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Van Hollen v. Federal Election Commission

United States Court of Appeals, District of Columbia Circuit

January 21, 2016

CHRISTOPHER VAN HOLLEN, JR., APPELLEE
v.
FEDERAL ELECTION COMMISSION, APPELLEES, CENTER FOR INDIVIDUAL FREEDOM AND HISPANIC LEADERSHIP FUND, INTERVENOR-APPELLANTS

Argued: October 20, 2015.

Page 487

Appeals from the United States District Court for the District of Columbia. (No. 1:11-cv-00766).

Reversed.

Thomas W. Kirby argued the cause for appellant Center for Individual Freedom. With him on the briefs were Jan Witold Baran, Caleb P. Burns, and Samuel B. Gedge.

Jason Torchinsky was on the brief for appellant Hispanic Leadership Fund.

Daniel Z. Epstein and Joshua N. Schopf were on the brief for amicus curiae Cause of Action in support of appellants.

Catherine M.A. Carroll argued the cause for appellee Christopher Van Hollen Jr. With her on the brief were Roger M. Witten, Donald J. Simon, Trevor Potter, J. Gerald Hebert, Fred Wertheimer, and Scott L. Nelson.

Kevin A. Deeley, Acting Associate General Counsel, Harry J. Summers, Assistant General Counsel, Holly J. Baker and Seth E. Nesin, Attorneys, Federal Election Commission, were on the brief for appellee Federal Election Commission.

Before: BROWN, Circuit Judge, SENTELLE and RANDOLPH, Senior Circuit Judges.

OPINION

Page 488

BROWN, Circuit Judge.

The arc of campaign finance law has been ambivalent, bending toward speech and disclosure. Indeed what has made this area of election law so challenging is that these two values exist in unmistakable tension. Disclosure chills speech. Speech without disclosure risks corruption. And the Supreme Court's track record of expanding who may speak while simultaneously blessing robust disclosure rules has set these two values on an ineluctable collision course.

That tension is on full display in this appeal. At issue is whether to uphold the FEC's rule requiring corporations and labor organizations to disclose only those donations " made for the purpose of furthering electioneering communications" or whether the Bipartisan Campaign Reform Act requires disclosure of all donations irrespective of donative purpose. Christopher Van Hollen, Jr.--a member of the United States House of Representatives--challenged this rule under the familiar Chevron and State Farm frameworks. In a previous judgment, we reversed the district court and held the rule survived Chevron Step One. We now consider whether the rule survives Step Two and

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State Farm' s " arbitrary and capricious" test. We hold that it does.

I

Congressman Van Hollen's challenge to the FEC's disclosure rules is best understood in its broader context, the century-long conflict over campaign finance reform. That context is a protean cascade of perspectives, supplied by each branch of government, on how best to safeguard democracy without unnecessarily sacrificing liberty.

Throughout the twentieth and early twenty-first centuries, campaign finance reform efforts endeavored both to ban corporate contributions and to expand disclosure requirements. These efforts date as far back as President Theodore Roosevelt's State of the Union address in 1905. Nine years earlier, William McKinley defeated populist William Jennings Bryan with a war chest of $16 million, dwarfing Bryan's paltry $600,000. Public opinion steadily galvanized in favor of campaign finance reform, prompting Roosevelt to champion the cause. Roosevelt urged Congress to forbid " [a]ll contributions by corporations . . . for any political purpose" and to " secure by law the full and verified publication in detail of all [political contributions]." President Theodore Roosevelt, State of the Union Address (Dec. 5, 1905), available at http://www.presidency.ucsb.edu/ws/index.php?pid=29546 . Two years later, Congress heeded his call with the Tillman Act of 1907. See Ch. 420, 34 Stat. 864.

The Tillman Act was just the beginning. Over the ensuing decades, Congress passed, in piecemeal fashion, several reform measures. The Federal Corrupt Practices Act, the Hatch Act, the Smith-Connolly Act of 1943, and the Taft-Hartley Act of 1947 each contained provisions aimed at tackling political corruption in campaign finance, either through restricting speech or requiring disclosure. And in 1974, Congress completed a massive campaign finance overhaul with passage of the Federal Election Campaign Act (FECA).

FECA confronted headlong the " who" and " how much" of campaign contributions. The Act established caps on contributions and expenditures, restricted corporations and unions from making independent expenditures, and required that the identities of any individuals making a contribution or expenditure be disclosed to the newly created Federal Elections Commission. The Supreme Court blessed most of FECA's reforms in Buckley v. Valeo, 424 U.S. 1, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976), striking only the caps on individual, candidate, and campaign expenditures. But critically, while upholding FECA's disclosure requirements, the Court construed them narrowly to reach only " contributions earmarked for political purposes" and " expenditures for communications that expressly advocate the election or defeat of a clearly identified candidate." Id. at 80.

The Court's gloss on FECA's disclosure requirements turned out to be a pyrrhic victory for campaign finance reformers. The " express advocacy" carve-out opened a gaping new loophole: advertising expenditures that eschewed magic words like " elect Mary Smith" or " defeat John Brown" could now go undisclosed. Corporations, unions, and political parties took full advantage by sponsoring " issue ads," which were functionally equivalent to express advocacy but comfortably skirted FECA's disclosure requirements.

