Fed. Election Comm'n v. Nat'l Rifle Assoc. of Am.

• Decision Date: 29 June 2001
• Docket Number: No. 00-5163,00-5163
• Citation: 254 F.3d 173
• Parties: (D.C. Cir. 2001) Federal Election Commission, Appellee v. National Rifle Association of America, et al., Appellants
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 173

254 F.3d 173 (D.C. Cir. 2001)

Federal Election Commission, Appellee v. National Rifle Association of America, et al., Appellants

No. 00-5163

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 2, 2001

Decided June 29, 2001

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[Copyrighted Material Omitted] Appeal from the United States District Court for the District of Columbia (No. 85cv01018)

Richard E. Gardiner argued the cause and filed the briefs for appellants. Christopher A. Conte and Michael W. Lojek entered appearances.

Richard B. Bader, Associate General Counsel, Federal Election Commission, argued the cause for appellee. With him on the brief were Lawrence M. Noble, General Counsel, and Vivien Clair, Attorney.

Before: Edwards, Chief Judge, Ginsburg and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Concurring opinion filed by Circuit Judge Ginsburg.

Tatel, Circuit Judge:

During the 1978, 1980, and 1982 federal election cycles, the National Rifle Association spent $37,833 on behalf of its political action committee. In a civil enforcement action brought by the Federal Election Commission, the district court found that the NRA violated the Federal Election Campaign Act of 1971, which prohibits corporations from making contributions or expenditures in connection with elections for federal office. On appeal, the NRA argues that its payments fall into various statutory and regulatory exceptions to the general prohibition on corporate contributions. Alternatively, the NRA argues that because it is a not-for-profit organization formed to promote the political views of its members, applying the Act to its activities violates the First Amendment. We reject the NRA's statutory claims, as well as its constitutional challenge with respect to the 1978 and 1982 election cycles. Although the NRA does promote the political views of its members, the substantial contributions it received from for-profit corporations in those two years justify the application of the Act. But because the corporate contributions the NRA received in 1980 were de minimis, we agree that, on the record before us, the Act cannot constitutionally be applied to the NRA's activities for that year.

I

The Federal Election Campaign Act of 1971 ("FECA"), 2 U.S.C. §§ 431-455, regulates the financing of campaigns for federal office. Section 441b(a) prohibits corporations (and labor organizations, which are not involved in this case) from making "a contribution or expenditure in connection with any [federal] election" and also prohibits "any candidate, political committee, or other person [from] knowingly ... acceptor receiv[ing] any contribution prohibited by this section." Id. 441b(a). For the purposes of this section, the Act defines "contribution or expenditure" as "any direct or indirect payment, distribution, loan, advance, deposit, or gift of money, or any services, or anything of value ... to any candidate, campaign committee, or political party or organization, in connection with any election to any of the offices referred to in this section." Id. 441b(b)(2).

In FEC v. Massachusetts Citizens for Life, Inc. ("MCFL"), the Supreme Court articulated the justification for the regulation of corporate political activity:

We have described that rationale ... as the need to restrict the influence of political war chests funneled through the corporate form, to eliminate the effect of aggregated wealth on federal elections, to curb the political influence of those who exercise control over large aggregations of capital, and to regulate the substantial aggregations of wealth amassed by the special advantages which go with the corporate form of organization.

479 U.S. 238, 257 (1986) (internal citations omitted). FECA thus "protect[s] the integrity of the marketplace of political ideas" from the "corrosive influence of concentrated corporate wealth." Id.

Notwithstanding FECA's prohibition against corporate contributions to election campaigns, the statute does permit corporations to participate in the electoral process in a limited fashion. Section 441b(b)(2)(C) allows corporations to make expenditures for "the establishment, administration, and solicitation of contributions to a separate segregated fund to be utilized for political purposes by a corporation, labor organization, [or] membership organization." 2 U.S.C. 441b(b)(2)(C). Though the treasuries of a corporation and its fund must be kept separate, Pipefitters Local Union No. 562 v. United States, 407 U.S. 385, 414 (1972), a corporation can nonetheless control how the separate segregated fund spends its money, FEC v. Nat'l Right to Work Comm., Inc., 459 U.S. 197, 200 n.4 (1982); 11 C.F.R. 114.5(d).

