concert or cooperation with or at the request or suggestion of such
candidate, the candidate’s authorized political committee, or their agents, or a political party
committee or its agents,” 2 U.S.C. § 431(17). Since independent expenditures currently enjoy
fewer restrictions than direct contributions to candidates, the Leadership Fund would like to
establish a second, separate bank account, for which it would like to solicit unlimited
contributions frоm the general public in order to finance its “independent expenditures.” Compl.
Ex. A at 2;
see also Carey v. FEC
,
To that end, the Leadership Fund submitted an advisory opinion request to the FEC on January 4, 2012, asking the FEC “whether it may open a[n] [independent expenditure-only] account . . . to accept contributions from individuals, corporations, and unions that is not subject to the limitations and prohibitions of 2 U.S.C. § 441a(a)(1)(C) or § 441b . . . to conduct Independent Expenditures and proportionally pay[] an appropriately tailored share of administrative expenses.” Compl. Ex. A at 1; see also 2 U.S.C. § 437f(a) (requiring the FEC to render a written advisory opinion in response to a “complete written request concerning the person of compensation for the personal services of another person which are rendered to a political committee without charge for any purpose.” 2 U.S.C. § 431(8)(A).
application of [the FECA] or a rule or regulation prescribed by the [FEC], with respect to a specific transaction or activity by the person”).
On February 17, 2012, the FEC issued two draft advisory opinions in response to the Leadership Fund’s request. The first draft advisory opinion (“Draft A”) concluded that the Leadership Fund “may establish a[n] [independent expenditure-only] account and solicit and accept unlimited contributions from individuals, other political committees, corporations, and labor organizations, STI itself, and STI’s restricted class” for the purpose of financing independent expenditures. Compl. Ex. B at 2. The second draft advisory opinion (“Draft B”), however, reached the opposite conclusion: “the [FECA] and [FEC] regulations prohibit [the Leadership Fund] and STI from establishing a[n] [independent expenditure-only] account for [the Leadership Fund] that would receive unlimited contributions solicited from all STI employees and the general public for the purpose of financing independent expenditures.” Id. Ex. C at 4, ECF No. 1-1. Both of these advisory opinions recognized that none of the recent judicial decisions issued in the realm of campaign finance and the First Amendment directly address whether FECA’s contribution limits and solicitation restrictions are constitutional as applied to an SSF, i.e. , a political committee connected to a corporation or labor organization. Id. Ex. B at 7; id. Ex. C at 6–7.
On March 2, 2012, the FEC certified that it had failed on a vote of 3-3 to approve either draft advisory opinion. See Compl. Ex. D at 1, ECF No. 1-1. Without the FEC’s blessing, the Leadership Fund was (and continues to be) unable to solicit contributions for independent expenditures without being subject to the contribution limits in § 441a(a) or the solicitation restrictions in § 441b(b)(4)(A) because the Leadership Fund alleges that it “will face a credible *6 threat of prosecution if it solicits or accepts contributions to a[n] [independent expenditure-only] account in excess of the limits contained in 2 U.S.C. §§ 441a(a)(1)(C) and 441a(a)(3)” or “in derogation of the restriction at 2 U.S.C. § 441b(b)(4)(A)(i).” Compl. ¶¶ 51, 52. Feeling “required to mute itself and curtail its activities” during the 2012 election cycle, id. ¶ 37, the Leadership Fund—along with its connected corporate entity (STI) and three potential donors who wish to make contributions to the Leadership Fund but are currently prohibited by the FECA from doing so (Glengary LLC, Todd Cefaratti, and Ladd Ehlinger)—filed the Complaint in the instant action on July 10, 2012. Pending before the Court are the plaintiffs’ Motion for Preliminary Injunction and the FEC’s Motion to Dismiss. For the reasons discussed below, the Court will deny the plaintiff’s Motion for Preliminary Injunction and will grant the FEC’s Motion to Dismiss.
II. LEGAL STANDARDS
A. Preliminary Injunction
The purpose of a preliminary injunction “is merely to preserve the relative positions of
the parties until a trial on the merits can be held.”
Univ. of Tex. v. Camenisch
,
*7
Historically, these four factors have been evaluated on a “sliding scale” in this Circuit,
such that “[i]f the movant makes an unusually strong showing on one of the factors, then it does
not necessarily have to make as strong a showing on another factor.”
Davis v. Pension Benefit
Guar. Corp.
,
That being said, in meeting the requisite burden for injunctive relief, “[i]t is particularly
important for the movant to demonstrate a likelihood of success on the merits.”
Konarski v.
Donovan
,
B. Motion to Dismiss
To survive a motion to dismiss under Rule 12(b)(6), a plaintiff need only plead “enough
facts to state a claim to relief that is plausible on its face” and to “nudge[] [his or her] claims
across the line from conceivable to plausible.”
