FEDERAL ELEC. COM'N v. Phillips Pub., Inc.

• Decision Date: 16 July 1981
• Docket Number: Misc. No. 81-0079.
• Citation: 517 F. Supp. 1308
• Parties: FEDERAL ELECTION COMMISSION, Petitioner, v. PHILLIPS PUBLISHING, INC., Respondent.
• Court: U.S. District Court — District of Columbia

517 F. Supp. 1308

FEDERAL ELECTION COMMISSION, Petitioner, v. PHILLIPS PUBLISHING, INC., Respondent.

Misc. No. 81-0079.

United States District Court, District of Columbia.

July 16, 1981.

Charles N. Steele, Lawrence M. Noble, Nancy B. Nathan, Washington, D. C., for petitioner.

Jack C. Landau, Clemens P. Work, Sharon P. Mahoney, Washington, D. C., for The Reporters Committee for Freedom of the Press.

Paul D. Kamenar, Washington, D. C., for respondent.

MEMORANDUM OPINION

FLANNERY, District Judge.

I. Background

This action is before the court on the petition of the Federal Election Commission (FEC) for court enforcement of two Commission orders to answer written questions. The Commission orders are addressed to Thomas Phillips and Ronald Pearson. The questions seek detailed information about the personnel and operations of Phillips Publishing, Inc. and one of its bi-weekly newsletters, The Pink Sheet on the Left.

Respondent Phillips Publishing, Inc. publishes ten newsletters on various topics, including satellite, telephone, radio, and video technology, retirement, travel, and real estate. The Pink Sheet on the Left is a conservative, anti-communist publication with an annual subscription rate of $39 and a circulation of approximately 14,000. It has been in existence for over ten years. The Pink Sheet and Phillips Publishing are neither owned nor controlled by any political party, political committee, or candidate. Affidavit of Thomas Phillips ¶ 5.

In early 1980 while Senator Edward Kennedy was a candidate for the Democratic Presidential nomination, Phillips Publishing sent a mailing to regular and potential subscribers soliciting subscriptions to The Pink Sheet and seeking donations for placing the newsletter in college libraries. The mailing included a one-page letter from Thomas Phillips, the publisher of the newsletter; a three-page letter from Ronald Pearson, managing editor; a one-page series of quotations endorsing the newsletter; and a one-page combination subscription order form and "Teddy Kennedy Opinion Poll" which could be completed and returned to the newsletter. The mailing appealed to political conservatives and strongly emphasized The Pink Sheet's opposition to the campaign and philosophy of Senator Kennedy.

On March 18, 1980, the Kennedy for President Committee filed a complaint with the FEC alleging that The Pink Sheet promotional material which advocated the defeat of Senator Kennedy violated four provisions of the Federal election laws. On March 24, 1980, the FEC notified Thomas Phillips, the owner and president of Phillips Publishing, that a complaint had been filed against him and requested that he respond to the Kennedy complaint within 15 days. Phillips Publishing responded to the FEC on April 11, 1980. It stated that The Pink Sheet was a periodical, was not controlled by any party, candidate, or committee, and therefore promotional material distributed by it was exempt from FEC regulation under 2 U.S.C. § 431(9)(B)(i).

On June 24, 1980 the FEC found "reason to believe" that the respondent had violated 2 U.S.C. §§ 433, 434(c)(1), 435(b), 441b, and 441d, and initiated an investigation pursuant to 2 U.S.C. § 437g(a)(2). Briefly, § 433 requires political committees to register with the FEC; § 434(c)(1) requires anyone other than a political committee who makes independent political expenditures in excess of $250 to file certain reports; § 435(b) was repealed January 8, 1980;¹ § 441b prohibits labor unions and corporations from making contributions to or expenditures for candidates in federal elections; and § 441d requires anyone who makes an independent expenditure or solicits political contributions to state whether or not the candidate paid for the communication.

The FEC notified respondent of its "reason to believe" finding by a letter dated June 26, 1980. The notification identified the following excerpts from The Pink Sheet's promotional material as being in violation of federal election laws:

1. "We must stop Kennedy before he seizes the Presidency."

2. "You can help with this effort to stop Teddy Kennedy."

3. "You learn how you can use this valuable information to help defeat Teddy Kennedy's drive for the Presidency."

4. "Whether you are a man or woman, young or old, a businessman, teacher, student, employee, employer, union member or government worker — you can actually help combat Teddy Kennedy and advance the cause of conservatism in America."

