Ted Cruz for Senate v. Fed. Election Comm'n

• Decision Date: 03 June 2021
• Docket Number: Civil No. 19-cv-908 (NJR) (APM) (TJK).
• Citation: 542 F.Supp.3d 1
• Parties: TED CRUZ FOR SENATE, et al., Plaintiffs v. FEDERAL ELECTION COMMISSION, et al., Defendants.
• Court: U.S. District Court — District of Columbia

542 F.Supp.3d 1

TED CRUZ FOR SENATE, et al., Plaintiffs

v.FEDERAL ELECTION COMMISSION, et al., Defendants.

Civil No. 19-cv-908 (NJR) (APM) (TJK).

United States District Court, District of Columbia.

Filed June 3, 2021

Charles J. Cooper, John D. Ohlendorf, J. Joel Alicea, Cooper & Kirk, PLLC, and Chris Gober, The Gober Group PLLC, for Plaintiffs.

Lisa J. Stevenson, Kevin Deeley, Harry J. Summers, Seth Nesin, and Tanya Senanayake, Federal Election Commission, Washington, DC, for Defendants.

Before: Rao, Circuit Judge, Mehta and Kelly, District Judges.

MEMORANDUM OPINION

Rao, Circuit Judge:

In our constitutional democracy, elections are the primary way for the people to express their political will. Political speech promotes the free exchange of ideas about principles of government, pressing policy matters, and the relative merits of candidates for office. In recognition of the centrality of free speech to our democracy, the Supreme Court has consistently held that "the First Amendment ‘has its fullest and most urgent application’ to speech uttered during a campaign for political office." Eu v. San Fran. Cnty. Dem. Cent. Comm. , 489 U.S. 214, 223, 109 S.Ct. 1013, 103 L.Ed.2d 271 (1989) (quoting Monitor Patriot Co. v. Roy , 401 U.S. 265, 272, 91 S.Ct. 621, 28 L.Ed.2d 35 (1971) ). Protections for political speech extend to campaign financing because effective speech requires spending money. See Buckley v. Valeo , 424 U.S. 1, 19–23, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976) (per curiam).

This case raises a constitutional challenge to a somewhat obscure campaign finance restriction that limits the amount of post-election contributions that may be used to repay a candidate's pre-election loans. Section 304 of the Bipartisan Campaign Reform Act of 2002 prohibits candidates from using post-election contributions to repay personal loans over $250,000. See 52 U.S.C. § 30116(j) (the "loan-repayment limit"). Senator Rafael Edward "Ted" Cruz and his campaign committee Ted Cruz for Senate brought this suit to invalidate and enjoin the enforcement of Section 304 and its implementing regulation. We find that the loan-repayment limit burdens political speech and thus implicates the protection of the First Amendment. Because the government has failed to demonstrate that the loan-repayment limit serves an interest in preventing quid pro quo corruption, or that the limit is sufficiently tailored to serve this purpose, the loan-repayment limit runs afoul of the First Amendment. We therefore grant summary judgment for Senator Cruz and his campaign.

I.

A.

Candidates for federal office require substantial funds to support their campaigns. Funding may come from individual contributions, which are subject to a per-election cap.¹ See Federal Election Campaign Act of 1971 ("FECA"), Pub. L. No. 92-225, 86 Stat. 3 (codified as amended at 52 U.S.C. § 30116 ); see also 52 U.S.C. § 30116(a)(1)(A) & (c). Candidates may also self-finance their campaigns without monetary limits. See 11 C.F.R. § 110.10 ; see also Buckley , 424 U.S. at 51–54, 96 S.Ct. 612. Self-financing often takes the form of loans, either from a candidate's personal funds or through a third-party lender. A campaign may repay a candidate's loans using contributions received both before and after the election. Under Section 304 of the Bipartisan Campaign Reform Act of 2002 ("BCRA"), however, a campaign may repay only $250,000 of a candidate's pre-election loans with post-election contributions. See Pub. L. No. 107-155, § 304, 116 Stat. 81 (codified at 52 U.S.C. § 30116(j) ).

The loan-repayment limit intersects with other restrictions on the use of campaign contributions promulgated by the Federal Election Commission ("FEC" or "Commission"). For instance, an individual may designate a contribution for a particular election, including a previous election. See 11 C.F.R. § 110.1(b)(2)(i). If designated for a previous election, a contribution may be accepted "only to the extent that [it] does not exceed net debts outstanding" from that election. See id. § 110.1(b)(3)(i). A campaign's "net debts outstanding" for an election equals the "total amount of unpaid debts and obligations" minus its total available resources. Id. § 110.1(b)(3)(ii)(A)–(C). A campaign may accept post-election contributions only to the extent necessary to pay down a net shortfall. To effectuate the loan-repayment limit in Section 304, the calculation of "net debts outstanding" excludes the amount of any candidate loans "that in the aggregate exceed $250,000 per election." Id. § 110.1(b)(3)(ii)(C). The $250,000 limit applies to third-party loans secured by the candidate and also to loans from the candidate's personal funds. See id. § 116.11(a).

