Van Hollen v. Federal Election Commission , 74 F. Supp. 3d 407 ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
CHRISTOPHER VAN HOLLEN, Jr., )
)
Plaintiff, )
)
v. ) Civil Action No. 11-0766 (ABJ)
)
FEDERAL ELECTION COMMISSION, )
)
Defendant. )
____________________________________)
MEMORANDUM OPINION
This case originated in 2011 when plaintiff Chris Van Hollen, Jr. – a member of the U.S.
House of Representatives from the 8th Congressional District of the State of Maryland – filed a
complaint challenging the authority of the Federal Election Commission to promulgate 11 C.F.R.
§ 104.20(c)(9), which narrowed the disclosure requirements set forth in the Bipartisan Campaign
Reform Act (“BCRA”), 52 U.S.C. § 30104(f)(d)(E)–(F) (2012), 1 for corporations and labor
organizations that fund electioneering communications. Compl. ¶¶ 1, 9 [Dkt. # 1]. Applying the
framework set forth in Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837(1984), the Court found that the Commission had exceeded its authority, particularly because the
problem it was trying to remedy was not – even as the agency characterized its task – to interpret
an ambiguity in the statute, but rather, to address a problem not contemplated by the statute that
was ostensibly created by the Supreme Court’s decisions in FEC v. Wisconsin Right to Life, Inc.
(“WRTL II”), 551 U.S. 449 (2007), and Citizens United v. FEC, 588 U.S. 310 (2010). The Court
1 At the time this case was filed, the BCRA was codified in Title 2 of the United States
Code, at 2 U.S.C. § 434. It has since been transferred to Title 52, at 52 U.S.C. § 30104.
Accordingly, the Court cites to the statute in this opinion as it now appears in Title 52 of the
United States Code.
struck down 11 C.F.R. § 104.20(c)(9) at the first level of the Chevron analysis, and it did not
then proceed to the second level of the Chevron test. 2 See Van Hollen v. FEC, 851 F. Supp. 2d
69, 89 (D.D.C.), rev’d sub nom. Ctr. for Individual Freedom v. Van Hollen, 694 F.3d 108 (D.C.
Cir. 2012).
The FEC did not appeal the decision. But the intervenor-defendants, the Center for
Individual Freedom (“CFIF”) and the Hispanic Leadership Fund (“HLF”) did, and the United
States Court of Appeals for the District of Columbia Circuit held that the case should not have
been decided at the first Chevron step. The Circuit Court found the BCRA’s disclosure
provisions to be ambiguous, “especially when viewed in the light of the Supreme Court’s
decisions” in Citizens United and WRTL II, and it remanded the case for consideration of the
regulation at Chevron step two. Van Hollen, 694 F.3d at 110, 112.
The Court now concludes that the promulgation of 11 C.F.R. § 104.20(c)(9) was
arbitrary, capricious, and contrary to law and that the regulation is an unreasonable interpretation
of the BCRA for several reasons. First, the Commission initiated the rulemaking process for the
stated purpose of responding to the decision in WRTL II, but nothing the Supreme Court did in
that case provides a basis for narrowing the disclosure rules enacted by Congress. WRTL II dealt
solely with the question of whether the statutory ban on corporate and labor organization funding
of electioneering communications could withstand an as-applied constitutional challenge. And
in answering that question, the Court did not find any need to address the BCRA’s disclosure
requirements.
2 Chevron instructs the reviewing court to consider first “whether Congress has directly
spoken to the precise question at issue,” and if so, “the court, as well as the agency, must give
effect to the unambiguously expressed intent of Congress.” 467 U.S. at 842–43.
2
Second, there is little or nothing in the administrative record that would support the
Commission’s decision to introduce a limitation into the broad disclosure rules in the BCRA.
Neither the petition for rulemaking nor the original notice of proposed rulemaking proposed
altering the disclosure requirements for corporations and labor unions. None of the commenters
asked the agency to amend the disclosure rules to include a purpose requirement, and the
Commission did not incorporate the purpose requirement in the new rule until after the notice
and comment period and the hearing had been concluded. The only post-hearing comment
received in response to the newly incorporated language strongly opposed its inclusion.
Finally, the regulation’s purpose requirement is inconsistent with the statutory language
and purpose of the BCRA. Congress passed the disclosure provisions of the BCRA to promote
transparency and to ensure that members of the public would be aware of who was trying to
influence their votes just before an election. The added purpose requirement in section
104.20(c)(9) thwarts that objective by creating an easily exploited loophole that allows the true
sponsors of advertisements to hide behind dubious and misleading names. Based on these
considerations, the Court will vacate 11 C.F.R. § 104.20(c)(9), and it will grant plaintiff’s motion
for summary judgment.
BACKGROUND
Over the course of seven years, the Supreme Court of the United States weakened, and
eventually invalidated entirely, the prohibition on the use of corporate and union treasury funds
to finance electioneering communications. See Citizens United, 558 U.S. at 365; WRTL II, 551
U.S. at 470–76; McConnell v. FEC, 540 U.S. 93, 93 (2003), overruled by Citizens United, 558
U.S. at 310. In the midst of this changing legal environment, the Commission began a
rulemaking process and solicited public comment “generally regarding the effect of the
3
[WRTL II] decision on the Commission’s rules governing corporate and labor organization
funding of electioneering communications, the definition of ‘electioneering communication,’ and
the rules governing reporting of electioneering communications.” 3 Electioneering
Communications, 72 Fed. Reg. 50261, 50262 (proposed Aug. 31, 2007). As part of that process,
the Commission offered two alternative ways to implement the WRTL II decision: “The first
alternative would incorporate the new exemption into the rules prohibiting the use of corporate
and labor organization funds for electioneering communications in 11 [C.F.R.] part 114. The
3 Section 30104(f)(2) of the BCRA requires the following disclosures:
(E) If the disbursements were paid out of a segregated bank account
which consists of funds contributed . . . directly to this account for
electioneering communications, the names and addresses of all
contributors who contributed an aggregate amount of $1,000 or more to
that account . . . . [; or]
(F) If the disbursements were paid out of funds not described in
subparagraph (E), the names and addresses of all contributors who
contributed an aggregate amount of $1,000 or more to the person making
the disbursement during the period beginning on the first day of the
preceding calendar year and ending on the disclosure date.
52 U.S.C. § 30104(f)(2)(E)–(F).
Section 104.207(c)(7)–(8) of FEC’s implementing regulations generally tracks the
language of section 30104(f)(2)(E)–(F), except that it substitutes the words “donor” and
“donated” for “contributor” and “contributed.” It calls for the following disclosures:
(7)(i) If the disbursements were paid exclusively from a segregated bank
account . . . , the name and address of each donor who donated an amount
aggregating $1,000 or more to the segregated bank account, aggregating
since the first day of the preceding calendar year; or . . . .
(8) If the disbursements were not paid exclusively from a segregated
bank account described in paragraph (c)(7) of this section, . . . the name
and address of each donor who donated an amount aggregating $1,000 or
more to the person making the disbursement, aggregating since the first
day of the preceding calendar year.
11 C.F.R. § 104.20(c)(7)(i), (c)(8) (2014).
4
second alternative would incorporate the new exemption into the definition of ‘electioneering
communication’ in 11 [C.F.R.] § 100.29.” Id. Under the first alternative, corporations and labor
organizations making the sorts of electioneering communications deemed permissible in WRTL
II would be permitted to use general treasury funds for that purpose, but they would be subject to
the same reporting requirements as other entities. Id. As part of that alternative, the agency also
proposed changes to the rules that would enable those organizations to establish segregated bank
accounts for the funding of electioneering communications as certain individuals were already
permitted to do. Id. Adopting Alternative II would have exempted the WRTL II ads from the
definition of electioneering communication in 11 C.F.R. § 100.29 entirely, thereby eliminating
both the disclosure and financing restrictions for those ads. Id. at 50263.
In December 2007, the agency adopted a variant of the first alternative. It promulgated
11 C.F.R. § 104.20(c)(9), which included the following language:
If the disbursements were made by a corporation or labor organization
pursuant to 11 [C.F.R.] § 114.15, the name and address of each person
who made a donation aggregating $1,000 or more to the corporation or
labor organization, aggregating since the first day of the precedent
calendar year, which was made for the purpose of furthering
electioneering communications.
11 C.F.R. § 104.20(c)(9) (emphasis added).
The Commission provided several explanations for adding this new “purpose” or “intent”
requirement to the corporate and labor organization disclosure regulation. First, it noted that
those entities’ “general treasury funds are often largely comprised of funds received from
investors,” donors, customers, or members “who may not necessarily support the organization’s
electioneering communications.” Electioneering Communications, Final Rule, 72 Fed. Reg.
72899, 72911 (Dec. 26, 2007). And second, it stated that compliance with the disclosure rules as
previously written would impose a heavy burden on corporations and labor organizations:
5
“[W]itnesses at the Commission’s hearing testified that the effort necessary to identify those
persons who provided funds totaling $1,000 or more . . . would be very costly and require an
inordinate amount of effort.” Id. The Commission then concluded that “the policy underlying
the disclosure provisions of BCRA [was] properly met by requiring corporations and labor
organizations to disclose and report only those persons who made donations for the purpose of
funding [electioneering communications].” Id.Plaintiff Chris Van Hollen – concerned that “corporations have exploited the enormous
loophole [the new regulation] created,” Compl. ¶ 29 – filed this case against the FEC under the
Administrative Procedure Act (“APA”). 5 U.S.C. § 706. He argued that the agency exceeded its
statutory authority in promulgating that regulation and that the regulation is also arbitrary,
capricious, and contrary to law under the APA. Two months after plaintiff filed his complaint,
CFIF and HLF filed motions to intervene as defendants [Dkt. # 14 & 15], and the Court granted
those motions pursuant to Federal Rule of Civil Procedure 24(a). Aug. 1, 2011 Minute Entry.
