r». 1 2 3 4 5 6. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 FEDERAL ELECTION COMMISSION FIRST GENERAL COUNSEL'S REPORT I'- •••- '" y. Q7 SENSITIVE COMPLAINANTS: RESPONDENTS: MUR: 7101 . DATE COMPLAINT FILED: 07/07/2016 r "' A DATE OF NOTIFICATION: ,07/14/2016 LAST RESPONSE RECEIVED: 12/14/2016 DATE ACTIVATED: 11/15/2016 ELECTION CYCLES: 2012 - ongoing EXPIRATION OF SOL: 06/08/2017 - ongoing Rep. Ted Lieu Rep. Walter Jones Sen. Jeff Merkley John Howe Zephyr Teachout Michael Wager Free Speech For People Campaign for Accountability ea —J ;•* :.j ro •::3 ro Respondent Committees House Majority PAG and Alixandria Lapp in her official capacity as treasurer American Alliance and Chris Marston in his official capacity as treasurer Congressional Leadership Fund and Caleb Crosby in his official capacity as treasurer Bold Agenda PAC and Candace Hermsmeyer in her official capacity as treasurer Defending Main Street SuperPAC Inc. and Sarah Chamberlain in her official capacity as treasurer ESAFund and Nancy H. Watkins in her official capacity as treasurer Freedom Partners Action Fund, Inc. and Thomas F. Maxwell III in his official capacity treasurer New York Wins PAC and Keith A. Davis in his official capacity as treasurer Senate Majority PAC and Rebecca Lambe in her official capacity as treasurer Senate Leadership Fund and Caleb Crosby in his official capacity as treasurer
Respondent Contributors Access Industries Inc Americans for Shared Prosperity Bernard H Schwartz Bernard Marcus Charles G Koch Charles G Koch 1997 Trust Chevron Corporation Diane Hendricks S Donald Sussmaii Fred Eychaner George M Marcus James H Simons John Jordan Kenneth Griffin LIUNA Building America Marlene Ricketts Mountaire Corporation Paul Singer Petrodome Energy Richard B Gilliam Robert C McNair Robert L Mercer Robert Ziff Sean Parker Sheldon Adelson Vitreo-Retinal Consultants of the Palm Beaches Warren Stephens
52 USC sect30116(a)(1)(C) (t)
Disclosure Reports
None
RELEVANT STATUTE
INTERNAL REPORTS CHECKED
AGENCIES CHECKED
I INTRODUCTION
The Complainants contend that respondent independent-expenditure-only political
committees (lEQPCs or super PACs) have violated the Federal Election Campaign Act of
1971 as amended (the Act) by knowingly accepting contributions in excessof the $5000
annual limit applicable to political committees that are not authorized committees or political
MUR 7101 (House Majority PAC el al) First General Counsels Report Page3 oflS
1 party committees The Complaint enumerates dozens of allegedly excessive contributions and
2 by implication alleges that the Respondent Contributors violated the Act by making those
3 contributions Further the Complaint alleges that without prospective relief the Respondent
4 Committees will continue to knowingly accept contributions in excess of the $5000 limit^
5 Following SpeechNoworg v FEC in which the Court of Appeals for the District of
6 Columbia held that contribution limits are unconstitutional as applied to lEOPCs the
7 7 Commission concluded that lEOPCs are permitted to accept unlimited contributions in Advisory
4 8 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
4 2 9 Commission to reconsider in light of later experience its previous decision to acquiesce to
7 10 SpeechNow find that Respondent Committees violated the Act and seek declaratory 6 reg 11 andor injunctive relief against future acceptance of excessive contributions^ The Complaint
12 asserts that the DC Circuits pronouncement that contributions to independent expenditure
13 groups cannot corrupt or create the appearance of corruption has proven empirically wrong^
14 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
15 transactions to arise because super PACs effectively spend money on behalf of candidates and
Compl 1|| 7-8 see also id 1 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the FEC to seek civil penalties or other sanctions for past conduct bull)
id 137-
MUR7101 (House Majority PAC etal) First General Counsels Report Page 4 of 15
1 political parties and (2) create an appearance of such corruption that is confirmed by public
2 opinion polls
The Respondents argue that the Complaint has alleged no violation of law They contend 3
4 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
3 Citizens United v FpoundCreg and that the Commission must acquiesce to the DC Circuit especially
6 given the number of circuit courts that have ruled in accordance They also state that in light of
7 AO 20)0-11 the contributions at issue fall within the Acts protection for persons entitled to rely
^ 8 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
9 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in J
10 the context of an enforcement action and the Complaints request for a change in Commission
11 policy should be treated as a petition for rulemaking or advisory opinion request
12 As explained below under AO 2010-11 the Complaint fails to show that the
13 Respondents violated the Act Therefore we recommend that the Commission find no reason to
14 believe that the Respondent Committees violated 52 USC sect 30116(f) by knowingly accepting
15 excessive contributions and find no reason to believe that the Respondent Contributors violated
16 52 USC sect 30116(a)(1)(C) by making excessive contributions
laquo 1111640-43
raquo 558 US 310 (2010)
MUR 7101 (House Majority PAC eflaquo) First General Counsels Report Page 5 of 15
1 II FACTUAL BACKGROUND
2 A The Respondents
3 The Respondent Committees are registered with the Commission as independent-
4 expenditure-only political committees The Complaint cites to statistics showing that the
5 Respondent Committees have spent or publicly stated their intent to spend large amounts to
6 influence federal elections For example by May 2016 House Majority PAC (formed to help
7 Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
8 2016 election cycle Senate Leadership Fund (formed to help Republicans win seats in the
9 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
10 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
11 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
12 across the country
13 The Complaint states that the Respondent Committees are among over 2400 super PACs
14 registered with the Commission and that as of July 2016 such groups as a whole reported $755
5ff Comp) 24-33 House Majority PAC Statement of Organization (500) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 13 2014) (Misc Text Form) Congressional Leadership Fund SOD (Oct 24 2011) Cover Lener Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending Main Street SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission anached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form 1 Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
Compl1|24
pound 1127
Id ^ 26
MUR 7101 (House Majority PAC ei at) First General Counsels Report Page 6 of 15
1 millionin total receipts and S405 million in total independent expenditures during the 2016
2 election cycleAfter the 2016 election cycle ended super PACs reported $18 billion in total
3 receipts and $11 billion in total independent expendituresThe Complaint asserts that the
4 number of super PACs has exploded as has the size of contributions to them and their influence
5 in federal racesFurther the Complaint contends that a large portion of their receipts are
6 attributed to a small number of wealthy individuals^
J 7 The Respondent Contributors are a group of individuals and corporations that made 0 4 8 allegedly excessive contributions to the Respondent CommitteesThe Complaint explains that
^ 9 it recites only select very large contributions
7 10 B Other Factual Allegations in the Complaint
1 11 According to the Complaint factual developments since the DC Circuits ruling in
12 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
13 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
14 Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of
15 federally regulated contributions was wrong given that the number of super PACs have
Id H 38
Super PACs OpenSecrets httpswwwopensecretsorgpacssuperpacsphp (last visited Mar 10 2017) see Compl H 38
IS Compl ^ 38
bull Id 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Age Close to Half of All Stiper-PAC Money Comes from 50 Donors WASH POSI Apr 15 2016)
Id 45-83
Id 1 44
Seelaquo 111137-3843
MUR 7101 (House Majority PAC et al) First General Counsels Report Page 7 of 15
1 exploded and that these committees have raised and spent over a billion dollars collectively^
2 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
3 individuals to evade contribution limits applicable to candidate committees and political party
4 committees by contributing funds to super PACs that spend money on behalf of candidates
5 and parties^
6 Second the Complaint relying on ihe results of several public opinion surveys asserts
- 7 that super PAC contributions create the appearance of quid pro quo corruption The Complaint I 4 8 cites to surveys that reveal widespread perceptions of corruption in the federal government^^
2 9 For instance 61 of likely voters agreed that most members of Congress were willing to sell
7 10 their vote for either cash or a campaign contribution with the same percentage believing it
^ 11 likely that their own representative had done the same according to a 2016 Rasmussen Reports
12 survey--^
13 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
14 corruption specifically attributable to large super PAC contributions^ For example 59 of
15 voters in 54 competitive congressional districts agreed that [w]hen someone gives 1 million
16 dollars to a super PAC they want something big in return from the candidates they are trying to
20 U 6 38
Id 40
Id (citing Rasmussen Reports Congressional Performance lafers Still Say Congress is For Sale (Feb 22 2016) httpvebarchiveorgweb20160624111643httpwvwrasmussenreportscompublic_contentpoiitics mood of americacongressional performance (archived version)
J 141
MUR 7101 (House Majority PAC et at) First General Counsels Report Page 8 of5
1 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey^^ In
2 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
3 that spent $ 100000 to help elect a member of Congress could successfully pressure him or her to
4 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
5 focused on the role of super PACs in federal elections^
6 Third the Complaint relies upon an in-depth study on the effects of independent spending
J 7 on congressional campaigns to allege that even absent coordination a pro arrangement
4 8 can result between a candidate and a contributor to a super PAC- In particular the Complaint
2 9 describes one interview with a campaign operative who explained So the Member calls and
7 10 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
^11 this other group Im not allowed to coordinate with them but can I have someone call you^reg
12 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
13 matters including an agreement to lake some official action in exchange for the donors
14 contributions to the other group ie the super PAC^
U (citing Stan Greenberg et a In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct I 2012) http7Avwwdemoracycorpscomattachmentsanicle9IOdcorpcaf memo0930i 2v4pd0
Id (citing Brennan Center for Justice National Surey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
Id ^ 42 (citing Daniel B Tokaji amp Renata EB Strause The New Soft Money (2014) available at httpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-sofl-money-WEBpdO
=laquo Id
Id
2
3
4
5
6
j 7 0 4 8 4 A
9
7 10
4 11
12
13
14
15
16
MUR 7101 (House Majority PAC ei al) First General Counsels Report Page 9 of 15
III ANALYSIS
A Legal Background
The Act provides that no person shall make contributions to any political committee that
is not an authorized committee or a political party committee in any calendar year which in the
aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
accepting contributions that exceed the limit^
An independent expenditure is defined as an expenditure made by a person that is not
made in concert or cooperation with or at the request or suggestion of such candidate the
candidates authorized political committee or their agents or a political party committee or its
agents^^ If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
and source prohibitions^^
In Citizens United the Supreme Court held that independent expenditures including
those made by corporations do not give rise to corruption or the appearance of corruption^
Therefore the Court determined that the government has no sufficient interest in prohibiting
certain entities from making independent expenditures because [t]he absence of
52 USCsect 30116(a)(1)(C)
Wsect 30116(0
pound sect30101(17)
Seelaquo sect 30125(e)(1)
558 US at 314 The Court invalidaied as unconstitutional the Acts ban on corporate independent expenditures Id at 372
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR7101 (House Majority PAC el al) First General Counsels Report Page 2 of 15
Respondent Contributors Access Industries Inc Americans for Shared Prosperity Bernard H Schwartz Bernard Marcus Charles G Koch Charles G Koch 1997 Trust Chevron Corporation Diane Hendricks S Donald Sussmaii Fred Eychaner George M Marcus James H Simons John Jordan Kenneth Griffin LIUNA Building America Marlene Ricketts Mountaire Corporation Paul Singer Petrodome Energy Richard B Gilliam Robert C McNair Robert L Mercer Robert Ziff Sean Parker Sheldon Adelson Vitreo-Retinal Consultants of the Palm Beaches Warren Stephens