Bell Atl. Corp. v. Twombly
,
III. DISCUSSION
This is the most recent attempt by a non-profit entity to invalidate, on First Amendment
grounds, federal regulations related to independent political expenditures. Such challenges
within this Circuit and before the Supreme Court have enjoyed almost universal success in recent
years on the premise that “independent expenditures, including those made by corporations, do
not give rise to corruption or the appearance of corruption.”
Citizens United v. FEC
, 130 S. Ct.
876, 909 (2010);
see also SpeechNow.org v. FEC
,
A. Probability of Success on the Merits
In assessing the viability of the plaintiffs’ as-applied constitutional challenge, it is critical to observe that this is a case about regulating the solicitation and fundraising activities of “connеcted” SSFs—PACs that are established, administered, and subsidized by corporations. SSFs have unique characteristics that come to bear on the Court’s analysis below.
First, although all political committees must disclose the amount of all “contributions” they receive and the source of any such contributions over $200, see 2 U.S.C. §§ 434(b)(2)(A), 434(b)(3)(A), the FECA specifically exempts from the definition of “contributions” any funds used for “the establishment, administration, and solicitation of contributions to a [SSF] to be utilized for political purposes by a corporation,” id. § 441b(b)(2)(C). Therefore, any funds provided by a corporation to finance the administration and solicitation of contributions to its SSF need not be disclosed to the government and need not count against the contribution limits established for political committees. 2 U.S.C. § 441a(a)(1)(C) (limiting contributions to “other political committees,” which includes SSFs); id. § 434 (requiring disclosure of all contributions and the source of any contributions over $200)
Second, although an SSF’s solicitation activities are permitted to benefit from undisclosed corporate subsidization, the FECA limits the universe of people the SSF may solicit: An SSF may generally solicit contributions only from its connected corporation’s “stockholders and their families and its executive or administrative personnel and their families.” Id. § 441b(b)(4)(A)(i). The SSF (or its connected corporation) may also solicit rank-and-file employees of the connected corporation to contribute to the SSF as long as the solicitations are: (1) made in writing; (2) addressed to the employees at their residence; (3) made only twice per calendar year; and (4) designed such that the SSF and its connected corporation “cannot determine who makes a contribution of $50 or less as a result of such solicitation and who does not make such a contribution.” Id. § 441b(b)(4)(B). Thus, there is a major statutory trade-off for SSFs: an SSF can have all of its administrative and solicitations costs paid for by its *11 connected corporation and need not report the amount or source of those funds, but in order to enjoy those financial, non-disclosure, and non-reporting benefits the SSF must limit its solicitation base. If, however, a political committee wishes to solicit contributions from the general public, it must disconnect from its affiliated corporation, pay its own administrative and solicitation expenses, and disclose and report the amount and source of all funds raised— including any funds that go toward administration and solicitation expenses. In essence, as the FEC points out, the plaintiffs are seeking relief that would create such a large loophole in political committee disclosure requirements that those requirements would be meaningless. Def.’s Opp’n to Pls.’ Mot. Prelim. Inj. (“Def.’s Opp’n”) at 15, ECF No. 6 (“This lawsuit, however, seeks to have the statutory disclosure exception swallow the rule . . . .”).
Third, since , SSFs have become vestiges of a bygone world of campaign
finance. Section 441b’s original purpose was “to prohibit contributions or expenditures by
corporations or labor organizations in connection with federal elections,” and the SSF was
created to “permit[] some participation of unions and corporations in the federal electoral
process.”
FEC v. Nat’l Right to Work Comm.
(“
NRWC
”),
Finally, the Supreme Court has recognized that SSFs are inherently suspect in certain
respects by virtue of the fact that a single entity (corporation, labor union, etc.) pays all of their
administration expenses. In
California Medical Association v. FEC
(“
Cal-Med
”),
If unlimited contributions for administrative support are permissible, individuals аnd groups like CMA could completely dominate the operations and contribution policies of independent political committees such as CALPAC. Moreover, if an individual or association was permitted to fund the entire operation of a political committee, all moneys solicited by that committee could be converted into contributions, the use of which might well be dictated by the committee’s main supporter. In this manner, political committees would be able to influence the electoral process to an extent disproportionate to their public support and far greater than the individual or group that finances the committee’s operations would be able to do acting alone. In so doing, they could corrupt the political process in a manner that Congress, through its contribution restrictions, has sought to prohibit.
Cal-Med
,
With these facts in mind, the Court will first discuss recently established First Amendment principles regarding independent expenditures and the continuing vitality of campaign finance regulations. Then, with those principles in tow, the Court will proceed to evaluate the probability that the plaintiffs will succeed on the merits of their claims that the contribution and solicitation limitations in §§ 441a(a)(1)(C), 441a(a)(3), and 441b(b)(4)(A)(i) are unconstitutional as applied to SSFs that engage in both direct candidate contributions and express advocacy.
1.
