District court vacates IE disclosure rule in CREW v. FEC (16-0259)

On August 3, 2018, the United States District Court for the District of Columbia granted CREW’s Motion for Summary Judgment and denied the FEC’s and Crossroads GPS’s cross-motions. The court held that the Commission’s independent expenditure disclosure rule for persons other than political committees at 11 CFR 109.10(e)(1)(vi) is invalid and vacated the regulation. However, the court stayed the vacatur for 45 days to provide time for the FEC to issue interim regulations consistent with the Federal Election Campaign Act (the Act). The Court also vacated the Commission’s dismissal of an administrative complaint against Crossroads GPS and remanded the matter for reconsideration.

Background

Under the Act and Commission regulations, an independent expenditure is an expenditure by a person for a communication that expressly advocates the election or defeat of a clearly identified candidate and that is not coordinated with a federal candidate or political party.

Political committees and other persons whose independent expenditures aggregate in excess of $250 in a calendar year with respect to a given election must report those expenditures to the FEC, in some cases within 24 or 48 hours. Under the regulations governing persons other than political committees (“non-political committees”), those reports must, among other things, identify each person who made a contribution in excess of $200 for the purpose of furthering the independent expenditure(s) disclosed.

On November 14, 2012, Citizens for Responsibility and Ethics in Washington, its former executive director Melanie Sloan and Ohio resident and registered voter Jessica Markley (collectively, CREW) filed an administrative complaint (MUR 6696) with the FEC. The complaint alleged that Crossroads GPS and individuals connected to the organization (Steven Law, Karl Rove, Haley Barbour, and Caleb Crosby) violated the Act by failing to disclose the contributors who funded the group's independent expenditures under 52 U.S.C. § 30104 and 11 CFR 109.10(b)–(e).

On November 17, 2015, the Commission, by a vote of three to three, failed to have the requisite four votes to proceed to an investigation. The three Commissioners that voted against proceeding found no reason to believe that Crossroads GPS violated certain provisions of the Act and declined to pursue an additional potential violation on the basis of prosecutorial discretion. A month later, the Commission unanimously voted to close the file on MUR 6696, thereby dismissing CREW’s complaint.

On February 16, 2016, CREW filed suit in the U.S. District Court of the District of Columbia seeking a declaratory order stating that the FEC’s dismissal of the MUR was arbitrary, capricious, an abuse of discretion and contrary to law. CREW alleged that the agency ignored undisputed evidence that Crossroads GPS violated 11 CFR 109.10(e)(1)(vi) when it failed to disclose identities of individuals whose donations were used to fund independent expenditures. The plaintiffs also alleged that the regulatory requirement to disclose contributors who gave "for the purpose of furthering the reported independent expenditure" in 11 CFR 109.10(e)(1)(vi) was inconsistent with the statutory requirement to identify those who gave "for the purpose of furthering an independent expenditure," in 52 U.S.C. § 30104(c)(2) (emphasis added). For that reason, they asked the court to declare the regulation invalid. Finally, the plaintiffs alleged that the Commission’s dismissal was contrary to 52 U.S.C. § 30104(c)(1), which cross-references a subsection of the political committee disclosure provision that requires that independent expenditure reports identify each person other than a political committee who contributed more than $200 to the committee or person making the independent expenditure.

The FEC moved to dismiss the complaint arguing that a regulatory challenge was time barred by a six-year statute of limitations to bring a civil action. Crossroads GPS, which had intervened in the lawsuit as a defendant, joined the FEC’s motion and also moved to dismiss arguing that the Act provides the exclusive avenue for review of an administrative complaint dismissal and bars Administrative Procedure Act (APA)-based judicial review.

The District Court denied the FEC’s motion. The court stated that CREW’s regulatory challenge fell within the D.C. Circuit’s exception to the statute of limitations allowing a regulatory challenge by a party that has been adversely affected by the regulation’s application, if the regulation arguably conflicts with the statute from which it derives.

In regard to Crossroads GPS’s motion, the court looked at whether the Act provides an "adequate remedy" for the plaintiffs’ claims. Counts I and III of the claim sought orders reversing the dismissal of the administrative complaint, however the court determined that the Act already provides such a remedy and an additional claim under the APA is not warranted. However, the court stated that Count II, which challenges the dismissal of the administrative complaint based on the alleged invalidity and unlawfulness of the FEC regulation, was properly brought under the Act and the APA.

All parties filed cross-motions for summary judgment on whether the FEC regulation is valid as a proper interpretation and implementation of the statute, and whether the FEC’s dismissal of the administrative complaint, which was based primarily on the challenged regulation, was contrary to law.

Court decision

In reviewing an agency’s regulations, the court looked to a two-step analysis set forth in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984). The first step of Chevron analysis asks whether Congress has directly spoken to the precise questions at issue. The second step considers whether the agency’s resolution of an issue not addressed in the statute is based on a permissible construction of the statute. In this case, the court held that the terms of 52 U.S.C. § 30104(c) were unambiguous and that the FEC’s regulation failed Chevron step one without having to proceed to step two.

Under its Chevron analysis, the court found that 52 U.S.C. § 30104(c)(1) requires broader disclosure than just reporting contributions made to further independent expenditures. The court found that the section applies to “all contributions received” by the reporting nonpolitical committees and requires disclosure of all donors of over $200 annually making contributions intended to influence elections.

The court found that subsection (c)(2) requires supplementary reporting for a subset of donors under (c)(1)—donors of over $200 who contribute “for the purpose of furthering an independent expenditure.” The court found that “an independent expenditure” referred to any unspecified independent expenditure: “[u]se of the indefinite article ‘an’ before ‘independent expenditure’ indicates a broader coverage than a particular, specified independent expenditure and instead means that disclosure must be made as to each non-trivial donor contributing to fund ‘an independent expenditure’ to a candidate, without regard to the actual reported form of the express advocacy funded by the expenditure.” The court stated that subsections (c)(1) and (c)(2) must be read together to avoid rendering any part of the statute “inoperative or superfluous, void or insignificant,” and that doing so is “essential to ensuring meaningful disclosure.”

The court was unpersuaded by the defendants’ arguments that the statute is ambiguous. The court found these arguments failed to overcome what it determined to be the plain meaning of the statute under Chevron. In regard to 11 CFR 109.10(e)(1)(vi), the court found that the regulation requires “significantly less” disclosure than the statute by ignoring what the court deemed to be the standalone disclosure requirement under (c)(1) and by substantially narrowing the requirements under (c)(2). As a result, the court found that the FEC’s regulation “deprive[s] the electorate of donor information that was intended and supposed to be disclosed.”

The court held that 109.10(e)(1)(vi) is invalid and vacated the regulation. However, the court stayed the vacatur for 45 days to provide time for the FEC to issue interim regulations consistent with the statute. The court also declared the FEC’s administrative decision dismissing MUR 6696 “contrary to law” and remanded the matter to the FEC for reconsideration within 30 days of the court’s order.

Editor's note: On August 24, 2018, intervenor-defendant Crossroads GPS filed a notice of appeal.

Resources

• CREW, et al. v FEC (16-259) litigation page
• MUR 6696