52 USC sect30116(a)(1)(C) (t)
Disclosure Reports
None
RELEVANT STATUTE
INTERNAL REPORTS CHECKED
AGENCIES CHECKED
I INTRODUCTION
The Complainants contend that respondent independent-expenditure-only political
committees (lEQPCs or super PACs) have violated the Federal Election Campaign Act of
1971 as amended (the Act) by knowingly accepting contributions in excessof the $5000
annual limit applicable to political committees that are not authorized committees or political
MUR 7101 (House Majority PAC el al) First General Counsels Report Page3 oflS
1 party committees The Complaint enumerates dozens of allegedly excessive contributions and
2 by implication alleges that the Respondent Contributors violated the Act by making those
3 contributions Further the Complaint alleges that without prospective relief the Respondent
4 Committees will continue to knowingly accept contributions in excess of the $5000 limit^
5 Following SpeechNoworg v FEC in which the Court of Appeals for the District of
6 Columbia held that contribution limits are unconstitutional as applied to lEOPCs the
7 7 Commission concluded that lEOPCs are permitted to accept unlimited contributions in Advisory
4 8 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
4 2 9 Commission to reconsider in light of later experience its previous decision to acquiesce to
7 10 SpeechNow find that Respondent Committees violated the Act and seek declaratory 6 reg 11 andor injunctive relief against future acceptance of excessive contributions^ The Complaint
12 asserts that the DC Circuits pronouncement that contributions to independent expenditure
13 groups cannot corrupt or create the appearance of corruption has proven empirically wrong^
14 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
15 transactions to arise because super PACs effectively spend money on behalf of candidates and
Compl 1|| 7-8 see also id 1 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the FEC to seek civil penalties or other sanctions for past conduct bull)
id 137-
MUR7101 (House Majority PAC etal) First General Counsels Report Page 4 of 15
1 political parties and (2) create an appearance of such corruption that is confirmed by public
2 opinion polls
The Respondents argue that the Complaint has alleged no violation of law They contend 3
4 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
3 Citizens United v FpoundCreg and that the Commission must acquiesce to the DC Circuit especially
6 given the number of circuit courts that have ruled in accordance They also state that in light of
7 AO 20)0-11 the contributions at issue fall within the Acts protection for persons entitled to rely
^ 8 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
9 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in J
10 the context of an enforcement action and the Complaints request for a change in Commission
11 policy should be treated as a petition for rulemaking or advisory opinion request
12 As explained below under AO 2010-11 the Complaint fails to show that the
13 Respondents violated the Act Therefore we recommend that the Commission find no reason to
14 believe that the Respondent Committees violated 52 USC sect 30116(f) by knowingly accepting
15 excessive contributions and find no reason to believe that the Respondent Contributors violated
16 52 USC sect 30116(a)(1)(C) by making excessive contributions
laquo 1111640-43
raquo 558 US 310 (2010)
MUR 7101 (House Majority PAC eflaquo) First General Counsels Report Page 5 of 15
1 II FACTUAL BACKGROUND
2 A The Respondents
3 The Respondent Committees are registered with the Commission as independent-
4 expenditure-only political committees The Complaint cites to statistics showing that the
5 Respondent Committees have spent or publicly stated their intent to spend large amounts to
6 influence federal elections For example by May 2016 House Majority PAC (formed to help
7 Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
8 2016 election cycle Senate Leadership Fund (formed to help Republicans win seats in the
9 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
10 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
11 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
12 across the country
13 The Complaint states that the Respondent Committees are among over 2400 super PACs
14 registered with the Commission and that as of July 2016 such groups as a whole reported $755
5ff Comp) 24-33 House Majority PAC Statement of Organization (500) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 13 2014) (Misc Text Form) Congressional Leadership Fund SOD (Oct 24 2011) Cover Lener Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending Main Street SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission anached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form 1 Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
Compl1|24
pound 1127
Id ^ 26
MUR 7101 (House Majority PAC ei at) First General Counsels Report Page 6 of 15
1 millionin total receipts and S405 million in total independent expenditures during the 2016
2 election cycleAfter the 2016 election cycle ended super PACs reported $18 billion in total
3 receipts and $11 billion in total independent expendituresThe Complaint asserts that the
4 number of super PACs has exploded as has the size of contributions to them and their influence
5 in federal racesFurther the Complaint contends that a large portion of their receipts are
6 attributed to a small number of wealthy individuals^
J 7 The Respondent Contributors are a group of individuals and corporations that made 0 4 8 allegedly excessive contributions to the Respondent CommitteesThe Complaint explains that
^ 9 it recites only select very large contributions
7 10 B Other Factual Allegations in the Complaint
1 11 According to the Complaint factual developments since the DC Circuits ruling in
12 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
13 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
14 Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of
15 federally regulated contributions was wrong given that the number of super PACs have
Id H 38
Super PACs OpenSecrets httpswwwopensecretsorgpacssuperpacsphp (last visited Mar 10 2017) see Compl H 38
IS Compl ^ 38
bull Id 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Age Close to Half of All Stiper-PAC Money Comes from 50 Donors WASH POSI Apr 15 2016)
Id 45-83
Id 1 44
Seelaquo 111137-3843
MUR 7101 (House Majority PAC et al) First General Counsels Report Page 7 of 15
1 exploded and that these committees have raised and spent over a billion dollars collectively^
2 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
3 individuals to evade contribution limits applicable to candidate committees and political party
4 committees by contributing funds to super PACs that spend money on behalf of candidates
5 and parties^
6 Second the Complaint relying on ihe results of several public opinion surveys asserts
- 7 that super PAC contributions create the appearance of quid pro quo corruption The Complaint I 4 8 cites to surveys that reveal widespread perceptions of corruption in the federal government^^
2 9 For instance 61 of likely voters agreed that most members of Congress were willing to sell
7 10 their vote for either cash or a campaign contribution with the same percentage believing it
^ 11 likely that their own representative had done the same according to a 2016 Rasmussen Reports
12 survey--^
13 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
14 corruption specifically attributable to large super PAC contributions^ For example 59 of
15 voters in 54 competitive congressional districts agreed that [w]hen someone gives 1 million
16 dollars to a super PAC they want something big in return from the candidates they are trying to
20 U 6 38
Id 40
Id (citing Rasmussen Reports Congressional Performance lafers Still Say Congress is For Sale (Feb 22 2016) httpvebarchiveorgweb20160624111643httpwvwrasmussenreportscompublic_contentpoiitics mood of americacongressional performance (archived version)
J 141
MUR 7101 (House Majority PAC et at) First General Counsels Report Page 8 of5
1 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey^^ In
2 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
3 that spent $ 100000 to help elect a member of Congress could successfully pressure him or her to
4 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
5 focused on the role of super PACs in federal elections^
6 Third the Complaint relies upon an in-depth study on the effects of independent spending
J 7 on congressional campaigns to allege that even absent coordination a pro arrangement
4 8 can result between a candidate and a contributor to a super PAC- In particular the Complaint
2 9 describes one interview with a campaign operative who explained So the Member calls and
7 10 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
^11 this other group Im not allowed to coordinate with them but can I have someone call you^reg
12 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
13 matters including an agreement to lake some official action in exchange for the donors
14 contributions to the other group ie the super PAC^
U (citing Stan Greenberg et a In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct I 2012) http7Avwwdemoracycorpscomattachmentsanicle9IOdcorpcaf memo0930i 2v4pd0
Id (citing Brennan Center for Justice National Surey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
Id ^ 42 (citing Daniel B Tokaji amp Renata EB Strause The New Soft Money (2014) available at httpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-sofl-money-WEBpdO
=laquo Id
Id
2
3
4
5
6
j 7 0 4 8 4 A
9
7 10
4 11
12
13
14
15
16
MUR 7101 (House Majority PAC ei al) First General Counsels Report Page 9 of 15
III ANALYSIS
A Legal Background
The Act provides that no person shall make contributions to any political committee that
is not an authorized committee or a political party committee in any calendar year which in the
aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
accepting contributions that exceed the limit^
An independent expenditure is defined as an expenditure made by a person that is not
made in concert or cooperation with or at the request or suggestion of such candidate the
candidates authorized political committee or their agents or a political party committee or its
agents^^ If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
and source prohibitions^^
In Citizens United the Supreme Court held that independent expenditures including
those made by corporations do not give rise to corruption or the appearance of corruption^
Therefore the Court determined that the government has no sufficient interest in prohibiting
certain entities from making independent expenditures because [t]he absence of
52 USCsect 30116(a)(1)(C)
Wsect 30116(0
pound sect30101(17)
Seelaquo sect 30125(e)(1)
558 US at 314 The Court invalidaied as unconstitutional the Acts ban on corporate independent expenditures Id at 372
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC el al) First General Counsels Report Page3 oflS
1 party committees The Complaint enumerates dozens of allegedly excessive contributions and
2 by implication alleges that the Respondent Contributors violated the Act by making those
3 contributions Further the Complaint alleges that without prospective relief the Respondent
4 Committees will continue to knowingly accept contributions in excess of the $5000 limit^
5 Following SpeechNoworg v FEC in which the Court of Appeals for the District of
6 Columbia held that contribution limits are unconstitutional as applied to lEOPCs the
7 7 Commission concluded that lEOPCs are permitted to accept unlimited contributions in Advisory
4 8 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
4 2 9 Commission to reconsider in light of later experience its previous decision to acquiesce to
7 10 SpeechNow find that Respondent Committees violated the Act and seek declaratory 6 reg 11 andor injunctive relief against future acceptance of excessive contributions^ The Complaint
12 asserts that the DC Circuits pronouncement that contributions to independent expenditure
13 groups cannot corrupt or create the appearance of corruption has proven empirically wrong^
14 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
15 transactions to arise because super PACs effectively spend money on behalf of candidates and
Compl 1|| 7-8 see also id 1 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the FEC to seek civil penalties or other sanctions for past conduct bull)
id 137-
MUR7101 (House Majority PAC etal) First General Counsels Report Page 4 of 15
1 political parties and (2) create an appearance of such corruption that is confirmed by public
2 opinion polls
The Respondents argue that the Complaint has alleged no violation of law They contend 3
4 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
3 Citizens United v FpoundCreg and that the Commission must acquiesce to the DC Circuit especially
6 given the number of circuit courts that have ruled in accordance They also state that in light of