First Amendment Principles
The First Amendment, which provides that “Congress shall make no law . . . abridging
the freedom of speech,” U.S. C ONST . amend. I, is an enduring bulwark against improper
intrusions upon “the exercise of rights so vital to the maintenance of democratic institutions,”
Schneider v. New Jersey
,
The vitality of the First Amendment, however, is also predicated on the fact that the
important rights subject to its protection are not absolute, and in certain contexts, must give way
to other compelling governmental interests.
See, e.g.
,
Times Film Corp. v. City of Chicago
,
A number of precepts—some broad, others narrow—can be derived from this body of recent case law. First, EMILY’s List and Carey have endorsed the hybridization of political committees—at least when such political committees are not connected to a candidate, political party, corporation, or labor union. In other words, “[t]he constitutional principles that govern . . . a hybrid non-profit entity follow ineluctably from the well-established principles governing the other two categories of non-profits,” which either (1) make only direct contributions to candidates or (2) make only “expenditures for political activities.” EMILY’s List , 581 F.3d at 12. An important aspеct to acknowledge about EMILY’s List , however, is that although it began with a very broad discussion of First Amendment principles, the Circuit’s holding was ultimately quite narrow. The case invalidated certain FEC regulations because they required a non- connected, non-profit political committee to use its hard-money ( i.e. , direct candidate and party contribution) account to pay for certain soft-money activities, namely “expenditures such as advertisements [about ballot initiatives], get-out-the-vote efforts, and voter registration drives.” Id. at 16. The Court’s holding was that “non-profits may not be forced to use their hard money *18 accounts” to pay for such expenditures. Id. Thus, EMILY’s List clearly announced that some level of hybridization is acceptable for registered political committees, but the Court left open the question of how much hybridization is too much.
Carey
, in turn, extended
EMILY’s List
. The court in
Carey
held that a non-connected
political committee could combine direct contribution activities with not only generic political
expenditures but also “independent expenditures,” which by definition are expenditures that
“expressly advocat[e] the election or defeat of a clearly identified candidate.”
Carey
, 791 F.
Supp. 2d at 132;
see also
2 U.S.C. § 431(17) (defining “independent expenditure”). The “soft
money” expenditures in
EMILY’s List
are distinct from the express advocacy contained in
independent expenditures,
see, e.g.
,
Citizens United
,
The second precept to glean from these cases is the genesis of so-called “Super PACs”—
political committees that can raise unlimited money to engage in unlimited electioneering
communications, so long as their activities are not made “in cooperation, consultation, or
concert, with, or at the request or suggestion of” a candidate, his or her authorized political
committee, or a national, State, or local committee of a political party. 2 U.S.C. § 441a(7)(B).
These “Super PACs” are permitted to exist by virtue of two cases. The first is the Supreme
Court’s decision in
Citzens United
, which held that corporations could not be prevented from
engaging in
their own
unlimited political speech funded from the corporation’s general treasury
so long as that speech is in the form of independent expenditures.
See Citizens United
, 130 S. Ct.
at 909. The second is the D.C. Circuit’s decision in
SpeechNow
, which held that individuals can
contribute unlimited amounts to a non-connected political committee, as long as the political
committee is engaged solely in independent expenditures.
See SpeechNow
,
Importantly, in allowing unlimited money to flow into the electoral process for express
advocacy, both
SpeechNow
and heavily emphasized the non-coordinated nature
of independent expenditures, which serves as an essential counterweight to concerns about
corruption or the appearance of corruption.
See Citizens United
,
The third and final precept, which loomed large behind the development of the first two
precepts, is that the government’s interest in preventing corruption or the appearance of
corruption endures as a compelling justification to restrict certain kinds of political speech. In
particular, courts continue to recognize that preventing corruption or the appearance of
corruption is sufficiently important to regulate entities that engage in direct contributions to
candidates and political parties, including “multicandidate political committees,” which are
political committees that “ha[ve] made contributions to 5 or more candidates for Federal office.”
2 U.S.C. § 441a(a)(4);
see Citizens United
,
Specifically, Congress explicitly carved out “multicandidate political committees” to be
entities that engage in direct contributions to candidates and political parties because such direct
contributions foment “the reality or appearance of corruption inherent in a system permitting
unlimited financial contributions.”
Buckley
,
In light of this distinction, any political contribution enjoys,
ex ante
, a lesser quantum of First Amendment
protection than any type of political expenditure.
See id.
at 23 (“[E]xpenditure ceilings impose significantly more
severe restrictions on protected freedoms of political expression and association than do . . . limitations on financial
contributions.”);
see also McConnell
,
The Supreme Court, however, started to narrow
Buckley
’s critical distinction, without explanation, only
five years after the case was decided.
Citizens Against Rent Control v. City of Berkeley
,
stemming from public awareness of the opportunities for abuse inherent in a regime of large
individual financial contributions.”
