FEC v. Political Contributions Data

On August 21, 1991, the U.S. Court of Appeals for the Second Circuit ruled that Political Contributions Data, Inc., did not violate 2 U.S.C. §438(a)(4) by selling, for profit, individual contributor information copied from FEC reports. (Civil Action No. 91-6084.) This ruling reversed the district court's decision.

On June 17, 1993, the court of appeals also reversed the district court's ruling on attorneys' fees. The appellate court held the FEC liable for payment of PCD's attorneys. On February 22, 1994, the Supreme Court denied the FEC's petition for review of that decision.

Background

Section 438(a)(4) protects information on individual contributors (including names, addresses, occupations and employers) that is disclosed on reports filed with the FEC. Under section 438(a)(4), information copied from such reports "may not be sold or used by any person for the purpose of soliciting contributions or for commercial purposes...." (The names and addresses of political committees, however, may be used for solicitation purposes.)

In AO 1986-25, issued to Public Data Access, Inc. (PDA), the Commission considered PDA's proposed sale of information on individual contributors that was compiled from FEC reports. The Commission concluded that the proposed sale would be for "commercial purposes" and would therefore violate section 438(a)(4).

After the opinion was issued, PDA established Political Contributions Data, Inc. (PCD), a for-profit corporation, which then sold lists of individual contributor information compiled from FEC reports. PCD marketed two standard reports: a list of contributions made by officers and upper-level employees of the 700 largest U.S. corporations; and a list of individuals contributing $500 or more, sorted by congressional district.

The Commission filed suit in August 1989 alleging that PCD had violated section 438(a)(4).

District court decision

On December 19, 1990, the U.S. District Court for the Southern District of New York ruled that PCD's sale of contributor lists violated the "commercial purposes" prohibition. (Civil Action No. 89-CIV-5238.) In reaching this decision, the district court found that the FEC's determination in AO 1986-25 was reasonable. The Commission had concluded that PDA's for-profit status indicated a commercial purpose. The Commission also concluded that PDA could not claim the exception for media use of contributor information under 11 CFR 104.15(c) because PDA's lists would have a commercial value to list brokers and because the FEC information contained in the lists was not incidental to the sale of the communication (as in a newspaper) but was instead the primary focus of the communication.

The court also considered but rejected PCD's constitutional challenges to section 438(a)(4). The court imposed a $5,000 penalty against PCD but stayed payment pending the resolution of PCD's appeal.

Court of appeals decision

The court of appeals rejected the Commission's conclusion in AO 1986-25 as an unreasonable interpretation of section 438(a)(4) and 11 CFR 104.15(c). The court instead found that PCD's sale of contributor lists was permissible under those provisions.

Under section 104.15(c), the use of information copied from FEC reports "in newspapers, magazines, books or other similar communications is permissible as long as the principal purpose of such communications is not to communicate any contributor information...for the purpose of soliciting contributions or for other commercial purposes." [emphasis added]

The court found that PCD's contributor lists qualified as "other similar communications" and that PCD's sale of FEC information did not violate the commercial purposes prohibition: "The absence from PCD's reports of mailing addresses and phone numbers, as well as the caveat on each page against solicitation and commercial use, make it virtually certain that these reports will be used for informative purposes (similar to newspapers, magazines, and books...), not for commercial purposes (similar to soliciting contributions or selling cars)."

The court based this conclusion on its interpretation of the commercial purposes prohibition: "The §438(a)(4) prohibition is only violated by a use of FEC data which could subject the 'public-spirited' citizens who contribute to political campaigns to 'all kinds of solicitations,'" such as commercial solicitations for magazine subscriptions or credit cards. The court said that this reading of the prohibition balances the need to protect the privacy of individual contributors with statutory intent to promote public disclosure of campaign finance information.

Finding the PCD did not violate section 438(a)(4), the court remanded the case to the district court with instructions to dismiss the FEC's complaint.

Application for Attorneys' Fees

District court

On December 19, 1991, PCD applied to the district court for an award of $55,022 in attorneys' fees and other expenses pursuant to the Equal Access to Justice Act (EAJA). 28 U.S.C. §2412(d)(1)(A). To be considered by a court, an application for attorneys' fees must be filed within 30 days of the date the judgment has become final. Citing judicial precedent, the district court said that "a judgment has been found to be final when the 'losing party asserts that no further appeal will be taken.'" The court found that the FEC provided "clear and unequivocal notice" that it would not appeal the court of appeals' decision in a letter from the FEC's attorney to PCD's attorney. The letter, which stated the FEC's reasons for not pursuing an appeal, was dated October 30, 1991; accordingly, the court found that the deadline expired 30 days later, on November 29, 1991, nearly a month before PCD filed its application for attorneys' fees. The court therefore denied the application because it was filed late. 807 F. Supp. 311 (S.D.N.Y. 1992).

The district court also said that defendants' application would have to be denied on the grounds that the FEC's position was "substantially justified." [1] Applying criteria set forth by the Supreme Court in Pierce v. Underwood, 487 U.S. 552 (1988), the court found that the FEC's position had a "reasonable basis both in law and fact" and "could satisfy a reasonable person."

Appeals court

Reversing the district court decision, the U.S. Court of Appeals for the Second Circuit, on June 17, 1993, found that PCD had filed its application for attorney's fees within 30 days of the "final judgment," as required under the EAJA. (No. 92-6240.) The court said that, in this instance, the date of "final judgment" was the last day the Commission could have applied for a writ of certiorari with the Supreme Court.

The appeals court also found that the FEC's position on the "sale or use" restriction was not "substantially justified." The court found that the 1991 appeals court ruling, which had held the FEC's interpretation to be "unreasonable," precluded the current panel from finding the agency's position "substantially justified" under the EAJA. "This is so," the court reasoned, "because the legal standards which governed the merits phase of this litigation are precisely those to be applied to the EAJA question." The court also relied on Oregon Natural Resources Council v. Madigan, 980 F.2d 1330 (9th Cir. 1992), a decision which was issued after this appeal had been filed.

Supreme Court

On February 22, 1994, the U.S. Supreme Court denied the FEC's petition to review the appellate court judgment. The FEC was required to pay PCD's attorneys $54,610.

In its Supreme Court petition, the FEC argued that the Second Circuit's ruling contradicted legislative intent as well as the Supreme Court's own rulings and those of other appellate courts. The FEC's brief quoted the Supreme Court in Pierce v. Underwood, where the Court observed that a court's agreement or disagreement with the government "does not establish whether its position was substantially justified. Conceivably, the Government could take a position that is not substantially justified, yet win; even more likely it could take a position that is substantially justified, yet lose." (487 U.S. 552, 569 (1988).)

The Solicitor General, who filed a friend of the court brief supporting the FEC's petition, said that the PCD holding "seriously expands the government's liability for attorney fees under EAJA."

FOOTNOTES:

[1] Attorneys' fees must be awarded to the prevailing nongovernment party unless the court finds the position of the federal agency to have been substantially justified. 28 U.S.C. §2412(d)(1)(A).

Source:   FEC Record — May 1994; August 1993; October 1992; October 1991; May 1991 and February 1991. FEC v. Political Contributions Data, Inc., 753 F. Supp. 1122 (S.D.N.Y. 1990), rev'd, 943 F.2d 190 (2d Cir. 1991).