7 AO 20)0-11 the contributions at issue fall within the Acts protection for persons entitled to rely
^ 8 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
9 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in J
10 the context of an enforcement action and the Complaints request for a change in Commission
11 policy should be treated as a petition for rulemaking or advisory opinion request
12 As explained below under AO 2010-11 the Complaint fails to show that the
13 Respondents violated the Act Therefore we recommend that the Commission find no reason to
14 believe that the Respondent Committees violated 52 USC sect 30116(f) by knowingly accepting
15 excessive contributions and find no reason to believe that the Respondent Contributors violated
16 52 USC sect 30116(a)(1)(C) by making excessive contributions
laquo 1111640-43
raquo 558 US 310 (2010)
MUR 7101 (House Majority PAC eflaquo) First General Counsels Report Page 5 of 15
1 II FACTUAL BACKGROUND
2 A The Respondents
3 The Respondent Committees are registered with the Commission as independent-
4 expenditure-only political committees The Complaint cites to statistics showing that the
5 Respondent Committees have spent or publicly stated their intent to spend large amounts to
6 influence federal elections For example by May 2016 House Majority PAC (formed to help
7 Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
8 2016 election cycle Senate Leadership Fund (formed to help Republicans win seats in the
9 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
10 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
11 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
12 across the country
13 The Complaint states that the Respondent Committees are among over 2400 super PACs
14 registered with the Commission and that as of July 2016 such groups as a whole reported $755
5ff Comp) 24-33 House Majority PAC Statement of Organization (500) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 13 2014) (Misc Text Form) Congressional Leadership Fund SOD (Oct 24 2011) Cover Lener Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending Main Street SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission anached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form 1 Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
Compl1|24
pound 1127
Id ^ 26
MUR 7101 (House Majority PAC ei at) First General Counsels Report Page 6 of 15
1 millionin total receipts and S405 million in total independent expenditures during the 2016
2 election cycleAfter the 2016 election cycle ended super PACs reported $18 billion in total
3 receipts and $11 billion in total independent expendituresThe Complaint asserts that the
4 number of super PACs has exploded as has the size of contributions to them and their influence
5 in federal racesFurther the Complaint contends that a large portion of their receipts are
6 attributed to a small number of wealthy individuals^
J 7 The Respondent Contributors are a group of individuals and corporations that made 0 4 8 allegedly excessive contributions to the Respondent CommitteesThe Complaint explains that
^ 9 it recites only select very large contributions
7 10 B Other Factual Allegations in the Complaint
1 11 According to the Complaint factual developments since the DC Circuits ruling in
12 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
13 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
14 Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of
15 federally regulated contributions was wrong given that the number of super PACs have
Id H 38
Super PACs OpenSecrets httpswwwopensecretsorgpacssuperpacsphp (last visited Mar 10 2017) see Compl H 38
IS Compl ^ 38
bull Id 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Age Close to Half of All Stiper-PAC Money Comes from 50 Donors WASH POSI Apr 15 2016)
Id 45-83
Id 1 44
Seelaquo 111137-3843
MUR 7101 (House Majority PAC et al) First General Counsels Report Page 7 of 15
1 exploded and that these committees have raised and spent over a billion dollars collectively^
2 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
3 individuals to evade contribution limits applicable to candidate committees and political party
4 committees by contributing funds to super PACs that spend money on behalf of candidates
5 and parties^
6 Second the Complaint relying on ihe results of several public opinion surveys asserts
- 7 that super PAC contributions create the appearance of quid pro quo corruption The Complaint I 4 8 cites to surveys that reveal widespread perceptions of corruption in the federal government^^
2 9 For instance 61 of likely voters agreed that most members of Congress were willing to sell
7 10 their vote for either cash or a campaign contribution with the same percentage believing it
^ 11 likely that their own representative had done the same according to a 2016 Rasmussen Reports
12 survey--^
13 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
14 corruption specifically attributable to large super PAC contributions^ For example 59 of
15 voters in 54 competitive congressional districts agreed that [w]hen someone gives 1 million
16 dollars to a super PAC they want something big in return from the candidates they are trying to
20 U 6 38
Id 40
Id (citing Rasmussen Reports Congressional Performance lafers Still Say Congress is For Sale (Feb 22 2016) httpvebarchiveorgweb20160624111643httpwvwrasmussenreportscompublic_contentpoiitics mood of americacongressional performance (archived version)
J 141
MUR 7101 (House Majority PAC et at) First General Counsels Report Page 8 of5
1 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey^^ In
2 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
3 that spent $ 100000 to help elect a member of Congress could successfully pressure him or her to
4 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
5 focused on the role of super PACs in federal elections^
6 Third the Complaint relies upon an in-depth study on the effects of independent spending
J 7 on congressional campaigns to allege that even absent coordination a pro arrangement
4 8 can result between a candidate and a contributor to a super PAC- In particular the Complaint
2 9 describes one interview with a campaign operative who explained So the Member calls and
7 10 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
^11 this other group Im not allowed to coordinate with them but can I have someone call you^reg
12 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
13 matters including an agreement to lake some official action in exchange for the donors
14 contributions to the other group ie the super PAC^
U (citing Stan Greenberg et a In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct I 2012) http7Avwwdemoracycorpscomattachmentsanicle9IOdcorpcaf memo0930i 2v4pd0
Id (citing Brennan Center for Justice National Surey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
Id ^ 42 (citing Daniel B Tokaji amp Renata EB Strause The New Soft Money (2014) available at httpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-sofl-money-WEBpdO
=laquo Id
Id
2
3
4
5
6
j 7 0 4 8 4 A
9
7 10
4 11
12
13
14
15
16
MUR 7101 (House Majority PAC ei al) First General Counsels Report Page 9 of 15
III ANALYSIS
A Legal Background
The Act provides that no person shall make contributions to any political committee that
is not an authorized committee or a political party committee in any calendar year which in the
aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
accepting contributions that exceed the limit^
An independent expenditure is defined as an expenditure made by a person that is not
made in concert or cooperation with or at the request or suggestion of such candidate the
candidates authorized political committee or their agents or a political party committee or its
agents^^ If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
and source prohibitions^^
In Citizens United the Supreme Court held that independent expenditures including
those made by corporations do not give rise to corruption or the appearance of corruption^
Therefore the Court determined that the government has no sufficient interest in prohibiting
certain entities from making independent expenditures because [t]he absence of
52 USCsect 30116(a)(1)(C)
Wsect 30116(0
pound sect30101(17)
Seelaquo sect 30125(e)(1)
558 US at 314 The Court invalidaied as unconstitutional the Acts ban on corporate independent expenditures Id at 372
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR7101 (House Majority PAC etal) First General Counsels Report Page 4 of 15
1 political parties and (2) create an appearance of such corruption that is confirmed by public
2 opinion polls
The Respondents argue that the Complaint has alleged no violation of law They contend 3
4 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
3 Citizens United v FpoundCreg and that the Commission must acquiesce to the DC Circuit especially
6 given the number of circuit courts that have ruled in accordance They also state that in light of
7 AO 20)0-11 the contributions at issue fall within the Acts protection for persons entitled to rely
^ 8 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
9 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in J
10 the context of an enforcement action and the Complaints request for a change in Commission
11 policy should be treated as a petition for rulemaking or advisory opinion request
12 As explained below under AO 2010-11 the Complaint fails to show that the
13 Respondents violated the Act Therefore we recommend that the Commission find no reason to
14 believe that the Respondent Committees violated 52 USC sect 30116(f) by knowingly accepting
15 excessive contributions and find no reason to believe that the Respondent Contributors violated
16 52 USC sect 30116(a)(1)(C) by making excessive contributions
laquo 1111640-43
raquo 558 US 310 (2010)
MUR 7101 (House Majority PAC eflaquo) First General Counsels Report Page 5 of 15
1 II FACTUAL BACKGROUND
2 A The Respondents
3 The Respondent Committees are registered with the Commission as independent-
4 expenditure-only political committees The Complaint cites to statistics showing that the
5 Respondent Committees have spent or publicly stated their intent to spend large amounts to
6 influence federal elections For example by May 2016 House Majority PAC (formed to help
7 Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
8 2016 election cycle Senate Leadership Fund (formed to help Republicans win seats in the
9 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
10 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
11 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
12 across the country
13 The Complaint states that the Respondent Committees are among over 2400 super PACs
14 registered with the Commission and that as of July 2016 such groups as a whole reported $755
5ff Comp) 24-33 House Majority PAC Statement of Organization (500) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 13 2014) (Misc Text Form) Congressional Leadership Fund SOD (Oct 24 2011) Cover Lener Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending Main Street SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission anached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form 1 Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
Compl1|24
pound 1127
Id ^ 26
MUR 7101 (House Majority PAC ei at) First General Counsels Report Page 6 of 15
1 millionin total receipts and S405 million in total independent expenditures during the 2016
2 election cycleAfter the 2016 election cycle ended super PACs reported $18 billion in total
3 receipts and $11 billion in total independent expendituresThe Complaint asserts that the
4 number of super PACs has exploded as has the size of contributions to them and their influence
5 in federal racesFurther the Complaint contends that a large portion of their receipts are
6 attributed to a small number of wealthy individuals^
J 7 The Respondent Contributors are a group of individuals and corporations that made 0 4 8 allegedly excessive contributions to the Respondent CommitteesThe Complaint explains that
^ 9 it recites only select very large contributions
7 10 B Other Factual Allegations in the Complaint
1 11 According to the Complaint factual developments since the DC Circuits ruling in
12 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
13 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
14 Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of
15 federally regulated contributions was wrong given that the number of super PACs have
Id H 38
Super PACs OpenSecrets httpswwwopensecretsorgpacssuperpacsphp (last visited Mar 10 2017) see Compl H 38
IS Compl ^ 38
bull Id 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Age Close to Half of All Stiper-PAC Money Comes from 50 Donors WASH POSI Apr 15 2016)
Id 45-83
Id 1 44
Seelaquo 111137-3843
MUR 7101 (House Majority PAC et al) First General Counsels Report Page 7 of 15
1 exploded and that these committees have raised and spent over a billion dollars collectively^
2 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
3 individuals to evade contribution limits applicable to candidate committees and political party
4 committees by contributing funds to super PACs that spend money on behalf of candidates
5 and parties^
