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Reader's Digest Association v. FEC


On March 19, 1981, the U.S. District Court for the Southern District of New York denied a preliminary injunction sought by the Reader's Digest Association, Inc. (RDA) to bar an FEC investigation of RDA. The FEC had initiated the investigation as the result of a complaint brought against plaintiff in August 1980. The complaint alleged that RDA had violated 2 U.S.C. §441b(a) by making an "illegal corporate expenditure to negatively influence" the 1980 Presidential elections. On November 11, 1980, the Commission found "reason to believe" that RDA may have violated 441b(a) by distributing a video tape to major media outlets that provided a computer reenactment of Senator Edward Kennedy's automobile accident at Chappaquiddick. RDA had produced the tape in connection with the publication of an article on the accident, which appeared in Reader's Digest in February 1980. The court noted that the FEC's finding did not mention expenditures for researching and publishing the article itself.

The FEC sent the publishing company a letter requesting answers to 15 questions concerning the content of the video tapes, how RDA had obtained the tapes and what use RDA had made of them. The FEC did not order a reply to its questions; nor did it issue a subpoena.

RDA's claims

In its suit asking the court to bar the FEC investigation, RDA contended that responding to the FEC's investigation would have a "chilling effect" on its First Amendment right to comment freely on newsworthy events. Plaintiff asserted that publishers would be more reluctant to take on controversial political stories if they resulted in costly, time-consuming FEC investigations. Moreover, plaintiff claimed that expenditures for the tapes were news story expenditures explicitly exempted from the definition of "contribution" or "expenditure" by 2 U.S.C. §431(9)(B)(i). As such, the tapes constituted a type of press activity beyond the scope of FEC regulation.

FEC's argument

The FEC, on the other hand, contended that its investigation was still in the preliminary stage, a fact that precluded any detrimental effect on RDA's news operations. Moreover, the FEC pointed out that since the Act's enforcement procedures provided RDA with an opportunity to respond to FEC findings at each stage of the investigation, the issues raised by plaintiff were not ripe for court action. The FEC further contended that the investigation was lawful and should not be barred.

District court ruling

The district court said that, "There should be no question that the FEC is authorized by statute to pursue its investigation at least for the limited purpose of determining whether the press exemption is applicable." Specifically, the court noted that the FEC's investigation must first determine "whether the press entity is owned by a political party or candidate and whether the press entity [was] acting as a press entity in making the distribution complained of ...or whether it was acting in a manner unrelated to its publishing function."

The court noted that the FEC had limited the scope of its investigation to distribution of the video tapes, suggesting to the court the FEC's recognition that the research and publication of the article were on their face exempt functions. The court therefore concluded that there was "no basis to grant the injunction sought by RDA" as long as the FEC investigation asked "the limited question of whether RDA was acting in its magazine publisher capacity in distributing the tape, so as to determine whether the press exemption is applicable, and so long as the investigation does not address itself to issues beyond this proper subject."

Pending a determination of whether RDA's distribution of the tapes is covered by the news story exemption, the court believed that certain types of questions would be beyond the permissible scope of an FEC investigation as, for example, inquiries into the information sources for the tape or what uses others made of the tape. The court did, however, approve the Commission's questions concerning distribution of the tape and its request for a copy of the tape.

The court noted that RDA could reapply for an injunction if the FEC pursued its investigation beyond the permissible scope outlined in its opinion.

Final action by FEC and court

In the ensuing investigation, the Commission did not uncover any evidence to suggest that the distribution was outside the scope of RDA's functions as a publisher. In August 1981, therefore, the Commission found no probable cause to believe RDA had violated 2 U.S.C. §441b.

On October 30, 1981, the U.S. District Court for the Southern District of New York issued a stipulation and order dismissing Reader's Digest Assoc., Inc. v. FEC (Civil Action No. 81 Civ. 596 (PNL)).

Source:   FEC RecordFebruary 1982; May 1981. Reader's Digest Association, Inc. v. FEC, 509 F. Supp. 1210 (S.D.N.Y. 1981).