FEC v. Legi-Tech
On February 16, 1996, the U.S. Court of Appeals for the District of Columbia Circuit reversed the district court's decision to dismiss the FEC's case against Legi-Tech, Inc. The district court had dismissed the case on October 12, 1994, based on the ruling of the U.S. Court of Appeals for the District of Columbia Circuit in FEC v. NRA Political Victory Fund.
On May 30, 1997, the U.S. District Court for the District of Columbia granted the FEC's motion for summary judgment and imposed a $20,000 civil penalty on Legi-Tech, after it used information obtained from disclosure reports filed with the FEC for commercial purposes in violation of the Federal Election Campaign Act (the Act).
The Act requires political committees to identify each individual whose aggregate contributions exceed $200 in a calendar year by listing their name, mailing address, occupation and employer. 2 U.S.C. §434(b)(3)(A). The FEC must make disclosure reports available for public inspection and copying within 48 hours of receipt. However, "information copied from such reports or statements may not be sold or used by any person for the purpose of soliciting contributions or for commercial purposes." 2 U.S.C. §438(a)(4).
Legi-Tech, through its Campaign Contribution Tracking System (CCTS), devised a plan to provide paying subscribers with information about political contributors and their contributions. Starting with the 1984 election cycle, CCTS copied contributor information directly from disclosure reports filed with the FEC, entered this information into a computer database, added telephone numbers of contributors and sold the information to its customers. In all, the CCTS received $273,869 from at least 42 customers, including the International Brotherhood of Teamsters, Freedom Policy Foundation, National Association of Independent Schools and International Funding Institute, Inc. In addition, Legi-Tech was aware that some of its customers used the information to solicit contributors.
In 1985, the National Republican Congressional Committee (NRCC) filed an administrative complaint against Legi-Tech, alleging the company was using contributor information for commercial purposes. After an investigation of the complaint, the Commission found probable cause to believe that a violation of the Act had occurred and attempted to enter into a conciliation agreement with Legi-Tech. That effort failed, and the Commission filed suit.
District court decision
While the court was considering the FEC's suit, the U.S. Court of Appeals for the District of Columbia Circuit issued its decision in FEC v. NRA Political Victory Fund. In that decision, the appeals court ruled that the FEC's structure was unconstitutional because, by having the Clerk of the House and the Secretary of the Senate as nonvoting ex officio members, it violated the separation of powers principle.
Following the NRA decision, the FEC removed the ex officio members from its body and, in this new form, ratified its former actions and authorized its attorneys to continue litigation against Legi-Tech. The district court, however, said that these corrective measures were not enough. The court reasoned that, because enforcement proceedings against Legi-Tech had been initiated by an unconstitutionally structured FEC, the rule set forth in Harper v. Virginia Department of Taxation-that a newly enunciated rule of law must be retroactively applied to pending cases-had to be applied in this case. For this reason, the district court dismissed this case.
Appeals court decision
While the appeals court did not object to the district court's application of the Harper rule in this case, it disagreed that dismissal was the only remedy.
In its decision, the appeals court pointed out that: "Even were the Commission to return to square one-assuming the statute of limitations were not a bar-it is virtually inconceivable that its decisions would differ in any way the second time from that which occurred the first time."
Most of the Commissioners who originally voted to find probable cause that Legi-Tech had violated §438(a)(4) and, subsequently, voted to initiate a lawsuit against Legi-Tech, are still on the Commission and would likely vote the same way now as they had before, reasoned the court. The court noted that it can not "examine the internal deliberations of the Commission, at least absent a contention that one or more of the Commissioners were actually biased."
Therefore, instead of dismissal, the appeals court said that "the better course is to take the FEC's post-reconstitution ratification of its prior decisions at face value and treat it as an adequate remedy for the NRA constitutional violation."
District court ruling
The court rejected Legi-Tech's arguments, which were based, in part, on the corporation's contention that it was an organ of the press and was therefore entitled to use the contributor information in the way that it did. The court agreed with the Commission when it stated that a publisher's use of the names and addresses from disclosure reports filed with the FEC is permissible so long as that use is incidental to the sale of a larger publication. For example, a newspaper article that includes such information as part of the story is permissible. What is not permissible, the FEC contends, is when the use of contributor information is not incidental to the sale of the publication, but, in fact, the primary focus of the publication. AO 1981-38.
Because the Act does not explicitly state whether commercial activity like the CCTS's is protected, the court gave deference to the FEC's construction of §438(a)(4) as well as to its regulations and advisory opinions relevant to this issue. On that basis, the court rejected all of Legi-Tech's challenges.
- It said that the CCTS could not be characterized as a communication similar to a "newspaper, magazine or book," but was more like a listbroker. The former would fall under the FEC's media exemption to §438(a)(4); a listbroker would not.
- It said that the CCTS failed the "principal purpose" test in that its primary purpose was the dissemination of the contributor information for profit. The court said: "Legi-Tech's sale of information through the CCTS posed the precise threat that troubled Congress: while Congress wanted to promote disclosure of campaign contribution information, it also wanted to protect political committees' intellectual property and 'political discourse from the adverse effect that the disclosure requirement of the Act would otherwise have.'"
- The court found Legi-Tech's argument that the CCTS was exempt because Legi-Tech's parent corporation was a diversified media company "unpersuasive" because the CCTS's primary purpose was commercial.
Legi-Tech also argued unsuccessfully that §438(a)(4) violates the First Amendment in that it prevents "'the dissemination of the truth about political campaigns' and constitutes 'a content based restriction on core political speech.'"
The court, noting that the constitutionality of the statute already had been upheld in FEC v. International Funding Institute, restated that the statute "serves important governmental interests by minimizing the adverse effects of the Act's disclosure requirements." In addition, the statute also protects political committees' intellectual property. The commercial use of such information, as the NRCC contended in its original complaint, diminishes the economic value of contributor lists. The court also found that prohibiting commercial use of contributor information would make it more likely that individuals would continue to support financially the current private campaign financing system for U.S. elections. Legi-Tech's other First Amendment arguments also were rejected by the court.
Source: FEC Record — July 1997; April 1996; December 1994. FEC v. Legi-Tech, Inc., No. 91-0213 (JHG) (D.D.C. Oct. 12, 1994), (D.D.C. Mar. 1, 1995) (final judgment); 75 F.3d 704 (D.C. Cir. 1996); 967 F. Supp. 523 (D.D.C. 1997).