6 Second the Complaint relying on ihe results of several public opinion surveys asserts
- 7 that super PAC contributions create the appearance of quid pro quo corruption The Complaint I 4 8 cites to surveys that reveal widespread perceptions of corruption in the federal government^^
2 9 For instance 61 of likely voters agreed that most members of Congress were willing to sell
7 10 their vote for either cash or a campaign contribution with the same percentage believing it
^ 11 likely that their own representative had done the same according to a 2016 Rasmussen Reports
12 survey--^
13 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
14 corruption specifically attributable to large super PAC contributions^ For example 59 of
15 voters in 54 competitive congressional districts agreed that [w]hen someone gives 1 million
16 dollars to a super PAC they want something big in return from the candidates they are trying to
20 U 6 38
Id 40
Id (citing Rasmussen Reports Congressional Performance lafers Still Say Congress is For Sale (Feb 22 2016) httpvebarchiveorgweb20160624111643httpwvwrasmussenreportscompublic_contentpoiitics mood of americacongressional performance (archived version)
J 141
MUR 7101 (House Majority PAC et at) First General Counsels Report Page 8 of5
1 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey^^ In
2 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
3 that spent $ 100000 to help elect a member of Congress could successfully pressure him or her to
4 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
5 focused on the role of super PACs in federal elections^
6 Third the Complaint relies upon an in-depth study on the effects of independent spending
J 7 on congressional campaigns to allege that even absent coordination a pro arrangement
4 8 can result between a candidate and a contributor to a super PAC- In particular the Complaint
2 9 describes one interview with a campaign operative who explained So the Member calls and
7 10 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
^11 this other group Im not allowed to coordinate with them but can I have someone call you^reg
12 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
13 matters including an agreement to lake some official action in exchange for the donors
14 contributions to the other group ie the super PAC^
U (citing Stan Greenberg et a In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct I 2012) http7Avwwdemoracycorpscomattachmentsanicle9IOdcorpcaf memo0930i 2v4pd0
Id (citing Brennan Center for Justice National Surey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
Id ^ 42 (citing Daniel B Tokaji amp Renata EB Strause The New Soft Money (2014) available at httpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-sofl-money-WEBpdO
=laquo Id
Id
2
3
4
5
6
j 7 0 4 8 4 A
9
7 10
4 11
12
13
14
15
16
MUR 7101 (House Majority PAC ei al) First General Counsels Report Page 9 of 15
III ANALYSIS
A Legal Background
The Act provides that no person shall make contributions to any political committee that
is not an authorized committee or a political party committee in any calendar year which in the
aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
accepting contributions that exceed the limit^
An independent expenditure is defined as an expenditure made by a person that is not
made in concert or cooperation with or at the request or suggestion of such candidate the
candidates authorized political committee or their agents or a political party committee or its
agents^^ If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
and source prohibitions^^
In Citizens United the Supreme Court held that independent expenditures including
those made by corporations do not give rise to corruption or the appearance of corruption^
Therefore the Court determined that the government has no sufficient interest in prohibiting
certain entities from making independent expenditures because [t]he absence of
52 USCsect 30116(a)(1)(C)
Wsect 30116(0
pound sect30101(17)
Seelaquo sect 30125(e)(1)
558 US at 314 The Court invalidaied as unconstitutional the Acts ban on corporate independent expenditures Id at 372
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC eflaquo) First General Counsels Report Page 5 of 15
1 II FACTUAL BACKGROUND
2 A The Respondents
3 The Respondent Committees are registered with the Commission as independent-
4 expenditure-only political committees The Complaint cites to statistics showing that the
5 Respondent Committees have spent or publicly stated their intent to spend large amounts to
6 influence federal elections For example by May 2016 House Majority PAC (formed to help
7 Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
8 2016 election cycle Senate Leadership Fund (formed to help Republicans win seats in the
9 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
10 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
11 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
12 across the country
13 The Complaint states that the Respondent Committees are among over 2400 super PACs
14 registered with the Commission and that as of July 2016 such groups as a whole reported $755
5ff Comp) 24-33 House Majority PAC Statement of Organization (500) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 13 2014) (Misc Text Form) Congressional Leadership Fund SOD (Oct 24 2011) Cover Lener Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending Main Street SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission anached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form 1 Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
Compl1|24
pound 1127
Id ^ 26
MUR 7101 (House Majority PAC ei at) First General Counsels Report Page 6 of 15
1 millionin total receipts and S405 million in total independent expenditures during the 2016
2 election cycleAfter the 2016 election cycle ended super PACs reported $18 billion in total
3 receipts and $11 billion in total independent expendituresThe Complaint asserts that the
4 number of super PACs has exploded as has the size of contributions to them and their influence
5 in federal racesFurther the Complaint contends that a large portion of their receipts are
6 attributed to a small number of wealthy individuals^
J 7 The Respondent Contributors are a group of individuals and corporations that made 0 4 8 allegedly excessive contributions to the Respondent CommitteesThe Complaint explains that
^ 9 it recites only select very large contributions
7 10 B Other Factual Allegations in the Complaint
1 11 According to the Complaint factual developments since the DC Circuits ruling in
12 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
13 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
14 Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of
15 federally regulated contributions was wrong given that the number of super PACs have
Id H 38
Super PACs OpenSecrets httpswwwopensecretsorgpacssuperpacsphp (last visited Mar 10 2017) see Compl H 38
IS Compl ^ 38
bull Id 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Age Close to Half of All Stiper-PAC Money Comes from 50 Donors WASH POSI Apr 15 2016)
Id 45-83
Id 1 44
Seelaquo 111137-3843
MUR 7101 (House Majority PAC et al) First General Counsels Report Page 7 of 15
1 exploded and that these committees have raised and spent over a billion dollars collectively^
2 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
3 individuals to evade contribution limits applicable to candidate committees and political party
4 committees by contributing funds to super PACs that spend money on behalf of candidates
5 and parties^
6 Second the Complaint relying on ihe results of several public opinion surveys asserts
- 7 that super PAC contributions create the appearance of quid pro quo corruption The Complaint I 4 8 cites to surveys that reveal widespread perceptions of corruption in the federal government^^
2 9 For instance 61 of likely voters agreed that most members of Congress were willing to sell
7 10 their vote for either cash or a campaign contribution with the same percentage believing it
^ 11 likely that their own representative had done the same according to a 2016 Rasmussen Reports
12 survey--^
13 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
14 corruption specifically attributable to large super PAC contributions^ For example 59 of
15 voters in 54 competitive congressional districts agreed that [w]hen someone gives 1 million
16 dollars to a super PAC they want something big in return from the candidates they are trying to
20 U 6 38
Id 40
Id (citing Rasmussen Reports Congressional Performance lafers Still Say Congress is For Sale (Feb 22 2016) httpvebarchiveorgweb20160624111643httpwvwrasmussenreportscompublic_contentpoiitics mood of americacongressional performance (archived version)
J 141
MUR 7101 (House Majority PAC et at) First General Counsels Report Page 8 of5
1 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey^^ In
2 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
3 that spent $ 100000 to help elect a member of Congress could successfully pressure him or her to
4 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
5 focused on the role of super PACs in federal elections^
6 Third the Complaint relies upon an in-depth study on the effects of independent spending
J 7 on congressional campaigns to allege that even absent coordination a pro arrangement
4 8 can result between a candidate and a contributor to a super PAC- In particular the Complaint
2 9 describes one interview with a campaign operative who explained So the Member calls and
7 10 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
^11 this other group Im not allowed to coordinate with them but can I have someone call you^reg
12 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
13 matters including an agreement to lake some official action in exchange for the donors
14 contributions to the other group ie the super PAC^
U (citing Stan Greenberg et a In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct I 2012) http7Avwwdemoracycorpscomattachmentsanicle9IOdcorpcaf memo0930i 2v4pd0
Id (citing Brennan Center for Justice National Surey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
Id ^ 42 (citing Daniel B Tokaji amp Renata EB Strause The New Soft Money (2014) available at httpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-sofl-money-WEBpdO
=laquo Id
Id
2
3
4
5
6
j 7 0 4 8 4 A
9
7 10
4 11
12
13
14
15
16
MUR 7101 (House Majority PAC ei al) First General Counsels Report Page 9 of 15
III ANALYSIS
A Legal Background
The Act provides that no person shall make contributions to any political committee that
is not an authorized committee or a political party committee in any calendar year which in the
aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
accepting contributions that exceed the limit^
An independent expenditure is defined as an expenditure made by a person that is not
made in concert or cooperation with or at the request or suggestion of such candidate the
candidates authorized political committee or their agents or a political party committee or its
agents^^ If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
and source prohibitions^^
In Citizens United the Supreme Court held that independent expenditures including
those made by corporations do not give rise to corruption or the appearance of corruption^
Therefore the Court determined that the government has no sufficient interest in prohibiting
certain entities from making independent expenditures because [t]he absence of
52 USCsect 30116(a)(1)(C)
Wsect 30116(0
pound sect30101(17)
Seelaquo sect 30125(e)(1)
558 US at 314 The Court invalidaied as unconstitutional the Acts ban on corporate independent expenditures Id at 372
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC ei at) First General Counsels Report Page 6 of 15
1 millionin total receipts and S405 million in total independent expenditures during the 2016
2 election cycleAfter the 2016 election cycle ended super PACs reported $18 billion in total
3 receipts and $11 billion in total independent expendituresThe Complaint asserts that the
4 number of super PACs has exploded as has the size of contributions to them and their influence
5 in federal racesFurther the Complaint contends that a large portion of their receipts are
6 attributed to a small number of wealthy individuals^
J 7 The Respondent Contributors are a group of individuals and corporations that made 0 4 8 allegedly excessive contributions to the Respondent CommitteesThe Complaint explains that
^ 9 it recites only select very large contributions
7 10 B Other Factual Allegations in the Complaint
1 11 According to the Complaint factual developments since the DC Circuits ruling in
12 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
13 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
14 Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of
15 federally regulated contributions was wrong given that the number of super PACs have
Id H 38
Super PACs OpenSecrets httpswwwopensecretsorgpacssuperpacsphp (last visited Mar 10 2017) see Compl H 38
IS Compl ^ 38
bull Id 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Age Close to Half of All Stiper-PAC Money Comes from 50 Donors WASH POSI Apr 15 2016)
Id 45-83
Id 1 44
Seelaquo 111137-3843
MUR 7101 (House Majority PAC et al) First General Counsels Report Page 7 of 15