Plaintiff, the Commission, and CFIF then filed cross-motions for summary judgment, Pl.’s Mot.
for Summ. J. (“Pl.’s Mot.”) [Dkt. # 20]; Def.’s Cross-Mot. for Summ. J. (“Def.’s Mot.”) [Dkt.
# 25]; CFIF’s Cross-Mot. for Summ. J. [Dkt. # 36], and HLF filed a motion to dismiss for lack of
jurisdiction. HLF’s Mot. to Dismiss [Dkt. # 30].
On March 30, 2012, the Court entered an order granting plaintiff’s motion for summary
judgment and denying the other three motions. Order [Dkt. # 47]. After determining that
plaintiff had standing to bring his APA challenge, the Court conducted a Chevron analysis and
struck down 11 C.F.R. § 104.20(c)(9) as inconsistent with text of the statute. The Commission
did not appeal the Court’s order, but intervenor-defendants CFIF and HLF did. Van Hollen, 694
F.3d at 110. On September 18, 2012, the U.S. Court of Appeals for the District of Columbia
6
Circuit concluded that since the BCRA was ambiguous, the case should not have been decided at
the first step of the Chevron test. Id. at 112.
The D.C. Circuit remanded the case with instructions to the District Court to refer the
matter first to the Commission to ascertain whether the agency intended to engage in further
rulemaking to clarify the regulatory regime. The judgment further provided: “[i]f the FEC elects
instead to defend the current regulation, then the District Court should allow the parties to
present arguments on Appellee’s claims that the regulation cannot survive review under Chevron
step two or [Motor Vehicle Manufacturers Ass’n of the United States, Inc. v. State Farm Mutual
Auto Insurance Co., 463 U.S. 29, 42–43 (1983)], and then decide these issues in the first
instance.” Id.On September 20, 2012, the Court referred the matter to the Commission and directed it
to advise the Court on or before October 12, 2012, whether it intended to pursue a new
rulemaking or defend the regulation. Order Referring Matter to Def. FEC for Further
Consideration [Dkt. # 66]. In a status report filed on October 4, 2012, the Commission stated
that it did not intend to pursue a rulemaking and that it would continue to defend 11 C.F.R.
§ 104.20(c)(9) as written before the Court. FEC Status Report [Dkt. # 67]. But the following
day, intervenor-defendant CFIF advised the Court that it had petitioned the FEC to engage in the
rulemaking that the agency had just informed the Court that it did not intend to undertake. CFIF
Status Report [Dkt. # 68]. The matter was stayed pending the FEC’s consideration of CFIF’s
petition, and on March 12, 2013, the stay was lifted in light of the agency’s decision to deny the
petition and forego further rulemaking. See Oct. 18, 2012 Minute Order Staying Case; Mar. 12,
2013 Minute Order Lifting Stay. The Court permitted the parties to supplement their original
memoranda with additional arguments on the Chevron step two issue, and it heard oral argument.
7
ANALYSIS
I. The standard to be applied at Chevron step two
This Court is bound by the Circuit’s determination that section 30104(f)(2)(E)–(F) is
ambiguous, and therefore, it must now address the question of whether the implementing
regulation, 11 C.F.R. § 104.20(c)(9), is “based on a permissible construction of the statute.”
Chevron, 467 U.S. at 843. At the second step of the Chevron analysis, the reviewing court must
give “considerable weight” to an agency’s interpretation of a statutory scheme it has been
“entrusted to administer;” the “court may not substitute its own construction of a statutory
provision for a reasonable interpretation made by the administrator of an agency.” Id. at 844. As
the D.C. Circuit put it in Serono Laboratories, Inc. v. Shalala, “under Chevron, courts are bound
to uphold an agency interpretation [so] long as it is reasonable – regardless [of] whether there
may be other reasonable, or even more reasonable, views.” 158 F.3d 1313, 1321 (D.C. Cir
1998).
Here, the Court of Appeals specifically directed this Court to determine whether the
regulation could survive review under the test prescribed in the State Farm opinion. Van Hollen,
694 F.3d at 112. In State Farm, the Supreme Court reiterated that under the arbitrary and
capricious standard, “a reviewing court may not set aside an agency rule that is rational, based on
consideration of the relevant factors, and within the scope of the authority delegated to the
agency by the statute.” 463 U.S. at 42. The Supreme Court went on to explain the process in
greater detail:
The scope of review under the “arbitrary and capricious” standard is
narrow and a court is not to substitute its judgment for that of the agency.
Nevertheless, the agency must examine the relevant data and articulate a
satisfactory explanation for its action including a “rational connection
between the facts found and the choice made.” In reviewing that
explanation, we must “consider whether the decision was based on a
8
consideration of the relevant factors and whether there has been a clear
error of judgment.” Normally, an agency rule would be arbitrary and
capricious if the agency has relied on factors which Congress has not
intended it to consider, entirely failed to consider an important aspect of
the problem, offered an explanation for its decision that runs counter to the
evidence before the agency, or is so implausible that it could not be
ascribed to a difference in view or the product of agency expertise.
Id. at 43 (citations omitted). This, then, is the framework that must govern the Court’s decision.
But as plaintiff points out, that analysis cannot be divorced from the context of the particular
statutory scheme involved.
Plaintiff Van Hollen cites Shays v. FEC (“Shays II”), 414 F.3d 76 (D.C. Cir. 2005), and
Shays v. FEC (“Shays III”), 528 F.3d 914 (D.C. Cir. 2008), to the Court. Pl.’s Supplemental
Briefing on Remanded Issues (“Pl.’s Supp.”) at 1–2 [Dkt. # 87]. He asserts that a reviewing
court’s task is to determine whether agency regulations are reasonable “in light of the language,
legislative history, and policies of the statute,” id. at 2, quoting Shays v. FEC, 337 F. Supp. 2d
28, 78 (D.D.C. 2004), and he calls upon the Court to follow the approach “exemplified in Shays”
and to reject the regulations here on the grounds that they frustrate the policy behind the BCRA.
Id. at 1–2, citing Shays III, 528 F.3d at 919.
The first Shays opinion cited is not helpful because it does not concern a Chevron step
two exercise. In Shays II, the court addressed the standing question at length, and then it
affirmed the District Court’s invalidation of a set of FEC rules as too lax. See 414 F.3d at 83–96.
The first two rules failed at the threshold Chevron inquiry, as the court found that they
contravened the unambiguously expressed intent of Congress, and the Circuit Court upheld the
District Court’s invalidation of the other three rules on APA grounds, noting that it did not need
to reach the second Chevron question of whether the rules were reasonable because the agency
had failed to advance any justification for them. Id. at 96–97.
9
But in Shays III, the Court of Appeals did directly address the second step of the Chevron
analysis when it approved the District Court’s “thorough” rejection of a set of FEC rules based
on the finding that they were “either contrary to BCRA’s purpose or arbitrary and capricious.”
528 F.3d at 919. The Court stated: “[i]n applying Chevron’s second step and the APA, we must
reject administrative constructions of [a] statute . . . that frustrate the policy that Congress sought
to implement.” Id. (alterations in original) (internal quotation marks omitted).
So, under the precedent that this Court is bound to follow, the challenged rule must also
be tested against the policy that BCRA was intended to advance.
II. The challenged regulation is not supported by the agency’s explanation for the
regulation.
The starting point of the second step of the Chevron analysis must be the stated reason
behind the regulation, which is illuminated by both the Notice of Proposed Rulemaking
(“NPRM”) and the Explanation and Justification that accompanied the announcement of the final
rule. The rulemaking was supposed to be about one narrow subject: what to do to implement
the Supreme Court’s decision in WRTL II. See 72 Fed. Reg. at 50261 (“These proposed rules
would implement the Supreme Court’s decision in FEC v. Wisconsin Right to Life, Inc., which
held that the prohibition on the use of corporate and labor organization funds for electioneering
communications is unconstitutional as applied to certain types of electioneering
communications.”); see also id. at 50262 (“The Commission is initiating this rulemaking to
implement the Supreme Court’s decision in WRTL II. . . . The Commission is seeking public
comment on two proposed alternative ways to implement the WRTL II decision in the rules
governing electioneering communications.”). To assess the reasonableness of the regulations,
then, one must first ascertain what the Supreme Court decided in that case that required
implementation.
10
WRTL II dealt with the constitutionality of section 203 of the BCRA, 2 U.S.C.
§ 441(b)(2), as applied to particular advertisements that the Wisconsin advocacy organization
planned to broadcast. 551 U.S. at 449. At that time, section 203 made it a crime for a
corporation or labor union to use its general treasury funds to pay for any “electioneering
communication,” 2 U.S.C. § 441b(b)(2), that is, a broadcast, cable, or satellite communication
that refers to a candidate for federal office and is aired within a prescribed time period before an
election. 52 U.S.C. § 30104(f)(3)(A).
WRTL II was not the first time the Supreme Court addressed section 203: the opinion
followed McConnell, in which the Court considered a series of facial challenges to multiple
provisions of the statute. 540 U.S. at 114. As part of that exercise, the McConnell Court found
the regulation of corporate and labor union expenditures in section 203 to be constitutional on its
face. Id. at 203–09. The plaintiffs claimed that section 203 was overbroad and that it violated
the First Amendment because it covered not only campaign speech, or “express advocacy,” but
also more general “issue advocacy” that might mention a candidate for federal office. Id. at 205–
07. The Court disagreed and found that the compelling governmental interests that justified the
imposition of restrictions on express campaign speech would also apply to advertisements that
are the “functional equivalent” of express campaign speech. Id. at 204–06. Thus, it concluded
that even if one assumed that section 203 would “inhibit some constitutionally protected
corporate and union speech,” plaintiffs had not met their heavy burden of establishing that the
provision was overbroad and that it could never be constitutionally enforced. Id. at 207; see also
WRTL II, 551 U.S. at 457 (“The [McConnell] Court concluded that there was no overbreadth
concern to the extent the speech in question was the ‘functional equivalent’ of express campaign
11
speech.”). The McConnell opinion did not further define “functional equivalent” or undertake to
resolve any future as-applied challenges to the law.
