Cox for U.S. Senate v. FEC (03-3715)
On January 21, 2004, the U.S. District Court for the Northern District of Illinois, Eastern Division, granted summary judgment in favor of the Commission in this case. The Cox for U.S. Senate Committee (the Committee) and John H. Cox, its treasurer, filed suit against the Commission on May 30, 2003, appealing a civil money penalty assessed against them by the Commission under its administrative fines regulations for the Committee's failure to file two 48-hour reports documenting campaign contributions in excess of $1,000. The plaintiffs argued that the Commission's determination that the Committee and its treasurer violated 2 U.S.C. §434(a) and the Commission's assessment of a $22,150 civil money penalty were arbitrary, capricious, an abuse of discretion and otherwise not in accordance with law. The plaintiffs also argued the Administrative Fines Schedule (the Schedule) imposes a form of criminal punishment and violates the substantive due process and equal protection clauses of the Fifth Amendment, as well as the "excessive fines" clause of the Eighth Amendment.
On February 11, 2002, the Commission sent a Primary Election Report Notice to the Committee, which explained that, under 2 U.S.C. §434(a)(6)(A), campaign contributions of $1,000 or more (including personal loans) received by the Committee between February 28, 2002, and March 16, 2002, must be reported to the Commission within forty-eight hours of the committee's receipt of the same. Mr. Cox delegated responsibility for filing reports during the 48-hour reporting period to a Committee employee, Cheryl Warren.
The Committee received a $75,000 loan from Mr. Cox in the form of a check on March 5, 2002. Although Ms. Warren received the check, she was uncertain as to whether the loan needed to be reported during the 48-hour period, did not take steps to determine whether reporting was required and failed to bring the issue to Mr. Cox's attention. Ms. Warren spent the better part of March 6, 2002, consoling a fellow Committee employee and helping him to find temporary lodging after his apartment had burned in a fire earlier that day. Neither she nor Mr. Cox filed a 48-hour report disclosing the $75,000 loan. On March 12, Mr. Cox wired a $144,507.47 loan directly to the Committee's bank account. Ms. Warren did not know about this second loan, and neither she nor Mr. Cox filed a 48-hour report disclosing it. Both loans, however, were subsequently reported by the Committee in its post-election April 2002 Quarterly Report, which is required by a separate reporting provision.
On September 18, 2002, the Commission found reason to believe that the Committee and Mr. Cox, as its treasurer, violated 2 U.S.C. §434(a)(6)(A) by failing to properly report three contributions of $1,000 or more, totaling $224,507.47, that were received during the 48-hour reporting period. On September 19, 2002, the Commission notified the Committee of its finding and the $22,750 civil money penalty, which had been calculated according to the Schedule.
The Committee submitted a response to the Commission's Office of Administrative Review (OAR) on October 25, 2002, in which it conceded that the two loans should have been reported within forty-eight hours of their receipt. The Committee argued, however, that:
- Mr. Cox had announced his intention to make the loans in campaign speeches prior to making the loans;
- The loans were subsequently disclosed in the Committee's post election Quarterly report;
- Both loans were from the candidate himself;
- The omissions were inadvertent; and
- A campaign staff member's apartment fire and the payment of the March 12, 2002, loan by wire transfer contributed to the oversights, although the committee admitted that the factual circumstances may not strictly constitute "extraordinary' circumstances that would excuse their violations.
The OAR issued its recommendation on March 27, 2003. After determining that a $5,000 contribution from a political action committee (one of the three contributions originally at issue) was not made during the 48-hour reporting period, the OAR recommended reducing the amount of the civil money penalty from $22,750 to $22,150. However, the OAR rejected the remainder of the Committee's arguments, finding that:
- Ms. Warren had previously filed reports for candidate loans received during the 48-hour reporting period in Mr. Cox's prior Congressional races and was, therefore, aware that candidate loans must be reported;
- A fire in the apartment of the campaign staff member did not constitute "extraordinary circumstances" within the meaning of 11 CFR 111.35;
- Mr. Cox also the Committee's treasurer, which made him personally responsible for reporting his own loans;
- Mr. Cox's public statement that he would contribute money to his own campaign did not override his duty to report the loans made during the 48-hour reporting period; and
- Reporting contributions in the post-election quarterly report was not a substitute for reporting contributions within forty-eight hours of their receipt.