1 exploded and that these committees have raised and spent over a billion dollars collectively^
2 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
3 individuals to evade contribution limits applicable to candidate committees and political party
4 committees by contributing funds to super PACs that spend money on behalf of candidates
5 and parties^
6 Second the Complaint relying on ihe results of several public opinion surveys asserts
- 7 that super PAC contributions create the appearance of quid pro quo corruption The Complaint I 4 8 cites to surveys that reveal widespread perceptions of corruption in the federal government^^
2 9 For instance 61 of likely voters agreed that most members of Congress were willing to sell
7 10 their vote for either cash or a campaign contribution with the same percentage believing it
^ 11 likely that their own representative had done the same according to a 2016 Rasmussen Reports
12 survey--^
13 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
14 corruption specifically attributable to large super PAC contributions^ For example 59 of
15 voters in 54 competitive congressional districts agreed that [w]hen someone gives 1 million
16 dollars to a super PAC they want something big in return from the candidates they are trying to
20 U 6 38
Id 40
Id (citing Rasmussen Reports Congressional Performance lafers Still Say Congress is For Sale (Feb 22 2016) httpvebarchiveorgweb20160624111643httpwvwrasmussenreportscompublic_contentpoiitics mood of americacongressional performance (archived version)
J 141
MUR 7101 (House Majority PAC et at) First General Counsels Report Page 8 of5
1 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey^^ In
2 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
3 that spent $ 100000 to help elect a member of Congress could successfully pressure him or her to
4 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
5 focused on the role of super PACs in federal elections^
6 Third the Complaint relies upon an in-depth study on the effects of independent spending
J 7 on congressional campaigns to allege that even absent coordination a pro arrangement
4 8 can result between a candidate and a contributor to a super PAC- In particular the Complaint
2 9 describes one interview with a campaign operative who explained So the Member calls and
7 10 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
^11 this other group Im not allowed to coordinate with them but can I have someone call you^reg
12 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
13 matters including an agreement to lake some official action in exchange for the donors
14 contributions to the other group ie the super PAC^
U (citing Stan Greenberg et a In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct I 2012) http7Avwwdemoracycorpscomattachmentsanicle9IOdcorpcaf memo0930i 2v4pd0
Id (citing Brennan Center for Justice National Surey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
Id ^ 42 (citing Daniel B Tokaji amp Renata EB Strause The New Soft Money (2014) available at httpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-sofl-money-WEBpdO
=laquo Id
Id
2
3
4
5
6
j 7 0 4 8 4 A
9
7 10
4 11
12
13
14
15
16
MUR 7101 (House Majority PAC ei al) First General Counsels Report Page 9 of 15
III ANALYSIS
A Legal Background
The Act provides that no person shall make contributions to any political committee that
is not an authorized committee or a political party committee in any calendar year which in the
aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
accepting contributions that exceed the limit^
An independent expenditure is defined as an expenditure made by a person that is not
made in concert or cooperation with or at the request or suggestion of such candidate the
candidates authorized political committee or their agents or a political party committee or its
agents^^ If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
and source prohibitions^^
In Citizens United the Supreme Court held that independent expenditures including
those made by corporations do not give rise to corruption or the appearance of corruption^
Therefore the Court determined that the government has no sufficient interest in prohibiting
certain entities from making independent expenditures because [t]he absence of
52 USCsect 30116(a)(1)(C)
Wsect 30116(0
pound sect30101(17)
Seelaquo sect 30125(e)(1)
558 US at 314 The Court invalidaied as unconstitutional the Acts ban on corporate independent expenditures Id at 372
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC et al) First General Counsels Report Page 7 of 15
1 exploded and that these committees have raised and spent over a billion dollars collectively^
2 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
3 individuals to evade contribution limits applicable to candidate committees and political party
4 committees by contributing funds to super PACs that spend money on behalf of candidates
5 and parties^
6 Second the Complaint relying on ihe results of several public opinion surveys asserts
- 7 that super PAC contributions create the appearance of quid pro quo corruption The Complaint I 4 8 cites to surveys that reveal widespread perceptions of corruption in the federal government^^
2 9 For instance 61 of likely voters agreed that most members of Congress were willing to sell
7 10 their vote for either cash or a campaign contribution with the same percentage believing it
^ 11 likely that their own representative had done the same according to a 2016 Rasmussen Reports
12 survey--^
13 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
14 corruption specifically attributable to large super PAC contributions^ For example 59 of
15 voters in 54 competitive congressional districts agreed that [w]hen someone gives 1 million
16 dollars to a super PAC they want something big in return from the candidates they are trying to
20 U 6 38
Id 40
Id (citing Rasmussen Reports Congressional Performance lafers Still Say Congress is For Sale (Feb 22 2016) httpvebarchiveorgweb20160624111643httpwvwrasmussenreportscompublic_contentpoiitics mood of americacongressional performance (archived version)
J 141
MUR 7101 (House Majority PAC et at) First General Counsels Report Page 8 of5
1 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey^^ In
2 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
3 that spent $ 100000 to help elect a member of Congress could successfully pressure him or her to
4 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
5 focused on the role of super PACs in federal elections^
6 Third the Complaint relies upon an in-depth study on the effects of independent spending
J 7 on congressional campaigns to allege that even absent coordination a pro arrangement
4 8 can result between a candidate and a contributor to a super PAC- In particular the Complaint
2 9 describes one interview with a campaign operative who explained So the Member calls and
7 10 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
^11 this other group Im not allowed to coordinate with them but can I have someone call you^reg
12 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
13 matters including an agreement to lake some official action in exchange for the donors
14 contributions to the other group ie the super PAC^
U (citing Stan Greenberg et a In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct I 2012) http7Avwwdemoracycorpscomattachmentsanicle9IOdcorpcaf memo0930i 2v4pd0
Id (citing Brennan Center for Justice National Surey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
Id ^ 42 (citing Daniel B Tokaji amp Renata EB Strause The New Soft Money (2014) available at httpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-sofl-money-WEBpdO
=laquo Id
Id
2
3
4
5
6
j 7 0 4 8 4 A
9
7 10
4 11
12
13
14
15
16
MUR 7101 (House Majority PAC ei al) First General Counsels Report Page 9 of 15
III ANALYSIS
A Legal Background
The Act provides that no person shall make contributions to any political committee that
is not an authorized committee or a political party committee in any calendar year which in the
aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
accepting contributions that exceed the limit^
An independent expenditure is defined as an expenditure made by a person that is not
made in concert or cooperation with or at the request or suggestion of such candidate the
candidates authorized political committee or their agents or a political party committee or its
agents^^ If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
and source prohibitions^^
In Citizens United the Supreme Court held that independent expenditures including
those made by corporations do not give rise to corruption or the appearance of corruption^
Therefore the Court determined that the government has no sufficient interest in prohibiting
certain entities from making independent expenditures because [t]he absence of
52 USCsect 30116(a)(1)(C)
Wsect 30116(0
pound sect30101(17)
Seelaquo sect 30125(e)(1)
558 US at 314 The Court invalidaied as unconstitutional the Acts ban on corporate independent expenditures Id at 372
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
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MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
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MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
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MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC et at) First General Counsels Report Page 8 of5
1 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey^^ In
2 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
3 that spent $ 100000 to help elect a member of Congress could successfully pressure him or her to
4 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
5 focused on the role of super PACs in federal elections^
6 Third the Complaint relies upon an in-depth study on the effects of independent spending
J 7 on congressional campaigns to allege that even absent coordination a pro arrangement
4 8 can result between a candidate and a contributor to a super PAC- In particular the Complaint
2 9 describes one interview with a campaign operative who explained So the Member calls and
7 10 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
^11 this other group Im not allowed to coordinate with them but can I have someone call you^reg
12 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
13 matters including an agreement to lake some official action in exchange for the donors
14 contributions to the other group ie the super PAC^
U (citing Stan Greenberg et a In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct I 2012) http7Avwwdemoracycorpscomattachmentsanicle9IOdcorpcaf memo0930i 2v4pd0
Id (citing Brennan Center for Justice National Surey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
Id ^ 42 (citing Daniel B Tokaji amp Renata EB Strause The New Soft Money (2014) available at httpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-sofl-money-WEBpdO
=laquo Id
Id
2
3
4
5
6
j 7 0 4 8 4 A
9
7 10
4 11
12
13
14
15
16
MUR 7101 (House Majority PAC ei al) First General Counsels Report Page 9 of 15
III ANALYSIS
A Legal Background
The Act provides that no person shall make contributions to any political committee that
is not an authorized committee or a political party committee in any calendar year which in the
aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
accepting contributions that exceed the limit^
An independent expenditure is defined as an expenditure made by a person that is not
made in concert or cooperation with or at the request or suggestion of such candidate the
candidates authorized political committee or their agents or a political party committee or its
agents^^ If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
and source prohibitions^^
In Citizens United the Supreme Court held that independent expenditures including
those made by corporations do not give rise to corruption or the appearance of corruption^
Therefore the Court determined that the government has no sufficient interest in prohibiting
certain entities from making independent expenditures because [t]he absence of
52 USCsect 30116(a)(1)(C)
Wsect 30116(0
pound sect30101(17)
Seelaquo sect 30125(e)(1)
558 US at 314 The Court invalidaied as unconstitutional the Acts ban on corporate independent expenditures Id at 372
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
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ilTS
9
7 10 8 4 11
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the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
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3
4
5
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j 7 0 4 8 4 A
9
7 10
4 11
12
13
14
15
16
MUR 7101 (House Majority PAC ei al) First General Counsels Report Page 9 of 15
III ANALYSIS
A Legal Background
The Act provides that no person shall make contributions to any political committee that
is not an authorized committee or a political party committee in any calendar year which in the
aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
accepting contributions that exceed the limit^
An independent expenditure is defined as an expenditure made by a person that is not
made in concert or cooperation with or at the request or suggestion of such candidate the
