Fulani v. Brady

• Citation: 935 F.2d 1324
• Decision Date: 14 June 1991
• Docket Number: No. 90-5063,90-5063
• Parties: , 67 A.F.T.R.2d 91-1139, 60 USLW 2005, 91-2 USTC P 50,305 Lenora B. FULANI, Dr., et al., Appellants, v. Nicholas F. BRADY, Secretary of the Treasury, Fred T. Goldberg, Commissioner of Internal Revenue and Commission on Presidential Debates.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 1324

935 F.2d 1324

290 U.S.App.D.C. 205, 67 A.F.T.R.2d

91-1139, 60 USLW 2005,

91-2 USTC P 50,305

Lenora B. FULANI, Dr., et al., Appellants, v. Nicholas F. BRADY, Secretary of the Treasury, Fred T.

Goldberg, Commissioner of Internal Revenue and

Commission on Presidential Debates.

No. 90-5063.

United States Court of Appeals,

District of Columbia Circuit.

Argued Jan. 18, 1991.

Decided June 14, 1991.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 88-02649).

Arthur R. Block, New York City, for appellants.

Teresa E. McLaughlin, Atty. Dept. of Justice, with whom Shirley D. Peterson, Asst. Atty. Gen., Gary R. Allen and Robert S. Pomerance, Attys., Dept. of Justice, and Jay B. Stephens, U.S. Atty., were on the brief, Washington, D.C., for federal appellees Nicholas F. Brady, Secretary of Treasury, and Fred T. Goldberg, C.I.R.

Lee Levine, with whom Harold E. Masback, III, and Lewis K. Loss were on the brief, Washington, D.C., for appellee Com'n on Presidential Debates.

Before MIKVA, Chief Judge, SENTELLE and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

Dissenting Opinion filed by Chief Judge MIKVA.

SENTELLE, Circuit Judge:

Appellant Lenora Fulani brought this action against the Internal Revenue Service ("IRS") challenging the tax-exempt status of the Commission for Presidential Debates ("CPD"), the sponsor of the 1988 presidential debates. Fulani alleges that the CPD did not meet the qualifications for tax-exempt status under Internal Revenue Code Sec. 501(c)(3) because it presented a partisan political viewpoint by excluding her from the presidential debates. Upon review, we agree with the District Court's conclusion that Fulani lacks standing to challenge the tax-exempt status of the CPD. For this reason, we affirm the District Court's decision to dismiss this complaint for lack of standing.

I. BACKGROUND

In 1987, the League of Women Voters withdrew its traditional sponsorship of the presidential debates, leaving the field open for new sponsors. The Democratic National Committee and Republican National Committee worked together to fill this gap, and eventually incorporated the CPD for purposes of sponsoring the debates. The CPD applied for, and received, tax-exempt status under Internal Revenue Code Sec. 501(c)(3) as an educational organization "which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office." 26 U.S.C. Sec. 501(c)(3) (1988). In addition to the benefit of being exempt from taxation, the CPD's Sec. 501(c)(3) status allows it to receive charitable contributions that are tax deductible to the donor. See I.R.C. Secs. 170(a)(1), (c)(2)(D). Perhaps more importantly, this status also qualified the CPD to sponsor candidate debates under Federal Election Commission Rule 11 C.F.R. Sec. 110.13(a)(1). Fulani attacks the CPD's tax-exempt status based on its exclusion of her from its presidential debates.

In 1988, Dr. Fulani was a minor-party candidate running as the presidential nominee of the New Alliance Party. Her name was included on the ballot in all fifty states, as well as the District of Columbia, and she qualified for Federal Election Commission presidential primary matching funds. When Fulani learned that the CPD would be sponsoring the presidential debates, she contacted the CPD, inquiring about the process for applying to participate in those debates.

The CPD responded to Fulani's request by stating that its policy was to invite "any candidate with a realistic chance of being elected to the Presidency or Vice-Presidency, whatever that candidate's party-affiliation."." The CPD determined the realistic nature of a candidate's chances by examining, inter alia, that candidate's ballot listings; professional opinions of the media, campaign managers, and political scientists; column inches of news coverage; and findings of national pollsters. Applying these criteria, the CPD concluded that Fulani did not have a realistic chance of being elected President of the United States in 1988 and, accordingly, that she would not be invited to participate in the 1988 presidential debates.

