Shays v. FEC (Shays III)

On September 12, 2007, the U.S. District Court for the District of Columbia granted in part and denied in part the plaintiffs’ motion for summary judgment in this case. The court remanded to the FEC a number of FEC regulations implementing certain provisions of the Bipartisan Campaign Reform Act of 2002 (BCRA). These rules included:

• The revised coordinated communications content standard at 11 CFR 109.21(c)(4);
• The 120-day window for coordination through common vendors and former employees under the conduct standard at 11 CFR 109.21(d) (4) and (d)(5);
• The safe harbor from the definition of “coordinated communication” for a common vendor that establishes a ‘’firewall’’ (11 CFR 109.21(h)(1) and (h)(2)); and
• The definitions of “voter registration activity” and “get-out-the-vote activity” (GOTV) at 11 CFR 100.24(a)(2)-(a)(3).

Background

In response to the court decisions and judgment in Shays I, the FEC held rulemaking proceedings during 2005 and 2006 to revise a number of its BCRA regulations, including the rules governing coordinated communications, certain definitions of FEA and the solicitation of soft money by federal officeholders and candidates at state party fundraising events. For more information, see the August 2005 Record, page 1, the March 2006 Record, page 2, and the July 2006 Record, page 1. On July 11, 2006, U.S. Representative Christopher Shays and then-Representative Martin Meehan (the plaintiffs) filed another complaint in the U.S. District Court for the District of Columbia. The complaint challenged the FEC’s recent revisions to, or expanded explanations for, regulations governing coordinated communications, federal election activity (FEA) and solicitations by federal candidates and officeholders at state party fundraising events. The plaintiffs claimed that the rules did not comply with the court’s judgment in Shays I or with the BCRA. The complaint also alleged the FEC did not adequately explain and justify its actions.

Court decision

The standard for judicial review in a case such as this, where one party alleges that an agency’s actions are contrary to the statute, is called Chevron review, after the Supreme Court’s decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984). In Chevron review, the court asks first whether Congress has spoken to the precise issue at hand. If so, then the agency’s interpretation of the statute must implement Congress’s unambiguous intent. If, however, Congress has not spoken explicitly to the question at hand, the court must defer to the agency’s answer unless it rests on an impermissible construction of the statute.

In this case, the plaintiffs also claimed that in some instances the FEC failed to engage in a reasoned analysis when it promulgated the regulations, or failed to follow proper procedures regarding public notice and comment. Under the Administrative Procedure Act (APA), regulations that are promulgated without a reasoned analysis may be found “arbitrary and capricious” and may be set aside by a reviewing court. 5 U.S.C. §706(2)(A).

Candidate and officeholder solicitation at state party fundraisers

Commission regulation 11 CFR 300.64(b) provides that federal candidates and officeholders may speak at state, district or local party fundraising events “without restriction or regulation.” The regulation implements 2 U.S.C §441i(e)(3), which permits federal candidates and officeholders to attend, speak or be featured guests at such events. The court held that the regulation passed Chevron review and was consistent with the requirements of the APA.

The plaintiffs had argued that the Commission had failed to explain why this broad exemption is uniquely necessary in the state party fundraising context and thus failed to provide a reasoned basis for the exemption. The court, however, found that this exemption was both supported by the record and rationally explained. The court noted that Congress itself treated state, district and local party committee fundraisers differently from other fundraisers when it enacted 2 U.S.C §441i(e)(3).

Coordinated communications content standard

The plaintiffs charged that the Commission’s revised “content standard” impermissibly reduces the pre-election window¹ for coordinated communications in House and Senate races from 120 days to 90 days, in violation of the decision in Shays I. The plaintiffs also argued that the Commission impermissibly retained the election year “gap period” in Congressional races (which begins on the day of the primary and runs until 90 days before the general election) and preserved the Presidential 120-day pre-primary window that was struck down by the court in Shays I.

The court found the revised content standard to be consistent with the statute. However, it ruled that the Explanation and Justification for the revised rule failed to explain how the regulation rationally separated election-related activity from other activity that occurs outside of the coordinated communications windows. According to court, the record before the FEC “demonstrates that candidates do run advertisements— which do not necessarily include express advocacy, but are nevertheless intended to influence federal elections—outside of the pre-election windows included in the revised content standard. The E&J presents no persuasive justification for writing off that evidence and does not suggest that it would somehow be captured by the ‘functionally meaningless’ express advocacy standard.” The court thus found that the revised regulation does not meet the APA standard of reasoned decision-making.

