Minnesota Citizens Concerned for Life v. FEC

On April 19, 1996, the U.S. District Court for the District of Minnesota ruled that the FEC's regulations defining and governing qualified nonprofit corporations (11 CFR 114.10) were unconstitutional on First Amendment grounds.

On May 7, 1997, the U.S. Court of Appeals for the Eighth Circuit affirmed the district court's decision.

Legal analysis

The Federal Election Campaign Act (the Act) contains a broad prohibition against using corporate and labor organization money in connection with a federal election. 2 U.S.C. §441b.

In FEC v. Massachusetts Citizens for Life (MCFL), 479 U.S. 238 (1986), the Supreme Court, citing First Amendment concerns, concluded that §441b could not constitutionally prohibit certain nonprofit corporations from making independent expenditures.[1] In that case, the Supreme Court ruled that independent expenditures made by MCFL were exempt from the ban at §441b because MCFL had the following essential features:

• It was formed to promote political ideas and did not engage in business activities;
• It did not have shareholders or other persons who had a claim on its assets or earnings, or who had other disincentives to disassociate themselves from the organization; and
• It was not established by a business corporation or labor union and had a policy of not accepting donations from such entities.

The FEC promulgated the regulations at 11 CFR 114.10 to incorporate the MCFL decision into its regulatory framework. These regulations established a test to determine whether a corporation qualified for exemption from the Act's prohibition against corporate independent expenditures.

Minnesota Citizens Concerned for Life (MCCL), a nonprofit corporation, brought suit to challenge the constitutionality of the FEC's new regulations. MCCL alleged that it does not qualify to make independent expenditures under the FEC's regulations because:

• It engages in business activities (sells advertising space in its newsletter, rents its membership list and engages in fundraisers that are not expressly described as requests for donations to be used for political purposes);
• It issues affinity credit cards to its members (impermissible under 11 CFR 114.10(c)(3)(ii) because it creates a disincentive for members to disassociate themselves from MCCL); and
• It accepts corporate contributions.

District court ruling

The court noted that the U.S. Court of Appeals for the Eighth Circuit, in addressing a similar Minnesota state law, rejected the argument that MCFL had created a bright-line test for exemption from the Act's prohibition against corporate independent expenditures. Day v. Holohan (34 F.3d 1356 (8th Cir., 1994). Since the judicial district of Minnesota is in the eighth circuit, Day constituted controlling law in this district court. The court also noted the decision of the U.S. Court of Appeals for the Second Circuit in FEC v. Survival Education Fund, 65 F.3d 285 (2nd Cir., 1995).

The Day decision concluded that, by disqualifying from the independent-expenditure exemption those nonprofit, membership corporations that engaged in some business activities and/or accepted corporate donations, Minnesota 's regulations were too restrictive and not narrowly tailored to serve a compelling governmental interest. Relying on Day, the district court ruled that these aspects of the FEC's regulations at 11 CFR 114.10(c) were unconstitutional.

The Day decision, however, did not address other aspects of the FEC's regulations, which plaintiffs had challenged in this suit, including: the imposition of reporting requirements on those corporations that make independent expenditures under the MCFL exemption (11 CFR 114.10(e)); and the requirement that exempt corporations disclose to their contributors that their donations may be used for political purposes (11 CFR 114.10(f)).

Instead of deciding whether these parts of the regulation were independently unconstitutional, the district court found that the unconstitutional provision was not severable under the severability doctrine: A regulation that contains unconstitutional provisions must be stricken in its entirety unless that which remains after the unconstitutional provisions are excised is fully operative as law and the body enacting the regulation would have enacted the constitutional provisions even in the absence of those which are unconstitutional. Because the court found that the FEC's definition of a qualified nonprofit corporation at 114.10(c) was flawed and that that provision was not severable from the rest of 114.10, the court concluded that the entire provision at 114.10 was void.[2]

Appeals court ruling

The appeals court found that, contrary to the FEC's arguments, MCCL had standing to bring this case to court. It also found that MCCL's challenge to the regulations was "ripe" for judicial resolution, and, on the authority of the Day decision, the court then affirmed the district court's declaratory judgment voiding the Commission's regulations.

Article III standing requires that a party show actual injury, a casual relationship between that injury and the challenged conduct and the likelihood that a favorable decision by the court will redress the alleged injury.[3] The FEC argued that MCCL lacked standing because voiding the statute would not redress its alleged injury. The FEC maintained that, even without the regulation, MCCL would have to prove that it was entitled to make independent expenditures under MCFL and Day. The appeals court found that MCCL had either to make significant changes to its operations or risk sanctions for violating FEC regulations and concluded that MCCL did not need to show that a favorable decision would relieve "every" injury. According to the appellate court, the district court redressed an injury for MCCL by declaring that it could continue to make independent expenditures if it met the exemptions defined in Day.

While the courts have been wary of pre-enforcement challenges-such as MCCL's challenge to the Commission's regulations before the organization has actually been alleged to have violated them-this stance is not always applicable. The Supreme Court has held that "the Administrative Procedure Act authorizes a pre-enforcement challenge to agency regulations if the issue is 'fit' for prompt judicial decision and if failure to review would cause significant hardship to the parties." In this case, the appeals court said that the legal issue-whether the Eighth Circuit's interpretation of MCFL in Day invalidates portions of the Commission's regulations-was "fit for prompt determination." Moreover, the court said, court action in this case would also relieve MCCL of a hardship because its representatives would now know that MCCL's methods of operation would be tested under Day, rather than under the Commission's regulations.

On the merits, the appellate court agreed with the district court that Day required voiding 11 CFR 114.10 (c)(2) and (c)(4). Only the court of appeals sitting en banc, the court noted, could overturn Day's interpretation of the Supreme Court's MCFL decision. Furthermore, because the district court found the remainder of 11 CFR 114.10 not to be severable from the invalid portions-a ruling the Commission had not appealed-11 CFR 114.10 as a whole was properly declared void.

FOOTNOTES:

[1] An independent expenditure is an expenditure made without any coordination with a candidate's campaign for a communication which expressly advocates the election or defeat of a clearly identified candidate for federal office.

[2] Although the court voided 11 CFR 114.10 in its entirety, the court noted that the FEC had the authority to impose certification and reporting requirements and to require qualified nonprofits to inform potential donors that their donations could be used for political purposes. These provisions, had they not been inextricably linked to the unconstitutional provisions, would have been entitled to deference.

[3] Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).

Source:   FEC Record — July 1997; June 1996. FEC v. Minnesota Citizens Concerned for Life, 936 F. Supp. 633 (D. Minn. 1996), aff'd, 113 F.3d 129 (8th Cir. 1997).