On August 30, 2007, the U.S. District Court for the District of Columbia granted the Commission's motion for summary judgment in Shays, et al., v. FEC. Congressman Christopher Shays and former Congressman Martin Meehan filed suit against the FEC asking the court to compel the Commission to issue new regulations requiring, with some exceptions, that groups registered with the Internal Revenue Service as political organizations under section 527 also register with the FEC as federal political committees. In March 2006, the court had remanded the matter to the FEC to institute a rulemaking or to explain further its rationale for regulating so-called "527" organizations on a case-by-case basis rather than through a rule specific to those organizations. In response, the FEC issue a Supplemental Explanation and Justification of its rulemaking. The court found this revised explanation to be sufficient under the Administrative Procedure Act (APA).
Under the Federal Election Campaign Act (the Act), a political committee must register with the FEC and follow the limits, prohibitions and reporting requirements of the federal campaign finance laws. The Act defines a "political committee" as "any committee, club, association, or other group of persons which receives contributions aggregating in excess of $1,000 during a calendar year or which makes expenditures aggregating in excess of $1,000 during a calendar year." 2 U.S.C. §431(4). The Supreme Court has additionally construed "political committee" only to "‘encompass organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate.'" Buckley v. Valeo, 424 U.S. 1, 79 (1976). The FEC has not promulgated regulations to codify the Court's "major purpose test." However, the FEC applies the test in enforcement actions against individual organizations.
In 2004, the FEC issued a Notice of Proposed Rulemaking that considered, among other things, possible regulatory tests for determining a committee's major purpose. The Commission did not ultimately choose to codify such a test and, instead, elected to continue applying the test on an individual, fact-specific basis in accordance with the relevant statutory and regulatory framework. In September 2004, the plaintiffs filed suit claiming that the Commission's decision not to include a major purpose test in its regulations was arbitrary and capricious and asking the court to direct the Commission to promulgate regulations defining when a 527 group must register with the FEC. The court remanded the case to the FEC to institute a new rulemaking on the definition of "political committee" or to explain more fully its 2004 decision not to issue such rules. The FEC published a Supplemental Explanation and Justification in the Federal Register (72 FR 5595) on February 7, 2007, which is available on the FEC web site at http://www.fec.gov/law/cfr/ej_compilation/2007/notice_2007-3.pdf. The plaintiffs subsequently moved for further relief, contending that the new explanation also violates the APA and that the court should order the FEC to issue an appropriate regulation.
According to the court, the "crux of the FEC's revised justification is that the complexity of applying the ‘major purpose' test to a particular organization requires that it be done through adjudication instead of rulemaking." The court found that the question of whether the application of the "major purpose test" was too "multifaceted to be codified" is "exactly the type of question generally left to the expertise of an agency, and the applicable standard of review is that ‘agency discretion is at its peak.'" In addition, the court "recognize[d] that the FEC has successfully brought enforcement actions against 527 groups." The court therefore concluded that the Commission's Supplemental Explanation and Justification was sufficient under the APA and that the Commission's decision not to promulgate the kind of regulation requested by the plaintiffs was not arbitrary and capricious. The court granted the FEC's motion for summary judgment and denied the plaintiffs' motion for further relief.
U.S. District Court for the District of Columbia, 04-1597 (EGS).