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  • FEC Record: Litigation

Groups have standing to challenge dismissal of some straw donor complaints (Campaign Legal Center, et al. v. FEC)

April 7, 2017

On March 29, 2017, the U.S. District Court for the District of Columbia granted in part and denied in part the Commission’s motion to dismiss for lack of standing a challenge brought by Campaign Legal Center and Democracy 21 (plaintiffs) that alleged that the Commission’s dismissal of five separate administrative complaints was arbitrary, capricious and contrary to law. The court held that the plaintiffs had standing to pursue their challenge regarding three of the five administrative complaints, but dismissed the plaintiffs’ claims regarding two of the administrative complaints.

Background and Challenge to Dismissal of Administrative Complaints
The Federal Election Campaign Act (the Act) expressly prohibits any person from making a "contribution in the name of another" or knowingly permitting his or her name to be used to effect such a contribution, and further provides that no person shall knowingly accept a contribution made by one person in the name of another person. 52 U.S.C. § 30122. The Commission's regulations state that examples of a contribution in the name of another include "giving money, or anything of value, all or part of which was provided to the contributor by another person (the true contributor) without disclosing the source of the money..." and "making a contribution of money or anything of value and attributing as the source of the money or thing of value another person when in fact the contributor is the source." 11 CFR 110.4(b)(2).

The plaintiffs had filed five sworn administrative complaints with the Commission against various entities and individuals alleging that they had violated the Act by using so-called "straw donors," including limited liability companies (LLCs), to make contributions in the name of another, thereby evading the Act's disclosure requirements. Further, the plaintiffs alleged that some of the entities that made contributions qualified as “political committees” under the Act, which would have required them to register with the Commission and file periodic disclosure reports of receipts and disbursements. See 52 U.S.C. §§ 30101(4) and 30104(b). (Note that entities which do not make contributions to candidates and only make independent expenditures may register as “independent expenditure-only” political committees (commonly referred to as “Super PACs”) and accept unlimited contributions (including contributions from corporations and labor organizations).)

The first complaint, which was designated Matter Under Review (MUR) 6485 by the Commission, was against W Spann LLC. The plaintiffs allege that the LLC was used as a conduit to hide the true source of a $1 million dollar contribution to a political action committee called Restore Our Future, which was supporting a then-presidential candidate in 2011. The plaintiffs allege that a single individual formed W Spann LLC for the sole purpose of concealing his contribution to Restore Our Future.

The second and third complaints, MURs 6487 and 6488, involved two LLCs that the plaintiffs allege were used as conduits to "hide the true source of two $1 million contributions to Restore Our Future" in 2011. The plaintiffs contend that a single individual made the contributions through the LLCs.

The fourth complaint, MUR 6711, alleged that an individual contributed more than $12 million to a Super PAC named FreedomWorks for America using the names of a corporation and an LLC established solely to make such contributions.

The final complaint, designated as MUR 6930, also involved allegations that contributions were made to a Super PAC from an LLC in order to hide the true source of the donors.

In their court challenge, the plaintiffs alleged that the Commission’s dismissal of the complaints effectively denied them access to complete and accurate information concerning the campaign contributions. The Commission argued that the plaintiffs’ lacked standing to pursue their court challenge because, among other things, the plaintiffs already had all relevant information about the contributions in question and had suffered no injury as a result of the Commission’s dismissal of the five complaints.

District Court Decision
The court agreed with the Commission’s argument that the plaintiffs lacked standing to challenge the dismissal of two of their administrative complaints. In the first complaint (MUR 6485), the Super PAC that received the $1 million contribution has since amended its public reports to make clear that the individual and not the LLC had made the contribution. Since the contribution at issue has been publicly reported, the court stated that “it is not clear what additional information [the] plaintiffs seek.” The court also noted that the issue in the second administrative complaint (MUR 6930) was similar in that the plaintiffs argue that an individual rather than an LLC should have been reported as the true source of the contributions in question. Since the plaintiffs do not contend that the LLC should register and file reports as a political committee, the court stated that “the Commission’s dismissal has not deprived them of the information that would normally be obtained by that route.” The court held that plaintiffs “failure to obtain that legal determination is not an informational injury.” The court thus found plaintiffs did not have standing to challenge the Commission’s decisions in MURs 6485 and 6930.

With respect to the remaining three administrative complaints at issue in the case however, the court held that the plaintiffs did have standing and had incurred informational injuries because they were denied information concerning the contributions in each case: “From the publicly available portions of the administrative record cited in plaintiffs’ opposition, it is clear that the Commission’s General Counsel did not believe it knew the entire story about the contributions identified in these three administrative complaints. If the General Counsel did not know the whole story then, there is little reason to believe that plaintiffs know it now. Under the Act, plaintiffs have ‘a right to truthful information regarding campaign contributions and expenditures.’”

The court ultimately held that the plaintiffs had adequately alleged informational injuries in connection with the contributions identified in three of their dismissed administrative complaints; that those injuries are traceable to the Commission’s dismissal “without requiring any of the alleged straw donors to register as political committees under the Act”; and that those injuries are likely to be redressed by a favorable court decision.

The court further held that plaintiffs need not also establish “organizational standing.” The court found that the plaintiffs already established informational standing, and that “there is no reason to doubt their claims that the information would be helpful to them.” The court thus concluded that the plaintiffs had standing to pursue the portions of their challenge that relate to the remaining three dismissed administrative complaints.

Resources:

  • Author 
    • Myles Martin
    • Communications Specialist