It was WRTL II that directly presented an as-applied challenge to section 203. The non-
profit issue advocacy corporation sought to broadcast radio advertisements that clearly identified
a particular Senator running for re-election during the period when “electioneering
communications” would be illegal under section 203. 551 U.S. at 458–61. The Supreme Court
reviewed its decision in McConnell and explained that resolving an as-applied challenge required
it to determine at the outset “whether the speech at issue is the ‘functional equivalent’ of speech
expressly advocating the election or defeat of a candidate for federal office, or instead a ‘genuine
issue a[d].’” Id. at 457 (alteration in original), quoting McConnell, 540 U.S. at 206. The Court
observed that McConnell did not adopt any test to be used as the standard for future as-applied
challenges, and so, it found it necessary to do so. Id. at 464.
The Court determined that in order to safeguard First Amendment rights, it was necessary
that the standard be an objective one, “focusing on the substance of the communication rather
than amorphous considerations of intent and effect.” Id. at 469.
It must entail minimal if any discovery, to allow parties to resolve disputes
quickly without chilling speech through the threat of burdensome
litigation. And it must eschew the open-ended rough-and-tumble of
factors, which invites complex argument in a trial court and a virtually
inevitable appeal. In short, it must give the benefit of any doubt to
protecting rather than stifling speech.
In light of these considerations, a court should find that an ad is the
functional equivalent of express advocacy only if the ad is susceptible of
no reasonable interpretation other than as an appeal to vote for or against a
specific candidate.
Id. (citations and internal quotation marks omitted).
12
This then is the sole holding of WRTL II: that the section 203 prohibition against the use
of a corporation’s or labor organization’s general funds for electioneering communications can
only be applied to express campaign ads or to those issue ads that can only be reasonably
interpreted as a plea to vote for or against a particular candidate.
Applying the new test, the majority concluded that the particular ads at issue were not the
functional equivalent of express campaign speech, and that since the interests that would justify
restricting corporate campaign speech or its functional equivalent do not support restrictions on
issue advocacy, section 203 was unconstitutional as applied to WRTL’s ads. Id. at 457. 4
Notably, the opinion in WRTL II said absolutely nothing about the reporting requirements
that attach when an individual or a group disburses funds to pay for express campaign ads or
those issue ads that fall within the definition of electioneering communications. The plaintiff
had specifically disavowed any challenge to the reporting provisions, noting that the ads it
sought to run would be subject to the transparency that was the goal of the BCRA. See In the
matter of Electioneering Communications: Notice 2007-16 (“Rulemaking Hr’g”) (Oct. 17,
2007), Administrative Record (“AR”) 622–23 [Dkt. # 17-5] (quoting WRTL’s brief: “Because
WRTL does not challenge the disclaimer in the disclosure requirements there will be no ads done
under misleading names. There will continue to be full disclosure of all electioneering
communications both as to disclaimer and public reports. The whole system will be
transparent.”). This raises the question: how did a Supreme Court opinion lifting the ban on
4 The Court was sharply divided on this point. Justice Souter, in an opinion joined by
Justices Stevens, Ginsburg, and Breyer, wrote: “it is beyond all reasonable debate that the ads
are constitutionally subject to regulation under McConnell.” Id. at 525 (Souter, J., dissenting).
13
WRTL’s ads prompt the agency to revise the reporting requirements? After all, the Supreme
Court had already squarely addressed those reporting requirements in McConnell. 5
After the WRTL II decision was handed down, a petition for rulemaking was filed. The
petition – filed by the James Madison Center for Free Speech, which was represented by the
same counsel who had represented WRTL – did not call for a change in the disclosure
requirements either. Petition for Rulemaking: Protecting “Genuine Issue Ads” from the
“Electioneering Communication” Prohibition & Repealing 11 C.F.R. § 100.22(b), James
Madison Ctr. for Free Speech, AR 96 [Dkt. # 17-2]. Instead, the organization urged the agency
to undertake a rulemaking to make two changes to the FEC’s regulations in the wake of WRTL
II: 1) to recognize the protection accorded to genuine issue ads in WRTL II by promulgating a
rule limiting the ban on corporate spending on “electioneering communications” to ads that meet
the WRTL II definition; and 2) to repeal 11 C.F.R. § 100.22(b), the Commission’s definition of
“expressly advocating.” Id., AR 98–103.
In response to that petition, the agency published a NPRM and requested comments on
proposed rules that “would implement the Supreme Court’s decision in FEC v. Wisconsin Right
to Life, Inc.” 72 Fed. Reg. at 50261. Acknowledging that “[t]he plaintiff in [WRTL II] . . . did
5 The McConnell plaintiffs had complained that the requirements should not extend to both
express and issue advocacy, but the Supreme Court unequivocally rejected that contention,
quoting the District Court opinion at length and noting its approval:
We agree with the District Court that the important state interests that
prompted the Buckley Court to uphold FECA’s disclosure requirements –
providing the electorate with information, deterring actual corruption and
avoiding any appearance thereof, and gathering the data necessary to
enforce more substantive electioneering restrictions – apply in full to
BCRA. Accordingly, Buckley amply supports application of FECA
§ 304’s disclosure requirements to the entire range of “electioneering
communications.”
540 U.S. at 196 (footnote omitted).
14
not contest . . . the reporting requirement in section [30104](f)(1)” and therefore that the case did
not directly impact the BCRA’s reporting requirements, id. at 50262, the agency nonetheless set
out two alternative approaches for how it could revise the then-established disclosure
requirements to apply to the newly allowed WRTL II ads.
Under the first alternative, the agency observed that “corporations and labor
organizations that make [WRTL II] electioneering communications . . . totaling over $10,000 in a
calendar year must file reports like other entities that make electioneering communications.” Id.
at 50271. It proposed amending subsection 104.20(c)(7), which deals with the use of segregated
bank accounts to fund electioneering communications, to include separate subparts covering non-
WRTL II and WRTL II ads so that corporations and labor unions would be authorized to create
such accounts to fund the permissible ads and would report contributions to the accounts
accordingly. Id. The FEC also recognized that under Alternative I, corporations and unions
would be permitted to expend general treasury funds for WRTL II ads. Id. In contemplating that
circumstance, it posed a series of questions about how the agency should administer the
disclosure requirements established by section 104.20(c)(8) in that context:
Under the proposed regulations, how would a corporation or labor
organization report an electioneering communication funded with general
treasury funds? If the corporation or labor organization does not pay for
the electioneering communication from an account described in proposed
sections 104.20(c)(7)(ii) and 114.14(d)(2)(i), would the corporation or
labor organization be required to report “the name and address of each
donor who donated an amount aggregating $1,000 or more” to the
corporation or labor organization during the relevant reporting period, as
required by [52 U.S.C. § 30104(f)(2)(F)] and 11 [C.F.R. §] 104.20(c)(8)?
If so, how would a corporation or labor organization determine which
receipts qualify as “donations”? Should the Commission limit the
“donation” reporting requirement to funds that are donated for the express
purpose of making electioneering communications?
15
Id. Although the agency posed this question, the first alternative set out in the Notice did not
include any sort of limiting language.
Alternative 2 embodied a simpler approach. Under that option, the agency proposed that
“a communication that qualifies for [the WRTL II] exemption in proposed section 100.29(c)(6)
would be exempted from the definition of ‘electioneering communication.’” Id. at 50272. In
other words, all WRTL II communications would be exempt from the “regulations imposing
reporting requirements on persons making ‘electioneering communications,’” while “the
reporting requirements applicable to all communications that continue to meet the definition of
‘electioneering communication’ would remain unchanged.” Id. Thus, neither of the alternatives
proposed in the FEC’s notice incorporated the specific limiting language that is the subject of
this litigation.
The Commission received twenty-seven written comments on the proposed rules, and it
held a two day hearing at which fifteen witnesses testified. 72 Fed. Reg. at 72900. After the
hearing and before it promulgated the final rule, the Commission added the language that is at
issue in this case – “made for the purpose of furthering electioneering communications” – for the
first time. See Memorandum on Draft Final Rule on Electioneering Communication to the
Commission (Nov. 16, 2007), AR 1006 (setting forth its proposed draft B of the regulation). The
agency received only one comment in response to the newly proposed language, which strongly
opposed the proposal. Letter from the Campaign Legal Center to the Federal Election
Commission (Nov. 19, 2007), AR 1024–25. 6
6 Another commenter recommended that the Commission adopt Draft A. AR 1018–19.
16
This review of the procedural history tends to diminish the validity of the regulation
under the second level of the Chevron analysis because it demonstrates that the Commission’s
action was unmoored from the stated basis for embarking on a rulemaking in the first place. 7
Before WRTL II, the McConnell Court upheld the disclosure provisions on their face,
with the understanding that they applied to individuals, to those corporations and unions using
segregated bank accounts, and to “groups” that had many individual donors. The rules also
applied to some corporations, see FEC v. Mass. Citizens for Life, Inc., 479 U.S. 238 (1986), even
if that group was small.
WRTL II left the reporting provisions untouched.
