Shays v. Federal Election Com'n, No. 07-5360.

• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)
• Writing for the Court: Tatel
• Citation: 528 F.3d 914
• Parties: Christopher SHAYS, Appellee/Cross-Appellant v. FEDERAL ELECTION COMMISSION, Appellant/Cross-Appellee.
• Docket Number: No. 07-5360.
• Decision Date: 13 June 2008

528 F.3d 914 Christopher SHAYS, Appellee/Cross-Appellant
v.
FEDERAL ELECTION COMMISSION, Appellant/Cross-Appellee. No. 07-5360. United States Court of Appeals, District of Columbia Circuit. Argued May 5, 2008. Decided June 13, 2008.

[528 F.3d 916]

Appeals from the United States District Court for the District of Columbia (No. 06cv01247).

David Kolker, Associate General Counsel, Federal Election Commission, argued the cause for appellant/cross-appellee. With him on the briefs was Vivien Clair, Attorney. Gregory J. Mueller, Attorney, entered an appearance.

Sean P. Trende was on the brief of amicus curiae Center for Competitive Politics in support of appellant urging reversal.

Charles G. Curtis, Jr. argued the cause for appellee/cross-appellant. With him on the briefs were Michelle M. Umberger, David L. Anstaett, Lissa R. Koop, Roger M. Witten, Randolph D. Moss, Fred Wertheimer, and Donald J. Simon.

J. Gerald Hebert and Paul S. Ryan were on the brief of amicus curiae U.S. Senator Russell D. Feingold in support of appellee.

Before: TATEL, GARLAND, and GRIFFITH, Circuit Judges.

Opinion for the court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

Congress passed the McCainFeingold Act, formally known as the Bipartisan Campaign Reform Act of 2002 (BCRA), Pub.L. No. 107-155, 116 Stat. 81, in an effort to rid American politics of two perceived evils: the corrupting influence of large, unregulated donations called "soft money," and the use of "issue ads" purportedly aimed at influencing people's policy views but actually directed at swaying their views of candidates. The Federal Election Commission promulgated regulations

528 F.3d 917

implementing the Act, but in Shays v. FEC, 414 F.3d 76 (D.C.Cir.2005) ("Shays II"), we rejected several of them as either contrary to the Act or arbitrary and capricious, concluding that the Commission had largely disregarded the Act in an effort to preserve the pre-BCRA status quo. Now the FEC has revised the regulations we earlier rejected and issued several new ones, three of which are before us here: (1) a "coordinated communication" standard, the original version of which we rejected in Shays II; (2) definitions of "get-out-the-vote activity" and "voter registration activity"; and (3) a rule allowing federal candidates to solicit soft money at state party fundraisers. Although we uphold one part of the coordinated communication standard known as the "firewall safe harbor," we reject the balance of the regulations as either contrary to the Act or arbitrary and capricious. We remand these regulations in the hope that, as the nation enters the thick of the fourth election cycle since BCRA's passage, the Commission will issue regulations consistent with the Act's text and purpose.

I.

Because both we and the Supreme Court have provided detailed histories of campaign finance regulation, see generally McConnell v. FEC, 540 U.S. 93, 115-32, 124 S.Ct. 619, 157 L.Ed.2d 491 (2003); Shays II, 414 F.3d at 79-82, here we provide only the background necessary to understand this case. Since long before BCRA, the Federal Election Campaign Act (FECA), 2 U.S.C. §§ 431-455, has regulated many aspects of campaign finance. Relevant here, FECA prohibits corporations and unions from making direct contributions or expenditures in connection with federal elections, id. § 441b, and it imposes dollar limits on individuals' contributions to federal candidates, id. § 441a(a). FECA defines "contributions" as "any gift ... made ... for the purpose of influencing any election for Federal office," id. § 431(8)(A)(i), and it defines "expenditures" as "any purchase, payment, distribution, ... or gift of money or anything of value, made by any person for the purpose of influencing any election for Federal office," id. § 431(9)(A)(i). Over time, "contributions subject to [FECA's] source, amount, and disclosure requirements" came to be known as "hard money," Shays II, 414 F.3d at 80, while "[p]olitical donations made in such a way as to avoid federal regulations or limits" came to be known as "soft money," The American Heritage Dictionary of the English Language 1652 (4th Ed.2006); see also Shays II, 414 F.3d at 80 (defining "soft money" as "[f]unds outside FECA's sphere").

