FEC v. Adams

On March 6, 2008, the U.S. District Court for the Central District of California denied defendant Stephen Adams’ motion to dismiss and granted the Commission’s motion for partial judgment on the pleadings. Following that decision, the Commission’s counsel and the defendant reached a proposed settlement agreement and the court stayed the case.

Background

Under the Federal Election Campaign Act (the Act), persons who make independent expenditures at any time during the calendar year, up to and including the 20th day before an election, must disclose this activity within 48 hours each time that the expenditures aggregate $10,000 or more. 2 U.S.C. §434(g)(2)(A). This report discloses the amount of the independent expenditure and certifies that the expenditure was not coordinated with a candidate or political party. Independent expenditures are also required to carry a disclaimer clearly stating the name and permanent street address, telephone number or web address of the person who paid for the communication and that the communication was not coordinated with any candidate or candidate’s committee. 2 U.S.C. §441d(a)(3).

In June 2004, Mr. Adams contracted for a $1 million ad campaign to place billboards in support of President Bush’s re-election in four battleground states: Michigan, Pennsylvania, Wisconsin and South Carolina. Mr. Adams’ billboard ads, which expressly advocated the election or defeat of a federal candidate, were independent expenditures under the Act and were required to be reported. The billboards first appeared on September 7, 2004, and ran through the date of the general election. Mr. Adams did not file the required independent expenditure reports until October 28, 2004—just five days before the general election. Moreover, the billboards’ disclaimers initially read “Personal message paid for and sponsored by Stephen Adams,” and did not contain all of the required disclaimer information.

The Commission received two administrative complaints regarding alleged violations of the Act and, on November 8, 2006, found probable cause to believe that violations had occurred. The Commission was not able to reach an acceptable conciliation agreement with Mr. Adams through informal methods and, thus, filed a complaint in federal court. See 2 U.S.C. §437(g)(4)(A)(i).

Complaint

On July 6, 2007, the FEC filed a complaint in the U.S. District Court for the Central District of California against Stephen Adams, charging that he failed to report and include proper disclaimers on $1 million worth of billboard ads during the 2004 Presidential race.

The Commission asked the court to:

• Declare that Stephen Adams violated the Act’s independent expenditure report requirements and disclaimer requirements (2 U.S.C. §§434(g)(2)(A) and 441d(a)(3));
• Permanently enjoin Mr. Adams from future violations of these provisions; and
• Assess an appropriate civil penalty.

District court decision

Motion to dismiss. The district court denied the defendant’s motion to dismiss, in which the defendant argued that the Commission failed to “meet its statutory obligation to make a good faith effort to conciliate prior to filing suit.” The court found that the Commission satisfied the Federal Election Campaign Act (the Act) by attempting to conciliate with the defendant. The court deferred to the Commission’s judgment as to the specifics of the proposed conciliation agreements offered by the Commission and the defendant.

Judgment as to six affirmative defenses. The district court also granted the Commission’s motion for partial judgment on the pleadings. The defendant asserted eight affirmative defenses, and the Commission sought to strike six of the defenses. The court agreed with the Commission and found that the six challenged defenses had no basis as a matter of law. Two of the affirmative defenses dealt with the defendant’s claim that the Commission failed to properly conciliate. Since the court found that the Commission attempted to conciliate adequately, it struck these two defenses.

The other four challenged affirmative defenses involved claims that the Act’s independent expenditure reporting requirement violates the First Amendment and that the Commission’s enforcement of that provision violates the Due Process Clause of the Constitution. Regarding the First Amendment claim, the court followed U.S. Supreme Court and Ninth Circuit precedent, dismissing the affirmative defenses and holding that, while the Act “may infringe on some First Amendment freedoms, the infringement is minimal and reasonable to keep the electorate fully informed about the source of campaign funds and to deter or expose corruption.”

The court also rejected the defendant’s due process defenses, stating that the disclosure law was sufficiently straightforward. While the defendant claimed that “virtually no one was aware of [the disclosure] requirement at the time of the 2004 general election,” the court rejected this argument because the law was promulgated two years before the election in question and ten other individuals filed the proper disclosures with the Commission. Additionally, the defendant did not present any evidence that the Commission brought suit based on improper or discriminatory grounds.

Case stayed for proposed settlement

The parties notified the court on April 7, 2008, that Commission counsel and Adams had reached a proposed settlement agreement. The defendant agreed to transfer within 30 days the full amount of the proposed civil penalty to a trust account held by his attorney’s firm. If the Commission approves the agreement once it has a quorum, the parties will file a proposed consent agreement and request dismissal of the case. The defendant’s attorney will then transfer the civil penalty to the Commission. On April 9, 2008, the court granted the parties’ request to stay the case until the Commission votes on the proposed settlement.

Source:   FEC Record —May 2008; October 2007

District Court (Central Dist. of CA)

Court decisions:

• Consent Order and Judgment (09/17/2008)
• Order (03/06/2008)

Related documents:

• Defendant Stephen Adams' Reply Brief in Response to Plaintiff's Memorandum of Points and Authorities in Opposition to Defendant Stephen Adams' Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(1) (01/28/2008)
• FEC's Reply to Defendant Stephen Adams' Opposition to FEC's Motion for Partial Judgment as to Certain Affirmative Defenses (01/28/2008)
• Memorandum of the Defendant Stephen Adams' in Opposition to Plaintiff FEC's Motion for Partial Judgment on the Pleadings; Declaration of Brett G. Kappel in Support Thereof (01/20/2008)
• FEC's Memorandum of Points and Authorities in Opposition to Defendant Stephen Adams' Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(1) (01/18/2008)
• FEC's Memorandum of Points and Authorities in Support of FEC's Motion for Partial Judgment on the Pleadings as to Certain Affirmative Defenses Alleged by Defendant (01/14/2008)