Campaign Legal Ctr. v. Fed. Election Comm'n

646 F.Supp.3d 57

CAMPAIGN LEGAL CENTER and Catherine Hinckley Kelley, Plaintiffs, v. FEDERAL ELECTION COMMISSION, Defendant,andHillary for America and Correct the Record, Defendant-Intervenors.

Civil Action No. 19-2336 (JEB)

United States District Court, District of Columbia

Signed December 8, 2022

Megan P. McAllen, Paul March Smith, Tara Malloy, Campaign Legal Center, Washington, DC, for Plaintiffs.

Aria C. Branch, Elias Law Group, Washington, DC, Marc Erik Elias, Perkins Coie LLP, Washington, DC, for Defendant-Intervenors.

Ryan Morrison, Owen Dennis Yeates, The Institute for Free Speech, Washington, DC, for Amicus Institute for Free Speech.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

2006 was a big year for the internet: Twitter began operations, Facebook announced the News Feed, and the Federal Election Commission promulgated a Final Rule known as the "internet exemption," which exempts online communications placed without a fee from certain campaign-finance restrictions. That exemption, if perhaps overshadowed by the former two developments, lies at the heart of this case.

Plaintiff Campaign Legal Center filed a complaint with the FEC in October 2016, alleging that Correct the Record, a super PAC that supported Hillary Clinton in the 2016 presidential election, had improperly used the internet exemption to justify not reporting millions of dollars' worth of in-kind contributions. By an evenly divided vote, however, the FEC effectively sided with CTR and declined to investigate. Its naysayers concluded that the exemption protected some of CTR's activities and that the Commission lacked sufficient evidence that others were coordinated with the Clinton campaign. CLC responded with this lawsuit to challenge that determination, and both CLC and CTR (intervening on behalf of the short-staffed Commission) now cross-move for summary judgment. Finding the Commission's analysis flawed on both points, the Court will grant CLC's Motion and deny CTR's.

I. Background

The legal, factual, and procedural background of this case has by now been covered thrice by this Court and once by the D.C. Circuit. Campaign Legal Ctr. v. FEC, 334 F.R.D. 1, 3-4 (D.D.C. 2019) (CLC I); Campaign Legal Ctr. v. FEC, 466 F. Supp. 3d 141, 146-50 (D.D.C. 2020) (CLC II); Campaign Legal Ctr. v. FEC, 507 F. Supp. 3d 79, 81-83 (D.D.C. 2020) (CLC III); Campaign Legal Ctr. v. FEC, 31 F.4th 781, 784-88 (D.C. Cir. 2022) (CLC IV). The Court assumes familiarity with that compendium and here offers just the highlights.

A. Legal Framework

Congress passed the Federal Election Campaign Act in 1971 to "remedy any actual or perceived corruption of the political process." FEC v. Akins, 524 U.S. 11, 14, 118 S.Ct. 1777, 141 L.Ed.2d 10 (1998). As relevant here, the Act places various restrictions — amount limitations, disclosure requirements, and the like — on contributions to candidates. The term "contribution" under the Act is defined very broadly to include any "gift, . . . deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office." 52 U.S.C. § 30101(8)(A)(i). Non-monetary contributions, such as gifts of "staff time, office space, or other resources," are known as "in-kind" contributions. CLC IV, 31 F.4th at 784.

FEC regulations define a relevant subset of in-kind contributions: coordinated communications. See 11 C.F.R. § 109.21(a)-(b) (defining "coordinated communication" and treating as in-kind contribution). As elaborated in 11 C.F.R. § 109.21, a communication qualifies as a "coordinated communication," and so a type of in-kind contribution, if it is paid for by an entity other than the campaign, with the campaign's involvement or collaboration, and qualifies as one of certain types of public communications. See 11 C.F.R. § 109.21(a)-(d); Shays v. FEC, 414 F.3d 76, 98 (D.C. Cir. 2005). "Expenditures coordinated with a candidate . . . are contributions under the Act." FEC v. Colo. Republican Fed. Campaign Comm., 533 U.S. 431, 438, 121 S.Ct. 2351, 150 L.Ed.2d 461 (2001). This structure is designed to "prevent attempts to circumvent the Act through prearranged or coordinated expenditures amounting to disguised contributions." Buckley v. Valeo, 424 U.S. 1, 47, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976).

