WinRed, Inc. v. Ellison

• Decision Date: 07 February 2023
• Docket Number: 22-1238
• Parties: WinRed, Inc. Plaintiff-Appellant v. Keith M. Ellison, in his official capacity as Attorney General for the State of Minnesota; Letitia James, in her official capacity as Attorney General for the State of New York; William Tong, in his official capacity as Attorney General for the State of Connecticut; Brian E. Frosh, in his official capacity as Attorney General for the State of Maryland Defendants-Appellees
• Court: U.S. Court of Appeals — Eighth Circuit

WinRed, Inc. Plaintiff-Appellant v. Keith M. Ellison, in his official capacity as Attorney General for the State of Minnesota; Letitia James, in her official capacity as Attorney General for the State of New York; William Tong, in his official capacity as Attorney General for the State of Connecticut; Brian E. Frosh, in his official capacity as Attorney General for the State of Maryland Defendants-Appellees

No. 22-1238

United States Court of Appeals, Eighth Circuit

February 7, 2023

Submitted: October 18, 2022

Appeal from United States District Court for the District of Minnesota

Before SMITH, Chief Judge, BENTON and SHEPHERD, Circuit Judges.

BENTON, CIRCUIT JUDGE.

The district court^[1] dismissed WinRed, Inc.'s request for a declaratory judgment and preliminary injunction. This court "review[s] de novo the grant of a motion to dismiss for failure to state a claim . . ., accepting] the factual allegations in the complaint as true and draw[ing] all reasonable inferences in the plaintiff's favor." Rydholm v. Equifax Info. Servs., 44 F.4th 1105, 1108 (8th Cir. 2022). Having jurisdiction under 28 U.S.C §§ 1291 and 1331, this court affirms.

I.

WinRed a "conduit" political action committee (PAC), centralizes donations to Republican-affiliated candidates and committees. WinRed helps them set up a WinRed.com webpage where donors contribute. WinRed collects and distributes the earmarked contributions. WinRed.com's technical and maintenance services are at least partly performed by a separate entity, WinRed Technical Services, LLC (WRTS). The relationship between WinRed and WRTS is not clear, but this court accepts WinRed's affidavit that it operates exclusively in the domain of federal elections. R. Doc. 24 at ¶ 6.^[2] See Tholen v. Assist Am., Inc., 970 F.3d 979, 982 (8th Cir. 2020) (standard of review).

As a federal PAC, WinRed must comply with the Federal Election Campaign Act (FECA). 52 U.S.C. §§ 30101 et seq. Originally passed in 1971, FECA consolidated federal election law, setting uniform requirements for many aspects of federal elections. See FEC, The First 10 Years 1-2 (Apr. 14, 1985), available at https://www.fec.gov/resources/cmscontent/documents/firsttenyearsreport.pdf (last visited Dec. 12, 2022). Congress amended FECA in 1974, creating the Federal Election Commission (FEC) to enforce the act, promulgate rules, and issue advisory opinions about FECA's scope and application. FEC v. Democratic Senatorial Campaign Comm,, 454 U.S. 27, 37 (1981). FECA and its regulations require WinRed register with the FEC, regularly disclose certain data, and include certain disclaimers on its public communications. 52 U.S.C. §§ 30103, 30104; 11 C.F.R. §§ 110.11, 108.7. The parties do not dispute that WinRed has always complied with its FECA obligations.

According to news reports, WinRed's involvement in the 2020 election angered some donors and overdrafted others. The reports accused Donald Trump and other WinRed candidates of "steer[ing] supporters into unwitting donations" with pre-checked recurring-donation checkboxes. See Shane Goldmacher, How Trump Steered Supporters into Unwitting Donations, N.Y. Times, Apr. 3, 2021, available at https://www.nytimes.com/2021/04/03/us/politics/trump-donations.html (last visited Dec. 23, 2022); Evie Fordham, Trump Campaign and Allies Refund $122M to WinRed Donors: Report, FoxNews, Apr. 4, 2021, available at https://www.foxnews.com/politics/trump-campaign-refund-winred-donors-2020 (last visited Dec. 23, 2022). According to one report, donations would be repeatedly withdrawn from consumers' accounts unless they "wade[d] through a fine-print disclaimer and manually uncheck[ed] a box to opt out," a process complicated by "lines of text in bold and capital letters that overwhelmed the opt-out language." N.Y. Times, Unwitting Donations, supra. Consumers complained to WinRed, campaigns, banks, credit card companies, and law enforcement entities like the FEC and state attorneys general. See id.

Attorneys General from Minnesota, Connecticut, Maryland, and New York launched a joint investigation. On April 29, 2021, the New York Attorney General, on behalf of the four Attorneys General, sent WinRed a letter expressing concern about consumers being "charged for regular contributions that they did not intend and could not afford." Letters Between Attorneys General and WinRed, R. Doc. 1-1 at 2 [hereinafter "Joint AG Communication"].