As a separate issue, the plaintiffs challenged the Commission’s methodology in determining these pre-election windows, alleging that the Commission’s use of a set of data from TNS Media Intelligence/ CMAG to support its revised coordination regulations was arbitrary and capricious because the data set does not support the revised regulations and, in some instances, actually undermines them. The court, however, noted that it lacked “any basis, either factual or legal, on which to conclude that the FEC’s very reliance on the CMAG data was arbitrary and capricious.” The court further noted that in drawing a bright-line rule the FEC “appears to have drawn the line in a reasonable place based on the data available to it.”

Common vendor and former employee conduct standard

Following the court decisions in Shays I, the Commission revised the conduct standard of the coordinated communications rules that addresses the activities of common vendors and former employees of a candidate or a political party committee. Under the revised rule, this standard can be met based on the activities of common vendors or former employees during a 120-day period, rather than during the entire election cycle, as was the case in the original rule. 11 CFR 109.21(d)(4) and (d)(5). The court found that the standard for “reasoned analysis” in a case where an agency changes course requires that the agency explain that its prior rules are being “deliberately changed” rather than “casually ignored.” The court found that the Commission had not adequately explained how the new rules would capture the “universe of coordinated communications” and thus found the rule arbitrary and capricious, in violation of the APA.

Firewall safe harbor

During its rulemaking process, the Commission also revised its rules to create a safe harbor for an organization using a common vendor or individuals who currently or previously provided services to a candidate clearly identified in the organization’s communication or to that candidate’s opponent or to a political party committee. For the safe harbor provision to apply, the vendor, former employee or political committee must establish a “firewall” between the parts of the organization working on each project. The court found that this provision both fails the second part of the Chevron test and is arbitrary and capricious in violation of the APA.

Under the Federal Election Campaign Act (the Act), expenditures count as contributions when they are made “in cooperation, consultation, or concert, with, or at the request or suggestion of, a candidate.” 2 U.S.C. § 441a(a)(7). The court found that the Commission’s safe harbor completely exempts communications when the organization creating them provides information that a firewall is in place. However, the court concluded that the rule fails to provide “substantive guidance” concerning what constitutes an effective firewall. The court further determined that the safe harbor might permit information to be passed through an organization’s leaders or administrative personnel and “sets a high evidentiary standard for overcoming the presumption created by the firewall.” According to the court, these factors together create a potential for gross abuse and compromise the purposes of the Act. Thus, the court found that the rule failed the second step of the Chevron test.

The court also found the rule arbitrary and capricious, in violation of the APA, because, again, the standard for “reasoned analysis” is higher when an agency changes course, and the Commission’s explanation of this rule had not met that standard.

Definitions of federal election activity

In Shays I, the court held that the Commission had not provided adequate notice of the approach it took in defining FEA “voter registration” and FEA “get-out-the-vote activity” (GOTV activity). In response, the Commission expanded its Explanation and Justification for the definitions. In the current case, the plaintiffs alleged that the Commission unlawfully left intact the limitation that only activities that “assist” voters by “individualized means” may constitute FEA “voter registration” or FEA “GOTV” activity, and did not revise its definition of voter registration activity.

The court found that the expanded Explanation and Justification for the regulation defining voter registration activity does not “address the vast gray area of activities that state and local parties may conduct and that may benefit federal candidates,” nor does it show that activities that fall within this gray area do not directly benefit candidates or significantly affect federal elections. Thus, the court ruled that the regulation “unduly compromises the Act” and therefore violates the second part of the Chevron test. The court additionally found that, for this same reason, the rule is arbitrary and capricious in violation of the APA.

The court found that the expanded Explanation and Justification “focuses on straw men, citing only examples falling at the far ends of the spectrum of potential voter registration activity without explaining how its definition, which apparently excludes the significant amount of activity in between, either supports or does not undermine BCRA’s purposes.” As a result, the court did not find that the rule meets the APA’s requirement of reasoned decision-making.

The court also found that the expanded Explanation and Justification fails to establish that the Commission’s definition of GOTV activity will not “unduly compromise” the Act’s purposes. In addition, citing the same reasons it gave in finding that the Commission failed adequately to explain its definition of voter registration activity, the court held that the Commission failed to provide a reasoned explanation in promulgating its definition of GOTV activity.

Decision

The court granted in part and denied in part the plaintiffs’ motion for summary judgment in this case and remanded these regulations to the Commission for further actions consistent with the court’s opinion.

Notices of Appeal

On October 16, 2007, the Commission filed a Notice of Appeal seeking appellate review of all of the adverse rulings issued by the district court. On October 23, Representative Shays cross-appealed the district court’s judgment insofar as it denied the plaintiff’s “claims or requested relief.”

U.S. District Court for the District of Columbia, 06-1247 (CKK).

¹ A communication that satisfies the payment, content and conduct prongs of the “coordinated communication test” is an in-kind contribution from the entity paying for the communication. 11 CFR 109.21.