Van Hollen v. Fed. Election Comm'n
| Decision Date | 25 November 2014 |
| Docket Number | Civil Action No. 11–0766 ABJ |
| Citation | 74 F.Supp.3d 407 |
| Court | U.S. District Court — District of Columbia |
| Parties | Christopher Van Hollen, Jr., Plaintiff, v. Federal Election Commission, Defendant. |
Roger Michael Witten, Fiona J. Kaye, Wilmer Cutler Pickering Hale & Dorr LLP, New York, NY, for Plaintiff.
Harry Jacobs Summers, Holly Jean Baker, Kevin Deeley, Seth E. Nesin, Federal Election Commission, Washington, DC, for Defendant.
This case originated in 2011 when plaintiff Chris Van Hollen, Jr.—a member of the U.S. House of Representatives from the 8th Congressional District of the State of Maryland—filed a complaint challenging the authority of the Federal Election Commission to promulgate 11 C.F.R. § 104.20(c)(9), which narrowed the disclosure requirements set forth in the Bipartisan Campaign Reform Act (“BCRA”), 52 U.S.C. § 30104(f)(d)(E)–(F) (2012),1 for corporations and labor organizations that fund electioneering communications. Compl. ¶¶ 1, 9 [Dkt. # 1]. Applying the framework set forth in Chevron , U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), the Court found that the Commission had exceeded its authority, particularly because the problem it was trying to remedy was not—even as the agency characterized its task—to interpret an ambiguity in the statute, but rather, to address a problem not contemplated by the statute that was ostensibly created by the Supreme Court's decisions in FEC v. Wisconsin Right to Life, Inc. (“WRTL II ”), 551 U.S. 449, 127 S.Ct. 2652, 168 L.Ed.2d 329 (2007), and Citizens United v. FEC, 558 U.S. 310, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010). The Court struck down 11 C.F.R. § 104.20(c)(9) at the first level of the Chevron analysis, and it did not then proceed to the second level of the Chevron test.2 See Van Hollen v. FEC, 851 F.Supp.2d 69, 89 (D.D.C.), rev'd sub nom. Ctr. for Individual Freedom v. Van Hollen, 694 F.3d 108 (D.C.Cir.2012).
The FEC did not appeal the decision. But the intervenor-defendants, the Center for Individual Freedom (“CFIF”) and the Hispanic Leadership Fund (“HLF”) did, and the United States Court of Appeals for the District of Columbia Circuit held that the case should not have been decided at the first Chevron step. The Circuit Court found the BCRA's disclosure provisions to be ambiguous, “especially when viewed in the light of the Supreme Court's decisions” in Citizens United and WRTL II, and it remanded the case for consideration of the regulation at Chevron step two. Van Hollen, 694 F.3d at 110, 112.
The Court now concludes that the promulgation of 11 C.F.R. § 104.20(c)(9) was arbitrary, capricious, and contrary to law and that the regulation is an unreasonable interpretation of the BCRA for several reasons. First, the Commission initiated the rulemaking process for the stated purpose of responding to the decision in WRTL II, but nothing the Supreme Court did in that case provides a basis for narrowing the disclosure rules enacted by Congress. WRTL II dealt solely with the question of whether the statutory ban on corporate and labor organization funding of electioneering communications could withstand an as-applied constitutional challenge.
And in answering that question, the Court did not find any need to address the BCRA's disclosure requirements.
Second, there is little or nothing in the administrative record that would support the Commission's decision to introduce a limitation into the broad disclosure rules in the BCRA. Neither the petition for rulemaking nor the original notice of proposed rulemaking proposed altering the disclosure requirements for corporations and labor unions. None of the commenters asked the agency to amend the disclosure rules to include a purpose requirement, and the Commission did not incorporate the purpose requirement in the new rule until after the notice and comment period and the hearing had been concluded. The only post-hearing comment received in response to the newly incorporated language strongly opposed its inclusion.
Finally, the regulation's purpose requirement is inconsistent with the statutory language and purpose of the BCRA. Congress passed the disclosure provisions of the BCRA to promote transparency and to ensure that members of the public would be aware of who was trying to influence their votes just before an election. The added purpose requirement in section 104.20(c)(9) thwarts that objective by creating an easily exploited loophole that allows the true sponsors of advertisements to hide behind dubious and misleading names. Based on these considerations, the Court will vacate 11 C.F.R. § 104.20(c)(9), and it will grant plaintiff's motion for summary judgment.
