Stop v. Fed. Election Comm'n

• Decision Date: 05 August 2014
• Docket Number: No. 13–5008.,13–5008.
• Citation: 761 F.3d 10
• Parties: STOP THIS INSANITY INC EMPLOYEE LEADERSHIP FUND, et al., Appellants v. FEDERAL ELECTION COMMISSION, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

761 F.3d 10

STOP THIS INSANITY INC EMPLOYEE LEADERSHIP FUND, et al., Appellants

v.FEDERAL ELECTION COMMISSION, Appellee.

No. 13–5008.

United States Court of Appeals,District of Columbia Circuit.

Argued Nov. 19, 2013.

Decided Aug. 5, 2014.

Appeal from the United States District Court for the District of Columbia (No. 1:12–cv–01140).

Tara A. Brennan argued the cause for appellants. With her on the briefs were Tillman J. Breckenridge, Patricia E. Roberts, and Dan Backer.

Erin Chlopak, Acting Assistant General Counsel, Federal Election Commission, argued the cause for appellee. With her on the brief were Anthony Herman, General Counsel, Kevin Deeley, Acting Associate General Counsel, and Steve Hajjar, Attorney. Adav Noti, Acting Associate General Counsel, Federal Election Commission, entered an appearance.

Before: BROWN and GRIFFITH, Circuit Judges, and SENTELLE, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge BROWN.

Senior Circuit Judge SENTELLE concurs in the judgment.

BROWN, Circuit Judge.

The iconic musician Mick Jagger famously mused, “You can't always get what you want. But if you try sometimes, well, you just might find, you get what you need.” The Rolling Stones, You Can't Always Get What You Want, on Let It Bleed (Decca Records 1969). Here, Stop This Insanity—a grassroots organization— wants to remove the congressionally–imposed binds on solicitation by separate segregated funds, a type of political action committee connected to a parent corporation. What it needs, however, it already has—an unrestrained vehicle, in the form of that parent corporation, which can engage in unlimited political spending. Because this less-obsolete and less-onerous alternative exists, we decline Stop This Insanity's invitation for us to tinker with what has become a statutory artifact.

I

The Federal Election Campaign Act sets forth ground rules for, inter alia, the participation of corporations in the electoral process. See2 U.S.C. § 441b; FEC v. Beaumont, 539 U.S. 146, 149, 123 S.Ct. 2200, 156 L.Ed.2d 179 (2003). Corporations, for example, cannot contribute directly to candidates for federal office or parties. 2 U.S.C. § 441b(a). And before the Supreme Court's decision in Citizens United v. FEC, 558 U.S. 310, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010), they could not use their treasuries to pay for independent expenditures, i.e., funds used to expressly advocate for or against a candidate. See2 U.S.C. § 441b(a); see also id. § 431(17); Citizens United, 558 U.S. at 320–21, 372, 130 S.Ct. 876. But the pre- Citizens United landscape did not leave corporations completely exiled from the political process. Instead, the Act permitted limited corporate participation through separate segregated funds, a type of political action committee. 2 U.S.C. § 441b(b)(2), 431(4)(B). “Though the treasuries of a corporation and its fund [were to be] kept separate, a corporation [could] nonetheless control how the separate segregated fund [spent] its money.” FEC v. NRA, 254 F.3d 173, 179–80 (D.C.Cir.2001) (citations omitted). A fund was “separate ... only in the sense that there [was] a strict segregation of its monies from the corporation's other assets.” FEC v. Nat'l Right to Work Comm., 459 U.S. 197, 200 n. 4, 103 S.Ct. 552, 74 L.Ed.2d 364 (1982) (internal quotation marks omitted).

These funds, however, came with strings attached. They were subject to organizational, recordkeeping, and reporting requirements. See2 U.S.C. §§ 432–34. The Act also placed constraints on the funds' ability to solicit. For one, the Act restricted whom the funds could solicit: only the connected company's stockholders, executives, and administrative personnel, in addition to their respective families. See id. § 441b(b)(4)(A)(i); see also Citizens United, 558 U.S. at 321, 130 S.Ct. 876. Solicitation of the public was off limits. See McConnell v. FEC, 540 U.S. 93, 118 n. 3, 124 S.Ct. 619, 157 L.Ed.2d 491 (2003), overruled on other grounds by Citizens United, 558 U.S. at 310, 130 S.Ct. 876 (“As a general rule, [the Act] permits corporations ... to solicit contributions to their PACs from their shareholders or members, but not from outsiders.”). The other major restriction came in the form of when the funds could solicit: twice yearly to any corporate employee or family member thereof, with responses being anonymous. See2 U.S.C. § 441b(b)(4)(B). But with the strings came benefits: because the funds were so closely tied to their parent corporations, they were not required to disclose the corporation's contributions or expenditures for “the establishment, administration, and solicitation of contributions.” Id. § 441b(b)(2)(C). Citizens United, of course, did away with the ban on corporate independent expenditures. But the funds—now functionally obsolete—still remained.