Buckley
,
This sets the stage for the constitutional question presently before the Court: Does the
government have a sufficiently compelling interest in limiting contributions to (and solicitations
by) connected political committees that engage in both express advocacy communications and
direct candidate contributions? All that such a hybrid organization needs to do, according to
Carey
, is establish two separate bank accounts—one for direct contributions and one for
independent expenditures—and
voilà
: the appearance of corruption and undue influence
magically disappear. Yet, the allowances of such hybrid PACs transmogrify Congress’s intent in
compartmentalizing “multicandidate political committees” from other kinds of political
associations. When a PAC gives directly to candidates with its right hand and engages in
express advocacy with its left hand, the risk that the PAC’s hybrid spending will appear
corrupting and corrosive is manifest. When the public sees a hybrid PAC hand a check to a
candidate or party leader while that PAC simultaneously spends unlimited amounts on highly
visible electioneering communications that directly advocate for that candidate’s election, the
façade of “independence”—even if formally observed by using separate funds or accounts—
appears non-existent to the public. Thus, the “belief that
quid pro quo
arrangements can be
neatly demarcated from other improper influences does not accord with the theory or reality of
politics.” ,
The instant case lies at the intersection of these three precepts, addressing whether a single connected PAC is permitted to engage in limited direct contributions funded from one bank account and simultaneously engage in unlimited express advocacy communications funded from another bank account. With these precedents in mind, the Court will now assess the probability of success of the plaintiffs’ constitutional claims.
2.
Contribution Limits
First, the plaintiffs challenge the constitutionality of the contribution limits in 2 U.S.C.
§§ 441a(a)(1)(C) and 441a(a)(3) as applied to SSFs that make both direct contributions and
express advocacy communications. Those provisions prohibit making contributions to any
“other political committee” (including SSFs) that exceed $5,000 in any calendar year and also
prohibit making contributions that aggregate more than $57,500 biennially.
[20]
Plaintiffs Glengary
LLC and Todd Cefaratti claim that they are both intеrested in making contributions to the
Leadership Fund that exceed these limits and are prohibited from doing so by these restrictions.
Compl. ¶¶ 25–26, 71. Those contribution limits for individuals, such as plaintiff Cefaratti,
have already been held unconstitutional as applied to non-connected political committees.
See
SpeechNow
,
*25
The plaintiffs contend that the broad-based discussion of contribution limits in
SpeechNow
and
EMILY’s List
dictate a result in the plaintiffs’ favor. Those cases are
distinguishable, however, and therefore do not control the outcome of the instant case. First,
although
EMILY’s List
was a facial challenge, the regulations challenged in that case only dealt
with solicitation and allocation restrictions, not contribution limits.
EMILY’s List
, 581 F.3d at
15–18 (outlining provisions of challenged regulations). Hence, to the extent the Court’s analysis
touched upon contribution limits, it was pure dicta. Second and perhaps more importantly,
although the non-profit plaintiff in
EMILY’s List
engaged in “expenditures,” none of the
expenditures at issue involved express advocacy for or against a clearly identified federal
candidate. Rather, the expenditures involved in
EMILY’s List
were either issue-based advocacy
or voter turnout and registration activities.
See id.
at 12 (noting that EMILY’s List “makes
expenditures for advertisements, get-out-the-vote efforts, and voter registration drives”);
EMILY’s List v. FEC
,
Thus,
EMILY’s List
did not address contribution limits, and in particular it did not address
the potential anti-corruption interests implicated by contribution limits on hybrid PACs that
engage in both direct contributions and express advocacy—a critical distinction from the facts of
*26
the instant case. The distinction is critical primarily because express advocacy has an inherently
stronger nexus to particular candidates, which materially alters the constitutional analysis of
hybrid political committees.
See FEC v. Mass. Citizens for Life, Inc.
(“
MCFL
”),
Similarly,
SpeechNow
is distinguishable from the instant case because it involved limits
on contributions by individuals to unincorporated non-profit associations that
only
engage in
independent expenditures.
See SpeechNow
,
“The Supreme Court has recognized only one interest sufficiently important to outweigh
the First Amendment interests implicated by contributions for political speech: preventing
corruption or the appearance of corruption.”
Id.
at 692;
see also Colo. Republican Fed.
Campaign Comm. v. FEC
,
If the First Amendment rights of a contributor are not infringed by limitations on the amount he may contribute to a campaign organization which advocates the views and candidacy of a particular candidate, the rights of a contributor are similarly not impaired by limits on the amount he may give to a multicandidate political committee . . . which advocates the views and candidacies of a number of candidates.
Cal-Med
,
As discussed above, the government’s interest in preventing the appearance of political corruption and undue influence is at its zenith when individuals and organizations give money directly to political candidates and political parties. As the Supreme Court prophetically stated over thirty-five years ago:
Under a system of private financing of elections, a candidate lacking immense personal or family wealth must depend on financial contributions from others to provide the resources necessary to conduct a successful campaign. The increasing importance of the communications media and sophisticated mass-mailing and polling operations to effective campaigning make the raising of large sums of money an ever more essential ingredient of an effective candidacy. To the extent that large contributions are given to secure a political quid pro quo from current and potential office holders, the integrity of our system of representative democracy is undermined.