And even after WRTL II, when the restrictions on corporate and labor union spending
were struck down entirely in Citizens United, and the Supreme Court was well aware that the
statutory reporting requirements would now apply to a large number of ads funded by those
organizations, it again left the reporting requirements untouched. 558 U.S. at 368 (alterations in
original) (citations omitted) (“[Citizens United] contends that the governmental interest in
providing information to the electorate does not justify requiring disclaimers for any commercial
advertisements, including the ones at issue here. We disagree. . . . The disclaimers required by
7 Indeed, multiple witnesses at the rulemaking hearing specifically cautioned that it would
be inappropriate for the Commission to take up a change to the disclosure rules when the sole
purpose of the rulemaking was supposed to be to conform the existing regulations to the WRTL II
opinion. See, e.g., Rulemaking Hr’g, AR 511 (testimony of Mark Elias) (imploring the agency
to address the Supreme Court ruling on electioneering communications and do no more: “[y]ou
are not faced with questions about disclosure”); id. 517 (testimony of Allison Hayward) (joining
Elias and “counseling restraint”); id. 647–49 (testimony of Donald Simon) (arguing that the
Commission was engaging in a “bait and switch” because “[t]he plaintiff in WRTL did not
challenge the [s]ection 201 disclosure requirements and repeatedly reassured the Supreme Court
that if it did permit corporations to make some electioneering communications there would
continue to be full disclosure . . . . But now having won the [s]ection 203 argument on that basis
many urge the Commission to reach out and eviscerate the disclosure requirement”); id. at 807–
08 (testimony of Brian Svoboda) (urging the Commission to proceed narrowly and do little more
than WRTL II required and noting that WRTL II did not address disclosure).
17
section 311 ‘provid[e] the electorate with information’ and ‘insure that the voters are fully
informed’ about the person or group who is speaking.”).
Therefore, the Court finds that it was unreasonable for the FEC to alter the statutory
reporting requirements on the stated grounds that it was implementing the Supreme Court’s
decision in WRTL II. There was nothing about implementing the new definition of “functional
equivalent of express advocacy” for purposes of enforcing section 203 that required narrowing
the disclosure requirements in 52 U.S.C. § 30104(f)(2).
III. The record does not reflect that the FEC examined the relevant data and
articulated a rational connection between the facts found and the choice it made.
In addition to considering the regulation in light of its stated purpose, the Court must also
review the record to determine whether the agency fully explained how its choice was predicated
upon data it accumulated during the rulemaking process. Here, the parties did not deal with the
record before the agency in any detail in their briefs. So the Court found it necessary to review
the record in its entirety in order to undertake the analysis described in State Farm. And it found
that there is a very poor fit between the rule that was promulgated and both the question and the
evidence that were before the agency at the time.
As an initial point, the Court notes that it was not until after the notice and comment
period that the Commission announced that it had decided to depart from the proposed rules set
forth in the NPRM and to do something entirely different – to limit corporate and labor union
disclosure requirements to cover only the names and addresses of donors who intended to fund
an electioneering communication. 72 Fed. Reg. at 72911 (“As discussed in detail below, after
consideration of the comments, the Commission has decided to depart from the rules proposed in
the NPRM . . . .”). Although the mere fact that changes were made to a proposed rule after the
notice and comment period does not itself invalidate the rule or the process, see Air Transport
18
Ass’n of Am. v. Civil Aeronautics Bd., 732 F.2d 219, 224 (D.C. Cir. 1984), the chronology here
has an impact upon this portion of the State Farm analysis. As the record stands, none of the
comments received during the NPRM stage or at the Commission’s hearing addressed the
language that the Commission eventually adopted, and the one post-hearing comment that did
address the proposed course of action vehemently opposed it. The record is therefore largely
devoid of evidence that supports the specific language that the Commission used to curtail the
disclosure requirements in the case of corporations and labor organizations.
The record also lacks evidence that supports the Commission’s decision to alter the
disclosure regulations in the first place. In the Explanation and Justification that accompanied
the promulgation of the final rule, the Commission stated that the disclosure regulation
governing corporations and labor organizations that paid for electioneering campaigns would be
tailored so that those entities need “disclose only the identities of those persons who made a
donation aggregating $1,000 or more specifically for the purpose of furthering [electioneering
communications] made by that” entity. 72 Fed. Reg. at 72911 (emphasis added). It offered the
following explanation in support of its decision:
A corporation’s general treasury funds are often largely comprised of
funds received from investors such as shareholders who have acquired
stock in the corporation and customers who have purchased the
corporation’s products or services, or in the case of a non-profit
corporation, donations from persons who support the corporation’s
mission. These investors, customers, and donors do not necessarily
support the corporation’s electioneering communications. Likewise, the
general treasury funds of labor organizations and incorporated
membership organizations are composed of member dues obtained from
individuals and other members who may not necessarily support the
organization’s electioneering communications.
Id. The agency also noted – without further specific citations to the record or testimony – that
“witnesses at the Commission’s hearing testified that the effort necessary to identify those
19
persons who provided funds totaling $1,000 or more to a corporation or labor organization would
be very costly and require an inordinate amount of effort.” Id. Based on those considerations,
the agency then summarily concluded that “the policy underlying the disclosure provisions of
BCRA [was] properly met by requiring corporations and labor organizations to disclose and
report only those persons who made donations for the purpose of funding [electioneering
communications].” Id.
Plaintiff does not dispute the agency’s representation that at the time WRTL II was
decided, it was anticipated that there would be a significant increase in the number of
advertisements sponsored by corporations and labor unions. See 551 U.S. at 535–36 (Souter, J.,
dissenting). But the written comments submitted to the agency and the testimony at the hearing
did not supply grounds for a narrowing of the reporting requirements. Although some
commenters raised concerns about the burdens that the disclosure rules might impose, those
concerns were generally presented in the context of urging the agency to define electioneering
communications clearly and narrowly, so that neither the prohibition nor the reporting
requirements would apply to genuine issue advertisements or commercial speech. No
commenters provided data to quantify the burden that this change in the law might impose on
corporations or labor unions, and no written submissions actually asked the Commission to limit
the disclosure rules to contributions made for the purpose of funding electioneering
communications.
Four of the commenters did not discuss the question of whether the reporting rules should
be changed in their comments at all. See Comments of the James Madison Center for Free
Speech, AR 96–103 (the organization that petitioned for the rulemaking); Comments of the
American Cancer Society Cancer Action Network, Inc., AR 222–27; Comments of the Thomas
20
Jefferson Center for the Protection of Free Expression and Comments of the Media Institute, AR
249–62. And although there were several commenters that did mention disclosure, they
generally mentioned it in the context of advancing their position that their issue ads should not be
subject to any regulation. They favored the approach embodied in Alternative 2 – establishing
an exclusion to the definition of electioneering communications for the type of speech protected
by WRTL II – and observed that excluding constitutionally protected communications from the
definition of electioneering communications would also mean that the reporting requirements
would not apply to them. See, e.g., Comments of National Association of Realtors, AR 376–82;
see also Comments of Citizens United, AR 298–323. 8
For example, the American Association of Advertising Agencies, the American
Advertising Federation, and the Association of National Advertisers sought clarification that
their commercial and business advertisements were fully shielded by the Constitution and not
subject to either the prohibitions or the reporting requirements in the BCRA. See Comments of
the American Association of Advertising Agencies, the American Advertising Federation, and
the Association of National Advertisers, AR 231–41. They favored a broad safe harbor that
would clearly distinguish commercial speech from prohibited communications and noted:
“There is no legal rationale for subjecting to the electioneering communication reporting regime
ads that are protected under the WRTL II decision. Further, such an obligation would impose
8 Citizens United also mentioned disclosure in passing in its comments in favor of the
adoption of Alternative 2 instead of Alternative 1. The organization was concerned that
advertisements for its books and documentary films could include references to candidates for
federal elective office. It took the position that the FEC was obligated by WRTL II to address
general advertising for businesses, products, and services, and that it should do so by exempting
business advertising from the definition of electioneering communications. In that context, it
noted: “Also, from a practical standpoint, we believe the disclosure requirements of Alternative
1 would be extremely difficult to implement because ads for products and services are often
financed by investment capital and sales revenues, not reportable contributions.” Comments of
Citizens United, AR 309.
21
significant burdens on advertisers and would chill the full exercise of their First Amendment
rights.” Id. 239. The advertisers pointed out that “the legal underpinnings for reporting
articulated in Buckley are wholly absent for ads protected by the WRTL II decision[,]” and
concluded, “[a] reporting and disclosure regime is inconsistent with the zone of safety created by
the Supreme Court for advertisements that can reasonably be interpreted as concerning
something other than an election campaign.” Id. 240.
The Free Speech Coalition, Inc. and the Free Speech and Education Fund, Inc. echoed
those concerns, and they called for the promulgation of a narrow definition of “express advocacy
and its functional equivalent” that would in turn limit the applicability of the reporting and
disclosure requirements. Comments of the Free Speech Coalition, Inc. and the Free Speech &
Education Fund, Inc., AR 325–35. “[I]f the funding limitations placed upon a broadcast of a
genuine issue ad or any other broadcast communication is found to be unconstitutional, then the
reporting and disclosure requirement that would otherwise be attached to the ad because it is the
functional equivalent of express advocacy cannot be justified by the Buckley standard . . . .” Id.
330. The two free speech organizations warned that disclosure and reporting requirements posed
the same dangers and should be subject to the same strict scrutiny as absolute prohibitions if they
imposed any burden on constitutionally protected speech. Id. 329; see also Comments of
Independent Sector, AR 365 (advocating Alternative 2 – excluding issue ads from the definition
of electioneering communications – over Alternative 1 because “issue advocacy is a fundamental
right and purpose of nonprofit organizations” and a “distinction between the funding of ads,
which the Supreme Court struck down, and the disclosure of funding for that right cannot be
maintained. . . . Aside from the daunting complexity involved in following FEC procedures,
donor disclosure requirements present significant privacy concerns that are not outweighed by
22
the government interest in disclosure. . . . We are also concerned about the chilling effect of
proposed Alternative One on advocacy rights”); Comments of OMB Watch, AR 384–88 (calling
for a more specific general rule exempting issue advocacy and grassroots lobbying from the
statutory prohibitions and objecting to the imposition of any reporting requirements on
broadcasts that should be exempt). 9
And similarly, the American Taxpayers Alliance and Americans for Limited Government
also warned that compelled disclosure could infringe upon or chill the exercise of First
Amendment rights and rejected the notion that the Commission could regulate or impose
reporting requirements on issue ads that fell short of express advocacy or its functional
equivalent. Comments of the American Taxpayers Alliance and Comments of Americans for
Limited Government, AR 416–29.