Determined to close this loop, Congress passed the Bipartisan Campaign Reform Act (BCRA) in 2002. BCRA recognized and regulated a new category of political advertising called " electioneering communications,"

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defined as communications that " refer[] to a clearly identified candidate" " made within" sixty days of a general election or thirty days of a primary election. 2 U.S.C. § 434(f)(3)(A)(i) (2002). These communications were precisely the sort left unregulated by Buckley 's construction of FECA, and BCRA now subjected them to robust disclosure requirements. It required any person making an expenditure (referred to as a " disbursement" ) totaling more than $10,000 to disclose " all persons sharing the costs of the disbursement." Id. § § 434(f)(2)(A), (B), and (D). BCRA also went one step further: it altogether banned corporations and unions from using their general treasuries to fund electioneering communications. Id. § 441b(b)(2). These provisions were upheld by a sharply divided Court in McConnell v. FEC, 540 U.S. 93, 124 S.Ct. 619, 157 L.Ed.2d 491 (2003).

In BCRA's wake, the FEC promulgated several rules to enforce the various reforms, two of which are relevant to today's appeal. First, the FEC promulgated a rule enforcing BCRA's ban on corporate and union expenditures for electioneering communications. Electioneering Communications, 67 Fed.Reg. 65190, 65190 (Oct. 23, 2002). Second, the FEC promulgated a rule to enforce BCRA's requirement for disclosure of " the names and addresses of all contributors who contributed an aggregate amount of $1,000 or more to the person making the disbursement." 2 U.S.C. 434(f)(2)(E)-(F). The FEC's rule mirrored this language almost identically but replaced the words " contributor" and " contributed" with " donor" and " donated." Bipartisan Campaign Reform Act of 2002 Reporting, 68 Fed.Reg. 404, 420 (Jan. 3, 2003). Whatever the import of that choice, it is clear that as of 2003, (1) corporations and unions could not fund electioneering communications out of their general treasuries, and (2) with certain exceptions not relevant to this opinion, persons making disbursements for electioneering communications had to disclose the names of anyone who donated $1,000 or more to them.

But the Supreme Court would soon deliver a heavy blow to BCRA's attempt to regulate electioneering communications. With its ruling in FEC v. Wisconsin Right to Life, Inc., 551 U.S. 449, 127 S.Ct. 2652, 168 L.Ed.2d 329 (2007), another sharply divided decision, and this time without even a majority opinion, the Court held corporations and unions could not be barred from electioneering communications unless they are " the functional equivalent of express advocacy." Id. at 465. And an ad is only the functional equivalent of express advocacy, the Court said, when it " is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate." Id. at 469-70. The three ads before the Court in Wisconsin Right to Life couldn't satisfy this exacting test, and neither, it seems, could the vast majority of issue ads funded through independent expenditures. See Id. at 476. For restrictions on core political speech, the Court announced it would " give the benefit of the doubt to speech, not censorship." Id. at 482. BCRA's prohibition on corporate- and union-funded electioneering communications, beaten and tattered by Wisconsin Right to Life, was left on life support.[1]

The FEC was now left to decide how BCRA's disclosure requirements should apply to a class of speakers Congress never

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expected would have anything to disclose. The FEC published a Notice of Proposed Rulemaking (NPRM) and requested comments on proposed rules that " would implement the Supreme Court's decision in Wisconsin Right to Life." 72 Fed.Reg. 50261, 50262 (Aug. 31, 2007). That NPRM advanced two proposals for applying BCRA's disclosure provisions to corporations and unions. Under the first, the FEC would simply apply the existing disclosure requirements for individuals and qualified nonprofit corporations (QNCs) to corporations and unions, which would require disclosure of all $1,000 contributors. Id. Under the second, the FEC proposed to exempt corporations and unions from the disclosure requirements altogether. Id.

The FEC received twenty-seven comments and held a two-day hearing. Rather than embracing either of the NPRM's proposals, it adopted a middle path. See Electioneering Communications, 72 Fed.Reg. 72899, 72900 (Dec. 26, 2007). Corporations and unions would not be altogether exempted, but neither would they be required to disclose every donation totaling $1,000 or more. Id. Rather, corporations and unions would be required to disclose all donations totaling $1,000 or more that were " made for the purpose of furthering electioneering communications." Id. at 72911. This new " purpose requirement" set corporate and union electioneering communications apart from communications funded by other persons, who were still required to disclose all donations regardless of purpose.

Representative Christopher Van Hollen challenged the FEC's new purpose requirement and persuaded the district court that it violated BCRA's text. Van Hollen v. FEC, 851 F.Supp.2d 69 (D.D.C. 2012); see Chevron, USA, Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). That decision was appealed to and reversed by a panel of this court, which concluded BCRA's disclosure provisions were ambiguous, and the FEC's rule cleared Chevron Step One. Ctr. for Individual Freedom v. Van Hollen, 694 F.3d 108, 111, 402 U.S.App.D.C. 345 (D.C. Cir. 2012). Congress's use of the terms " contributors" and " contributed," the panel said, is " anything but clear." Id. The panel did " not agree with the District Court that the[se] words . . . cannot be construed to include a 'purpose' requirement." Id. However, it concluded that it was " in no position to assess the parties' arguments on whether § 104.20(c)(9) is reasonable, and thus entitled to deference under Chevron Step Two, or whether the regulation survives arbitrary and capricious review." Id. at 112. The panel sent the case back to the district court to sort these questions out.[2]

On remand, the district court concluded that the FEC's rule failed at both the Chevron Step Two and arbitrary and capricious stages. The Center for Individual Freedom filed its notice of ...


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