Bush-Quayle '92 Primary Committee, Inc. v. Federal Election Com'n

• Decision Date: 14 January 1997
• Docket Number: BUSH-QUAYLE,95-1431 and 95-1432,Nos. 95-1430,s. 95-1430
• Citation: 104 F.3d 448
• Parties: '92 PRIMARY COMMITTEE, INC., et al., Petitioners v. FEDERAL ELECTION COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 448

104 F.3d 448

322 U.S.App.D.C. 405

BUSH-QUAYLE '92 PRIMARY COMMITTEE, INC., et al., Petitioners v. FEDERAL ELECTION COMMISSION, Respondent.

Nos. 95-1430, 95-1431 and 95-1432.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 31, 1996.

Decided Jan. 14, 1997.

On Petitions for Review of Orders of the Federal Election Commission.

Bobby R. Burchfield argued the cause for petitioners, with whom Thomas O. Barnett was on the briefs.

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

Before WALD, SENTELLE and ROGERS, Circuit Judges.

SENTELLE, Circuit Judge:

This petition seeks review of a Federal Election Commission ("FEC" or "Commission") decision requiring the Bush-Quayle '92 Primary Committee to repay federal matching funds made pursuant to the Presidential Primary Matching Payment Account Act, 26 U.S.C. §§ 9031-9042 ("Matching Payment Act"). Petitioners argue that the Commission's repayment determination is inconsistent with the statute and regulations and that the Commission has not adequately explained its departure from precedent. After review of the agency record we agree that the Commission has failed to justify its departure from precedent. We therefore remand the case to the Commission to justify or remedy the departure.

I.

The Matching Payment Act was enacted in 1974 to provide partial public funding to the campaigns of qualified presidential primary candidates. 26 U.S.C. §§ 9031-9042. An eligible candidate is entitled to receive payments matching individual contributions of up to $250, subject to an overall ceiling. 26 U.S.C. § 9034(a), (b). As a condition to receiving the funds, the candidate must agree to limit expenditures to "qualified campaign expenses," defined as expenses incurred by the candidate "in connection with his campaign for nomination" that do not violate state or federal law. 26 U.S.C. § 9032(9)(A).

The Matching Payment Act instructs the Commission to conduct an audit of the campaign finances of every publicly funded campaign after the campaign for nomination ends. 26 U.S.C. § 9038(a). If the Commission's audit reveals that public funds have been spent on non-qualified expenses, the candidate is required to repay to the Treasury the portion of non-qualified campaign expenses attributable to public funds. 26 U.S.C. § 9038(b)(2); 11 C.F.R. § 9038.2(b)(2)(iii). Moreover, if the Commission determines that "any portion of the payments made to a candidate from the matching payment account was in excess of the aggregate amount of payments to which [the] candidate was entitled under section 9034, it shall notify the candidate, and the candidate shall pay to the Secretary an amount equal to the amount of excess payments." 26 U.S.C. § 9038(b)(1).

If a candidate becomes eligible for the general election, the candidate may obtain additional federal funds under the Presidential Election Campaign Fund Act, 26 U.S.C. §§ 9001-9013 ("Fund Act"). The Fund Act requires that candidates not accept private campaign contributions and "not incur qualified campaign expenses in excess of the limitations of the aggregate payments to which they will be entitled." 26 U.S.C. §§ 9002, 9003(b)(1), (b)(2). Like the Matching Payment Act, the Fund Act directs the Commission to conduct a post-election audit. 26 U.S.C. § 9007(a).

This case arises from Commission audits of the 1992 campaign of President George Bush. During the 1992 primary campaign, $10,658,521 in public funds were deposited into the account of the Bush-Quayle '92 Primary Committee under the Matching Payment Act. After President Bush received the Republican nomination on August 20, 1992, the Bush-Quayle '92 General Committee received $55,240,000 in public funds for the general election campaign. At the conclusion of the race, the Commission conducted an audit of the finances of the Bush-Quayle '92 Primary Committee, the Bush-Quayle '92 General Committee, and the legal and accounting arm of the general election campaign, the Bush-Quayle '92 Compliance Committee. At that time the process for determining whether repayment was required was as follows: Under the regulations, the audit staff would first issue an Interim Audit Report that recommended an amount for repayment. 11 C.F.R. § 9038.1(c)(1). After considering any objections raised to the Interim Audit Report by the candidate, the Commission adopted a Final Audit Report that made an "initial repayment determination." 11 C.F.R. § 9038.2(c)(1). The candidate could submit evidence that the repayment determination was erroneous and could also request an oral hearing. 11 C.F.R. § 9038.2(c)(3). The Commission then issued a final repayment determination with an accompanying statement of reasons. 11 C.F.R. § 9038.2(c)(4).