In sum, the commenters who expressed concerns about the burdens or the
constitutionality of the reporting requirements were primarily advancing the view that certain
advertising should fall outside of the scope of the regulatory regime altogether. None of them
called for or even discussed revising or narrowing of the reporting requirements for corporations
and labor unions sponsoring genuine electioneering communications: their aim was to shrink the
pool of advertisements to which those requirements would apply.
Meanwhile, on the other end of the spectrum, there were approximately a dozen
commenters who urged the Commission to keep the disclosure requirements intact. See
Comments of S.B. Hornik, AR 167; Comments of Professors Richard L. Hasen of School of
Law: Loyola University Chicago and Professor Richard Briffault of Columbia Law School, AR
9 In light of the language in Citizens United and McConnell, the Court is not persuaded that
there is much force to the constitutional objections raised to reporting requirements as opposed to
the funding prohibitions. See Citizens United, 558 U.S. at 366–70; McConnell, 540 U.S. at 196;
Van Hollen, 851 F. Supp. 2d at 88–89.
23
184–88; Comments of Washington State Public Disclosure Commission, AR 190–92; Comments
of Professor Allison Hayward of George Mason University Law School, AR 243–47; Comments
of Democratic Senatorial Campaign Committee and Democratic Congressional Campaign
Committee, AR 264–69; Comments of Common Cause, Public Citizen, and U.S. Public Interest
Research Group (“PIRG”), AR 346–60; Comments of Senators McCain, Feingold, and Snowe
and Representative Shays, AR 369–74; Comments of Public Campaign, AR 390–91; Comments
of the Campaign Legal Center, Democracy 21, Brennan Center for Justice, Common Cause,
League of Women Voters, and U.S. PIRG, AR 393–414; Comments of Campaign Legal Center
and Robert F. Bauer, AR 431–33; Comments of Alliance for Justice, AR 435–51; Comments of
American Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”),
American Federation of State, County, and Municipal Employees (“AFSCME”), National
Education Association (“NEA”), and Service Employees International Union (“SEIU”), AR
453–75. 10
The Center for Competitive Politics expressed strong views against revising the
disclosure rules:
To our knowledge, no plaintiff has challenged McConnell’s interpretation
of BCRA’s reporting requirements for electioneering communications.
Because the Commission has no new or additional basis for believing that
electioneering communications run within the temporal windows cannot
be subject to reporting, the Commission’s rulemaking in response to
WRTL II must address the application of BCRA § 203 to its regulations
and not application of other parts of BCRA. This means the Commission
has guidance from the Court only to amend 11 CFR Part 114.
10 The comments made by Alliance for Justice as well as those submitted by American
Federation of Labor and Congress of Industrial Organizations, American Federation of State,
County, and Municipal Employees, National Education Association, and Service Employees
International Union also contained an alternative position on what the agency should do in the
wake of WRTL II if the Commission should ultimately decide that the disclosure rules should be
changed. See Comments of Alliance for Justice, AR 444; Comments for American Federation of
Labor and Congress of Industrial Organizations, et al., AR 457.
24
Comments of Center for Competitive Politics, AR 339.
Similarly, Common Cause, Public Citizen, and U.S. PIRG admonished the Commission
that WRTL II did not open the door to altering that portion of the statute:
The Commission should retain the reporting and disclosure requirements
for electioneering communications that are express advocacy for a number
of compelling reasons. First, the plaintiffs in both WRTL and the other
major as-applied challenge to BCRA Section 203’s funding prohibition
(Christian Civic League of Maine v. FEC) never contested BCRA’s
reporting and disclosure requirements for electioneering communications.
Indeed, they repeatedly told the courts that they were ready and willing to
comply with the disclosure rules if permitted to fund the ads they wished
to run.
Second, neither the controlling opinion nor concurring opinions in WRTL
mentioned the reporting and disclosure requirements of BCRA Section
201. They certainly did not call into question the legality of the
provisions. The FEC would therefore be entering uncharted waters.
Comments of Common Cause, et al., AR 351 (footnote omitted). That view was seconded by
the Congressional sponsors of Title II of the BCRA, Senator John McCain, Senator Russell D.
Feingold, Senator Olympia Snowe, and Representative Christopher Shays, who insisted that the
Supreme Court’s holding finding some funding restrictions to be unconstitutional did not extend
to the reporting requirements:
The reporting requirements were not at issue in [WRTL II]. The Court did
not analyze their constitutionality, and if it had, an entirely different legal
framework would have been implicated. The Commission should not
undertake such an analysis on its own, especially since the Court in
McConnell upheld the reporting requirement against a facial challenge. . . .
One of the main purposes of Title II of BCRA was to make sure that the
public was informed of the identity of persons making expenditures on
electioneering communications. The legislative history of BCRA and the
record in McConnell are replete with examples of ads run by organizations
with benign sounding names and of unknown origin. The reporting
requirements of Section 201 were a significant reform in and of
themselves, completely independent of the prohibition contained in
Section 203. Those disclosure provisions apply not only to corporations
25
and unions but to individuals and unincorporated associations who fund
electioneering communications. And the severability clause in section 401
of BCRA was meant to underscore congressional intent that even if
Section 203 were declared unconstitutional, other sections of the bill,
including Section 201, should survive. The Commission should not now
effectively throw out Section 201 based on an as-applied challenge to
Section 203 that specifically and explicitly disclaimed any challenge to
Section 201.
Comments of Senator McCain, et al., AR 371.
Other commenters underscored the salutary purposes of disclosure and took the position
that reporting requirements are much less burdensome than restrictions on expenditures. See
Comments of Public Campaign, AR 390–91 (“Disclosure enhances transparency and can provide
citizens with the information to determine how to vote or respond to calls for grassroots
lobbying. . . . I urge the Commission to retain the extant disclosure requirements for all ads that
meet the definition of ‘electioneering communication.’”).
After the written comments were submitted, there was a hearing to consider the NPRM.
The hearing to consider the NPRM was held on October 17 and 18, 2007, and it consisted of a
series of panels. The witnesses and the Commissioners considered many issues other than the
possible narrowing of the disclosure rules, and those discussions that do not bear on the issue
presented in this case are not summarized here.
The first panel included James Bopp, who represented Wisconsin Right to Life in WRTL
II, on behalf of the organization that filed the petition for rulemaking: The James Madison
Center for Free Speech. He was joined by Marc Elias of Perkins Coie, representing the
Democratic Senatorial Campaign Committee, and former FEC staff member and George Mason
Law School faculty member, Allison Hayward. AR 503–632. While there was some discussion
of disclosure issues during this panel, the bulk of the discussion was directed towards other
issues, such as which of a series of sample ads should be considered to be the “functional
26
equivalent” of express advocacy, and whether the proposed rules would have the effect of
regulating grassroots lobbying. It is true that Professor Hayward commented that if a
corporation or labor union did not utilize a segregated account, the regulatory reporting
requirements would require it to “open up [its] books,” which could impose a “real burden.” AR
517. But she did not offer further specifics or quantification. When prompted to make a
prediction, Professor Hayward stated that she anticipated that the Supreme Court might find
disclosure requirements for WRTL II communications to be unconstitutional if presented with the
right case, AR 592–93, but her central point was that WRTL II dealt only with the ban on
corporate spending, and not disclosure, and therefore, the Commission should not tread into that
area at all. AR 517–18.
Elias similarly “implored” the Commission to do what was necessary under WRTL II and
no more; “you are not faced with questions about disclosure.” AR 511; 537. Elias also
cautioned against attempting to predict how the Supreme Court would treat the disclosure of
WRTL II communications. AR 594.
Hayward’s general comments about the burdens of disclosure included her observation
that the “contributors” to be disclosed under the statute would not include an organization’s
commercial customers, those who pay for its services, or members who pay membership dues.
AR 611. Elias agreed. AR 612; 616 (“Are there ‘contributors’ to Ford?”). So this panel did not
supply evidence that compliance would be difficult for commercial enterprises or labor unions
that did not elect to establish the segregated bank account.
At least one of the Commissioners did express concerns about how the rule would affect
non-profit organizations since they are not generally required to identify their contributors, and
the delineation between dues and “donations” paid to them might be unclear. AR 616–19. But
27
much of the record consists of the Commissioners themselves thinking out loud about those
issues – there was little data placed before them. And there was no testimony offered that
suggested that the availability of the segregated bank account option would not alleviate any
burdens or privacy concerns associated with imposing the disclosure requirements on a non-
profit or any other organization.
Finally, as the Commission wrestled with the larger question of how it should administer
the statutory disclosure requirements in the case of organizations that Congress did not anticipate
would be funding electioneering communications in the first place, Elias urged the Commission
to be guided by the approach that the BCRA is “a disclosure statute.” AR 599. He cautioned the
Commission to address only section 203 issues, not issues related to section 201 disclosures. AR
599–600. Even James Bopp, who was the most vocal member of the panel on behalf of
grassroots advocacy organizations and who warned against adopting an approach that would
chill their lobbying and issue advocacy, conceded that no change to the disclosure requirements
was required by the WRTL II decision. AR 626. Instead, Bopp’s position was limited to
advocating for Alternative 2, which would exclude WRTL II communications from the definition
of electioneering communications all together. AR 601–04.
