MCCL v. Federal Election Com'n

• Decision Date: 19 April 1996
• Docket Number: Civil No. 3-95-1147.
• Citation: 936 F. Supp. 633
• Parties: MINNESOTA CITIZENS CONCERNED FOR LIFE, INC. and Elizabeth A. Blosser, Plaintiffs, v. FEDERAL ELECTION COMMISSION and Janet Reno, Defendants.
• Court: U.S. District Court — District of Minnesota

936 F. Supp. 633

MINNESOTA CITIZENS CONCERNED FOR LIFE, INC. and Elizabeth A. Blosser, Plaintiffs, v. FEDERAL ELECTION COMMISSION and Janet Reno, Defendants.

Civil No. 3-95-1147.

United States District Court, D. Minnesota, Third Division.

April 19, 1996.

James Bopp, Jr., Paul R. Scholle, Bopp, Coleson & Bostrom, Terre Haute, IN, and Frank J. Walz, Best & Flanagan, Minneapolis, MN, for Plaintiffs.

Lawrence M. Nobel, Richard B. Bader, Stephen E. Hershkowitz and Kenneth E. Kellner, Office of the General Counsel for the Federal Election Commission, Washington, D.C., for Defendant Federal Election Commission.

Lonnie F. Bryan, Assistant United States Attorney, United States Attorneys Office, Minneapolis, MN, for Defendant Janet Reno.

MEMORANDUM OPINION AND ORDER

KYLE, District Judge.

Introduction

This matter is before the Court on Plaintiffs Minnesota Citizens Concerned for Life, Inc. ("MCCL") and Elizabeth A. Blosser's ("Blosser") Consolidated Motion for a Preliminary Injunction and Trial on the Merits,¹ and Defendant United States Attorney General Janet Reno's ("Attorney General") Motion to Dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure.² MCCL³ commenced this action challenging regulations Defendant Federal Election Commission (the "Commission") promulgated pursuant to the Federal Election Campaign Act of 1971, as amended, (the "Act" or the "FECA"), 2 U.S.C. §§ 431-455. These regulations, found at 11 C.F.R. § 114.10, define an exemption to the Act's prohibition against the use of corporate funds to influence federal elections. MCCL claims these regulations violate the First Amendment and the Administrative Procedures Act ("APA"), 5 U.S.C. §§ 551-706.

A hearing on MCCL's Consolidated Motion was held before the undersigned on March 11, 1996. At the hearing, the Commission moved (1) to engage in additional discovery; (2) to file the complete administrative rulemaking record relative to 11 C.F.R. § 114.10; (3) to strike the Affidavit of Jacqueline A. Schwietz, MCCL's Co-Executive Director; and (4) to file supplemental briefing on the merits of MCCL's claims. The Court granted the Commission's motion to file supplemental briefing on the merits and denied the remainder of its motions.

The Court is currently in receipt of the Commission's supplemental brief and MCCL's response thereto. The Commission has also re-filed motions to engage in additional discovery, to file the complete administrative record pertaining to 11 C.F.R. § 114.10, and to strike the Affidavit of Jacqueline A. Schwietz. This Memorandum Opinion and Order follows.

Background

I. Parties

MCCL is a nonprofit corporation organized under Minnesota law. MCCL's purpose is "to educate the public through the presentation of detailed and factual information about fetal development, abortion, alternatives to abortion, infanticide, euthanasia and related issues." (Am.Compl. ¶ 10.) In accordance with this purpose, MCCL claims it makes expenditures for communications and publications such as a newsletter, candidate surveys and voter guides. (Id. ¶ 16.) Blosser is a resident of Minnesota; she is not a member of MCCL but claims the regulations challenged in this case impair her ability to receive information contained in MCCL's communications. (Id. ¶¶ 5, 55.)

The Commission is an independent agency of the United States Government empowered to administer, interpret, enforce, and make such rules as are necessary to implement the FECA. 2 U.S.C. §§ 437c(b)(1), 437d(1) and 437g.

The Attorney General is charged under the FECA with the enforcement of certain penal provisions of the FECA and is empowered to receive reports of apparent FECA violations from the Commission and to take appropriate action; she is sued in her official capacity. See 2 U.S.C. § 437g.

II. FECA Regulations

The regulations challenged in this case were promulgated pursuant to FECA § 441b. This section prohibits corporations and labor organizations from using general treasury funds⁴ to make a "contribution or expenditure in connection with any federal election." 2 U.S.C. § 441b(a). In Federal Election Comm'n v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, 107 S.Ct. 616, 93 L.Ed.2d 539 (1986) ("MCFL"), the Supreme Court placed a limiting construction on § 441b's campaign spending restrictions; it held that § 441b's prohibition against the use of corporate general treasury funds to make independent campaign expenditures was unconstitutional as applied to MCFL, a small nonprofit corporation,⁵ because this restriction "infringed protected speech without a compelling justification for such infringement." Id. at 263, 107 S.Ct. at 630. The Supreme Court observed MCFL had the following three features "essential" to its holding:

(1) it was formed for the express purpose of promoting political ideas, and could not engage in business activities.

