Bush-Quayle '92 Primary Committee v. FEC

On January 14, 1997, the U.S. Court of Appeals for the District of Columbia Circuit remanded this case to the FEC and asked it to explain why the Commission departed from precedent, or remedy that departure, when it required the Bush-Quayle '92 Primary Committee to repay $323,832 of the federal matching funds it received.

Background

As required by law, the FEC, at the end of the 1992 election cycle, audited former President George Bush's 1992 campaign. The audit included the primary committee, the Bush-Quayle '92 General Committee and the legal and accounting arm of the general election committee, the Bush-Quayle '92 Compliance Committee. The latter two committees are party to this lawsuit.

During the 1992 election, the primary committee received nearly $10.7 million in public funds through the Matching Payment Act. Once Mr. Bush and his running mate, Dan Quayle, had received the Republican nomination for President and Vice President, the general committee received $55.2 million in public funds.

The law

The Matching Payment Act provides partial public funding-paid for through the $3 check-off on federal tax forms-to Presidential primary candidates who meet certain qualifications. Candidates who receive public funding must agree to limit expenditures to "qualified campaign expenses," i.e., those expenses that are incurred by the candidate in connection with his or her campaign for nomination and that do not violate state or federal law. 26 U.S.C. §9032(9)(A).

The Commission also must conduct an audit of every publicly funded campaign after it ends and require the committee to repay the U.S. Treasury for any nonqualified campaign expenses that were paid for with public funds. The Commission also can require a committee to repay any matching funds that it received in excess of what the law allows. 26 U.S.C. §9038(b)(1).

Final repayment determination

The FEC issued a final repayment determination to the primary committee on August 17, 1995, having determined that $409,123 in expenses incurred by the primary committee were not qualified primary campaign expenses because they had, in fact, been made for the benefit of the general election campaign as well.

The expenses in question included disbursements for direct mailings and political advertisements and for equipment and materials sent to the Bush campaign's national headquarters. All these disbursements took place before August 20, 1992 -the day Mr. Bush was nominated by his party to run for President. Concluding that expenses benefited both the primary and general campaigns, the Commission determined that half of the expenses should be assigned to the general election committee and the other half to the primary committee.

The FEC calculated the repayments as follows:

• The primary committee would pay its share of the nonqualified campaign expenses-$106,979-plus an additional $216,853 that the FEC determined it had received in excess of the matching fund allowance.
• As a result of reassigning half of the expenses in question to the general committee, the FEC found that the general committee had exceeded its expenditure limit by $182,785. The FEC recommended, but did not order, that the compliance fund reimburse the general committee for this overspending. That would resolve the general committee's excess expenditure problem.

Expenses in connection with primary

The Bush-Quayle committees challenged the FEC's final repayment determination in court, saying the Commission should have used a "bright-line" rule and allocated expenses based solely on whether they were incurred before the August 20 Presidential nomination or after the party's Presidential contender had been named.

The Commission had rejected this approach, arguing that whether an expenditure is a primary qualified expenditure depends on both its timing and nature. To qualify, the Commission had explained, the expense must be primarily in connection with the primary. The committees had argued that any connection to the primary campaign would qualify an expense fully as a qualified primary campaign expenditure.

Finding that arguments from both the agency and the committees were defensible, the court upheld the FEC's interpretation, based on Chevron U.S.A. Inc. v. NRDC.[1] That case requires that, where statutory language is ambiguous, courts must uphold the agency's interpretation so long as it is reasonable. The court added, however, that another committee objection to the Commission's decision merited further consideration.

Arbitrary and capricious

The committees charged that the FEC had acted "arbitrarily and capriciously" because it had treated expenditures of the Bush-Quayle 1992 campaign differently than similar expenditures of the 1984 Reagan-Bush campaigns.

In the 1984 election, the committees said, the FEC had concluded that certain pre-nomination expenditures by the Reagan-Bush Primary Committee were primary expenses despite the fact that some benefited the general election campaign.

The FEC responded that the two cases were distinguishable from each other and thus were treated differently. It also said that in the Reagan audit, the FEC had not adopted a "bright line" test based on the date of the candidate's nomination.

The court found the FEC's response inadequate. Further, the court said: "An agency interpretation that would otherwise be permissible is, nevertheless, prohibited when the agency has failed to explain its departure from prior precedent."[2]

The court noted further that the FEC's determination was especially problematic given the fact that the agency had adopted new regulations two months before making its repayment determination concerning the Bush-Quayle campaign, but had not applied the approach embodied in those regulations to that determination. The court said that the new rules use a "bright-line" approach to determine whether expenses should be attributed to primary or general elections.

The court remanded the matter to the FEC either to justify its approach or to reconsider the repayment determination.

FOOTNOTES:

[1] Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 844 (1984).

[2] See Interstate Quality Servs. Inc. v. RRB, 83 F. 3d 1463, 1465 (D.C. Cir. 1996); ANR Pipeline Co. v. FERC, 870 F. 2d 717, 723 (D.C. Cir. 1989); Greater Boston Tel. Corp. v. FCC, 444 F. 2d 841, 852 (D.C. Cir.), cert denied, 403 U.S. 923 (1971).

Source: FEC Record—March 1997. Bush-Quayle '92 Primary Committee v. FEC, 104 F.3d 448 (D.C. Cir. 1997).