Fulani brought this action against the IRS in the District Court, seeking to require the IRS to revoke the CPD's tax-exempt status under Sec. 501(c)(3) and assess the taxes due once that tax-exempt status was revoked. She filed separate motions seeking temporary restraining orders or preliminary injunctions, either enjoining the debates from going forward, or requiring the CPD to include Fulani in the debates. The District Court denied these motions, citing the "public interest in allowing the presidential debates to go forward and in preserving an orderly political process." Order Denying Plaintiff's Motion for a Temporary Restraining Order or Preliminary Injunction (D.D.C. Sept. 23, 1988). The District Court later dismissed Fulani's other claims, on the grounds that Fulani lacked standing to challenge the tax-exempt status of a third party such as the CPD. Memorandum Opinion and Order (D.D.C. Feb. 2, 1990) 729 F.Supp. 158. Appellant then filed the present appeal.

II. DISCUSSION

Before a claimant may request this Court to decide the merits of a dispute, the claimant must establish that she has the requisite standing to bring such a claim. As the Supreme Court has defined it, a claimant establishes standing only if she alleges a "personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief." Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984) (citation omitted). In the present case, Fulani contends that she is injured by the fact that the CPD is engaging in a program of political misinformation, perpetuating bipartisan, rather than non partisan, political debates. This program, she argues, advocates and perpetuates a two-party system, giving the false impression that there are only two legitimate candidates for presidential office. According to Fulani, this misinformation program directly injured her by depriving her of the media coverage and political legitimacy necessary to her campaign. Moreover, this program violates Sec. 501(c)(3)'s mandate that tax-exempt educational organizations not engage in partisan political activities. Therefore, Fulani alleges that the IRS is responsible for her injury because it indirectly subsidized the CPD by according it Sec. 501(c)(3) tax-exempt status. Thus, Fulani argues, the CPD's tax-exempt status is the cause of her injury, and that injury would be redressed were that status revoked. ¹

Accordingly, Fulani seeks to require the IRS to revoke the tax-exempt status of a third party, the CPD. This claim brings to mind Justice Stewart's concurring opinion in Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976), stating that he could not "imagine a case, at least outside the First Amendment area, where a person whose own tax liability was not affected ever could have standing to litigate the federal tax liability of someone else." Id. at 46, 96 S.Ct. at 1928 (Stewart, J., concurring). ² While Justice Stewart's separate concurrence does not, of course, constitute binding precedent, we have noted previously that it "dramatically denotes the special problems attendant upon the establishment of standing in ... tax cases," when a litigant seeks to attack the tax exemption of a third party. American Soc'y of Travel Agents, Inc. v. Blumenthal, 566 F.2d 145, 150 n. 3 (D.C.Cir.1977), cert. denied, 435 U.S. 947, 98 S.Ct. 1533, 55 L.Ed.2d 546 (1978); see also Tax Analysts & Advocates v. Blumenthal, 566 F.2d 130, 145 n. 90 (D.C.Cir.1977).

Indeed, the statutory scheme created by Congress is inconsistent with, if not preclusive of, third party litigation of tax-exempt status. Specifically, 26 U.S.C. Sec. 7428 (1988) provides for the "[c]reation of [a] remedy" in the case of an "actual controversy involving--

(1) A determination by the Secretary--

(A) with respect to the initial qualification or continuing qualification of an organization as an organization described in section 501(c)(3)."

Significantly, Sec. 7428 specifically limits the remedy it creates by the requirement that "[a] pleading may be filed under this section only by the organization the qualification or classification of which is at issue." 26 U.S.C. Sec. 7428(b)(1).

While the cited statute does not preclude expressly the possibility that a third party could file an action under some statute or source of law other than Sec. 7428, it certainly is telling that Congress thought it necessary to create a specific remedy for the adjudication of a Sec. 503(c)(3) determination even on behalf of the one entity whose standing is least subject to challenge, and that Congress chose to limit the remedy to that entity. Therefore, in light of prior judicial pronouncements, such as those quoted above, and apparent congressional intent, if we were to find that a case does exist in which one party can litigate properly the tax exemption of another, it would have to be something far removed from the norm.

Fulani, however, hardly acknowledges the existence of the judicial dicta and statutory scheme against her, but seeks to ground her claim in an application of "competitor standing" theory, an application not recognized previously in this Circuit. Under Fulani's proposed application of competitor standing, we should recognize her right to challenge tax benefits that the CPD used to benefit her competitors. Unquestionably, there is such a concept as "competitor standing." That standing has been recognized in circumstances where a defendant's actions benefitted a plaintiff's competitors, and thereby caused the plaintiff's subsequent disadvantage. See, e.g., Association of Data Processing Serv....