(2) it has no shareholders or other persons affiliated so as to have a claim on its assets or earnings.

(3) it was not established by a business corporation or a labor union, and it is its policy not to accept contributions from such entities.

Id. at 263-64, 107 S.Ct. at 631.

The Supreme Court's description of these three features forms the basis for 11 C.F.R. § 114.10, the regulation at issue in this case. See 60 Fed.Reg. 35,292, 35,293 (July 6, 1995) (explaining that the "new section 114.10 has been added to implement the MCFL Court's conclusion that nonprofit corporations possessing certain essential features may not be bound by the restrictions on independent expenditures contained in section 441b.") Section 114.10 establishes requirements a nonprofit corporation must satisfy to be exempt from § 441b's prohibition against corporate campaign expenditures. Section 114.10 provides that an entity will not be a "qualified nonprofit corporation" and will be bound by § 441b's spending restrictions unless, inter alia:

(1) its only express purpose is the promotion of political ideas and it does not engage in any "business activities";

(2) its members are not offered and do not receive any benefit which "is a disincentive from them to disassociate the corporation on the basis of the corporation's position on a political issue," including credit cards; and

(3) it "does not directly or indirectly accept donations of anything of value from business corporations, or labor organizations."

11 C.F.R. § 114.10(c)(1)-(5). With respect to this first requirement, the regulations further provide:

(i) The term business activities includes but is not limited to:

(A) Any provision of goods or services that results in income to the corporation; and

(B) Advertising or promotional activity which results in income to the corporation, other than in the form of membership dues or donations.

(ii) The term business activities does not include fundraising activities that are expressly described as requests for donations that may be used for political purposes, such as supporting or opposing candidates.

11 C.F.R. § 114.10(b)(3)(i) and (ii).

In addition to defining a "qualified nonprofit corporation," § 114.10(e) and (f) impose certification and reporting requirements "qualified nonprofit corporations" must satisfy in order to retain their exempt status. Specifically, § 114.10(e) provides in pertinent part:

(1) Procedure for demonstrating qualified nonprofit corporation status. If a corporation makes independent expenditures ... that aggregate in excess of $250 in a calendar year, the corporation shall certify that it is eligible for an exemption from the prohibition against corporate expenditures contained in this section....

(ii) This certification may be made either as part of a filing FEC Form 5.... or by submitting a letter which certifies that the corporation has the characteristics of a "qualified nonprofit corporation" set forth in § 144.10 paragraphs (c)(1) through (5).

(2) Reporting independent expenditures. Qualified nonprofit corporations that make independent expenditures aggregating in excess of $250 in a calendar year shall file reports as required by 11 C.F.R. § 109.2.

Section 114.10(f) provides in pertinent part:

Solicitation; disclosure of use of contributions for political purposes. Whenever a qualified nonprofit corporation solicits donations, the solicitation shall inform potential donors that their donations may be used for political purposes, such as supporting or opposing candidates.

Each of these requirements is challenged in this case.

III. MCCL

MCCL claims it has the following pertinent characteristics with respect to the regulations at issue:

• MCCL has approximately 32,500 members⁶ and 160 local chapters throughout Minnesota • No part of MCCL's net earning inures to the benefit of any private shareholder or individual;

• MCCL has no capital stock;

• Except for "reasonable compensation for services rendered to it," MCCL does not afford pecuniary gains to its members, directors, officers or any other persons;

• MCCL offers its members the opportunity to obtain "affinity" credit cards;

• The majority of MCCL's funding comes from individual donations;

• MCCL does not have a written policy against accepting contributions from business corporations into its "general fund" and in fact accepts such contributions in an amount which is "insignificant" in relation to the total contributions received by MCCL during the year⁷;

• MCCL engages in traditional fundraising activities of nonprofit organizations and in incidental business activities related to its advocacy of issues, such as selling advertisements in its newsletter; renting its membership list; conducting bake, wreath and corsage sales; and seeking donations through direct mail, telemarketing and major gift solicitations.⁸ MCCL does not expressly describe its fundraising activities as requests for donations which may be used for political purposes, such as supporting or opposing candidates.

(Am.Compl. ¶¶ 8-15; Schwietz Aff. ¶¶ 14-17.)

IV. MCCL's claims

MCCL...