Buckley
,
When a single entity is allowed to make both limited direct contributions and unlimited
independent expenditures, keeping the bank accounts for those two purposes separate is simply
insufficient to overcome the appearance that the entity is in cahoots with the candidates and
*29
parties that it coordinates with and supports. Although such an entity may maintain separate
bank accounts, it need not maintain separate management or hold itself out to the public as
engaging in two distinct activities. Thus from the perspective of any citizen who does not
scrutinize the entity’s bank statements, all of the entity’s spending (direct contributions and
express advocacy communications) is coming from the same place.
See N.C. Right to Life, Inc.
v. Leake
,
This is, of course, not to say that an organization like the Leadership Fund forfeits its
First Amendment rights simply by virtue of wanting to make both direct contributions and
independent electioneering expenditures. Those rights remain unscathed. Further, the burden on
the plaintiffs to comply with the current contribution limits is minimal. If banding together to
engage in unlimited political speech is their goal, the plaintiffs could easily form an independent
expenditure-only PAC (
i.e.
, a Super PAC) and receive contributions in unlimited amounts.
Compare SpeechNow
,
engaging in unlimited independent expenditures. It merely imposes a narrow limit on the mechanism through which they may do so. For example, STI could establish a second connected PAC that engaged in only independent
3. Solicitation Restrictions Next, the plaintiffs challenge the constitutionality of the FECA’s restrictions on the group of people from whom an SSF may solicit contributions. Section 441b(b)(4)(A)(i) of the FECA makes it unlawful “for a corporation, or a separate segregated fund established by a corporation, to solicit contributions to such a fund from any person other than its stockholders and their families and its executive or administrative personnel.” SSFs may also solicit the rank-and-file employees of their connected corporations as long as the solicitations are: (1) made in writing; (2) addressed to the employees at their residence; (3) made only twice per calendar year; and (4) designed such that the SSF and its connected corporation “cannot determine who makes a contribution of $50 or less as a result of such solicitation and who does not make such a contribution.” Id. § 441b(b)(4)(B). The plaintiffs state, however, that they do not challenge the validity of these latter restrictions, which regulate the manner in which rank-and-file employees may be solicited. Pls.’ Mem. in Supp. Mot. Prelim. Inj. (“Pls.’ Mem.”) at 3, ECF No. 4-1 (“Plaintiffs do not challenge . . . the prohibition on soliciting employees of the SSF not in the restricted class more than twice annually subject to certain restrictions.” (citing 2 U.S.C. § 441b(b)(4)(B))). Rather, the plaintiffs seek to expand the scope of people who may be solicited beyond the limited group of individuals associated with the host corporation through an ownership or employment interest. In essence, however, the direct solicitation restrictions for rank-and-file employees would be swallowed if the relief sought by the plaintiffs were granted (and STI and the Leadership Fund were permitted to solicit from the general public) because the general public necessarily would include rank-and-file employees.
expenditures. Also, any or all of the plaintiffs could establish a non-connected political committee that engages in only independent expenditures.
Soliciting money for political spending is distinct from either making political
contributions or making independent political expenditures, though all three activities enjoy First
Amendment protection. The Supreme Court has held that “[s]oliciting financial support is
undoubtedly subject to reasonable regulation,” so long as that regulation is “undertaken with due
regard for the reality that solicitation is characteristically intertwined with informative and
perhaps persuasive speech.”
Vill. of Schaumberg v. Citizens for a Better Env’t
,
It is not completely clear what level of scrutiny applies when examining the
constitutional validity of restrictions on solicitation activities. A number of courts have held that,
so long as the solicitation restrictions are content neutral, they need not withstand strict scrutiny.
See, e.g.
,
McConnell
,
Although the Court is mindful that solicitation activities are “characteristically
intertwined with informative and perhaps persuasive speech,”
Village of Schaumberg
, 444 U.S.
at 632, the plaintiffs have altogether failed to allege or describe how their proposed solicitation
activities would include a “communicative element.”
See Kennedy
,
The Supreme Court established long ago, however, that the federal government has a
number of “sufficiently strong” interests in limiting the solicitation activities of SSFs.
See NRWC
,
Yet another important consideration implicated by the solicitation restrictions challenged
in this case is the government’s interest in protecting the First Amendment rights of a
corporation’s employees. This concern was not addressed by the majority in or
the Court of Appeals in
EMILY’s List
and
SpeechNow
, but it is vitally important to the health of
American democracy.