In a 2006 rulemaking, however, the FEC carved out a narrow exemption from the "coordinated communications" definition for unpaid internet communications — that is, "communications over the Internet . . . [not] placed for a fee on another person's Web site." 11 C.F.R. § 100.26; see Internet Communications, 71 Fed. Reg. 18589, 18593-95 (Apr. 12, 2006); see also 11 C.F.R. §§ 100.94(a), 100.155(a)(1) (providing that uncompensated internet activity does not constitute a contribution or an expenditure). This is the so-called "internet exemption," and it is at the crux of the dispute here. Its upshot is that unpaid internet communications, such as blog posts, do not count as in-kind contributions at all. In its explanation and justification for the rule, however, the Commission made clear that certain expenses related to unpaid communications could still themselves qualify as in-kind contributions. For instance, the Commission noted, "[A] political committee's purchase of computers for individuals to engage in [unpaid internet communications]" would still constitute an expenditure and so an in-kind contribution if coordinated with a campaign — even if the ensuing unpaid internet activities conducted on that computer were exempt. See 71 Fed. Reg. at 18606; see also 52 U.S.C. § 30116(a)(7)(B)(i); 11 C.F.R. § 109.20. So, too, with staff salaries. The Commission explained that "if a political committee pays a blogger to write a message and post it within his or her blog entry," that salary payment would similarly (if coordinated) constitute an in-kind contribution — even if the blog post itself would not. See 71 Fed. Reg. at 18604-05. In other words, the Commission made clear the unremarkable conclusion that the internet exemption covers only unpaid internet communications themselves, and not all offline inputs to those communications.

FECA also sets out a specific scheme for enforcement of its provisions. Under the Act, any person who believes that a violation has occurred may file a complaint with the Commission. See 52 U.S.C. § 30109(a)(1). The FEC's Office of General Counsel reviews the complaint and any response and recommends to the Commission whether there is "reason to believe" a violation has occurred. Id. § 30109(a)(2), (3). The FEC Commissioners — six total, half from each of the two major political parties — then vote on whether there is "reason to believe" the Act was violated. Id. §§ 30106(a)(1), 30109(a)(2). If at least four Commissioners vote yes, the Commission will investigate; otherwise, the complaint may not go forward. Id. §§ 30106(c), 30109(a)(2). If they deadlock, the "declining-to-go-ahead" Commissioners — who are the "controlling" Commissioners — must issue a Statement of Reasons, which provides a basis for judicial review. Common Cause v. FEC, 842 F.2d 436, 449 (D.C. Cir. 1988). "Any party aggrieved" by the dismissal of a complaint may then seek such review. See 52 U.S.C. § 30109(a)(8)(A).

B. Factual Background

The Super PAC Correct the Record was conceived and organized specifically to press the limits of the internet exemption. See Matea Gold, How a super PAC plans to coordinate directly with Hillary Clinton's campaign, Wash. Post (May 12, 2015), https://www.washingtonpost.com/news/post-politics/wp/2015/05/12/how-a-super-pac-plans-to-coordinate-directly-with-hillary-clintons-campaign/ [https://perma.cc/AM7A-L9SX]), cited in ECF No. 43 (Joint Appendix) at 78-79, OGC Report at 7-8. Its activities, according to Plaintiffs' administrative complaint (and which Defendant-Intervenors do not dispute), included: producing voluminous digital content, conducting press outreach, staffing a "30-person war room" during Secretary Clinton's appearance before the House Select Committee on Benghazi, commissioning private polling about the campaign, training campaign surrogates and arranging their travel, sending "trackers" to record Clinton's opponents at events, and more. See OGC Report at 10-11 (JA 81-82).

Plaintiff Campaign Legal Center is a non-profit campaign-finance watchdog group. CLC II, 466 F. Supp. 3d at 148. CLC filed an administrative complaint with the FEC in October 2016. Id. Catherine Hinckley Kelley, a director at CLC and a registered voter, later joined as a Plaintiff in this suit. Id. CLC alleged that CTR had coordinated the aforementioned activities, which had millions of dollars in value, with the Clinton campaign (known as Hillary for America) — and did so without properly disclosing those expenditures as in-kind contributions and in gross violation of FECA's contribution limits. See OGC Report at 4-6 (JA 75-76); see also generally Administrative Complaint dated Oct. 6, 2016 (JA 3-54). In response, CTR argued that this spending qualified for the internet exemption because the items it purchased were inputs to CTR's unpaid online communications. See CTR Letter dated Jan. 24, 2017 (JA 62-71). (CTR also contended that some spending fell within a separate exemption not relevant here. Id.) CTR did not dispute that its activities, and in particular its polling, surrogate training, and other offline activities, were coordinated with HFA. Id.

FEC's Office of General Counsel investigated the allegations and issued a report recommending that the Commission find reason to believe that several violations had occurred. See OGC Report at 27-28 (JA 98-99). Specifically, OGC concluded that CTR had "systematically coordinated with HFA on its activities," id. at 16 (JA 87), that the bulk of CTR's spending "cannot fairly be described as for 'communications' . . . unless that term covers every conceivable political activity," id. at 20 (JA 91), and that most of CTR's activities thus are...