FEC v. Survival Education Fund

In a January 12, 1994, decision, the U.S. District Court for the Southern District of New York ruled that communications paid for by Survival Education Fund, Inc. (SEF) and National Mobilization for Survival, Inc. (NMS) did not violate the prohibition on corporate expenditures or the disclaimer requirements.

The U.S. Court of Appeals for the Second Circuit, on September 12, 1995, affirmed that the two nonprofit corporations did not violate the corporate prohibition but reversed the district court's ruling on the disclaimer violation.

On September 3, 1996, the district court issued a consent order imposing a $2,000 penalty against the SEF for failing to comply with the disclaimer rules of 2 U.S.C. §441d(a)(3). The parties agreed to the district court's imposition of the $2,000 penalty and dismissal of the case.

Background

The defendant corporations paid $16,500 to distribute about 30,000 copies of two letters critical of President Reagan, who was up for reelection. The first letter, mailed in July 1984-four months before the Presidential general election-asked readers to complete and return a "special election-year ANTI-WAR BALLOT" seeking "your No vote for President Reagan" on several policies pursued by his administration. The ballots, which were to be forwarded to the President, ended with the statement: "My vote in the November election will be influenced by your response to these demands." The second letter, a "1984 election survey," was headed "Ronald Reagan: Four More Years?" and asked readers to express their views on predictions that a second Reagan term would bring arms escalation, war in Central America and "life-threatening cuts in human services." The letter said that the survey results would be used "to educate Americans who will be voting."

District court decision

In ruling that SEF did not violate the prohibition on corporate expenditures (2 U.S.C. §441b(a)), the district court relied on Supreme Court cases that interpreted §441b as applying only to communications that expressly advocate the election or defeat of a candidate in words such as "vote for," "elect," "support," "cast your ballot," "Smith for Congress," "vote against," "defeat," and "reject." [1]

Based on those rulings, the district court concluded that "[b]oth letters fell short of expressly advocating how the readers should vote." The court commented: "Obviously, the courts are not giving a broad reading of this statute." In the court's view, "...expressions of hostility to the positions of an official, implying that official should not be reelected-even when that implication is quite clear-do not constitute express advocacy which runs afoul of the statute."

Appeals court decision

Corporate expenditure

The appeals court declined to address the express advocacy question and instead used different grounds to affirm the district court's decision that defendants' letter did not violate §441b. The appeals court accepted SEF's argument that SEF was within the class of nonprofit advocacy corporations whose independent campaign advocacy the Supreme Court has found to be exempt from the prohibition in §441b(a) because of the First Amendment. The appeals court relied on the Supreme Court's ruling in FEC v. Massachusetts Citizens for Life (MCFL) to support this idea. In that case, the Supreme Court concluded that the prohibition on corporate expenditures could not be applied to independent political communications made by certain nonprofit groups. The Court determined that MCFL, a nonprofit corporation formed for antiabortion advocacy, had three characteristics that made it "more akin to voluntary political associations than business firms." MCFL, 479 U.S. at 251. The Court ruled that a corporation was allowed to make independent expenditures if:

• Its purpose was promoting political activities as opposed to amassing capital;
• It lacked shareholders or other persons having a claim on its assets or earnings; and
• It was not formed by a labor or corporate organization and had a policy of refusing contributions from such entities.

The appeals court rejected FEC arguments that SEF did not qualify under these terms because, unlike MCFL, it did not have an express policy against accepting contributions from corporations or labor unions, and had in fact accepted corporate contributions. The court maintained that the core concerns of MFCL are the amount of for-profit corporate funding a nonprofit receives, rather than the establishment of a policy not to accept corporate contributions. Day v. Holahan, 34 f.3d 1356 (8th Cir. 1994), cert. denied, 115 S. Ct. 936 (1995). The court determined that the evidence did not show that SEF received a significant amount of corporate contributions.

Disclaimer

With regard to the disclaimer issue, the appeals court reversed the district court ruling and upheld the FEC's arguments that SEF and NMS violated §441d(a)(3) in the July 1984 mailing. The court found that even if the communication itself did not expressly advocate the defeat of a candidate (Mr. Reagan), it was a solicitation for funds that "would be used to advocate President Reagan's defeat at the polls, not simply to criticize his policies during the election year." The letter read: "your special election-year contribution today will help us communicate your views to hundreds of thousands of members of the voting public (emphasis added), letting them know why Ronald Reagan and his anti-people policies must be stopped."

Section 441d(a)(3) requires disclaimers in political communications that either expressly advocate election or defeat of a clearly identified candidate, or solicit contributions. The appeals court only addressed the second category in this case and concluded that requiring disclosure of the identity of a group that is soliciting a contribution does not run afoul of the First Amendment.

The court concluded that §441d(a)(3) serves several compelling interests that justify any infringement on SEF's First Amendment rights. The government has an interest, the court reasoned, in ensuring that contributors know whether they are donating their money directly to a candidate or, instead, to independent critics of another candidate. Further, disclosure of the identity of the sponsor of a solicitation helps private contributors determine whether a new contribution would cause them to exceed their aggregate contribution limit for that group.

Thus, the application of §441d(a)(3) to SEF and NMS does not conflict with the Supreme Court's recent decision in McIntyre v. Ohio Elections Commission. In that case, the Supreme Court ruled unconstitutional a state law banning the distribution of anonymous campaign literature. The Supreme Court determined that Ohio "had not shown that its interest in preventing the misuse of anonymous election-related speech justified a prohibition of all uses of that speech."

FOOTNOTE:

[1] FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, 248-248 (1986); Buckley v. Valeo, 424 U.S. 1, 44 n. 52 (1976).

Source:   FEC Record — November 1996; December 1995; March 1994. FEC v. Survival Education Fund, Inc., No. 89 Civ. 0347 (TPG) (S.D.N.Y. Feb. 25, 1992); 1994 WL 9658 (S.D.N.Y. Jan. 12, 1994); 65 F.3d 285 (2d Cir. 1995).