Stop This Insanity, Inc. (“STII” or “the Corporation”) is a corporation that had a past life as a “nonconnected,” standalone political action committee engaged in political advocacy. See Appellee's Br. at 14. It later deregistered as such a committee, and instead formed a segregated fund—the Employee Leadership Fund (“the Fund”). See J.A. at 10. The Corporation asked the Federal Election Commission (“the Commission”) for guidance on whether the Fund could open a separate unrestricted account devoted to making independent expenditures that could solicit the general public. See J.A. at 31–34. The Commission's response was the regulatory equivalent of a shrug—one memorandum said yes, while another one said no. See J.A. at 41–71. At an impasse, the Commission declined to issue advice. J.A. at 73.

Unhappy with this nonresponse, STII, the Fund, two individuals, and another corporation filed a complaint in district court, alleging the restrictions on the segregated fund were unconstitutional. J.A. at 4–11. The plaintiffs moved for a preliminary injunction.J.A. at 79–81. The Commission moved to dismiss. J.A. at 185–89. Siding with the Commission, the district court dismissed the case. See Stop This Insanity, Inc. Employee Leadership Fund v. FEC, 902 F.Supp.2d 23 (D.D.C.2012). The plaintiffs timely appealed. ¹

II

Simply put, Stop This Insanity would like to use its segregated fund to solicit the entire public while concealing its expenses for such solicitation. It claims Citizens United compels such a result. Even assuming the Corporation's constitutional analysis is correct, it is far from a foregone conclusion that the Act is severable in a way that would eliminate the restrictions but leave intact the partial waiver on disclosure. See Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 685, 107 S.Ct. 1476, 94 L.Ed.2d 661 (1987) (“The more relevant inquiry in evaluating severability is whether the statute will function in a manner consistent with the intent of Congress.” (emphasis added)). Thankfully, we need not make that determination, for STII's arguments fall short on the merits. We review de novo the district court's grant of a motion to dismiss for failure to state a claim. Rudder v. Williams, 666 F.3d 790, 794 (D.C.Cir.2012).

A

Political participation is integral to our democratic government; for this reason, limitations on political contributions and expenditures “operate in an area of the most fundamental First Amendment activities.” Buckley v. Valeo, 424 U.S. 1, 14, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976) (per curiam). Accordingly, limits on independent expenditures, which do not implicate the anticorruption rationale, are subjected to the highest form of scrutiny and are generally unconstitutional. See, e.g., Citizens United, 558 U.S. at 340, 357, 130 S.Ct. 876. Limits on direct contributions to candidates to avoid corruption or the appearance of corruption, however, are tolerated, subjected to a milder form of scrutiny. See Buckley, 424 U.S. at 25, 96 S.Ct. 612; see also McConnell, 540 U.S. at 140–41, 124 S.Ct. 619.

Congress crafted the segregated fund scheme at a time when this reality was not fully realized—in other words, at a time when direct participation by corporations was banned. Segregated funds were limited vehicles through which corporations could participate in the political process. See NRA, 254 F.3d at 179 (“Notwithstanding [the Act's] prohibition[s], ... the statute does permit corporations to participate in the electoral process in a limited fashion.”). After Citizens United, segregated funds became a vintage—yet still operable—relic. Though these funds have the advantage of being able to directly contribute to candidates—something parent corporations still cannot do—they are no longer necessary for independent expenditures. And yet, STII decided to form a separate segregated fund.

The crux of the Corporation's argument is simple: Citizens United prohibits restrictions based on distinctions between organizational entities, and such restrictions are subject to our highest form of scrutiny. Because segregated funds are singled out for the solicitation restrictions, STII reasons the constraints should be subjected to the more exacting half of the Buckley paradigm.

We do not share the Corporation's confidence that Citizens United is apposite here. This case does not present an “outright ban” on political speech, see Citizens United, 558 U.S. at 337, 130 S.Ct. 876; it is governmental “regulat[ion] [of] corporate political speech,” not suppression, see id. at 319, 130 S.Ct. 876. Indeed, the Citizens United Court even acknowledged the existence of these segregated funds—as the so-called counterparts to the then-speechless corporate entities, the funds formed a critical part of the Court's analysis. See id. at 321, 130 S.Ct. 876. The Court indicated these segregated funds were capable of speaking, not unduly restrained by their various obligations. In no uncertain terms, the Court stated “a PAC created by a corporation can still speak.” Id. at 337, 130 S.Ct. 876; see id. at 338, 130 S.Ct. 876 (“PACs have to comply with these regulations just to speak.”); id. at 339, 130 S.Ct....