The second panel on October 17, 2007 included Jan Baran, representing the Chamber of
Commerce; Larry Gold on behalf of the AFL-CIO; and Don Simon for Democracy 21, a non-
profit campaign finance reform organization. AR 632–720. Much of the discussion covered
other issues, such as what the definitions of express advocacy and electioneering
communications should be, and how to provide clear guidance about what would be permissible
after WRTL II. See, e.g., AR 665–720. With respect to any changes to the disclosure provisions,
Baran simply urged the FEC to create a safe harbor for the funding of issue ads that would be
28
sure to include all permissible speech, which would in turn have the effect of also eliminating
reporting requirements for permissible speech and grassroots lobbying. AR 636–39.
Gold emphasized that the line of prohibition in the statute defined the line of disclosure,
and he pressed for an approach along the lines of Alternative 2 that would narrowly define
“electioneering communication” rather than a new regulation addressing the prohibition or the
related disclosure rules directly. AR 641. In the event the agency took a different approach,
Gold observed that the Commission was faced with a situation that had not been contemplated
by Congress: “unions and corporations would never be in a position to have to report
electioneering communications because they were simply banned from doing so.” Id. Gold also
testified that the words “contribute” or “donate” connote a voluntary transfer without
consideration, so under the terms of the statute, “such income [as] receipts, dues, investment
income, damages awards and other commercial income and the like ought not to be subject to
disclosure.” AR 645. He explained that taking a broader approach would impose “a tremendous
burden on unions in particular. The obligation to report income at the $1,000 level would be
remarkable in comparison to a regulatory requirement . . . which requires unions to disclose all
receipts at the $5,000 threshold.” AR 646 (referring to the $5,000 threshold for disclosure under
the long-standing Labor Management Report and Disclosure Act).
Simon urged the FEC to leave the disclosure requirement for electioneering
communications untouched.
The [WRTL II] court said nothing about disclosure and the analysis used to
evaluate the “as applied” constitutionality of Section 203 cannot logically
be extended to invalidate the disclosure required by Section 201. The
standard of review is different. Strict scrutiny versus intermediate
scrutiny. The nature of the burden is different – a ban on spending versus
a disclosure of spending that, as the court previously said, “does not
prevent anyone from speaking.” . . . Yet, notwithstanding these
differences on every level of the analysis and notwithstanding the court’s
29
own silence on the matter in [WRTL II], and notwithstanding the court’s
eight to one majority ruling in McConnell that the disclosure provision is
facially constitutional, you are being asked to make a determination that
Section 201 is unconstitutional. Surely the fact that Justices Scalia and
Kennedy, as well as Chief Justice Rehnquist in McConnell, agreed that
Section 201 was constitutional while at the same time voting to strike
down Section 203, indicates that they think the analysis of the two
provisions is completely different and there is nothing in [WRTL II] that
indicates that they or any other member of the court has changed their
mind on this question.
AR 649–651. Simon was asked whether the FEC could choose its first alternative and adopt
language that would exempt business income and membership dues from disclosure. AR 654–
55. He opined that the agency could exempt business income, and he expressed some
uncertainty about whether the agency could address union dues or whether that required a
legislative fix. He acknowledged that membership dues paid to non-profit organizations might
raise a different set of questions, but he warned against doing anything that would undermine the
reporting requirements, and he directed the agency’s attention back to McConnell, where the
Supreme Court had talked about the importance of donor disclosure in an era of advertisements
sponsored by vague “false fronts.” AR 656–57. And he emphasized that Congress had already
addressed the burdens that might arise out of the disclosure obligation by building in the $1000
reporting amount and creating the option of a segregated bank account. AR 657–58.
The Commissioners turned back to the union representative to ask if there were some
way to exempt membership dues while still exposing those hiding behind vague monikers. The
witness did not express a need for further regulation in the union context since he opined that
dues would fall outside of the disclosure provisions as they were already written. “[T]he main
point is that the statute talks in terms of ‘contributing contributions’ and you have interpreted it
to mean ‘donating donations.’ Union dues are neither. Plainly they are neither.” AR 659–60.
30
But Gold did caution that an organization should not be required to reveal its members simply
because it had engaged in a single electioneering communication:
It seems to me that if somebody gives funds at the dues level – pays dues –
that is not a donation, that is not money contributed. If that individual
voluntarily gives more, that is truly a donative act and then you are
beginning to count perhaps towards the $1,000. But you do clearly have
the authority to make these distinctions and you ought to do so. And the
availability of the option that you’re suggesting in one of the alternatives –
a separate fund, even a union or corporation having a segregated fund, and
just dealing with that – that doesn’t really address this issue completely.
AR 660–61.
The Chairman of the Commission observed that when WRTL II identified a new group of
communications that could not be prohibited, it necessarily drew a broader group of entities into
the regulatory regime, and then the panel went on to discuss with how it should define the class
of communications that were protected. AR 665–721.
The third panel on October 17, 2007 consisted of Jessica Robinson of the American
Federation of State, County, and Municipal Employees and Paul Ryan from the Campaign Legal
Center. AR 721–790. Robinson’s remarks were directed to the need for a broad, clearly
delineated safe harbor for permissible issue advocacy. She recommended that the Commission
adopt Alternative 2, which would limit disclosure obligations by limiting the set of
communications to which they would pertain. AR 721–26. She did say, though, that if the
agency adopted Alternative 1, instead, it should simplify the disclosure requirements. She feared
that the regulatory requirement to disclose “donations” could be applied to dues and therefore
difficult to enforce and she concluded, “[t]he easiest way to address these issues is to require
reporting only for those people who earmark funds to be used for WRTL II type communications
and other funds should be reported just as a donation of the labor union.” AR 727.
31
Ryan pointed out that while there were several commenters who proposed exempting
WRTL II ads from the BCRA disclosure requirements, there was a large group of commenters,
who came from groups with varying perspectives on campaign finance disclosure, who would all
agree “that the plaintiff in WRTL did not challenge the disclosure requirements, the WRTL court
did not address the constitutionality of the disclosure requirements, and the McConnell court by a
large majority specifically upheld the constitutionality of these disclosure requirements.” AR
730–31. For those reasons, and because there are different constitutional tests to be applied to
funding restrictions and disclosure rules, there are broader governmental interests served by
disclosure, and the burdens imposed by disclosure are less than those imposed by restrictions on
expenditures, he urged the agency not to utilize the rulemaking to alter the BCRA disclosure
requirements. AR 729–32.
The panel then talked a great deal about the scope of any safe harbor and where the
Supreme Court had drawn the line on permissible expenditures for issue ads, before it turned
again to the disclosure issue. One Commissioner asked whether there would be any union
members whose dues would exceed $1,000 per year, and the answer was yes, although no
numbers were provided. AR 766–67. The Commissioner also posed questions about how to
exempt legitimate dues from disclosure requirements without creating a loophole whereby an
anonymous advocacy organization could simply structure itself to charge exorbitant “dues” and
thereby shield the names of a limited set of individual donors. Robinson responded, “I suppose
one thing you would look at is donative intent . . . . Union dues, they are not donations because
they are required for union membership. So one of the ways you would look at it is you would
look at the intent of the members of [the group]. Are they doing it so the organization can pay
for electioneering communications?” AR 768–69. The specter of probing a contributor’s intent
32
prompted this comment by the Vice Chairman: “It’s one of those things that we would have to
get into discovery for and that would be a bad thing.” AR 769. Robinson agreed, id., and the
panel resumed its discussion about the content of WRTL II ads.
On October 18, 2007, the Commission heard from Brian Svoboda on behalf of the
Democratic Congressional Campaign Committee, Jeremiah Morgan of William J. Olson, P.C.,
representing the Free Speech Coalition and Free Speech Defense and Education Fund, and
Michael Trister for the Alliance for Justice. AR 797–899. Morgan took a strong stance against
imposing disclosure requirements on entities sponsoring issue ads, and he argued that neither of
the alternatives in the Notice would comport with the First Amendment. AR 798–805. Svoboda
encouraged the Commission to proceed narrowly and to do little more than what WRTL II
required, particularly in the disclosure arena, which was not addressed in the opinion at all and
might require a different legal standard and method of legal review. AR 805–09. He maintained
that this approach would reflect “fidelity to what it was that Congress passed,” AR 806, but in
his remarks, Trister countered that the existing reporting requirements were not written for
corporations or labor unions, so it would be impossible for the Commission to divine how
Congress would have decided the question. Under those circumstances, he counseled the agency
to adopt Alternative 2, excluding WRTL II communications from the definition of electioneering
communications, and to leave the question of what reporting requirements should apply to the
funding of this new particular category of speech up to the legislature. AR 812–16.
After the panelists discussed the safe harbor issue in depth, a Commissioner asked:
The comment that was most persuasive to me on this point was the one the
labor unions filed, because it seems to me you would not even get very
useful information out of making a labor union disclose the names of all of
its members, anybody who has paid dues in the last year . . . . Now is
there some way that we could preserve the disclosure piece of it, because I
think it’s still on the books and we kind of have an obligation to do that,
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and yet, define donation perhaps in some way to exclude union dues . . .
and yet not open the door to . . . those sort of organizations that are always
described as shady or shadowy because we do not know who the donors
are behind them? That’s the sort of disclosure that I think Congress
actually has historically been concerned about. Is there some way to catch
one and not the other?
AR 833–34.