The Committee responded to the recommendation with a number of new arguments, including constitutional challenges to the Schedule. The Commission made a final determination that the Committee violated 2 U.S.C. §434(a)(6)(A) and assessed a civil money penalty of $22,150 and notified the Committee on April 30, 2003. The plaintiffs subsequently filed their complaint with the court on May 30, 2003.
Assessment of civil penalty
The court found that the Commission's assessment of a civil money penalty was not arbitrary, capricious, irrational or an abuse of discretion and was in accordance with law. The court explained that:
- The record establishes that the Commission considered the Committee's mitigating factors before reaching its decision, and the Committee conceded that the "mitigating factors" do not qualify as "extraordinary circumstances" under Commission regulations.
- Campaign promises by Mr. Cox provide no guarantee that pledged contributions from Mr. Cox's personal assets would be made or even derived from the stated funding sources, and, therefore, in failing to report loans, the Committee undermined the three "substantial governmental interests" that the disclosure requirements protect. Buckley v. Valeo, 424 U.S. 1 (1976).
The court found that the Schedule does not impose a form of criminal punishment and determined the Schedule's penalties to be civil in construction, nature and application. The court explained that civil fines are not historically regarded as punishment and that the plaintiffs failed to establish that the Schedule's deterrent effect is penal in nature or how it might restrict their future behavior. Moreover, the Federal Election Campaign Act provides separate criminal penalties for knowing and willful violations, which suggests that the Schedule is directed towards civil behavior. 2 USC § 437g(d) An alternative purpose for the civil money penalty, other than a punitive purpose, is clearly assignable -namely the protection of "substantial governmental interests" related to the pre-election disclosure of campaign contributions - and not excessive.
The court also determined that the Schedule does not violate substantive due process or the Equal Protection Clause of the Fifth Amendment. The Committee argued that the sanctions imposed by the Schedule are "so severe that they transform the sanctions into criminal penalties," and this transformation renders the Schedule unconstitutional because the penalties set forth therein "constitute criminal punishment without the safeguards afforded an accused under the Fifth and Sixth Amendments."
The court, however, found that the Committee failed to explain how the money required to satisfy the civil penalty assessed by the Commission constituted or related in any way to an "underlying constitutionally protected property interest." In addition, the court determined that the Committee failed to establish that the Schedule is not "narrowly tailored to serve a compelling state interest." Although the plaintiffs were assessed a civil money penalty for failing to comply with 2 U.S.C. §434(a)(6)(A), their campaign activities and/or ability to run for public office were in no way limited. Furthermore, the disclosure requirements and accompanying Schedule serve to further "substantial governmental interests."
The Committee also failed to establish to the satisfaction of the court that the Schedule creates classifications subject to equal protection analysis, or even how the disclosure requirements differ among campaign committees. In addition, the plaintiffs failed to establish that they have suffered "invidious discrimination" or disparate treatment, or that such treatment was purposeful.
The court also concluded that the Schedule is not grossly disproportionate to the conduct to which it applies and, thus, does not violate the Eighth Amendment's excessive fines clause. Instead, the court found that the Committee subverted "substantial governmental interests" by failing to report the contributions received during the 48-hour reporting period, depriving the public of important pre-election information. Moreover, the court stated that campaign promises are not a substitute for formal and timely reporting. While the violations were inadvertent, the Committee was directly responsible for both violations - negligence is specifically excluded as an "extraordinary circumstance." 11 CFR 111.35(b)(4). Finally, the court found that the Schedule is directly proportional to the amount of the unreported contributions and takes into account the existence of prior violations.
The Court denied the Committee's motion for summary judgment, granted summary judgment in favor of the Commission and upheld the fine assessed against the Committee.
 The granting of summary judgment by a court is appropriate where there is "no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Under the Administrative Procedure Act, a court can set aside an agency action it finds "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. §706(2)(A); Smith v. Office of Civilian Health & Med. Program of the Uniformed Servs., 97 F.3d 950, 954 (7th Cir. 1996).
 Other than the amounts and dates of the contributions, no other information about the loans was available to the Commission when it made its reason-to-believe finding.