See NRWC
,
Providing corporations with an unlimited political voice may bring more and louder voices to the national political dialogue as the majority repeatedly emphasized and lauded, but allowing unlimited amplification of corporate political speech will also inevitably chill the political speech of corporate employees whose views diverge from their corporate employers. The plaintiffs assure the Court that they will abide by the FECA’s other applicable solicitation restrictions, such as the restriction on only soliciting rank-and-file employees twice per year under certain restrictions, “the requirement to ‘inform each employee it solicits of the political purposes of [the SSF]’ and ‘of his right to refuse to contribute without any reprisal.’” Pls.’ Reply at 6, 16 (quoting Def.’s Opp’n at 23). Yet, as one commentator has noted, “the inherent potential for coercion in employer-employee relationships . . . cannot simply be undone by prohibiting explicit or implicit threats or discrimination.” Paul M. Secunda, Addressing Political Captive Audience Workplace Meetings in the Post-Citizens United Environment , 120 Y ALE L.J. O NLINE 17, 24 (2010). Rather, “it is in the best interest of all involved to keep political discussions and partisanship out of the public and private workplace.” Id. The relief sought by the plaintiffs would do just the opposite. As noted above, allowing STI and the Leadership Fund to solicit funds from the general public would essentially do away with the FECA’s strict limitations on how corporate employees may be solicited because all corporate *37 employees are also members of the general public. The danger that rank-and-file employees would be exposed to repeated public solicitations from their employer’s PAC [28] —via direct mail, radio, television, or other public media of the corporation’s choice—and would thereby feel coerced to contribute or adopt a particular political viewpoint at work, represents an unacceptable risk of infringing those employees’ First Amendment rights. Preventing such an outcome would essentially require rewriting the statute to account for the existence of gеneral- public solicitation, which is a task for the Congress, not this Court.
The solicitation restrictions in § 441b are also narrowly drawn to serve the foregoing governmental interests because the restrictions are tailored to match the special benefit that Congress extended to SSFs—exempting all funds used for “the establishment, administration, and solicitation of contributions to a [SSF]” from the definition of “contributions.” See 2 U.S.C. § 441b(b)(2)(C). This exemption, as discussed above, evidences a delicate statutory balancing of burden and benefit: An SSF’s solicitation speech may be subsidized by its connected corporation, so long as those solicitations are limited to corporate insiders and employees. See id. § 441b(b). The statutory exemption allows connected PACs to avoid the disclosure and reporting requirements that would otherwise apply to contributions that fund political solicitations. Consequently, donations to the general treasury of the non-profit corporation in any amount from any source may be funneled, without disclosing or reporting the amount or the source, to the connected PAC for use in solicitations. [29] Removing the statute’s restrictions on *38 the breadth of such solicitations would allow the disclosure and reporting exception to swallow the rule.
SSFs are creatures of statute—they were crafted by Congress to enjoy certain benefits
that other, non-connected PACs cannot enjoy, and it is therefore eminently reasonable and
important for connected PACs to abide by Congress’s countervailing restriction on the universe
of people to whom SSFs’ solicitations may be directed.
See Cal-Med
,
* * *
In sum, the plaintiffs have not demonstrated a likelihood of success on the merits of their claims. Although the Court will continue to discuss the other three preliminary injunction factors in assessing the plaintiff’s Motion for Preliminary Injunction, the foregoing conclusion about the merits of the plaintiffs’ claims is sufficient to grant the FEC’s Motion to Dismiss. As a result, the Leadership Fund may establish two separate bank accounts that may be used for direct contributions and independent expenditures (including express advocacy). Insofar as the Leadership Fund chooses to remain as a single entity that engages in both direct candidate contributions and express advocacy communications, however, the Leadership Fund may not solicit contributions beyond the limits on such solicitations contained in 2 U.S.C. § 441b(b)(4), *39 and the Leadership Fund also may not accept any contributions in excess of the limits contained in 2 U.S.C. §§ 441a(a)(1)(C) and 441a(a)(3).
B. Irreparable Harm
The plaintiffs claim that they will suffer irreparable harm if the Leadership Fund is not
allowed immediately to “solicit and accept unlimited contributions in order to conduct
independent expenditures.” Pls.’ Mem. at 33. This claim, however, is highly dubious in light of
the numerous alternative ways that the plaintiffs could engage in unlimited political speech.
Most notably, the plaintiffs could form a Super PAC that paid its own administrative and
solicitation costs and could therefore solicit unlimited contributions from the general public to
finance unlimited independent expenditures. The plaintiffs respond to this option by arguing that
operating a Super PAC would be burdensome.
See
Pls.’ Reply at 11–12 (citing
MCFL
, 479 U.S.
at 254–55). The plaintiffs argue that the “additional requirements” of administering a Super
PAC “‘may create a disincentive for [plaintiffs] to engage in political speech.’”