Svoboda posited that Congress provided for the segregated account as one possible
option for organizations that wanted to limit disclosure by disclosing only those who donated to
the segregated account. AR 834–37. Trister suggested that the agency could call for the
information that 501(c) organizations are already required to supply to the IRS. But he
expressed the view that there should be a distinction between a general support grant, which an
organization can use for any purpose, and an earmarked or special project grant, and he noted
that general support grants, even if reportable to the IRS, should not be included within the FEC
definition of donation. “If they gave it whenever they gave it and said, ‘Here’s $1,000 and I
want you to run an ad,’ then they ought to report that. But if they give them $1,000 and say,
‘here’s $1,000. I like your organization. Keep up the good work,’ which is essentially a general
support grant, then it is unfair and it [is] misleading to the public to suggest that person was
connected to the ad in some way, that they paid for the ad.” AR 839–40. Trister also noted that
Congress had distinguished between earmarked and non-earmarked funds in other reporting
contexts. AR 840.
Svoboda generally agreed with Trister as to unions, but he thought that an intent-based
distinction would be problematic in the case of those non-profit organizations created for the
primary purpose of running electioneering communications. He cautioned that such an approach
would create an enormous hole in the statutory requirement, leaving both the public, and a
candidate who might wish to respond to an attack, in the dark about who had sponsored an
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advertisement at a critical time close to an actual election. AR 842–44. In response to a question
by a Commissioner concerned about potential threats to those who might criticize an incumbent
officeholder, Svoboda further explained that the identity of the speaker, and not simply the
content of the speech, could play an important role in determining the nature of the response.
AR 850–52. Trister took the position that Svoboda’s concerns were overstated, because such
organizations would likely be required to disclose under the regulations for registered political
committees anyway. AR 845.
The panel was then occupied by an extended legal discussion on the question of whether
the justifications for campaign finance regulation set forth in the Supreme Court’s opinion in
Buckley v. Valeo would apply to WRTL II ads and what Chief Justice Roberts meant on page
2672 of the WRTL II opinion when he questioned whether issue ads that are not the functional
equivalent of express advocacy raise the sort of corruption concern identified in Buckley as
reason for campaign finance regulation. And Commissioner von Sakovsky asked, if WRTL II
ads were not electoral activities, how did the FEC have any authority to call for disclosure of
their sponsors at all? AR 853–56. Since the positions expressed by both the Commissioners and
the witnesses during this and similar portions of the hearing were legal conclusions, they shed
light on the agency’s thought processes and decision making but in the end, they do not provide
“evidence” against which the decision can be tested.
The final panel consisted of Stephen Hoersting of the Center for Competitive Politics;
John Sullivan of the Service Employees International Union; Heidi Abegg, on behalf of the
American Taxpayers Alliance and Americans for Limited Government, and Michael Boos of
Citizens United. AR 900; 902. Abegg urged the Commissioners to think about those 501(c)(4)
organizations that may express unpopular opinions and generate strong adverse reactions from
35
both the government and the public. She took the position that disclosure requirements would
raise privacy concerns and pose a risk of harassment and reprisals. She spoke of a longstanding
tradition of anonymous public speech, and said that there would be no compelling governmental
interest that would support disclosure regulations in the case of communications that are not
express advocacy or its functional equivalent. Ultimately, Abegg urged the adoption of
Alternative 2, which would have the effect of eliminating disclosure requirements for WRTL II
communications. AR 902–08.
Boos of Citizens United also noted that Alternative 1 did not solve the problems related
to those communications because it would leave the “burdensome” disclosure scheme that
applies to electioneering communications intact. But Boos failed to elaborate on how disclosure
was burdensome. AR 910. He took the position that the FEC should adopt Alternative 2 instead
since it would exempt the ads in question – not only the WRTL II grassroots ads, but also
Citizens United’s advertisements promoting the books and documentary films it produces – from
the regulatory scheme altogether. Finally, he called for a broader safe harbor in Alternative 2.
AR 908–14.
Stephen Hoersting agreed with the notion that “it would be absurd to have organizations
Congress never intended to run ECs all of a sudden have to start reporting their electioneering
communications,” but he cautioned: “it would be untenable for the Commission to invoke its
administrative authority to stay application of Section 201, a facially valid provision, without
some organization asserting the application of 201 violates the rights of speech and association.
It would be unseemly for that question to be litigated in the posture of an agency defending its
administrative prerogatives . . . with no factual background of a speaker who is actually chilled.”
AR 915. See also AR 927–28. He concluded: “The Commission should therefore hold its nose
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and apply Section 201 to issue advocates . . . . The word ‘contributes’ . . . should guide the
Commission in crafting disclosure requirements even if disclosure comes down harder on
nonprofit organizations whose ads are funded by contributors than it would for for-profit
corporations.” AR 916. 11 Finally, Hoersting underscored the importance of the need for a clear,
narrow definition of express advocacy. AR 917–19.
The union witness explained that the SEIU, AFL, NEA, and AFSCME were all very
active in the area of issue advocacy, spending considerable resources on federal and state
legislative activities and spending “a tremendous amount of our members’ voluntary
contributions on political activities.” AR 920. He argued that WRTL II required the agency to
revise its regulations concerning the definition of electioneering communications since the
Supreme Court had redefined the boundaries of the Commission’s authority, and he emphasized
the important distinction between donations and dues.
Members pay dues to unions not to finance electioneering
communications, but to finance and support the full range of activities that
the union engages in, from collective bargaining representation, to
servicing members, to engaging in advocacy both with their employers
and with state and local officials around the country. And it would be, if
not counterproductive, at least serving no particular purpose to report or
disclose the names of people who did in fact not contribute to the
financing of a particular electioneering communication.
AR 923–24.
There was then considerable discussion by the panel about the extent of the safe harbor
provisions in the regulations under consideration and the manner in which the agency could and
should implement the WRTL II imperative to define the functional equivalent of express
advocacy. AR 925–65. In response to a question from one of the Commissioners returning to
11 Later, Abegg disagreed. AR 952–53 (“I am for ‘the tie goes to the speaker’ and not
require another nonprofit to spend a lot of money bringing another lawsuit to challenge the
disclosure provisions.”).
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the disclosure issue, Stephen Hoersting suggested that the Commission could probably draw an
inference from Congress’s rejection of amendments to the Honest Leadership Open Government
Act that would have required the disclosure of donors to grassroots lobbying organizations that
Congress did not intend that the FECA disclosure rules would apply to grassroots issue
advertisements. AR 964–65. Boos, from Citizens United, stressed the fact that if the agency
were to define electioneering communication to exempt certain ads, then those ads would be free
of any the disclosure and reporting requirements as well. AR 967.
At the close of the hearing, the Vice Chairman asked Abegg to provide more information
in support of her claim that disclosure could pose some threat to potential donors. AR 968. The
witness reiterated that disclosure requirements might chill political speech, but she presented the
Commission with no specifics:
I have particular examples, but I can’t share them. Some of them are
businessmen who are active in one political party but there is an issue that
is important to them so they want [to] give to effect change on that issue
and they are afraid if they do so they will face harassment or reprisals
from those in the other organizations with which they were associated.
AR 969–70. Abegg went on:
Some of them just don’t want their names known. They don’t want any
attention. They just want to do it anonymously and go about their way.
AR 970. She maintained that “[i]t is a very real concern” that could stop the flow of donations,
and Hoersting echoed that sentiment. He indicated that he had been involved in conversations
where “people stopped their activities because they heard about this disclosure aspect,” but his
testimony on that point was similarly vague. AR 971.
Chairman Lenard: Could you just elaborate on exactly concretely what
their concern is?
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Mr. Hoersting: Yes. Well, I am not sure that I could, actually. I just
know when they heard disclosure they were not longer interested in
pursuing that issue that had a nexus to candidates.
AR 971. Sullivan from SEIU reminded the Commission of the need to protect the names of
union members from potential reprisals in the workplace. AR 973–74. And then finally, with
respect to the disclosure issue, the Citizens United witness raised the question of the
organization’s sales revenue and asked how, if the agency adopted Alternative 1, one would
differentiate between such revenue and reportable “contributions” that would be used to fund
advertisements. AR 974–75. At that point, the second day of hearings came to an end.
A month later, on November 16, 2007, the General Counsel to the Commission
transmitted a Memorandum to the Commission which set forth two proposed draft final rules for
the implementation of a WRTL II exemption. AR 1001–12. Draft A simply created an
exemption from the definition of “electioneering communication.” AR 1002–04. But Draft B
included changes to the electioneering communications reporting requirements in 11 CFR
§104.20, adding the language at issue in this case. AR 1006. The agency received only one
letter responding to the change in the reporting requirements, and in it, J. Gerald Hebert and Paul
S. Ryan of the Campaign Legal Center expressed their strong objection. AR 1024–26 (“We
believe it would be a mistake of historic proportions for the Commission to go beyond the text of
the controlling opinion in WRTL.”). 12 The final rule was approved by the Commission on
November 20, 2007.
Based upon this review of the entire record and the hearing transcript, the Court cannot
conclude that the FEC “examine[d] the relevant data and articulate[d] a satisfactory explanation
12 The Commission also received a letter strongly objecting to proposed language in the
draft Explanation and Justification which would have differentiated between for-profit
corporations and qualified non-profit corporations when applying the new limitation to the
reporting requirements. AR 1127–28. This language did not appear in the final rule.
39
for its action including a ‘rational connection between the facts found and the choice made.’”
See State Farm, 463 U.S. at 43, quoting Burlington Truck Lines v. United States, 371 U.S. 156,
168 (1962). It is hard to put one’s finger upon any data that prompted the particular rule in
question, or the specific material in the transcript that supports the agency’s statement in the
Explanation and Justification that “witnesses at the Commission’s hearing testified that the effort
necessary to identify those persons who provided funds totaling $1,000 or more to a corporation
or labor organization would be very costly and require an inordinate amount of effort.” 72 Fed.
Reg. at 72911. There was no testimony about how many organizations now covered by the
regulatory regime would be affected by the burdens involved with compliance, what those
burdens would actually entail, and what the costs would be.