A campaign has two options to pay back a candidate's personal loans. First, a campaign "[m]ay repay the entire amount of the personal loans using contributions" made before the election. Id. § 116.11(b)(1). If the campaign chooses to use pre-election contributions, "it must do so within 20 days of the election." Id. § 116.11(c)(1). Second, pursuant to Section 304, a campaign may repay up to $250,000 of the personal loans with post-election contributions. After the election, any balance of the personal loan that exceeds $250,000 will be treated "as a contribution by the candidate." Id. § 116.11(c)(2).

B.

This case arose from Senator Cruz's 2018 campaign for reelection to the United States Senate. The day before the general election, Senator Cruz made two loans totaling $260,000 to his campaign: $5,000 from his personal bank account and $255,000 from a third-party lender secured with his personal assets. Senator Cruz won reelection.

After the election, Senator Cruz's campaign had almost $2.5 million in debt against approximately $2.2 million in cash on hand. The campaign "used the funds it had on hand to pay vendors and meet other obligations instead of repaying [Senator Cruz's] loans." Compl. ¶ 29, ECF No. 1. The campaign did not use any pre-election funds within twenty days of the election to repay the Senator's loans, as Section 304's implementing regulation would have permitted. Instead, the campaign repaid Senator Cruz the maximum $250,000 with post-election contributions but Section 304 prevented the campaign from paying back the final $10,000. The $10,000 balance of those loans was subsequently deemed a campaign contribution from Senator Cruz.

Senator Cruz and his campaign (collectively, the "Cruz campaign") brought suit against the FEC, alleging that Section 304 of BCRA and its implementing regulation, 11 C.F.R. § 116.11, violate the First Amendment. The complaint contends that the loan-repayment limit unconstitutionally infringes the First Amendment rights of Senator Cruz, his campaign, other candidates, and any individuals who might seek to make post-election contributions. Because the complaint concerned a constitutional challenge to a provision of BCRA, the Cruz campaign also applied for a three-judge district court pursuant to Section 403 of BCRA and 28 U.S.C. § 2284. The FEC moved to dismiss for lack of standing and also argued that a three-judge court would not have subject matter jurisdiction. The one-judge district court denied the FEC's motion to dismiss, held the Cruz campaign had standing to challenge the loan-repayment limit, and granted the Cruz campaign's application for a three-judge district court. See Ted Cruz for Senate v. FEC , 2019 WL 8272774, at *5–8 (D.D.C. Dec. 24, 2019). We convened to hear and decide the case.

Following additional preliminary proceedings,² the Cruz campaign and the FEC both moved for summary judgment. Summary judgment is warranted if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). "[I]n ruling on cross-motions for summary judgment, the court shall grant summary judgment only if one of the moving parties is entitled to judgment as a matter of law upon material facts that are not genuinely disputed." Shays v. FEC , 424 F. Supp. 2d 100, 109 (D.D.C. 2006). Because the Cruz campaign and the FEC agree that there is no genuine dispute of material fact, we resolve this case by summary judgment.

II.

To determine whether the loan-repayment limit abridges First Amendment rights we follow the approach taken in McCutcheon v. FEC , the Supreme Court's most recent foray into the constitutionality of a campaign finance regulation.

572 U.S. 185, 134 S.Ct. 1434, 188 L.Ed.2d 468 (2014) (plurality opinion). First, we assess whether the loan-repayment limit burdens political speech and thus implicates the protection of the First Amendment. Second, because we conclude that the limit burdens political speech, we must carefully scrutinize the government's interests and the fit between that interest and the regulatory means chosen to effectuate it. Even under the less exacting test of closely drawn scrutiny, we find the government fails to demonstrate that the loan-repayment limit serves an interest in preventing quid pro quo corruption or its appearance. Moreover, the loan-repayment limit has only a tenuous connection to the asserted government interest in preventing corruption and thus lacks the close tailoring necessary under the First Amendment.

A.

When presented with a less familiar type of campaign finance regulation, we must determine at the outset whether the restriction burdens the exercise of political speech. See id. at 203–06, 134 S.Ct. 1434 ; Ariz. Free Enter. Club's Freedom Club PAC v. Bennett , 564 U.S. 721, 736–47, 131 S.Ct. 2806, 180 L.Ed.2d 664 (2011) ; Davis v. FEC , 554 U.S. 724, 738–40, 128 S.Ct. 2759, 171 L.Ed.2d 737 (2008). The Cruz campaign argues the loan-repayment limit burdens speech by limiting campaign expenditures and contributions. The FEC maintains the limit does not burden speech at all. We find the loan-repayment limit burdens political speech and thus implicates the protection of the First Amendment.

The First Amendment provides that "Congress shall...