FEC v. National Right to Work Committee (77-7125); National Right to Work Committee v. FEC (78-0315)

On December 13, 1982, the Supreme Court issued a unanimous decision reversing a decision by the U.S. Court of Appeals for the District of Columbia Circuit in FEC v. National Right to Work Committee (NRWC) (U.S. Supreme Court No. 81-1506). In its opinion, the Court held that some 267,000 individuals solicited by NRWC for contributions to its separate segregated fund during 1976 did not qualify as solicitable members [1] of NRWC under 2 U.S.C. §441b(b)(4)(C). (NRWC is a nonprofit corporation without capital stock, which advocates voluntary unionism.)

Complaints

In November 1977, the FEC filed suit against NRWC (FEC v. NRWC, Civil Action No. 77-7125) claiming that, since both NRWC's bylaws and the articles of incorporation it had filed with Virginia stated that NRWC had no members, NRWC had violated section 441b(b)(4)(C) of the Act by soliciting funds to its separate segregated fund from persons other than members. (Under this provision, corporations without capital stock may pay the costs of soliciting contributions from their members to their separate segregated funds.) NRWC contended, on the other hand, that its solicitations were permissible since those persons solicited were members of NRWC, within the meaning of the Act and FEC regulations.

After receiving notice of the FEC's intent to file a civil action, NRWC filed suit in October 1977 (NRWC v. FEC, Civil Action No. 78-0315), seeking injunctive and declaratory relief and challenging the constitutionality of sections 441b(b)(4)(A) and (C) of the Act, which, together, prohibit nonstock corporations from soliciting persons other than their members. Among its constitutional claims, NRWC asserted that section 441b(b)(4)(C) was unconstitutionally vague and infringed on the First Amendment rights of free speech and association of those persons solicited by NRWC.

In February 1978, the cases were consolidated for argument before the U.S. District Court for the District of Columbia.

District court ruling

Referring to NRWC's articles of incorporation and bylaws, the district court found that NRWC was organized without members. The court held that NRWC had violated Section 441b(b)(4)(C) by soliciting contributions to its separate segregated fund from persons who were not members of NRWC. The court found that the legislative history of the Section 441b membership exception required a limited definition of members. The court defined "members" as those "...persons who have interests and rights in an organization similar to those of a shareholder in a corporation and a union member in a labor organization. To read the exception more broadly would be to upset the symmetry of the statutory scheme." (501 F. Supp. 422, 432 (D.D.C. 1980)) The court noted that no class of persons solicited by NRWC had been given any such participation rights in NRWC.

Appeals court ruling

On September 4, 1981, reversing the district court's ruling, the appeals court held that the term "member" set forth at Section 441b(b)(4)(C) "...necessarily includes those individuals solicited by NRWC.... " The appeals court concluded that the district court's definition of "member" was "...so narrow that it infringes on associational rights." The court noted that two identifiable public interests served by the Act (i.e., to eliminate the appearance or actuality of corruption in federal elections and to prevent coercive contributions) were not served by restricting the solicitation activities of a nonstock corporation organized solely for political purposes. The court found that, "as to the first interest, we believe that solicitation [alone] will neither corrupt officials nor distort elections." As to the second interest, the court found that "...the individuals from whom NRWC solicits contributions, unlike employees of a corporation or members of a labor union, clearly are not subject to coercion." In the court's opinion, the NRWC operation, "ensures that NRWC accurately identifies and solicits only those individuals who share a similar political philosophy and who have evidenced a willingness to promote that philosophy through support of the Committee."

On October 19, 1981, the Commission filed a petition with the appeals court for a rehearing of the case and a suggestion for an en banc rehearing. On November 13, 1981, the U.S. Court of Appeals for the District of Columbia Circuit, sitting en banc, denied the FEC's suggestion for a rehearing of National Right to Work Committee, Inc. (NRWC) v. FEC (Civil Action No. 80-1487). On December 15, the Commission voted to petition the Supreme Court for a writ of certiorari.

Supreme Court's ruling

In rejecting the appeals court's reasoning, the Supreme Court held that the persons solicited by NRWC were insufficiently attached to the corporation to qualify as members under Section 441b(b)(4)(C) of the Act. In this regard, the Court noted that the legislative history of Section 441b(b)(4)(C) indicated that members' of nonstock corporations were to be defined, at least in part, by analogy to stockholders of business corporations and members of labor unions. The analogy to stockholders and union members suggests that some relatively enduring and independently significant financial or organizational attachment is required to be a member' under 441b(b)(4)(C). The Court found that those individuals solicited by NRWC through "random mass mailings" failed to meet this membership requirement. Among other things, NRWC's solicitation letters did not mention membership, its articles of incorporation disclaim the existence of members, and members play no part in the operations or administration of the corporation. Consequently, the Court found that the respondent's arguments would, "virtually excise from the statute the restriction of solicitation to 'members'.... and would open the door to all but unlimited corporate solicitation."

