Shays v. Federal Election Com'n, 04-5352.

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Citation414 F.3d 76
Docket NumberNo. 04-5352.,04-5352.
PartiesChristopher SHAYS and Martin Meehan, Appellees v. FEDERAL ELECTION COMMISSION, Appellant
Decision Date15 July 2005
414 F.3d 76
Christopher SHAYS and Martin Meehan, Appellees
No. 04-5352.
United States Court of Appeals, District of Columbia Circuit.
Argued May 12, 2005.
Decided July 15, 2005.

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Appeal from the United States District Court for the District of Columbia (No. 02cv01984).

David B. Kolker, Attorney, Federal Election Commission, argued the cause for appellant. With him on the briefs were Richard B. Bader, Associate General Counsel, and Vivien Clair, Erin K. Monaghan, and Harry J. Summers, Attorneys.

Charles G. Curtis, Jr. argued the cause for appellees. With him on the brief were Michelle M. Umberger, David L. Anstaett, Brent N. Rushforth, Carl S. Nadler, Shahid A. Buttar, Roger M. Witten, Randolph D. Moss, Donald J. Simon, and Fred Wertheimer.

Trevor Potter was on the brief for amici curiae John McCain, et al. in support of appellees.

Before: EDWARDS, HENDERSON, and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

Dissenting opinion filed by Circuit Judge HENDERSON.

TATEL, Circuit Judge.

A landmark reform to the nation's campaign finance laws, the Bipartisan Campaign Finance Reform Act of 2002, Pub.L. No. 107-155, 116 Stat. 81, took aim at two perceived demons of federal electoral contests: "soft money," i.e., use of unregulated political party activities to influence federal elections, and "sham issue ads," i.e., ostensibly issue-related advocacy functioning in practice as unregulated campaign advertising. These two tactics, given broad scope by permissive Federal Election Commission rulings, infused federal campaigns with hundreds of millions of dollars in federally unregulated funds, much of it contributed by corporations and labor unions. Now BCRA's House sponsors (joined by Senate sponsors as amici) claim the FEC has undone their hard work, resurrecting in its regulations practices BCRA eradicated and thus forcing them to seek reelection in illegally constituted electoral contests. Considering this facial challenge to the regulations, the district court invalidated some fifteen rules, finding some inconsistent with the statute and others arbitrary and capricious. The FEC appeals regarding five key rules: standards for "coordinated communication," definitions of the terms "solicit" and "direct," the interpretation of "electioneering communication," allocation rules for state party employee salaries, and a de minimis exemption from allocation rules governing certain contributions, known as "Levin funds," to state and local parties. We affirm in all respects.


Needless to say, federal campaign finance law is complex, and BCRA is no exception. Though few of its details are important to this litigation (and those that are we describe later in our analysis), we here provide a brief overview of the statute's background and objectives.

As the Supreme Court explained in McConnell v. FEC, 540 U.S. 93, 124 S.Ct. 619, 157 L.Ed.2d 491 (2003), which upheld BCRA's core provisions against constitutional challenge, "BCRA is the most recent federal enactment designed `to purge national politics of what was conceived to be the pernicious influence of "big money" campaign contributions.'" Id. at 115, 124 S.Ct. 619 (quoting United States v. Auto. Workers, 352 U.S. 567, 572, 77 S.Ct. 529, 1 L.Ed.2d 563 (1957)). Even before BCRA, federal campaign finance laws, including

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the Federal Election Campaign Act of 1971 ("FECA"), Pub.L. 92-225, 86 Stat. 3, and amendments to that statute, restricted campaign "contributions," defined as "any gift, subscription, loan, advance, or deposit of money or anything of value made ... for the purpose of influencing any election for Federal office." 2 U.S.C. § 431(8)(A)(i). Individuals could contribute to federal candidates and their campaigns only within strict dollar limits, 2 U.S.C. § 441a(a), and corporations and labor unions could not contribute at all (though they could sponsor special political funds known as "political action committees" or "PACs"), id. §§ 441b(a), (b)(2)(C). See McConnell, 540 U.S. at 117-19, 124 S.Ct. 619. FECA also restricted "expenditures," i.e., "any purchase, payment, distribution, loan, advance, deposit, or gift of money or anything of value, made ... for the purpose of influencing any election for Federal office," 2 U.S.C. § 431(9)(A)(i). See McConnell, 540 U.S. at 118-19, 124 S.Ct. 619.

