Chamber of Commerce of the USA, et al. v. FEC

On November 14, 1995, the U.S. Court of Appeals for the District of Columbia reversed the district court's dismissal of this case and ordered the court to issue appellants appropriate declaratory relief.

The U.S. District Court for the District of Columbia had dismissed this case on October 28, 1994, on the grounds that the matter was not ripe for review and that the plaintiffs lacked standing to bring the action.

This case involved the FEC's regulatory definition of "member." FEC regulations allow membership organizations to use their corporate funds to send political communications and solicitations, but only to their administrative and executive personnel and to persons who qualify as "members" under federal election law.[1] To qualify as a "member" under FEC regulations a person must have a significant financial interest in the organization, or pay regular dues and possess the right to vote either directly or indirectly for at least one representative in the organization's highest governing body, or possess the right to vote for all members of the organization's highest governing body. 11 CFR 114.1(e)(2).

Background

In 1976, FEC regulations defined an organization's "members" as "all persons who are currently satisfying the requirements for membership" in the organization. 11 CFR 114.1(e). In subsequent years, court decisions and advisory opinions established that political communications and solicitations financed with corporate monies could only be sent to persons who have a significant financial or organizational attachment to the membership organization.

In 1993, the FEC adopted new rules to reflect these precedents. These rules clarified that a person will be considered a "member" for purposes of the Act if that person:

• Has some significant financial attachment to the organization beyond the mere payment of dues, such as a significant investment or ownership stake; or
• Is obligated to make regular dues payments and has the right to vote, either directly or indirectly, for at least one representative in the membership organization's highest governing body; or
• Is entitled to vote directly for all who sit on the organization's highest governing body. 11 CFR 114.1(e)(2).

When these new regulations took effect, the Chamber of Commerce of the U.S.A. and the American Medical Association (AMA) submitted Advisory Opinion Requests (AORs) 1994-4 and 1994-12 to the Commission, asking about the "member" status of their members. The Commission responded to the AORs by stating that the six Commissioners could not reach a consensus on the status of more than 200,000 Chamber members and nearly 45,000 AMA members; these persons paid dues to their respective organizations but lacked voting rights.

Not satisfied with this result, the Chamber and the AMA challenged the FEC's revised definition of "member" in the U.S. District Court for the District of Columbia.

District court decision

The district court ruled that:

• The case was not ripe for review because neither plaintiff had suffered harm by the rule;
• Plaintiffs lacked standing to bring this suit because the rule did not present a reasonable threat of prosecution to them; and
• The FEC's definition of "member" was entitled to deference because it was a permissible construction of that term by the Commission. Chevron U.S.A. v. Natural Resources Defense Council, (467 U.S. 837, 1984).

Appeals court decision

The court of appeals found that the Chamber and the AMA did have standing to argue their case before the court: "In the last federal election, appellants, not surprisingly, felt constrained to alter their prior practice-they ceased political communications with those constituents who did not qualify as 'members' under the Commission's new rule. and counsel for the Commission agreed . . . that he would not advise the Chamber and the AMA to ignore the rule." Thus, the issue brought before the court was ripe for review because it caused both the Chamber and the AMA harm.

Further, the Chamber and the AMA had standing to bring this suit because, although an FEC enforcement decision had not been issued against them, there was a credible threat of enforcement if they chose to ignore the regulation. Additionally, the possibility that appellants' First Amendment rights were chilled by the FEC's regulations conferred standing upon appellants. Virginia v. American Booksellers.

The court found that the FEC's rules presented "serious constitutional difficulties" because they precluded "appellants from communicating on political subjects with thousands of persons, heretofore regarded by the Commission as members." Thus, although the court did not disagree with the district court's conclusion that the FEC was entitled to deference under the Chevron doctrine, the court reasoned that the conflict between the rules and the First Amendment warranted judicial review.

At issue here, in the court's view, was whether the FEC's rule accorded with the Supreme Court's opinion in FEC v. National Right to Work Committee (459 U.S. 197, 1982). There, the Court ruled that "members of nonstock corporations were to be defined . . . by analogy to stockholders of business corporations and members of labor unions . . . [which] suggest[ed] that some relatively enduring and independently significant financial or organizational attachment is required . . . "

The appeals court concluded that the FEC's new rule did not square with the Supreme Court's opinion in NRWC: "[I]mplicit in the Commission's rule is the view that dues, no matter how high, are not by themselves a manifestation of a significant financial attachment." The court said that the FEC's position reads the disjunctive "or" between "financial" and "organizational" as if the Supreme Court had used the conjunctive "and."

Furthermore, the court held that, "It is . . . quite illogical to regard someone who has one share of stock in a public corporation, which can be sold in minutes, as more significantly attached to the organization than a person or entity who pays $1000 or even $100,000 (as is the case for some Chamber members) in annual dues."

The court also criticized the rule's voting requirement. It noted that the nearly 45,000 AMA members in question are subject to sanction by the organization should they violate the organization's Principles of Medical Ethics. "It might be thought, that for a professional, placing oneself in such a position is the most significant organizational attachment."

Lastly, the court noted that the rule treats some labor unions and federated rural electric cooperatives differently, exempting them from its new definition of "member." The court noted that this question had not been squarely presented on appeal, but stated that it was not satisfied with the FEC's claim that the separate treatment was consistent with the Act's legislative history. Without further elaboration, the court stated, it "would determine that these exemptions make the regulation arbitrary and capricious."

FOOTNOTE:

[1] This is an exception to the general ban on the use of corporate money in connection with federal elections. 2 U.S.C. §441b.

Source:   FEC Record — January 1996; and December 1994. Chamber of Commerce v. FEC, 1994 WL 615786 (Oct. 28, 1994); No. 94-5339 (D.C. Cir. Nov. 14, 1995).