At issue in this case are campaign-related payments made by appellant, the National Rifle Association, a not-for-profit membership organization, and its lobbying and fund-raising division, the NRA Institute for Legislative Action ("ILA"), on behalf of the Political Victory Fund ("PVF"), the NRA's separate segregated fund created pursuant to section 441b(b)(2)(C). During the 1978, 1980, and 1982 federal election cycles, the NRA paid $37,833 worth of PVF electionrelated expenses for, among other things, direct mail campaigns for and against individual candidates, as well as production and mailing of proand anti-candidate bumper stickers and brochures. The PVF distributed these materials to NRA members, firearm dealers, gun and sportsmen clubs, and gun shows. NRA money also paid for newspaper advertising, telephone banks, and a fund-raising breakfast for an individual candidate. The PVF thereafter reimbursed the NRA and reported the payments to the Federal Election Commission as independent expenditures.

Suspicious of the PVF's expenditures, the Commission commenced administrative proceedings, subsequently finding "reason to believe" that the NRA, ILA, and PVF had violated FECA. 2 U.S.C. 437g(a)(2). After conciliation efforts failed, the Commission found "probable cause to believe" that the three organizations had violated FECA section 441b. Id. 437g(a)(4)(A)(i). Following the failure of additional conciliation efforts, the Commission filed suit seeking declaratory and injunctive relief in the United States District Court for the District of Columbia pursuant to section 437g(a)(6)(A), which authorizes the Commission to seek civil enforcement of the Act. See FEC v. NRA, No. 85-1018, at 4-5 (D.D.C. July 27, 1999) (describing the proceedings before the Commission).

Defending its actions, the NRA argued that its payments on behalf of the PVF were "establishment" and "administration" expenses permitted by section 441b(b)(2)(C) and FEC regulations. 2 U.S.C. 441b(b)(2)(C); 11 C.F.R. 114.1(b). Citing MCFL, the NRA also challenged the constitutionality of the Act as applied to NRA activities. In MCFL, the Court carved out an exception from section 441b for certain political not-for-profit corporations. 479 U.S. at 254-55, 259-63. Because such organizations do not present the dangers addressed by the statute--contributions by for-profit corporations to political campaigns--the Court held that requiring them to create separate segregated funds to finance their political activities unconstitutionally burdens their First Amendment free speech rights. Id.

On cross motions for summary judgment, the district court found that because the NRA made payments from its corporate treasury for the PVF's electioneering expenses and because the PVF accepted those payments, the NRA, ILA, and PVF all violated FECA section 441b. Persuaded by the Commission's interpretation of "establishment" costs as limited to initial costs incurred in setting up and running political committees, the district court concluded that the NRA's payments did not fall under section 441b(b)(2)(C)'s exception for establishment, administration, and solicitation costs. FEC v. NRA, No. 85-1018, at 11. The court also rejected the NRA's constitutional challenge, id. at 12, finding that because the organization had not been formed for the express purpose of promoting political ideas, and because it had no policy against accepting corporate contributions, it could not qualify for an MCFL exception. Mem. & Order Denying Def.'s Mot. for Recons., FEC v. NRA, No. 85-1018, at 3 (D.D.C. Aug. 1, 1995). The court imposed a $25,000 fine on the NRA and ILA, finding them jointly and severally liable, and a separate $25,000 fine on the PVF. Final Order & J., FEC v. NRA, No. 85-1018 (D.D.C. Apr. 3, 2000). Renewing their statutory and constitutional arguments, all three organizations appeal.

II

The NRA divides the payments it made on behalf of the PVF into three categories: payments to third-party vendors, in-kind payments, and payments for employee time. According to the Commission, all payments amounted to illegal corporate contributions because they were "advance[s]" of funds within the meaning of section 441b(b)(2) and were made "in connection with" a federal election. 2 U.S.C. §§ 441b(b)(2), 441b(a). The NRA argues that because the PVF fully reimbursed the NRA, and because the payments fell into various statutory and regulatory exceptions, they were not "contributions" prohibited by the Act. We consider each category in turn.

Payments to Third-Party Vendors

The NRA paid $3,710.56 to third-party vendors for services related to the production of election advocacy materials. The services included the design, layout, and preparation of mechanical art; typography for an anti-candidate brochure; and data processing and printing for candidate endorsement letters.

According to the NRA, these payments did not run afoul of the Act because they fell within section 441b(b)(2)(C)'s exception for the "establishment [and] administration" costs of the corporation's separate segregated fund. Id. 441b(b)(2)(C). FEC regulations define establishment and...