On June 5, 2006, the U.S. District Court for the District of Columbia issued a memorandum opinion and order denying Club for Growth, Inc.'s (the Club's) motion to dismiss. In its motion to dismiss, the Club claimed that because the Federal Election Commission (FEC) failed to follow proper procedures before bringing this lawsuit, the court lacked subject-matter jurisdiction. In the opinion denying the Club's motion, the court found that the FEC was in compliance with the enforcement provisions of the Federal Election Campaign Act (the Act). Specifically, the court found that the FEC's failure to provide timely notice of the administrative complaint constituted harmless error; the agency was entitled to deference in its conciliation procedures; and the Commission properly ratified its decision to file suit.
The Democratic Senatorial Campaign Committee filed an administrative complaint with the Commission alleging, among other things, that the Club, a Virginia corporation registered with the Internal Revenue Service (IRS) as a political organization under Section 527 of the Internal Revenue Code, had improperly failed to register with the FEC as a political committee. On October 19, 2004, the Commission authorized an administrative investigation after finding reason to believe that the Club accepted contributions and made expenditures in excess of the $1,000 registration threshold, and violated the Act by failing to register as a political committee.
The Club received notification on July 21, 2005, from the FEC General Counsel that the Commission had found probable cause to believe the Club violated the Act and authorized filing a lawsuit in District Court if the parties could not reach an agreement. On September 19, 2005, the General Counsel notified the Club that the Commission rejected their September 14, 2005, offer and filed suit. See November 2005 Record.
The Club made three distinct arguments in support of its motion to dismiss, each rejected by the court for the reasons set out below.
First, the Club argued the FEC failed to provide timely notice of the allegations made against it. Under the Act, the Commission shall notify any person alleged to have committed a violation within five days after the FEC's receipt of the complaint. 2 U.S.C. 437g(a)(1). In this case, the FEC sent notice of the administrative complaint to Stephen Moore, who served as the Club's President, as well as Treasurer of the Club for Growth, Inc. PAC (the PAC). The notification was addressed to Mr. Moore as Treasurer of the PAC. After realizing the error, the FEC sent notice to Mr. Moore again, this time addressing the document to him as President of the Club. In its opinion, the court did not agree with the Club's claim that this error resulted in untimely notification. Though the original (and timely) notice was sent to him in his capacity as PAC Treasurer rather than as President of the Club, the court noted that through Mr. Moore, the Club had notice.
In the motion to dismiss, the Club also argued that the FEC's conciliation proposals were not made in good faith. The Act requires the Commission to attempt, for a period of at least 30 days, to correct or prevent violations by informal means, and to enter into a conciliation agreement with any person involved. 2 U.S.C. 437g(a)(4)(A)(i). In assessing whether the FEC complied with this statutory provision, the court afforded high deference to the agency's action. The court's opinion also noted that the Club provided no evidence or argument to support this claim, except that they did not like the FEC's conciliatory offers. The opinion also reasoned that the Act requires the Commission to come to the conciliation table, but does not instruct it on the nature of its offerings. The court agreed with the FEC's argument that, in showing deference, the court should not scrutinize the FEC's conciliation offers.
Lastly, the Club argued that the Commission violated the Act by authorizing the lawsuit prior to the completion of the conciliation process. During the course of the conciliation process, the FEC General Counsel sent an undated letter to the Club indicating that the Commission had authorized suit be filed in District Court if the parties were unable to reach an agreement. Although the court held that the initial contingent suit authorization, prior to completion of the conciliation process, was contrary to law under 2 U.S.C. 437g(a)(6)(A), it found that the FEC cured the defective vote by later ratifying its first action. On December 5, 2005, the Commission reaffirmed authorization for the General Counsel to pursue litigation. In its opinion, the court noted that the FEC's reaffirmation constituted a subsequent review of evidence, and since the December 5 action came after 30 days of conciliation efforts, it was consistent with the requirements of the Act.
U.S. District Court for the District of Columbia, 05-1851(RMU).