Over the course of seven years, the Supreme Court of the United States weakened, and eventually invalidated entirely, the prohibition on the use of corporate and union treasury funds to finance electioneering communications. See Citizens United, 558 U.S. at 365, 130 S.Ct. 876 ; WRTL II, 551 U.S. at 470–76, 127 S.Ct. 2652 ; McConnell v. FEC, 540 U.S. 93, 93, 124 S.Ct. 619, 157 L.Ed.2d 491 (2003), overruled by Citizens United, 558 U.S. at 310, 130 S.Ct. 876. In the midst of this changing legal environment, the Commission began a rulemaking process and solicited public comment “generally regarding the effect of the [WRTL II ] decision on the Commission's rules governing corporate and labor organization funding of electioneering communications, the definition of ‘electioneering communication,’ and the rules governing reporting of electioneering communications.”3
Electioneering Communications, 72 Fed.Reg. 50261, 50262 (proposed Aug. 31, 2007). As part of that process, the Commission offered two alternative ways to implement the WRTL II decision: Id. Under the first alternative, corporations and labor organizations making the sorts of electioneering communications deemed permissible in WRTL II would be permitted to use general treasury funds for that purpose, but they would be subject to the same reporting requirements as other entities. Id. As part of that alternative, the agency also proposed changes to the rules that would enable those organizations to establish segregated bank accounts for the funding of electioneering communications as certain individuals were already permitted to do. Id. Adopting Alternative II would have exempted the WRTL II ads from the definition of electioneering communication in 11 C.F.R. § 100.29 entirely, thereby eliminating both the disclosure and financing restrictions for those ads. Id. at 50263.
In December 2007, the agency adopted a variant of the first alternative. It promulgated 11 C.F.R. § 104.20(c)(9), which included the following language:
If the disbursements were made by a corporation or labor organization pursuant to 11 [C.F.R.] § 114.15, the name and address of each person who made a donation aggregating $1,000 or more to the corporation or labor organization, aggregating since the first day of the precedent calendar year, which was made for the purpose of furthering electioneering communications .
11 C.F.R. § 104.20(c)(9) (emphasis added).
The Commission provided several explanations for adding this new “purpose” or “intent” requirement to the corporate and labor organization disclosure regulation. First, it noted that those entities' “general treasury funds are often largely comprised of funds received from investors,” donors, customers, or members “who may not necessarily support the organization's electioneering communications.” Electioneering Communications, Final Rule, 72 Fed.Reg. 72899, 72911 (Dec. 26, 2007). And second, it stated that compliance with the disclosure rules as previously written would impose a heavy burden on corporations and labor organizations: “[W]itnesses at the Commission's hearing testified that the effort necessary to identify those persons who provided funds totaling $1,000 or more ... would be very costly and require an inordinate amount of effort.” Id. The Commission then concluded that “the policy underlying the disclosure provisions of BCRA [was] properly met by requiring corporations and labor organizations to disclose and report only those persons who made donations for the purpose of funding [electioneering communications].” Id.
Plaintiff Chris Van Hollen—concerned that “corporations have exploited the enormous loophole [the new regulation] created,” Compl. ¶ 29—filed this case against the FEC under the Administrative Procedure Act (“APA”). 5 U.S.C. § 706. He argued that the agency exceeded its statutory authority in promulgating that regulation and that the regulation is also arbitrary, capricious, and contrary to law under the APA. Two months after plaintiff filed his complaint, CFIF and HLF filed motions to intervene as defendants [Dkt. # 14 & 15], and the Court granted those motions pursuant to Federal Rule of Civil Procedure 24(a). Aug. 1, 2011 Minute Entry. Plaintiff, the Commission, and CFIF then filed cross-motions for summary judgment, Pl.'s Mot. for Summ. J. (“Pl.'s Mot.”) [Dkt. # 20]; Def.'s Cross–Mot. for Summ. J. (“Def.'s Mot.”) [Dkt. # 25]; CFIF's Cross–Mot. for Summ. J. [Dkt. # 36], and HLF filed a motion to dismiss for lack of jurisdiction. HLF's Mot. to Dismiss [Dkt. # 30].
On March 30, 2012, the Court entered an order granting plaintiff's motion for summary judgment and denying the other three motions. Order [Dkt. # 47]. After determining that plaintiff had standing to bring his APA challenge, the Court conducted a Chevron analysis and struck down 11 C.F.R. § 104.20(c)(9) as inconsistent with text of ...
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