The Court found that the Act's restrictions on solicitations by nonstock corporations did not raise any insurmountable constitutional difficulties. The First Amendment associational rights asserted by respondent are overborne by the interests Congress has sought to protect in enacting Section 441b. In this regard, the statute reflects a legislative judgment that the special characteristics of the corporate structure require particularly careful regulation. Moreover, the Court noted that the governmental interest in preventing both actual corruption and the appearance of corruption of elected representatives has long been recognized [by the Court], First National Bank of Boston v. Bellotti, 435 U.S. at 787, n.26, and there is no reason why it may not in this case be accomplished by treating unions, corporations, and similar organizations differently from individuals. California Medical Association v. FEC, 435 U.S. 182, 201 (1981).

As to the defendants' claim that Section 441b(b)(4)(C) was unconstitutionally vague, the Court maintained that there may be more than one way under the statute to go about determining who are 'members' of a nonprofit corporation, and the statute may leave room for uncertainty at the periphery of its exception for solicitation of 'members.' However, on this record we are satisfied that NRWC's activities extended in large part, if not in toto, to people who would not be members under any reasonable interpretation of the statute. See Broadrick v. Oklahoma, 413 U.S. 601 (1973).

Remand to appeals court

The Court then remanded the case to the appeals court to consider, among other things, "the...imposition of a $10,000 civil penalty" on NRWC for unlawful solicitations to its separate segregated fund. On September 2, 1983, the appeals court found that the district court had erred in finding NRWC's violation to be 'knowing and willful.' The appeals court therefore concluded that the $10,000 civil penalty imposed by the district court was unwarranted.

Remand to district court

After the case had been remanded to the district court, the court accepted a consent order on October 4, 1984, which provides that:

• NRWC, ERCC and any of their agents will not solicit contributions to ERCC from persons other than NRWC's members. See 2 U.S.C. §441b(b)(4).
• Within thirty days of the date of the consent order, NRWC and ERCC will mail refunds totaling $67,401.62 to those individuals unlawfully solicited on June 21 and September 9-15, 1976. (The court will grant extensions for reasonable delays.)
• Each refund will be accompanied by a letter informing the contributor that the courts have determined that the solicitation constituted a violation of the law's prohibition on corporate contributions which was not knowing and willful. 2 U.S.C. §441b.
• The refund checks will expressly, and in bold print, require deposit within 30 days from the date drawn.
• NRWC and ERCC will report to the FEC on the status of the refund checks indicating whether they were undeliverable, cleared through the bank or remained outstanding.
• Within 30 days of the consent order, NRWC and ERCC will pay a $5,000 civil penalty (without interest) to the U.S. Treasury.
• Within 30 days of the consent order, NRWC and ERCC will pay FEC court costs from the district court proceeding amounting to $4,483.64 (without interest).
• Within an agreed upon time, NRWC and ERCC will donate to the Salvation Army: any contribution refunds that were undeliverable; all checks which remain outstanding; and $15,000 in lieu of the interest accrued from April 24, 1980, on refundable contributions, NRWC's civil penalty and the FEC's court costs. Once NRWC and ERCC have satisfied these conditions, the parties will file a joint motion to:
• Have the Aetna Casualty and Surety Company released from any and all obligations under the Supersedes Bond filed with the district court in these actions; and
• Have all NRWC and ERCC contributor information which was filed under seal with the district court returned to NRWC and ERCC. In addition, the FEC will return to NRWC and ERCC all contributor information that the defendants presented to the FEC under seal, together with all copies, lists, summaries or digests made from them.

FOOTNOTE:

[1] As defined by 11 CFR 114.1(e), Members' mean all persons who are currently satisfying the requirements for membership.... A person is not considered a member...if the only requirement for membership is a contribution to a separate segregated fund.

Source:   FEC Record — January 1985; November 1983; February 1983; January 1982; November 1981. FEC v. National Right to Work Committee, 501 F. Supp. 422 (D.D.C. 1980), rev'd, 665 F.2d 371 (1981), rev'd, 459 U.S. 197 (1982), on remand, 716 F.2d 1401 (1983).