The Commission audit staff issued Interim Audit Reports on the Committees on March 24, 1994, to which the Committees responded in writing. On December 27, 1994, the Commission approved Final Audit Reports and made initial repayment determinations. Consistent with the conclusions of the staff, the Commission determined that a number of expenses incurred by the Primary Committee were not "qualified campaign expenses" because they were made for the benefit of the general election campaign. Among the problematic disbursements were expenses for polling, focus group surveys, direct mail, list rental, shipping, print media services, leased office space, and equipment. Although these expenses were made prior to August 20, 1992, the day on which President Bush received the Republican nomination, the Commission concluded that they were non-qualified because they benefitted the general election campaign. For instance, one mailing contrasted the records of George Bush and Bill Clinton. Similarly, a letter from Marilyn Quayle compared Clinton and Bush and urged voters to "make the difference in November." Although the Commission agreed with the staff that these expenses could not be allocated entirely to the Primary Committee, the Commission partly revised the audit staff's repayment determination. While the staff had recommended allocating the expenses entirely to the General Committee, the Commission determined that the expenses had mixed purposes of benefitting both the general election and the primary campaign. It therefore determined that one-half of the expenses could be allocated to the Primary Committee. The remaining one-half was assigned to the General Committee and subject to reimbursement.

The Committees challenged the Final Audit Reports arguing that the Commission should use a "bright-line" rule in allocating expenses based on whether the expenses were incurred before or after August 20, 1992. The Committees also argued that, even without a bright-line rule, the challenged expenditures were made "in connection with" the primary campaign.

Following an oral presentation, the Commission issued a final repayment determination requiring the Primary Committee to repay $323,832 to the United States Treasury. In the accompanying statement of reasons, the Commission rejected the bright-line approach, stating that "whether an expenditure is a primary qualified expenditure relies on both the timing of the expenditure and the nature of the expenditure." Statement of Reasons at 19, reprinted in Joint Appendix ("J.A.") at 1256. The Commission assigned certain expenses to the Primary Committee, but concluded that $818,246 of expenditures were related to the general election campaign. The Committee applied the 50/50 approach and determined that $409,123 in campaign expenses were non-qualified. Approximately 26% of the Committee's funds were public, leaving $106,979 as the Primary Committee's pro rata share of non-qualified campaign expenses. The Commission also found that the Primary Committee had received $216,853 in funds in excess of its entitlement which was subject to repayment.

The Commission stated that it was not requiring further payment from the General Committee or the Compliance Committee. The Commission found, however, that based on the reassignment of expenses from the Primary Committee to the General Committee the General Committee had exceeded its expenditure limit by $182,785. The Commission therefore "recommended" that the Compliance Fund reimburse$182,785 to the General Committee to eliminate the expenditures in excess of its overall expenditure limitation.

II.

As a preliminary matter, we must dispose of the Commission's argument that the petitions of the General Committee and the Compliance Committee should be dismissed for lack of standing. In order to establish constitutional standing, a litigant must demonstrate an injury in fact that is fairly traceable to the challenged action of the defendant and redressable by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 2136-37, 119 L.Ed.2d 351 (1992). The Commission argues that the General Committee and the Compliance Committee have not suffered an injury in fact sufficient to meet the requirements of Article III. We reject this argument and decline to dismiss the petitions. Based on its determination that the amounts in issue ought to have been allocated to the general election, the Commission concluded that the General Committee had exceeded its overall expenditure limitation by $182,785. The violation of federal election laws presupposed by this conclusion may be remedied only if the General Committee's legal and accounting arm, the Compliance Committee, raises funds to reimburse the Treasury. The repayment obligations of the General Committee and the Compliance Committee are, therefore, implicit in the Commission's findings with regard to the Primary Committee. We hold that these repayment obligations are sufficient injury in fact for purposes of Article III.

We turn to the merits of the...