FEC v. Reform Party of the USA
On February 28, 2008, the U.S. District Court for the Northern District of Florida dismissed the amended counterclaim filed by the Reform Party of the United States of America (the Reform Party) for lack of jurisdiction and failure to state a claim upon which relief could be granted. In addition to granting the FEC’s motion to dismiss, the court modified an injunction against the Reform Party to permit the party to make expenditures to raise funds to repay the amount owed to the U.S. Treasury.
Under the Presidential Election Campaign Fund Act (the Fund Act), the national party committee of an eligible major or minor party is entitled to receive public funding to finance the party's presidential nominating convention. 26 U.S.C. § 9008. To receive these funds, the national committee must establish a convention committee that "shall be responsible for conducting the day to day arrangements and operations of that party's presidential nominating convention." 11 CFR 9008.3(a)(2). The convention committee may use the funds only to pay for permissible convention expenses, defined as "all expenses incurred by or on behalf of a political party's national committee or convention committee with respect to and for the purpose of conducting a presidential nominating convention or convention-related activities." 11 CFR 9008.7(a)(4). The Reform Party received $2,522,690 in public funds for its 2000 presidential nomination convention.
The Fund Act also requires that the FEC conduct an audit of any committee that receives public funding. The Final Audit Report, adopted by the FEC on September 26, 2002, included a determination that the defendants must repay $333,558 to the U.S. Treasury for expenditures that were not permissible convention expenses or were not properly documented. 11 CFR 9008.7(a) and 9008.10. The RPUSA submitted a timely request for administrative review of the repayment determination, and after review, the FEC upheld the repayment determination. The RPUSA requested reconsideration of the FEC's repayment determination, which the FEC rejected as untimely.
By law, public funding recipients may—among other things—ask the Commission to reconsider its repayment determinations, and seek additional review by the US Court of Appeals for the DC Circuit. The Reform Party repeatedly asked both the Commission and the courts to review its repayment obligation, but most of its requests were not filed within statutory and regulatory deadlines, and all were denied. The FEC brought this action to recover the repayment amount. The RPUSA then filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit, which the D.C. Circuit dismissed as untimely.
On July 21, 2004, the Federal Election Commission (FEC) filed an action with the U.S. District Court for the Northern District of Florida to collect $333,558 from RPUSA and its treasurer, William D. Chapman, Sr., and the Reform Party 2000 Convention Committee and its treasurer, Gerald M. Moan. The suit arose from a final determination by the FEC regarding the financing of the RPUSA's 2000 Presidential nominating convention, during which the Party spent some of the public money grant it received to pay for convention expenditures not permitted by law.
In its court complaint, the FEC asserted that the repayment determination was "final and conclusive" and the merits of the repayment determination was not subject to judicial review. The defendants have not paid any of the $333,558 debt. The FEC asked the court to declare that the defendants are obliged to pay to the U.S. Treasury $333,558, plus interest, order defendants to make that repayment, and to give preference to the repayment over all other outstanding obligations of the committee, other than federal taxes.
District court decision
On November 22, 2005, the U.S. District Court for the Northern District of Florida ordered the Reform Party of the United States of America (RPUSA) to repay $333,558 with calculated interest to the United States Treasury and enjoined the party from diverting any of its assets to any other expenditures other than repayment of federal taxes until it completes its repayment obligation.
The district held that the U.S. Court of Appeals for the DC Circuit is the only venue in which repayment determinations made by the FEC may be challenged. Accordingly, the district court ruled that the Reform Party could not now raise defenses that it failed to properly bring to the DC Circuit. Finding that this case was simply an effort by the FEC to recover funds it had already determined the party owed, the court granted the FEC’s motion for summary judgment and ordered the defendants to repay $333,558 plus interest calculated in accordance with 11 CFR § 9007.2(d)(3). In addition, the court found that the Reform Party to date has failed to repay the funds and thus enjoined the Reform Party from diverting any of its assets to any expenditures other than repayment of federal taxes until it completes its repayment obligation.
Appeals court decision
On March 1, 2007, the U.S. Court of Appeals for the 11th Circuit affirmed the district court’s decision requiring the Reform Party of the United States (the Reform Party) to repay $333,558 in public funds to the U.S. Treasury. The court also ruled that all challenges to FEC repayment determinations must occur in the U.S. Court of Appeals for the District of Columbia.
RPUSA appealed the district court decision, arguing that summary judgment was improperly granted because:
- The district court erroneously found it did not have jurisdiction to hear the Reform Party’s defenses and claims against the Commission;
- The Reform Party was denied discovery; and
- The injunction violates the Reform Party’s first amendment right to free speech.
The appeals court agreed that the district court lacked jurisdiction to review the repayment obligation because the Act clearly designates the DC Circuit as the forum for judicial review of any certification, determination or other action by the Commission. The appeals court also found no procedural irregularity in the grant of summary judgment because the Reform Party failed to demonstrate how discovery would have assisted it in rebutting the Commission’s showing that there were no genuine issues of fact concerning the final and conclusive repayment determination. Finally, the appeals court did not consider whether the injunction violates the first amendment because the argument was raised for the first time on appeal.
Counterclaim by the Reform Party
The Reform Party renewed its First Amendment argument in a counterclaim filed in the district court. The Reform Party argued that the injunction was an invalid spending restraint on political speech by a political party.
District court decision
The district court granted the Commission’s motion to dismiss the Reform Party’s counterclaim. The court held that since the relief requested by the Reform Party—modification of the injunction—can only be provided by the court, not the FEC, the Reform Party failed to state a claim. Additionally, the court lacked subject matter jurisdiction over the Reform Party’s suit, as the plaintiffs did not ask the court to interpret any portion of the Presidential Election Campaign Fund Act and the United States has not waived its sovereign immunity.
The court analyzed whether the injunction should be modified. The court found that while the injunction involved First Amendment activity by prohibiting the Reform Party from spending its funds to promote political views or candidates, the injunction is narrowly tailored to address a specific harm and thus permissible.
To alleviate the Reform Party’s concern that it could not spend money to raise money to pay the debt owed to the U.S. Treasury, the court agreed with the Commission’s suggestion to modify the injunction slightly to permit the Reform Party to make expenditures for the purpose of raising funds to meet the repayment obligation.