candidates authorized political committee or their agents or a political party committee or its
agents^^ If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
and source prohibitions^^
In Citizens United the Supreme Court held that independent expenditures including
those made by corporations do not give rise to corruption or the appearance of corruption^
Therefore the Court determined that the government has no sufficient interest in prohibiting
certain entities from making independent expenditures because [t]he absence of
52 USCsect 30116(a)(1)(C)
Wsect 30116(0
pound sect30101(17)
Seelaquo sect 30125(e)(1)
558 US at 314 The Court invalidaied as unconstitutional the Acts ban on corporate independent expenditures Id at 372
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 10 of 15
1 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 quid pro quo for improper commitments from the candidate
3 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
4 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
5 were unconstitutional^^ The court reasoned that contributions to groups that make only
6 independent expenditures also cannot corrupt or create the appearance of corruption and
7 therefore the government has no anti-corruption interest in limiting contributions to an
independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
9 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
10 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
11 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
12 advisory opinion request to solicit and accept unlimited contributions from individuals political
13 committees corporations and labor organizations on the condition that it would make only
14 independent expenditures and the Commission granted the request^ In concluding that an
td at 357 (quoting Buckley v Valeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
W at 694-95
See Republican Party of NM v King 741 F3d 1089 (10th Cir 2013) M) Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texansfor Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v Borland 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) (pre-Cfrem- United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Growth) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC efl) First General Counsels Report Page 11 of 15
1 independent expenditure-only political committee could accept unlimited contributions the
2 Commission relied upon Citizens United and SpeechNow stating
3 Following Citizens United and SpeechNow corporations labor organizations 4 andpolitical committees may make unlimited contributions to organizations 5 such as the Committee that make only independent expenditures Given the 6 holdings in Citizens United and SpeechNow that independent expenditures do 7 not lead to or create the appearance of quid pro quo corruption the 8 Commission concludes that there is no basis to limit the amount of contributions 9 to the Committee
1 y 11 The Commission further provided guidance regarding how the Committee should register
4 12 as an lEOPC with the Commission by submitting a letter expressing its intent to accept 4 ^ 13 unlimited contributions for the purpose of making only independent expenditures Since
7 14 this advisory opinion more than 2400 have registered as lEOPCs
I 15 B There is No Reason to Believe That the Respondents Made or Accepted 16 Excessive Contributions
17 The DC Circuits decision in SpeechNow and the Commissions AO 2010-11 plainly
18 permit the contributions described in the Complaint and the Complainants do not suggest
19 otherwise Instead the Complainants primary contention is that the Commission should
20 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
21 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
22 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
23 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
24 to Commission guidance Under the Act and Commission regulations an advisory opinion may
25 be relied upon by the person involved in the specific transaction or activity with respect to
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
Compl H 38
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC el al) First General Counsels Report Page 12 of 15
1 which such advisory opinion is rendered and by any person involved in any specific transaction
2 or activity which is indistinguishable in all its material aspects from the transaction or activity
3 with respect to which such advisory opinion is rendered^ Further the Act and Commission
4 regulations prohibit the Commission from imposing any sanction under the Act on any person
5 who acts in good faith reliance on an advisory opinion^
6 Here consistent with AO 2010-11 the Respondent Committees registered with the
y 1 Commission by submitting documentation included with their Statements of Organization 0 4 8 stating their intent to accept unlimited contributions for the purpose of making only independent 4 ^ 9 expenditures And none of the Respondent Committees have reported contributions to
0 7 10 authorized committee or political party committee nor does the Complaint allege that any of the
11 committees coordinated their spending with a candidate authorized committees or political
12 party committees The contributions described in the Complaint therefore clearly fall within the
13 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
14 would apply to any future contributions involving the Respondents so long as the Commission
15 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
16 administrative action Indeed the Complaint acknowledges that the Respondent Committees
17 complied with Commission guidance and do not ask the FEC to seek civil penalties or other
18 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR7I01 (House Majority PACelal) First General Counsels Report Page 13 of 15
1 investigation determine the Respondents violated the law and seek only declaratory andor
2 injunctive relief against future acceptance of excessive contributions^
3 The Act does not permit the Commission to investigate an allegation before making a
4 finding that there is reason to believe that a respondent has violated or is about to violate the
5 law^ The Complainants concede that SpeechNow and AO 2010-11 permit the conduct
6 described in the Complaint which is inconsistent with a finding of reason to believe that
^ 7 respondents violated the law Under these circumstances we recommend that the Commission 0 gt 4 8 find no reason to believe that the Respondents violated 52 USC sect 30116(a)( 1 )(C) or (f) by
^ 9 making or knowingly accepting excessive contributions 0 7 10 Furthermore we recommend against accepting the Complainants invitation not to
^ 11 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
12 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
Id ^ 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United Stales v Alabama 69 F3d 1269 1289 (I Ith Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTt-iiis THIRDNBV INTHRNATIONAI DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the freedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
MUR7101 (House Majority PAC ea) First General Counsels Report Page 14 of 15
1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
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the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
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MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
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1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
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agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
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1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
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1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
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MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
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1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
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1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
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1 result in judicial finality through Supreme Court review^ The propriety of nonacquiescence
2 therefore bullbullassume[s] that the law forming the basis for the obligation to acquiesce remains in
3 flux-laquo
4 Here seven federal courts of appeals have addressed the constitutionality of limiting
5 contributions to lEOPCs each has ruled that such limits are unconstitutional One court went
6 so far as to conclude that [fjew contested legal questions are answered so consistently by so
7 many courts and judgesreg With these decisions there issimply no basis to conclude that the
8 law remains unsettled in a way that would begin to justify Commission nonacquiescence as the 4 2 9 Complainants contend even if the Commission had not already adopted the holding of
0 7 10 ^peeczA^owin AO 2010-11
reg 11 D Conclusion
12 The Complaint raises a number of policy arguments as to why the Commission should
13 reconsider its regulation of super PACs However the Commission has adopted the holding of
14 SpeechNow in AO 2010-11 and the Commission cannot now pursue sanctions against the
bull See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Administrative Agencies 98 YAIH L J 679 (1989) (seminal law review article on the subject still routinely cited by courts)
laquo Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 see also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
See supra no^ 3^
^ N Y Progress and Protection PAC 733 F3d at 488
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not substantially justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly S125000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey v FEC 864 F Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including CiVrem-United and SpeechNow rf at 61
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
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MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
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MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC cfl) First General Counsels Report Page 15 of 15
1 Respondents so long as they act consistently with the Commissions guidance The Complaint
2 therefore fails to show that a violation of the Act has occurred or is about to occur Accordingly
3 we recommend that the Commission find no reason to believe that the Respondents have violated
4 or will violate the Act
5 IV RECOMIVIENDATIONS
6 1 Find no reason to believe that the Respondent Committees violated 52 USC ^ 7 sect30116(0
Q 8 2 Find no reason to believe that the Respondent Contributors violated 52 USC 4 9 sect 30116(a)(1)(C) 4 4 10 3 Approve the attached Factual and Legal Analysis
^11 4 Approve the appropriate letters and
g 12 5 Close the file
14 Date ^ 1^ 1 C) 15 Lisa J Stevenson 16 Acting General Counsel 17 18 19 20 Kathleen M Guith 21 Associate General Counsel 22 r 23 24 1 -1-^^ 25 Ji^Lee 26 Acting Assistant GeflgaU^unsel 27 28 29 30 31 Attorney 32 33 Attachments 34 Factual and Legal Analysis
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
ATTACHMENT Page 1
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
ATTACHMENT Page 3
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
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MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
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1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
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1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
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1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
I
1 FEDERAL ELECTION COMMISSION 2 FACTUAL AND LEGAL ANALYSIS 3 4 5 Respondents Respondent Committees MUR7101 6 House Majority PAC and Ailxandria Lapp in her 7 official capacity as treasurer 8 American Alliance and Chris Marston in his 9 official capacity as treasurer
10 Congressional Leadership Fund and Caleb Crosby 11 in his official capacity as treasurer 12 Bold Agenda PAC and Candace Hermsmeyer in her 13 official capacity as treasurer 14 Defending Main Street SuperPAC Inc and Sarah 15 Chamberlain in her official capacity as 16 treasurer 17 ESAFund and Nancy H Watkins in her official 18 capacity as treasurer 19 Freedom Partners Action Fund Inc and Thomas F 20 Maxwell III in his official capacity treasurer 21 New York Wins PAC and Keith A Davis in his 22 official capacity as treasurer 23 Senate Majority PAC and Rebecca Lambe in her 24 official capacity as treasurer 25 Senate Leadership Fund and Caleb Crosby in his 26 official capacity as treasurer 27 28 Respondent Contributors 29 Access Industries Inc 30 Americans for Shared Prosperity 31 Bernard H Schwartz 32 Bernard Marcus 33 Charles G Koch 34 Charles G Koch 1997 Trust 35 Chevron Corporation 36 Diane Hendricks 37 S Donald Sussman 38 Fred Eychaner 39 George M Marcus 40 James H Simons 41 John Jordan 42 Kenneth Griffin 43 LIUNA Building America 44 Marlene Ricketts 45 Mountaire Corporation 46 Paul Singer
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1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
