FEC v. Adams

On March 6, 2008, the U.S. District Court for the Central District of California denied defendant Stephen Adams’ motion to dismiss and granted the Commission’s motion for partial judgment on the pleadings. Following that decision, the Commission’s counsel and the defendant reached a proposed settlement agreement and the court stayed the case.

Background

In 2004, Stephen Adams contracted for a $1 million advertising campaign to place billboards expressly advocating the reelection of President George W. Bush in four "battleground" states. See the October 2007 Record. The billboards first appeared on September 7, 2004, and ran through the general election.

The ads were independent expenditures, and thus required disclosure and proper disclaimers. While persons who make independent expenditures at any time during the calendar year, up to and including the 20th day before an election, must disclose this activity within 48 hours each time the expenditures aggregate $10,000 or more, Mr. Adams did not file the required independent expenditure reports until October 28, 2004 -- only five days before the general election. See 2 U.S.C. §434(g)(2)(A). Additionally, the billboards did not include adequate disclaimers. See 2 U.S.C. §441d(a)(3).

The Commission received two complaints regarding Mr. Adams' independent expenditures. Based on these complaints and additional information obtained in the course of carrying out its supervisory duties, on November 8, 2006, the Commission found probable cause to believe that the violations occurred. After the Commission tried but failed to reach an acceptable conciliation agreement with Mr. Adams, the Commission filed a complaint in the U.S. District Court for the Central District of California on July 6, 2007.

Court decision

Motion to Dismiss. The district court denied the defendant's motion to dismiss, in which the defendant argued that the Commission failed to "meet its statutory obligation to make a good faith effort to conciliate prior to filing suit." The court found that the Commission satisfied the Federal Election Campaign Act (the Act) by attempting to conciliate with the defendant. The court deferred to the Commission's judgment as to the specifics of the proposed conciliation agreements offered by the Commission and the defendant.

Judgment as to Six Affirmative Defenses. The district court also granted the Commission’s motion for partial judgment on the pleadings. The defendant asserted eight affirmative defenses, and the Commission sought to strike six of the defenses. The court agreed with the Commission and found that the six challenged defenses had no basis as a matter of law. Two of the affirmative defenses dealt with the defendant’s claim that the Commission failed to properly conciliate. Since the court found that the Commission attempted to conciliate adequately, it struck these two defenses.

The other four challenged affirmative defenses involved claims that the Act’s independent expenditure reporting requirement violates the First Amendment and that the Commission’s enforcement of that provision violates the Due Process Clause of the Constitution. Regarding the First Amendment claim, the court followed U.S. Supreme Court and Ninth Circuit precedent, dismissing the affirmative defenses and holding that, while the Act “may infringe on some First Amendment freedoms, the infringement is minimal and reasonable to keep the electorate fully informed about the source of campaign funds and to deter or expose corruption.”

The court also rejected the defendant’s due process defenses, stating that the disclosure law was sufficiently straightforward. While the defendant claimed that “virtually no one was aware of [the disclosure] requirement at the time of the 2004 general election,” the court rejected this argument because the law was promulgated two years before the election in question and ten other individuals filed the proper disclosures with the Commission. Additionally, the defendant did not present any evidence that the Commission brought suit based on improper or discriminatory grounds.

Case stayed for proposed settlement

The parties notified the court on April 7, 2008, that Commission counsel and Adams had reached a proposed settlement agreement. The defendant agreed to transfer within 30 days the full amount of the proposed civil penalty to a trust account held by his attorney's firm. If the Commission approves the agreement once it has a quorum, the parties will file a proposed consent agreement and request dismissal of the case. The defendant’s attorney will then transfer the civil penalty to the Commission. On April 9, 2008, the court granted the parties' request to stay the case until the Commission votes on the proposed settlement.

U.S. District Court for the Central District of California, 2:07-cv04419-DSF-SH.