The Commission's letter went on to explain its determination that The Pink Sheet's solicitation letter is not covered by the press exemption contained in § 431(9)(B)(i):

In your letter dated April 11, 1980, you defend your clients on the ground that the activity in which the Phillips Publishing Inc. and The Pink Sheet On The Left were engaged is exempt from the definition of "expenditures" under 2 U.S.C. § 431(9)(B)(i):

"any news story, commentary, or editorial distributed through the facilities of any broadcasting station, newspaper, magazine, or other periodical publication, unless such facilities are owned or controlled by any political party, political committee, or candidate."

As the questioned communication is not a news story, commentary or editorial, the Commission has determined that the exemption of 2 U.S.C. § 431(9)(B)(i) is not available. Furthermore, the Commission has determined that the questioned communication was not distributed through the facilities of a periodical publication. This determination is based upon a facial comparison of the questioned communication to a copy of the periodical The Pink Sheet On The Left as exhibited in your letter dated April 11, 1980. Unlike the newsletter submitted by you, the title of the questioned communication is not in the same format as the title of the regular Pink Sheet publication (e. g., there is a difference in type). Furthermore, the questioned communication does not contain legends normally carried on the publication (e. g. "America's Authoritative Report on Left-Wing Activities", or the legend bearing the names of staff officers, subscription rates, copyright date etc.) In addition, the content of the Pink Sheet publication has a different format than the questioned communication. For example, the publication is normally laid out in subheadings followed by editorial comment. Finally, the questioned communication bears the salutation of "Dear Friend" as opposed to "Dear Subscriber" which is printed in the Pink Sheet Publication. In light of these considerations, the Commission has determined that your clients cannot claim the exemption afforded by 2 U.S.C. § 431(9)(B)(i).

FEC letter, June 26, 1980 at 2 n.1. Included with the FEC's notification letter were two sets of interrogatories, one directed to Thomas Phillips and one directed to Ronald Pearson.

The FEC voted on October 7, 1980 to order respondent to answer the interrogatories. On October 24 Thomas Phillips and Ronald Pearson filed a motion to quash with the FEC, which was denied on December 17, 1980. After being notified that it would receive no further responses to its questions, the FEC filed this action on April 8, 1981. Respondent has filed a motion to dismiss, a counterclaim, and a motion for preliminary injunction which seeks to enjoin the FEC from investigating or taking any other action with respect to The Pink Sheet and its promotional material.

II. Discussion

A. Standard of Review

When a party refuses to obey a subpoena or order of the FEC, a federal court may issue an order requiring compliance. 2 U.S.C. § 437d(b). In the context of commercial and corporate matters, subpoenas are entitled to court enforcement if "the inquiry is within the authority of the agency, the demand is not too indefinite, and the information sought is reasonably relevant." United States v. Morton Salt, 338 U.S. 632, 652, 70 S.Ct. 357, 369, 94 L.Ed. 401 (1950). While courts have generally been favorably disposed to enforcing agency subpoenas without looking closely at the agency's subject matter jurisdiction over the area being investigated, this court must "exercise particular care in assuring itself that subject matter jurisdiction does exist." Federal Election Commission v. Machinists Non-Partisan Political League, 655 F.2d 380 at 386 (D.C.Cir.1981) (hereinafter "MNPL").

In MNPL the FEC found "reason to believe" that MNPL violated 2 U.S.C. § 441a(a)(2) by contributing more than $5,000 to four "draft Kennedy" organizations formed to promote the acceptance of presidential candidacy by Senator Kennedy. The Commission then issued a sweeping subpoena to MNPL, which was enforced by the district court. The court of appeals vacated the enforcement order on the ground that the subpoena exceeded the FEC's subject matter jurisdiction.

Four factors in MNPL convinced the court that the deference courts usually give to agencies' business-related subpoena enforcement requests was unwarranted and that the court should carefully scrutinize the FEC's subject matter jurisdiction. Each of the factors present in MNPL are present in this case. First, the MNPL court was concerned because the investigation at issue was a "novel extension of the Commission's investigative authority." Id. at 387. Here the FEC has initiated an investigation of a newsletter because it opposed a political candidate as a method to attract subscribers. While the FEC has initiated a somewhat similar investigation on at least one other occasion, see Reader's Digest Association v. Federal Election Commission, 509 F.Supp. 1210 (S.D.N.Y.1981) (investigation of magazine publisher to determine whether distribution of videotapes of computer reenactment of Senator Kennedy's accident at Chappaquidick constituted illegal corporate contribution), on another occasion the FEC appears to have recognized such promotional activities as permissible under the election laws.

In MUR (Matter Under Review) 296(76), the FEC dismissed an internally generated complaint against ...