In Buckley v. Valeo, 424 U.S. 1, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976), the Supreme Court, invoking constitutional avoidance, construed FECA's limitation on expenditures to apply only to funding of communications that "express[ly] ... advocate the election or defeat of a clearly identified candidate for federal office," i.e., those that contain phrases such as "`vote for,' `elect,' `support,' `cast your ballot for,' `Smith for Congress,' `vote against,' `defeat,' [or] `reject.'" Id. at 43-44 & n. 52, 96 S.Ct. 612. Thus, by avoiding these "magic words," organizations unable to make "expenditures"—such as corporations and unions—could fund so-called "issue ads" that were "functionally identical" to campaign ads and just as effective. McConnell, 540 U.S. at 126, 124 S.Ct. 619; see also FEC v. Mass. Citizens for Life, 479 U.S. 238, 249, 107 S.Ct. 616, 93 L.Ed.2d 539 (1986) (clarifying that the limited definition of "expenditures" applied to ads funded by corporations and unions). "Little difference existed, for example, between an ad that urged viewers to `vote against Jane Doe' and one that condemned Jane Doe's record on a particular issue before exhorting viewers to `call Jane Doe

528 F.3d 918

and tell her what you think.'" McConnell, 540 U.S. at 126-27, 124 S.Ct. 619.

Following Buckley, the Commission repeatedly interpreted FECA to expand the permissible uses of soft money. In particular, because FECA regulated only contributions intended to influence elections "for Federal office," 2 U.S.C. § 431(8)(A)(i) (emphasis added), "questions arose concerning the treatment of contributions intended to influence both federal and state elections." McConnell, 540 U.S. at 123, 124 S.Ct. 619. As the Supreme Court explained:

Although a literal reading of FECA's definition of "contribution" would have required such activities to be funded with hard money, the FEC ruled that political parties could fund mixed-purpose activities—including get-out-the-vote drives and generic party advertising—in part with soft money. In 1995 the FEC concluded that the parties could also use soft money to defray the costs of "legislative advocacy media advertisements," even if the ads mentioned the name of a federal candidate, so long as they did not expressly advocate the candidate's election or defeat.

Id. at 123-24, 124 S.Ct. 619 (footnote and citations omitted).

Because soft money could now be spent in so many ways that benefited federal candidates, and because it could be raised in massive amounts without any of FECA's limitations or reporting requirements, federal candidates would often solicit such donations directed to their political party. The party would then spend the money on ads supporting the candidate—omitting the magic words—or on get-out-the-vote activity and voter registration activity aimed at helping the candidate. This "enabled parties and candidates to circumvent FECA's limitations on the source and amount of contributions in connection with federal elections." Id. at 126, 124 S.Ct. 619. "As the permissible uses of soft money expanded, the amount of soft money raised and spent by the national political parties increased exponentially," from $22 million in 1984 to $498 million in 2000. Id. at 124, 124 S.Ct. 619. Thus, "the `soft money loophole' had led to a `meltdown' of the campaign finance system that had been intended `to keep corporate, union and large individual contributions from influencing the electoral process.'" Id. at 129, 124 S.Ct. 619 (quoting S. REP.No. 105-167, vol. 4, at 4611 (1998); id. vol. 5, at 7515).

Recognizing these problems, Congress passed BCRA, the "central provisions" of which were "designed to address Congress' concerns about the increasing use of soft money and issue advertising to influence federal elections." Id. at 132, 124 S.Ct. 619. BCRA made a number of dramatic changes to campaign finance law to achieve these goals, including barring national political parties from soliciting soft money. 2 U.S.C. § 441i(a). Relevant here, the Act required the FEC to develop a new test for determining what advertisements count as "coordinated communications," BCRA § 214(c), 116 Stat. at 95 (codified at 2 U.S.C. § 441a note); barred state parties from spending soft money on "federal election activity," including "get-out-the-vote activity" and "voter registration activity," 2 U.S.C. § 441i(b)(1); and prohibited federal candidates from soliciting soft money, id. § 441i(e).

The FEC first issued regulations implementing BCRA in 2003. Believing these regulations far too permissive, Representative Chris Shays, a prime BCRA sponsor, challenged nineteen of them in the United States District Court for the District of Columbia, arguing that they either violated the Act or were arbitrary and capricious. In Shays v. FEC, 337 F.Supp.2d 28 (D.D.C.2004) ("Shays I"),

528 F.3d 919

the district court agreed with Shays, rejecting all nineteen regulations. On appeal, the FEC challenged the district court's decision as to five of the regulations, and in Shays II, 414 F.3d 76, we affirmed the district court.

In response, the Commission modified or more thoroughly justified its proposed regulations and reissued them, along with several new ones. Shays now challenges three of these regulations. The first is the Commission's definition of "coordinated communications," the original version of which we rejected in Shays II. This regulation includes three subparts: (1) a "content standard" providing that only ads containing certain content may be deemed coordinated, 11 C.F.R. § 109.21(c); (2) a "conduct standard" governing when campaign employees and vendors who go to work for outside organizations may share campaign information, id. §...