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0 4 8 4
ilTS
9
7 10 8 4 11
12
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14
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MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
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1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
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1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
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1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
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1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
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agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
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1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
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1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
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1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
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1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 2 of 14
1 Petrodome Energy 2 Richard B Gilliam 3 Robert C McNair 4 Robert L Mercer 5 Robert Ziff 6 Sean Parker 7 Sheldon Adelson 8 Vitreo-Retinal Consultants of the Palm Beaches 9 Warren Stephens
10 11 I INTRODUCTION
1 12 This matter was generated by a complaint filed with the Federal Election Commission
4 13 alleging that respondent independent-expenditure-only political committees (bulliEOPCs or super 4 J 14 PACs) have violated the Federal Election Campaign Act of 1971 as amended (the Act) by
7 15 knowingly accepting contributions in excess of the $5000 annual limit applicable to political
2 16 committees that are not authorized committees or political party committees The Complaint
17 enumerates dozens of allegedly excessive contributions and by implication alleges that the
18 Respondent Contributors violated the Act by making those contributions^ Further the
19 Complaint alleges that without prospective relief the Respondent Committees will continue to
20 knowingly accept contributions in excess of the $5000 limit^
21 Following SpeechNoworg v FEC^ in which the Court of Appeals for the District of
22 Columbia held that contribution limits are unconstitutional as applied to IEOPCs the
23 Commission concluded that IEOPCs are permitted to accept unlimited contributions in Advisory
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 3 of 14
1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
raquo 558 US 310(2010)
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the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
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MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
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MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
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MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
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1 Op 2010-11 (Commonsense Ten) (AO 2010-11) However the Complaint asks the
2 Commission to reconsider in light of later experience its previous decision to acquiesce to
3 SpeechNow find that Respondent Committees violated the Act and seek declaratory
4 andor injunctive relief against future acceptance of excessive contributions The Complaint
5 asserts that the DC Circuits pronouncement that contributions to independent expenditure
6 groups cannot corrupt or create the appearance of corruption has proven empirically wrong
7 In support it states that super PAC contributions (1) provide an opportunity for quid pro quo
8 transactions to arise because super PACs effectively spend money on behalf of candidates and 4 ^ 9 political parties and (2) create an appearance of such corruption that is confirmed by public
7 10 opinion polls
^ 11 The Respondents argue that the Complaint has alleged no violation of law They contend
12 that SpeechNow was correctly decided under the principles enunciated by the Supreme Court in
13 Citizens United v FEC and that the Commission must acquiesce to the DC Circuit especially
14 given the number of circuit courts that have ruled in accordance They also state that in light of
15 AO 2010-11 the contributions at issue fall within the Acts protection for persons entitled to rely
16 on an advisory opinion Further the Respondents assert that even if the Commission has a legal
17 basis to declare its nonacquiescence to SpeechNow it would be inappropriate for that to occur in
Compl 7-8 see also id H 7 (In light of [AO 2010-11 and the Acts protection for persons entitled to rely on an advisory opinion] complainants do not ask the PEC to seek civil penalties or other sanctions for past conduct )
id 11 37
pound 1111640-43
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MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
2
3
4
5
6
1 I 7
0 4 8 4
ilTS
9
7 10 8 4 11
12
13
14
15
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 4 of 14
the context of an enforcement action and the Complaints request for a change in Commission
policy should be treated as a petition for rulemaking or advisory opinion request
As explained below under AO 2010-11 the Complaint fails to show that the
Respondents violated the Act Therefore the Commission finds no reason to believe that the
contributions and finds no reason to believe that the Respondent Contributors violated 52 USC
sect 30116(a)(1)(C) by making excessive contributions
II FACTUAL BACKGROUND
A The Respondents
The Respondent Committees are registered with the Commission as independent-
expenditure-only political committees The Complaint cites to statistics showing that the
Respondent Committees have spent or publicly stated their intent to spend large amounts to
influence federal elections For example by May 2016 House Majority PAC (formed to help
Democrats win seats in the House) had reserved nearly $19 million of advertising time for the
2016 election cycleSenate Leadership Fund (formed to help Republicans win seats in the
See Compl 24-33 House Majority PAC Statement of Organization (bullSCO) (Apr 8 2011) Cover Letter American Alliance SCO at 5 (Aug 132014) (Misc Text Form) Congressional Leadership Fund SCO (Oct 24 2011) Cover Letter Bold Agenda PAC SOO Cover Letter (Oct 10 2014) Defending MainStreet SuperPAC Inc SOO (Dec 26 2012) Cover Letter ESAFund (then Ending Spending Fund) SOO (Oct 5 2010) Cover Letter Freedom Partners Action Fund Inc SOO (Jun 13 2014) Cover Letter New York Wins PAC SOO at 5 (Jan 12 2016) (Misc Text Form) Senate Majority PAC (then Commonsense Ten) Misc Report to FEC (July 27 2010) Senate Leadership Fund SOO (Jan 20 2015) Cover Letter The cited cover letters miscellaneous text forms and miscellaneous reports are based on the template that the Commission attached to AO 2010-11 See AO 2010-11 at 3 n4 (providing that the Committee may include a letter with its Form I Statement of Organization clarifying that it intends to accept unlimited contributions for the purpose of making independent expenditures) see id Attach A (template) Respondent Bold Agenda PAC terminated months before the Complaint was filed Bold Agenda PAC Termination Approval (Jan 28 2016)
0 Compl ^ 24
ATTACHMENT Page 4
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 5 of 14
1 Senate) had reserved $386 million in advertising time by June 2016 The Complaint also
2 describes how during the 2014 election cycle Senate Majority PAC (formed to help Democrats
3 win seats in the Senate) apparently funded one out of every 20 television ads in senate races
4 across the country
5 The Complaint states that the Respondent Committees are among over 2400 super PACs
6 registered with the Commission and that as of July 2016 such groups as a whole reported $755
I 7 million in total receipts and $405 million in total independent expenditures during the 2016 bull
4 8 election cycle After the 2016 election cycle ended super PACs reported $18 billion in total
^ 9 receipts and $11 billion in total independent expenditures The Complaint asserts that the
7 10 number of super PACs has exploded as has the size of contributions to them and their influence 8 5 11 in federal races Further the Complaint contends that a large portion of their receipts are
12 attributed to a small number of wealthy individuals
W 127
Id 1 26
W 138
Super PACs j OpenSecrets httpswvwopensecretsorgpacssupetpacsphp (last visited Mar 10 2017) vee Compl 1 38
Compl 138
id 11 38-39 (citing Matea Gold amp Anu Narayanswamy The New Gilded Afie Close to Half of AH Super-PAC Money Comes from 50 Donors WASII POST Apr 15 2016)
ATTACHMENT Page 5
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC ei al) Factual and Legal Analysis Page 6 of 14
1 The Respondent Contributors are a group of individuals and corporations that made
2 allegedly excessive contributions to the Respondent Committees The Complaint explains that
3 it recites only select very large contributions
4 B Other Factual Allegations in the Complaint
5 According to the Complaint factual developments since the DC Circuits ruling in
6 SpeechNow have proven the courts rationale wrong and demonstrated that contributions to super
^ 7 PACs can give rise to corruption or the appearance thereof First the Complaint asserts that
Attorney General Eric Holders prediction that SpeechNow would affect only a small subset of 4
0 ^ 9 federally regulated contributions was wrong given that the number of super PACs have
10 exploded and that these committees have raised and spent over a billion dollars collectively-
11 The Complaint argues that the unlimited nature of super PAC contributions enables wealthy
12 individuals to evade contribution limits applicable to candidate committees and political party
13 committees by contributing funds to super PACs that spend money on behalf of candidates
14 and parties-
15 Second the Complaint relying on the results of several public opinion surveys asserts
16 that super PAC contributions create the appearance of quid pro quo corruption The Complaint
17 cites to surveys that reveal widespread perceptions of corruption in the federal government^-
U 45-83
raquo Id H 44
See id 37-38 43
Id 6 38
Id H 6
Id H 40
ATTACHMENT Page 6
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 7 of 14
1 For instance 6 of likely voters agreed that most members of Congress were willing to sell
2 their vote for either cash or a campaign contribution with the same percentage believing it
3 likely that their own representative had done the same according to a 2016 Rasmussen Reports
4 survey
5 Additionally the Complaint cites to surveys that demonstrate[] an appearance of
6 corruption specifically attributable to large super PAC contributions For example 59 of
7 voters in 54 competitive congressional districts agreed that [wjhen someone gives 1 million
8 dollars to a super PAC they want something big in return from the candidates they are trying to
^ 9 elect according to a 2012 Democracy CorpsPublic Campaign Action Fund survey- In
10 addition 68 of respondents (71 of Democrats 71 of Republicans) agreed that a company
7 11 that spent S100000 to help elect a member of Congress could successfully pressure him or her to
12 change a vote on a proposed law according to a 2012 Brennan Center for Justice survey that
13 focused on the role of super PACs in federal elections^^
14 Third the Complaint relies upon an in-depth study on the effects of independent spending
15 on congressional campaigns to allege that even absent coordination a quid pro quo arrangement
Id (citing Rasmussen Reports Congressional Performance Voters Still Say Congress is For Sale (Feb 22 2016) httpwebarchiveorgveb20160624111643httpwwwrasmussenreportscompublic_contentpolitics mood_of_americacongressional_performance (archived version)
ld^A
bull Id (citing Stan Greenberg et al In Congressional Battleground Voters Intensely Concerned About Money in Politics at 4 Democracy Corps (Oct 1 2012) httpvwwdemoracycorpscomattachm^ntsarticle910dcorpcaf memo093012v4pd0
Id (citing Brennan Center for Justice National Survey Super PACs Corruption and Democracy (Apr 24 2012) httpswwwbrennancenterorganalysisnational-survey-super-pacs-corruption-and-democracy)
ATTACHMENT Page 7
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC Factual and Legal Analysis Page 8 of 4
1 can result between a candidate and a contributor to a super PAC^ In particular the Complaint
2 describes one interview with a campaign operative who explained So the Member calls and
3 says Hey I know youre maxed out mdash and I cant take any more money from you mdash but theres
4 this other group Im not allowed to coordinate with them but can I have someone call you^
5 The Complaint then posits that [t]he same conversation could then proceed to discuss legislative
6 matters including an agreement to take some official action in exchange for the donors
1 7 contributions to the other group ie the super PAC
0 4 8 III ANALYSIS 4 ^9 A Legal Background
7 10 The Act provides that no person shall make contributions to any political committee that 8 8 11 is not an authorized committee or a political party committee in any calendar year which in the
