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On November 5, 2012, the U.S. District Court for the District of Columbia denied a request for a preliminary injunction and dismissed a suit filed by Stop This Insanity, Inc. (STI), its separate segregated fund (SSF) and potential contributors. The suit challenged the Commission’s application of the Federal Election Campaign Act (the Act) in its response to STI’s advisory opinion request (AOR).
In its AOR, STI asked if it could establish a non-contribution account associated with its existing SSF — Stop This Insanity, Inc. Employee Leadership Fund (the Leadership Fund). The Leadership Fund would solicit unlimited contributions for its non-contribution account from members of its restricted class, as well as other individuals, political committees, corporations and labor organizations. Those contributions would be used to fund independent expenditures. The Commission could not reach a majority response. See AOR 2012-01.
STI, the Leadership Fund and a group of potential contributors challenged the Commission’s application of the limits on contributions to political committees, the individual biennial contribution limit, the ban on corporate contributions and the restrictions on SSF solicitations as an unconstitutional limit on their First Amendment rights of freedom of speech and association. See 2 U.S.C. §§441a(a)(1)(C), 441a(a)(3), 441b(a) and 441b(b)(4)(A)(i). The plaintiffs sought preliminary and permanent injunctive relief and a declaratory judgment.
The court denied the plaintiffs’ request for a preliminary injunction and granted the Commission’s motion to dismiss the case.
Throughout its opinion, the court sought to distinguish STI’s claims from those in earlier cases, such as EMILY’s List and SpeechNow, which contributed to the development of the so-called hybrid nonconnected PACs the Leadership Fund sought to emulate.
Among other things, the court noted that the Leadership Fund is an SSF, rather than a nonconnected PAC. Unlike a nonconnected PAC, an SSF may receive unlimited and undisclosed administrative support from its sponsoring corporation or labor organization. In exchange, the SSF must limit its solicitations to a restricted class of individuals associated with the connected organization.
The court rejected STI’s challenge to that restriction, concluding that “SSFs are creatures of statute—they were crafted by Congress to enjoy certain benefits that other, non-connected PACs cannot enjoy, and it is therefore eminently reasonable and important for connected PACs to abide by Congress’s countervailing restriction on the universe of people to whom SSFs’ solicitations may be directed.” The court further explained that, “Granting the plaintiffs the relief they request would force the FEC to ignore the congressionally mandated limits on the fundraising activities of SSFs without a sound constitutional basis for doing so.”
The court also questioned whether a hybrid PAC could effectively avoid the appearance of corruption that serves as a rationale for contribution limits: “When a single entity is allowed to make both limited direct contributions and unlimited independent expenditures, keeping the bank accounts for those two purposes separate is simply insufficient to overcome the appearance that the entity is in cahoots with the candidates and parties that it coordinates with and supports.” Accordingly, the court concluded that, “Insofar as the Leadership Fund chooses to remain as a single entity that engages in both direct candidate contributions and express advocacy communications, … the Leadership Fund may not solicit contributions beyond the limits on such solicitations contained in 2 U.S.C. §441b(b)(4) and … also may not accept any contributions in excess of the limits contained in 2 U.S.C. §§441a(a)(1)(C) and 441a(a)(3).”
Finally, the court rejected the plaintiffs’ argument that the statute’s restrictions would cause it irreparable harm, finding it “highly dubious in light of the numerous alternative ways that the plaintiffs could engage in unlimited political speech.”