Id.
at 12
(alteration in original) (quoting
MCFL
,
C. Balance of Equities and Public Interest
For many of the same reasons already discussed, the balance of equities tips in favor of
the FEC rather than the plaintiffs. Granting the plaintiffs the relief they request would force the
FEC to ignore the congressionally mandated limits on the fundraising activities of SSFs without
a sound constitutional basis for doing so. Also, though the plaintiffs may not be capable of
raising the amount of funds they would be capable of raising as a Super PAC, that wound is self-
inflicted. Furthermore, the plaintiffs do not seek a preservation of the status quo, but rather they
seek fundamental change in how SSFs are regulated by the FEC, which would undoubtedly
require new agency guidance and other burdens that are at least equal, if not far greater, than any
burdens that would result from establishing a separate Super PAC to engage in the unlimited
fundraising the plaintiffs desire. Finally, and perhaps most importantly, “‘[t]he presumption of
constitutionality which attaches to every Act of Congress is . . . an equity to be considered in
favor of [the government] in balancing hardships.’”
Bowen v. Kendrick
,
The public interest would also not be served by granting the injunctive relief requested by the plaintiffs. As discussed above, the provisions challenged by the plaintiffs serve important governmental interests intended to protect the integrity of the electoral process. Therefore, enjoining the enforcement of those provisions would palpably disserve the public interest, absent a strong countervailing First Amendment reason for doing so.
IV. CONCLUSION
In sum, the plaintiffs have failed to satisfy any of the four preliminary injunction factors in connection with their First Amendment claims, and thus they have failed to state a plausible *41 claim for relief. Therefore, for the reasons discussed above, the plaintiffs’ Motion for Preliminary Injunction, ECF No. 4, is DENIED. For the same reasons, the FEC’s Motion to Dismiss, ECF No. 8, is GRANTED.
An appropriate Order accompanies this Memorandum Opinion.
Date: November 5, 2012
/s/ Beryl A. Howell BERYL A. HOWELL United States District Judge
Notes
[1] The plantiffs refer to STI as both “Stop the Insanity, Inc.” and “Stop This Insanity, Inc.” in their Complaint. Compare Compl. ¶ 17, with id. ¶ 18. It appears that the correct name is Stop This Insanity, Inc. See Ariz. Corp. Comm’n, Corps. Div., http://starpas.azcc.gov/scripts/cgiip.exe/WService=wsbroker1/corp-detail.p?name- id=15854462 (last visited Nov. 5, 2012).
[2] The plaintiffs also reference that they challenge the apрlication of the source restrictions in 2 U.S.C. § 441b(a), which prohibits, inter alia , political committees from accepting contributions from corporations. See Compl. ¶ 1, ECF No. 1; Pls.’ Mem. in Supp. Mot. Prelim. Inj. (“Pls.’ Mem.”) at 1, ECF No. 4-1. The plaintiffs do not clearly articulate the nature of their challenge to § 441b(a). In fact, the plaintiffs do not cite that provision anywhere in their three causes of action, and they do not say that they seek declaratory or injunctive relief from that provision in their prayer for relief. Compl. at 15–21. Because the plaintiffs only mention this provision in passing, the Court does not construe the plaintiffs’ Complaint to state a claim for relief against that provision, and the Court will not further address § 441b(a) in this opinion.
[3] The term political action committee or “PAC” is generally used as a synonym for “separate segregated fund.” It
“normally refers to organizations that corporations or trade unions might establish for the purpose of making
contributions or expenditures that the [FECA] would otherwise prohibit.”
FEC v. Akins
,
[5] Other types of associations may also establish SSFs, including labor organizations, membership organizations, or cooperatives. 2 U.S.C. § 441b(b)(2)(C). This case, however, only involves an SSF established by a corporation.
[6] The FECA defines “executive or administrative personnel” to mean “individuals employed by a corporation who are paid on a salary, rather than hourly, basis and who have policymaking, managerial, professional, or supervisory responsibilities.” 2 U.S.C. § 441b(b)(7).
[7] The term “hard money” refers to “contributions subject to [FECA’s] source, amount, and disclosure requirements.”
See Shays v. FEC
,
[8] The FECA defines “contributions” as “any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office” or “the payment by any
[9] The FEC is required to approve any advisory opinion by the affirmative votes of four members. 11 C.F.R. § 112.4(a) (2012).
[10] The FEC’s Motion to Dismiss became fully briefed on October 18, 2012.
[11] This statutory mechanism, although admirably intended to prevent rank-and-file corporate employees from feeling coerced into making political contributions, appears to be easy to circumvent. For example, any corporation intent on discovering which employees failed to contribute to its connected PAC could refuse to accept any employee contributions of $50 or less and, with this contribution minimum, could thereby deduce which employees gave and which employees did not.
[12] The Supreme Court has repeatedly recognized this principle in myriad contexts in recent years.
See, e.g.
,
Holder
v. Humanitarian Law Project
,
[13]
See, e.g.
, ,
[14] In
EMILY’s List
, the D.C. Circuit held unconstitutional several FEC regulations that required non-profit entities
registered as political committees to spend “hard money” to pay for the costs of engaging in certain political
expenditures (
e.g.
, generic voter turnout and registration drives, generic party advocacy) and limited the manner in
which such groups could solicit funds used to support or oppose the election of a clearly identified federal candidate.