12 aggregate exceed $5000^deg Further the Act prohibits any political committee from knowingly
13 accepting contributions that exceed the limit^
14 An independent expenditure is defined as an expenditure made by a person that is not
15 made in concert or cooperation with or at the request or suggestion of such candidate the
16 candidates authorized political committee or their agents or a political party committee or its
Id n 42 (citing Daniel B Tokaji amp Renata EB Strause The ^ew Soft Money (2014) available at htlpmoritzlawosueduthenewsoftmoneywp-contentuploadssites57201406the-new-soft-money-WEBpdO
2 id
Id
52 USC sect 30116(a)(1)(C)
W sect30116(0
ATTACHMENT Page 8
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC fa) Factual and Legal Analysis Page 9 of 14
agents If an expenditure is coordinated with a candidate or an authorized committee such
expenditure is treated as an in-kind contribution and is subject to the applicable contribution limit
3 and source prohibitions^^
4 In Citizens United the Supreme Court held that independent expenditures including
5 those made by corporations do not give rise to corruption or the appearance of corruption
6 Therefore the Court determined that the government has no sufficient interest in prohibiting
J 7 certain entities from making independent expenditures because [tjhe absence of
4 8 prearrangement and coordination alleviates the danger that expenditures will be given as a
2 9 quid pro quo for improper commitments from the candidate^
7 10 In SpeechNow the DC Circuit extended the legal principles enunciated in Citizens
^ 11 United and held that the Acts contribution limits as applied to contributions made to an lEOPC
12 were unconstitutional^ The court reasoned that contributions to groups that make only
13 independent expenditures also cannot corrupt or create the appearance of corruption and
14 therefore the government has no anti-corruption interest in limiting contributions to an
W sect30101(17)
sect 30125(e)(1)
558 US ai 314 The Court invalidated as unconstitutional the Acts ban on corporate independent expenditures td at 372
Id at 357 (quoting Bucldey v Faeo 424 US 1 47 (1976))
SpeechNow 599 F3d at 689
ATTACHMENT Page 9
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC et al) Factual and Legal Analysis Page 10 of 14
1 independent group such as SpeechNow^ Further like the DC Circuit every circuit court that
2 has considered this issue has ruled that lEOPCs may accept unlimited contributions^reg
3 After the DC Circuit issued its opinion in SpeechNow one of the Respondent
4 Committees Senate Majority PAC (formerly known as Commonsense Ten) submitted an
5 advisory opinion request to solicit and accept unlimited contributions from individuals political
6 committees corporations and labor organizations on the condition that it would make only
^ 7 independent expenditures and the Commission granted the request^ In concluding that an
4 8 independent expenditure-only political committee could accept unlimited contributions the 4 ^ 9 Commission relied upon Citizens United and SpeechNow stating
7 10 Following Citizens United and SpeechNow corporations labor organizations 9 11 and political committees may make unlimited contributions to organizations C) 12 such as the Committee that make only independent expenditures Given the
13 holdings in Citizens United and SpeechNow that independent expenditures do 14 not lead to or create the appearance of quid pro quo corruption the 15 Commission concludes that there is no basis to limit the amount of contributions 16 to the Committee 17 18 The Commission further provided guidance regarding how the Committee should register
19 as an lEOPC with the Commission by submitting a letter expressing its intent to accept
id at 694-95
See Republican Party ofNM v King 741 F3d 1089 (10th Cir 2013) N Y Progress and Protection PAC V Walsh 733 F3d 483 (2d Cir 2013) Texans for Free Enterprise v Tex Ethics Comm 732 F3d 535 (5th Cir 2013) Farris v Seabrook 677 F3d 858 (9th Cir 2012) Wis Right to Life State PAC v BaHand 664 F3d 139 (7th Cir 2011) Thalheimer v City of San Diego 645 F3d 1109 (9th Cir 2011) Long Beach Area Chamber of Com v City of Long Beach 603 F3d 684 (9th Cir 2010) see also NC Right to Life Inc v Leake 525 F3d 274 (4th Cir 2008) pre-Citizens United)
AO 2010-11 at 2 see also Advisory Op 2010-09 (Club for Grovvih) (concluding that a corporation may establish and administer a political committee that makes only independent expenditures and that such committee is not subject to contribution limits)
AO 2010-11 at 3 (citing Citizens United 558 US at 360)
ATTACHMENT Page 10
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
4
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 11 of 14
1 unlimited contributions for the purpose of making only independent expenditures Since
2 this advisory opinion more than 2400 have registered as lEOPCs
3 B There is No Reason to Believe That the Respondents Made or Aceepted 4 Exeessive Contributions
5 The DC Circuits decision in SpeechNow and the Comhiissions AO 2010-11 plainly
6 permit the contributions described in the Complaint and the Complainants do not suggest
7 otherwise Instead the Complainants primary contention is that the Commission should
8 reconsider AO 2010-11 engage in strategic nonacquiescence to the DC Circuits binding
9 decision in SpeechNow and resume enforcement of limits on contributions to super PACs
2 Q 10 As the Complainants acknowledge the Commission adopted the holding in SpeechNow
11 by issuing AO 2010-11 and the Respondents are entitled to rely on it unless they acted contrary
12 to Commission guidance Under the Act and Commission regulations an advisory opinion may
13 be relied upon by the person involved in the specific transaction or activity with respect to
14 which such advisory opinion is rendered and by any person involved in any specific transaction
15 or activity which is indistinguishable in all its material aspects from the transaction or activity
16 with respect to which such advisory opinion is rendered^ Further the Act and Commission
17 regulations prohibit the Commission from imposing any sanction under the Act on any person
18 who acts in good faith reliance on an advisory opinion^
19 Here consistent with AO 2010-11 the Respondent Committees registered with the
20 Commission by submitting documentation included with their Statements of Organization
bull 52 USC sect 30108(c)(2) see 11 CFR sect 1125(b)
ATTACHMENT Page 11
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 12 of 14
1 Stating their intent to accept unlimited contributions for the purpose of making only independent
2 expenditures And none of the Respondent Committees have reported contributions to
3 authorized committee or political party committee nor does the Complaint allege that any of the
4 committees coordinated their spending with a candidate authorized committees or political
5 party committees The contributions described in the Complaint therefore clearly fall within the
6 Acts protection for persons entitled to rely on an advisory opinion Further the protection also
1 7 would apply to any future contributions involving the Respondents so long as the Commission
4 8 does not supersede AO 2010-11 through an advisory opinion rulemaking or other
^ 9 administrative action Indeed the Complaint acknowledges that the Respondent Committees
7 10 complied with Commission guidance and do not ask the FEC to seek civil penalties or other 9 2 11 sanctions for past conduct Rather the Complaint requests that the Commission conduct an
12 investigation determine the Respondents violated the law and seek only declaratory andor
13 injunctive relief against future acceptance of excessive contributions
Compl ^ 7
Id H 96 Though we are aware of no directly applicable precedent construing the term sanction under 52 USC sect 30108(c)(2) in other contexts courts have construed the term sanction to include injunctive and declaratory relief For example courts have concluded that the term is expansive enough to cover nonmonetary limits on future activities See eg Alabama v North Carolina 560 US 330 340-41 (2010) (citation omitted) (noting in the course of construing an interstate compact that the imposition of a nonmonetary obligation can be one kind ofsanction) United States v Alabama 691 F3d 1269 1289 (11th Cir 2012) (A sanction is commonly understood to be a restrictive measure used to punish a specific action or to prevent some future activity) (quoting WtBSTiRs THIRIJNIAV IN I ERNATIONAL DICTIONARY 2009 (1976)) Such a construction would also be consistent with the relatively broad definition found in the Administrative Procedure Act See 5 USC sect 551(10) (defining sanction to include an agency prohibition requirement limitation or other condition affecting the Ireedom of a person and other compulsory or restrictive action) Further accepting the Complainants argument that the Commission remains free to seek judicial remedies notwithstanding a clear and on-point advisory opinion would mean that persons who have relied in good faith on that opinion can nonetheless be subjected to Commission enforcement proceedings and potential litigation Such a conclusion upends the purpose of the advisory opinion process which is intended to provide the regulated community with an assurance that they can carry out activity deemed permissible by the Commission without the possibility of some form of regulatory enforcement action
ATTACHMENT Page 12
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
MUR 7101 (House Majority PAC ea) Factual and Legal Analysis Page 13 of 14
1 The Act does not permit the Commission to investigate an allegation before making a
2 finding that there is reason to believe that a respondent has violated or is about to violate the
3 law The Complainants concede that and AO 2010-11 permit the conduct
4 described in the Complaint which is inconsistent with a finding of reason to believe that
5 respondents violated the law
6 Furthermore the Commission chooses not to accept the Complainants invitation not to
I 7 acquiesce to the binding SpeechNow decision Generally nonacquiescence refers to an agencys
4 8 conscious decision to disregard the law of one or more circuits to generate a circuit split that will
^ 9 result in judicial finality through Supreme Court review The propriety of nonacquiescence
7 10 therefore assume[s] that the law forming the basis for the obligation to acquiesce remains in
3 11 flux
12 Here seven federal courts of appeals have addressed the constitutionality of limiting
13 contributions to lEOPCs each has ruled that such limits are unconstitutional^ One court went
14 so far as to conclude that [f]ew contested legal questions are answered so consistently by so
15 many courts and judges^ With these decisions there is simply no basis to conclude that the
See 52 USC sect 30109(a)(2) (providing that the Commission shall conduct an investigation if it finds reason to believe that a person has violated or is about to violate the Act)
See generally Samuel Estreicher amp Richard L Revesz Nonacquiescence by Federal Adminislralive Agencies 98 YMi L j 679 (1989) (seminal law review article on the subject still routinely cited by courts)
Johnson v US RR Ret Bd 969 F2d 1082 1092 (DC Cir 1992) (quoting Estreicher amp Revesz supra note 47) (internal quotations deleted) In Johnson the DC Circuit suggested that once three circuits have rejected an agencys position and not one has accepted it further resistance would show contempt for the rule of law Id at 1093 ee also Heartland Plymouth Corp v NLRB 838 F3d 16 24-25 29 (DC Cir 2016) (granting fees against agency for bad faith in continuing nonacquiescence to DC Circuit precedent)
SetiMjra note 38
V y Progress and Protection PAC 733 F3d at 488
ATTACHMENT Page 13
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
ATTACHMENT Page 14
i
MUR 7101 (House Majority PAC el al) Factual and Legal Analysis Page 14 of 14
1 law remaitis unsettled in a way that would begin to Justify Commission nonacquiescence as the
2 Complainants contend even if the Commission had not already adopted the holding of
3 SpeechNow in AO 2010-11
4 D Conclusion
5 The Complaint raises a number of policy arguments as to why the Commission should
6 reconsider its regulation of super PACs However the Commission has adopted the holding of
SpeechNow in AO 2010-11 and cannot now pursue sanctions against the Respondents so long as
4 8 they act consistently with the Commissions guidance The Complaint therefore fails to show 4 ^ 9 that a violation of the Act has occurred or is about to occur Accordingly the Commission finds
710 no reason to believe that the Respondents have violated or will violate the Act
Attempting to enforce contribution limits against independent expenditure groups might expose the Commission to awards of legal fees under the Equal Access to Justice Act because its position was not bullsubstantially Justified 28 USC sect 2412 One district court has already ordered the Commission to pay nearly SI25000 in legal fees for arguing that it could restrict political committees that make direct contributions to candidates from also raising unlimited contributions for independent expenditures See Carey w FEC 864 P Supp 2d 57 (DDC 2012) That court criticized the FEC for failing to appreciate binding precedent including Citizens United and SpeechNow Id at 61