The letter noted the offices' "significant experience with pre-checked solicitations"; expressed a belief that such practices "can be inherently misleading"; and explained: "For that reason, various state and federal laws specifically require businesses to provide clear and conspicuous disclosures to consumers before an automatic renewal or additional purchase can take effect." Id. It requested documents and information "[i]n order to better understand WinRed's practices and ensure that consumers in [the four represented] states are not subject to deceptive or unlawful solicitation practices." Id.

WinRed declined to comply with the request. It claimed that because WinRed is a PAC engaged only in federal elections, its fundraising practices are governed exclusively by FECA, not state law. Id. at 6-7. When the Attorneys General reasserted authority to investigate and enforce their state consumer-protection laws, WinRed sued in federal court. It sought a declaratory judgment and permanent injunction preventing the Attorneys General from (1) "investigating] WinRed's activities with respect to contributions"; and (2) "bring[ing] a deceptive-practice action against it for those activities." Complaint, R. Doc. 1 at ¶ 7.

The Attorneys General then issued subpoenas and civil investigative demands (CIDs). Minnesota's CID asserted that Attorney General Keith M. Ellison had reasonable grounds to believe that WinRed violated Minnesota Statutes sections 325F.69 (Prevention of Consumer Fraud) and 325D.44 (Deceptive Trade Practices). Demand for Answers to Interrogatories and Request for Documents, R. Doc. 24-1 at 1 [hereinafter "Minnesota CID"]. Specifically, General Ellison believed WinRed had "use[d] certain practices with the tendency or capacity to deceive consumers, or to create a likelihood of confusion or misunderstanding, including WinRed's use of pre-checked boxes or similar options to lock-in donations on a recurring basis." Id.

The CID made ten document requests, many focused on pre-checked recurring-donation boxes, the webpages that contained them, and any disclosures or disclaimers from the webpages.^[3] WinRed sought to preliminary enjoin enforcement of the subpoenas and CIDs.

The Attorneys General moved to dismiss for lack of personal jurisdiction and failure to state a claim. The U.S. District Court for the District of Minnesota found that it lacked personal jurisdiction over the out-of-state Attorneys General and granted their motion to dismiss. It then granted the Minnesota Attorney General's motion to dismiss, finding that FECA does not preempt Minnesota's consumer-protection law as applied to WinRed. R. Doc. 51. WinRed appeals only the Minnesota decision.

II.

WinRed ask this court to declare General Ellison's investigation preempted and enjoin it.

Preemption claims typically focus on state laws or enforcement actions, not investigations. See Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 516 (1992) ("[S]tate law that conflicts with federal law is without effect."), citing M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 427 (1819). Cf. Bunning v. Kentucky, 42 F.3d 1008, 1012 (6th Cir. 1994) (an ostensible investigation could be preempted because it "constituted an attempt to impose [Kentucky law]").

Federal law's supremacy can render state investigations unlawful in one of two ways. First, federal law might provide a substantive right to be free from state investigation. See Major League Baseball v. Crist, 331 F.3d 1177, 1181 (11th Cir. 2003). WinRed does not make this claim.

WinRed argues instead that federal law insulates it from potential enforcement actions, and state law prohibits investigations where no enforcement action could be brought. It acknowledges that Minnesota law authorizes investigations when General Ellison has "reasonable ground to believe that any person has violated, or is about to violate [Minnesota's consumer-protection] laws." Minn. Stat. § 8.31 Subd. 2.^[4] But it claims that FECA immunizes its federal fundraising-related activities from state-law sanction. And because FECA preempts applying Minnesota consumer-protection laws to WinRed's conduct, the argument goes, "as a matter of law, General Ellison can have no 'reasonable ground to believe' that [WinRed] is violating his State's law." WinRed concludes that the investigation is unlawful. See WinRed's Reply Brief at 8 ("[W]ithout a 'reasonable ground to believe' that WinRed, Inc. is violating Minnesota law, General Ellison has no authority whatsoever to investigate WinRed, Inc.'s federal fundraising-related practices for a potential violation of Minnesota law."); id. ("WinRed, Inc. is not challenging General Ellison's ability to impose one remedy instead of another. WinRed, Inc.'s point, in contrast, is that FECA preempts General Ellison from imposing any liability whatsoever based on WinRed, Inc.'s federal fundraising-related activities."); id. at 7-8 ("WinRed, Inc.'s argument . . . is premised on General Ellison's determination that there currently exists a 'reasonable ground to believe' that WinRed, Inc.'s federal fundraising-related practices might give rise to State consumer-protection liability."); WinRed's Opening Brief at 21 ("Because WinRed, Inc.'s activities are fully consistent with federal law, as vetted by federal regulators, General Ellison's state...