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  • FEC Record: Litigation

Court grants Commission summary judgment in “straw donor” cases (Campaign Legal Center, et al., v. FEC, et al.)

June 28, 2018

On June 7, 2018, the United States District Court for the District of Columbia upheld the Commission’s exercise of its prosecutorial discretion when it declined to investigate three administrative complaints alleging that corporate and other entities had been used in violation of the Federal Election Campaign Act’s (the Act’s) prohibition on making contributions in the name of another person. The Court concluded that the Commission’s dismissals of the administrative complaints were not contrary to law and granted summary judgment for the FEC and the intervenor-defendants.

Background

The Campaign Legal Center and Democracy 21 (collectively “Plaintiffs”) filed five administrative complaints with the FEC alleging that other persons were the true sources of contributions disclosed as being made by limited liability companies (LLCs) to independent expenditure-only political committees (commonly referred to as “Super PACs”). Additionally, the Plaintiffs alleged that some of the LLCs were political committees subject to the reporting requirements of the Act. The Commission’s Office of General Counsel recommended finding reason to believe that the respondents had violated the Act’s “straw donor” prohibitions, but recommended taking no action on the political committee allegations.

In February 2016, the Commission voted 3-3 on whether to find reason to believe that any violations had occurred, and the administrative complaints were dismissed. The Commission’s “controlling group” in the dismissal of the administrative complaints – the three Commissioners who voted against finding reason to believe – released a Statement of Reasons in April 2016. In this Statement of Reasons, the three Commissioners stated that they declined to find reason to believe a violation occurred as “an exercise of the Commission’s prosecutorial discretion.” They stated that the Supreme Court’s decision in Citizens United v. FEC required the Commission to examine how the Act’s straw donor ban applied to corporate contributions and that “the speech rights recognized in Citizens United would be hollow if closely held corporations and LLCs were presumed to be straw donors.” They concluded that “principles of due process, fair notice, and First Amendment clarity counsel against applying a standard to persons and entities that were not on notice of the governing norm.” The controlling Commissioners also described a new standard they propose to use to evaluate straw donor allegations in this context. The standard focuses on whether the funds were intentionally funneled through a closely held corporation or corporate LLC for the purpose of making a contribution that evades the Act’s reporting requirements.

The Plaintiffs subsequently filed suit in U.S. District Court for the District of Columbia alleging that the Commission’s dismissal of their administrative complaints was contrary to law. In March 2017, the Court held that the Plaintiffs had standing to pursue their challenge regarding three of the five administrative complaints, but dismissed the Plaintiffs’ claims regarding two of the complaints.

Analysis

The Court noted the controlling Commissioners concerns of fair notice, due process, confusing Commission precedent, and the obligation to protect First Amendment speech and found that these concerns constituted a rational basis for the controlling Commissioners’ decision to dismiss the complaints. As a result, the Court concluded the dismissal of the complaints was not contrary to law. The Plaintiffs also challenged the controlling Commissioners’ prospective standard as “arbitrary, capricious, and contrary to law.” The Court found that this challenge was not ripe as the Commission has not applied this standard or formally adopted it and granted the Commission’s motion for summary judgment.

Resources

  • Author 
    • Paul Stoetzer
    • Communications Specialist
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