See EMILY’s List
,
[15] The Circuit in
EMILY’s List
was careful not to use the statutory term of art “independent expenditure,” which is
an expenditure “expressly advocating the election or defeat of a clearly identified candidate,” 2 U.S.C. § 431(17),
because the plaintiff in in
EMILY’s List
did not engage in any express advocacy communications that would have
been considered “independent expenditures.” The Court instead referred more generally to “expenditures for
political activities” or simply “expenditures.”
See EMILY’s List
[16]
See also McConnell v. FEC
,
[17] This sentence in particular suggests that the
Carey
court felt constrained by the Circuit’s precedent in
EMILY’s
List
to decide the case as it did. Additionally, “[t]he
Carey
court was constrained by the D.C. Circuit’s recent
decision in [
SpeechNow
], holding unconstitutional contribution limits to independent expenditure groups.”
McCutcheon v. FEC
, No. 12-1034,
[18] The Supreme Court was clear in its seminal campaign finance decision of the twentieth century (
Buckley
) that
“[b]y contrast with a limitation upon expenditures for political expression, a limitation upon the amount that any one
person or group may contribute to a candidate or political committee entails only a marginal restriction upon the
contributor’s ability to engage in free communication.”
Buckley
,
[19] The Court of Appeals’ holding in
SpeechNow
, which struck down as unconstitutional limits on individuals’
contributions to independent expenditure-only groups, did not account for the newly minted approval of “hybrid”
PACs in
EMILY’s List
. Indeed,
SpeechNow
never even cited to
EMILY’s List
. Although
SpeechNow
purported to
limit its holding to “contributions to independent expenditure-only organizations,”
[20] The $57,500 biennial cap applies to all contributions that are not made “to candidates and the authorized committees of candidates,” though of the $57,500 cap no more than $37,500 “may be attributable to contributions to political committees which are not political committees of national political parties.” 2 U.S.C. § 441a(a)(3)(B).
[21] The Circuit panel in
EMILY’s List
was also very careful to emphasize repeatedly that its “constitutional analysis
of non-profits applie[d] only to
non-connected
non-profits.”
EMILY’s List
,
[22] This is notwithstanding the partially concurring opinion in EMILY’s List , which observed that the results of the majority’s decision “are in tension—perhaps irreconcilable tension—with McConnell .” EMILY’s List , 581 F.3d at 39 (Brown, J., concurring); see also id. at 37 (“This novel argument [that hybrid political committees may exist] is not without considerable charm, but one must read Cal-Med with a squint to see that holding.”).
[23] It also appears that the plaintiffs in SpeechNow and EMILY’s List were not established, administered, or subsidized by a corporation and thus were “non-connected,” unlike the Leadership Fund in the instant action.
[24] Brennan Ctr. for Justice, National Survey: Super PACs, Corruption, and Democracy 2–3 (2012) (reporting that 73% of respondents in national poll agreed that “there would be less corruption if there were limits on how much could be given to Super PACs,” 77% “agreed that members of Congress are more likely to act in the interest of a group that spent millions to elect them than to act in the public interest,” and 65% said that “they trust government less because big donors to Super PACs have more influence than regular voters”); see also Morgan Little, Poll: Americans Largely in Favor of Campaign Spending Limitations , L.A. T IMES (Sept. 16, 2012) (reporting that recent national poll conducted by the Associated Press and the National Constitution Center found that 83% of Americans “believe there should be at least some limits on the amount of money corporations, unions and other
[26] The FEC has stated that one of its concerns is that the Leadership Fund will solicit the general public through expressive or persuasive conduct, but the plaintiffs do not address this possibility in their Complaint or their briefing. Def.’s Opp’n at 16 (noting “the damage that would result from STI’s proposal to pay for undisclosed solicitations of the general public—communications that can themselves support or oppose federal candidates”).
[27] The plaintiffs seem to believe that the right to engage in unrestricted solicitation of funds follows ineluctably from
the holding in because, in the plaintiffs’ view, every campaign finance regulation that has any nexus
to independent expenditures is also unconstitutional.
See, e.g.
, Pls.’ Reply at 14. Yet, this is clearly not so. For
example, courts have consistently upheld the FECA’s organizational, reporting, and disclosure requirements—
requirements that continue to apply to independent expenditure-only organizations, despite the fact that compliance
with such requirements imposes costs that necessarily divert organizational resources away from independent
expenditure activity.
See Citizens United
,
[28] Corporate employees would be well aware that they are being solicited by their employer’s PAC because each SSF is required to “include the name of its connected organization” in its name. 2 U.S.C. § 432(e)(5).
[29] This is yet another distinction between the instant case and
EMILY’s List
. The plaintiff in
EMILY’s List
, unlike
the plaintiff STI in the instant action, was registered as a political committee and thus was required to disclose the
amount and source of any “contributions,”
i.e.
, any monies given to the organization “for the purpose of influencing
any election for Federal office.” 2 U.S.C. § 431(8)(A);
EMILY’s List
,