Although in Buckley v. Valeo, 424 U.S. 1, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976) (per curiam), the Supreme Court upheld FECA's contribution limitations as well as various reporting and disclosure requirements, the Court invalidated expenditure limits for individual donors, candidates, and campaigns. See id. at 143-44, 96 S.Ct. 612. (Though unchallenged in Buckley, FECA also codified a pre-existing ban on election-related spending by corporations and unions. See 2 U.S.C. § 441b; McConnell, 540 U.S. at 116-17, 122, 124 S.Ct. 619; FEC v. Mass. Citizens for Life, Inc., 479 U.S. 238, 247-48, 107 S.Ct. 616, 93 L.Ed.2d 539 (1986).) In addition, invoking constitutional avoidance, the Buckley Court construed the term "expenditure" to cover communications only where they "advocate the election or defeat of a clearly identified candidate for federal office," and do so using "express terms" such as "`vote for,' `elect,' `support,' `cast your ballot for,' `Smith for Congress,' `vote against,' `defeat,' `reject.'" 424 U.S. at 43-44 & n. 52, 96 S.Ct. 612.

In the political world, several terms of art emerged to describe the boundaries of this pre-BCRA law—terms we shall use throughout this opinion. Most important, contributions subject to federal source, amount, and disclosure requirements are called "hard money" or "federal money." See McConnell, 540 U.S. at 122, 124 S.Ct. 619. Funds outside FECA's sphere are called "nonfederal" or "soft." See id. at 122-23, 124 S.Ct. 619. Due to its reliance on specific phrases like "vote for" and "vote against," the express advocacy standard became known as the "magic words" test. See id. at 126, 124 S.Ct. 619.

Because FECA defined both "contribution" and "expenditure" in terms of the "purpose of influencing any election for federal office," see 2 U.S.C. §§ 431(8)(A), (9)(A) (emphasis added), donations aimed at state and local elections were unregulated, i.e., "soft." Thus, as McConnell explains, "questions arose concerning the treatment of contributions intended to influence both federal and state elections." 540 U.S. at 123, 124 S.Ct. 619. Charged with administering federal campaign finance laws, the Federal Election Commission ("FEC") took a permissive view. "Although a literal reading of FECA's definition of `contribution' would have required funding such activities 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." Id. Parties had to allocate such costs between hard and soft accounts, but rules in place after 1990 allowed national parties to fund as much as 35-40% of their mixed-purpose activities with soft money. Id. at 123 n. 7, 124 S.Ct. 619. Even more

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generous, rules for state and local party organizations allowed allocation based on the ratio of federal to nonfederal offices on a given ballot, "which in practice meant that they could expend a substantially greater proportion of soft money than national parties to fund mixed-purpose activities." Id.

Over time, political parties took increasing advantage of these soft money opportunities. Although the two major parties spent only $21.6 million in soft money in the 1984 election cycle, by 2000 that figure had risen to $498 million—roughly 42% of their total spending. Id. at 124, 124 S.Ct. 619. Because this "soft" money fell outside FECA's contribution limitations, parties could raise it in massive dollops from single contributors, including corporations and unions. See id. at 124-25, 124 S.Ct. 619. Though federal candidates often played a key role in raising these funds, the parties shifted much of their soft money ($280 million in 2000) to the state level, where the FEC's more generous state-party allocation rules applied, and where certain disclosure regulations applicable to national parties did not. See id. at 124-26, 124 S.Ct. 619; McConnell v. FEC, 251 F.Supp.2d 176, 198-99 (D.D.C.2003) (per curiam) (decision of three-judge district court).

Just as soft money spending was exploding, a related phenomenon, "sham issue ads," also developed. The term "issue ad" derives from Buckley's "magic words" construction of FECA, the idea being that express advocacy relates to candidates whereas non-express advocacy relates to "issues." See McConnell, 540 U.S. at 126, 124 S.Ct. 619. However "neat in theory," this distinction proved meaningless in practice—hence the "sham." See id. at 126-27, 124 S.Ct. 619. Free to mention candidates by name and even discuss their views and voting records, those financing non-express advocacy could generate ads "functionally identical" to campaign ads, notwithstanding the absence of "magic words." See id. at 126, 124 S.Ct. 619. "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 and tell her what you think,'" id. at 126-27, 124 S.Ct. 619, a ruse employed in many ostensibly issue-oriented ads, see McConnell, 251 F.Supp.2d at 301 (Henderson, J., concurring in the judgment in part and dissenting in part). Indeed, the record in the McConnell litigation showed that even when permitted to employ express advocacy, advertisers typically used more indirect language. See McConnell, 540 U.S. at 127 & n. 18, 124 S.Ct. 619.

Beginning in about 1996, corporations and unions—both barred from direct contributions and expenditures, s...

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