The witnesses appeared to generally agree that neither the statute nor the existing
regulations defining “contributors” as “donors” would call for the disclosure of the names of a
for-profit corporation’s commercial customers and investors, or names of all labor union
members, since none of those individuals could fairly be characterized as “donors.” Thus, the
concerns that were expressed related largely to non-profit advocacy groups. In the Explanation
and Justification that accompanied the final rule, the agency stated that a non-profit corporation’s
coffers would include “donations from persons who support the corporation’s mission,” but that
those “donors do not necessarily support the corporation’s electioneering communications.” 72
Fed. Reg. at 72911. But no testimony indicated how many non-profit organizations, if any,
collected contributions or dues or that would exceed the $1000 statutory threshold, how many
individuals made donations or paid dues in those amounts, or how difficult it would be to keep
track of them. No evidence was adduced that would suggest that individuals contributing more
than $1000 to a non-profit would be likely to disagree with the messages to be conveyed by that
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organization in its electioneering communications. And nothing explained why the segregated
bank account was not a suitable solution for any of the problems that were identified. So the
Court cannot find the regulation to be reasonable under the State Farm formulation.
IV. The regulation contravenes the language and the purpose of the statute.
It is true that at the second step of the Chevron analysis, the reviewing court is required to
accord appropriate weight to an agency’s interpretation of a statutory scheme that falls within its
bailiwick. 467 U.S. at 844. But an agency’s interpretation of an ambiguous statutory provision
must still be reasonable “in light of the language, legislative history, and policies of the statute.”
Shays v. FEC, 337 F. Supp. 2d 28, 78 (D.D.C. 2004), aff’d 414 F.3d 76 (D.C. Cir. 2005)
(“Shays I”), quoting Republican National Committee v. FEC, 76 F.3d 400, 406 (D.C. Cir. 1996).
Moreover, in Shays III, the Court of Appeals declared: “[i]n applying Chevron’s second step and
the APA, we must reject administrative constructions of a statute that frustrate the policy that
Congress sought to implement.” 528 F.3d at 918 (internal quotations and edits omitted). In light
of those precedents, the FEC’s decision to take it upon itself to “limit” the statutory disclosure
requirements cannot be sustained, and for those reasons, in addition to those set forth above, the
Court does not find section 104.20(c)(9) to be a reasonable interpretation of the BCRA.
First, looking at the language of the statute, section 30104(f)(1) imposes its disclosure
requirements on “[e]very person who makes a disbursement for the direct costs of producing and
airing electioneering communications in an aggregate amount in excess of $10,000 during any
calendar year.” 52 U.S.C. § 30104(f)(1). The BCRA defines “person” to include corporations
and labor unions, 52 U.S.C. § 30101(11), and as the FEC acknowledged in its pleadings before
this Court, even before WRTL II, the disclosure rules applied to some corporations, in particular,
the non-profit corporations described in FEC v. Massachusetts Citizens for Life, Inc., 479 U.S.
41238 (1986). See Def.’s Mem. [Dkt. # 24] at 6. And section 30104(f)(2) requires disclosure of
“the names and addresses of all contributors who contributed an aggregate amount of $1,000 or
more,” 52 U.S.C. § 30104(f)(2)(E)–(F) (emphasis added), with no limitation other than the
threshold amount.
It is true that the Court of Appeals has already stated that the words “contributors” and
“contributed” can, on their face, be construed to include a purpose requirement. Ctr. for
Individual Freedom v. Van Hollen, 694 F.3d at 111. But an interpretation that narrows the
application of the reporting provision would be inconsistent with the policies underlying the
statute. There can be no dispute that the concept of disclosure and transparency is fundamental
to the BCRA. As the Court set out in some detail in its prior opinion, the legislative history of
the BCRA makes it clear that the purpose behind the disclosure requirements was to enable
voters to be informed about who was trying to influence their decisions. 147 Cong. Rec. S3022-
05, S3034 (Mar. 28, 2001) (statement by Sen. Jeffords) (noting that Congress intended to
“shine[] sunlight on the undisclosed expenditures for sham issue advertisements”); 147 Cong.
Rec. S3233-06, S3238 (April 2, 2001) (statement of Sen. Feinstein) (“The attacks come and no
one knows who is actually paying for them. I believe this is unethical. I believe it is unjust. I
believe it is unreasonable and it must end.”). As the Supreme Court has explained, the disclosure
provisions were intended to prevent independent groups from running advertisements “‘while
hiding behind dubious and misleading names’” so that “citizens [could] ‘make informed choices
in the political marketplace.’” Citizens United, 558 U.S. at 367, quoting McConnell, 540 U.S. at
197.
Therefore, it was contrary to the policy goal that Congress intended to implement for the
Commission to add limiting language to its regulations when the aim of that language was – as
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the FEC put it – “to ensure that disclosure of the newly-permitted electioneering communications
would be narrowly tailored . . . .” Def.’s Mem. at 10. Congress did not call for narrow tailoring;
it called for just the opposite.
And the new rule serves to frustrate the aim of the statute because the introduction of a
subjective test to the reporting regime creates an exception that has the potential to swallow the
rule entirely. A donor can avoid reporting altogether by transmitting funds but remaining silent
about their intended use.
Moreover, the decision to reduce disclosure and transparency was not justified or
necessitated by the reasons the agency identified when the final rule was promulgated. The
Commission posited that the donative purpose limitation was needed because the general
treasury of a corporation or labor organization is likely to contain funds derived from individuals
who do not necessarily support the entity’s electioneering communications, and that therefore,
disclosing the identity of those payors would not advance the goals underlying the reporting
requirements. 72 Fed. Reg. at 72911. But the same rationale applies equally to partnerships,
unincorporated entities, and any other “persons,” and Congress determined that they would all be
bound by the disclosure requirements anyway. See also Citizens United, 558 U.S. at 351 (“All
speakers, including individuals and the media, use money amassed from the economic
marketplace to fund their speech.”). And, prior to WRTL II, the disclosure provisions already
applied to some corporations – the MCFL organizations – which, like other non-profits, pursue a
broad range of educational and advocacy activities beyond the mere funding of electioneering
communications. Furthermore, the agency’s statement that it would be too burdensome to
require organizations to identify all “persons who provided funds,” see 72 Fed. Reg. at 72911, is
inconsistent not only with the statute, but with the agency’s own regulations, because that is not
43
who had to be identified under the existing regime in the first place. FEC regulations
implementing the BCRA reporting provisions require the disclosure of “the name and address of
each donor who donated an amount aggregating $1,000 or more,” 11 CFR §104.20(c)(8)
(emphasis added), not “persons who provided funds.” The Commission failed to articulate why
a for-profit corporation’s customers and investors, or a labor union’s members – all of whom
transfer funds in return for some consideration in the form of goods or services or an ownership
interest – would not be fully protected by the regulation’s limiting reporting requirements to
“donors,” or why further elaboration on that term – rather than the interposition of an intent
limitation that could eviscerate the reporting rules – would not alleviate any lingering confusion.
In other words, the FEC had already clarified the ambiguous statutory term “contributors” in a
manner that largely cured the potential problems it identified. And Congress had already
prescribed a remedy for those organizations that found the identification of all individual donors
to be too burdensome: the segregated bank account. See 52 U.S.C. § 30104(f)(2)(E). 13
Since nothing about the WRTL II decision altered the operation of those regulations, it
was unreasonable to add an intent requirement that limited disclosure obligations for the
supposed purpose of implementing the changes brought about by WRTL II. Indeed, the
Commission explicitly acknowledged in the Explanation and Justification for the rule that WRTL
II did not authorize it to eliminate the reporting requirements. See 72 Fed. Reg. at 72901 (“Thus,
because McConnell has upheld the definition of ECs, as well as the reporting and disclaimer
requirements, as facially valid, and because WRTL II did not address these provisions, the
13 The fact that these accounts may be used to receive contributions from individual donors
only does not make them an unsuitable vehicle for eliminating the burdens of organizational
disclosure; it was the cost and effort that might be involved in reporting individual donations that
was what troubled the agency.
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Commission has no mandate to revise the underlying definition of ‘electioneering
communication’ or remove the reporting and disclaimer requirements.”)
Finally, the regulation cannot be supported on the grounds that the Commission fairly
balanced the need for disclosure against sensitive First Amendment and privacy concerns. See
Def.’s Mem. at 33–36; CIF Supplemental Mem. [Dkt. # 93] at 5–7. This was not a justification
advanced in the Explanation and Justification, and more important, those arguments have been
foreclosed by the Supreme Court. In Citizens United, the Court clearly found that the disclosure
requirements in the BCRA – even those that apply to ads that are not express advocacy or its
functional equivalent – do not impinge upon constitutional rights, see Citizens United, 558 U.S.
at 367–69. See also Independence Institute v. FEC, Civ. Action No. 14-1500 (CKK), 2014 WL
4959403 (D.D.C. Oct. 6, 2014); Def.’s Opp. at 7 (noting that in McConnell, the Supreme Court
“upheld the electioneering communication disclosure requirements, noting that they did not
suppress speech and that important state interests support the requirements”). Moreover, the
record evidence on the need to address privacy concerns was extremely thin; the fact that some
contributors “just don’t want their names known” does not provide grounds to override a clear
Congressional choice in favor of transparency. AR 970.
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CONCLUSION
For the reasons above, the Court finds that 11 C.F.R. § 104.20(c)(9) is unreasonable and
therefore fails under the second step of the Chevron test, and that it is arbitrary, capricious, and
contrary to law in violation of the APA. As a result, the Court will enter judgment in favor of
plaintiff, and it will vacate 11 C.F.R. § 104.20(c)(9). A separate order will issue.
AMY BERMAN JACKSON
United States District Judge
DATE: November 25, 2014
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