Allison R. Hayward*

1. You just THINK You’re a Federalist Society Member

The regulatory mill turns slowly and grinds increasingly fine. The FEC is attempting once again to define what the word "member" means. See 627 Fed. Reg. 66.882 (Dec. 22, 1997). This is an important definition, since incorporated organizations may only solicit contributions of and make political communications to their "members." The FEC’s previous definition was declared unconstitutional in Chamber of Commerce v. FEC, 69 F.3d 600, 605 (D.C. Cir. 1995), amended, 76 F.3d 1234 (1996).

In a quest for overregulation, the FEC’s proposed rule, instead of respecting a group’s ability to declare the qualifications of membership, attempts to catalogue all acceptable membership criteria. Even if this were possible, it is an unseemly course of action for a federal agency to pursue. What’s more, the FEC’s proposals betray an unsympathetic view of politically active groups. The FEC’s Notice even contends that membership requirements must provide a sufficient barrier to differentiate members with a "financial or organizational attachment" from those who merely demonstrate "political support indistinguishable from such support from the general public." The Notice uses this logic to justify setting an annual dues threshold of $50 – or even $200 – to ensure that mere "supporters" aren’t treated as "members."

Our $25 Federalist dues wouldn’t cut the mustard. To be sure, the FEC proposes also considering whether the member has voting rights or authority over the organizations policies. But since most Federalist officers are chosen by divine calling rather than conventional majority vote, this element would be of little help. While I doubt that the Federalist Society would ever consider political activity (for tax reasons), the FEC’s regulations apply to any membership organization, association, or corporation without capital stock – many of whom may be in a position to engage in political activity. These groups no doubt would assume that they could communicate with the people they understood were members – and would unwittingly violate federal law in the process

2. FEC Coordination Enforcement Against Joel Hyatt

Matter Under Review ("MUR") 3918, released last September, is significant because of the reasoning it contains regarding the legal consequences of "coordinating" expenditures with candidates. As many readers know, the FEC releases enforcement files once a mattar is closed. These files, called "MURs," contain the memoranda, correspondence, and other documents related to the FEC’s conduct of the enforcement action.

In MUR, 3918, Joel Hyatt of Hyatt Legal Services, who was the unsuccessful Democrat candidate for U.S. Senator from Ohio in 1996, was investigated for running advertising for his law firm while a candidate. Despite the fact that the advertisements contained no express advocacy and no message soliciting contributions, the FEC determined that they were illegal corporate in-kind campaign contributions. According to the General Counsel’s Report in MUR 3918 (at 20):

In short, because the Firm’s advertisements were crafted by the Committee’s paid media advisor and were under the ultimate editorial control of the candidate; because they indirectly referred to the candidate and his qualifications; and because several of them referred to health care and crime, which were "issues raised in the campaign," this Office, consistent with Advisory Opinion 1990-5, concludes that the advertisements were in part "for the purpose of influencing" Hyatt’s election. Because the advertisements were coordinated between the expenditor [sic] and the Committee, we conclude that they were contributions.

Mr. Hyatt settled with the FEC for $11,000. Although this reasoning is probably unconstitutional, celebrities or business personalities who pursue elective office must now be wary about commercial advertising during the campaign. Given the broad analysis used in MUR 3918, the FEC may construe advertising that includes "indirect" references to the candidate and vague issue content to be campaign contributions.

3. California’s Proposition 208: Dead for Now

U.S. District Court Judge Lawrence K. Karlton in Sacramento has issued a ruling declaring unconstitutional core provisions of California’s recent campaign reform initiative, Proposition 208. California Pro-Life Council PAC v. Scully, No. CIV S-96-1965 (Jan. 6, 1998) (to be published). This decision prevents California state regulators from enforcing any provisions of Proposition 208 provisions, pending reformation of the law by the California Supreme Court.

In California Pro-Life Council, the court determined that the effect of Proposition 208’s candidate contribution limits "is not only to significantly reduce a California candidate’s ability to deliver his or her message, but in fact to make it impossible for the ordinary candidate to mount an effective campaign for office." The court thus held the candidate limits unconstitutional. The court also found that the limits on contributions to and from political parties, to and from PACs, and the aggregate limits were only justified to prevent subversion of the candidate contribution limits, and "cannot stand if the justifying provision is itself unconstitutional." As for other Proposition 208 provisions -- in particular the provisions regarding surplus campaign funds, office accounts, advertising disclosures, and slate mailers -- the court noted that they "appear to have separate justifications and conceivably are constitutional if the limitation provisions are severable." The court then referred the reformation of Proposition 208 to the California Supreme Court.

Additionally, Proposition 208 contained an extreme restriction on independent expenditures that will be stayed by the court’s order. Under Proposition 208, any donor of $100 or more to a candidate could not make an independent expenditure. Rather, any such expenditures would be treated as in-kind contributions subject to the Proposition’s contribution limits. (California regulators have interpreted "independent expenditure" using federal judicial decisions, in particular Federal Election Commission v. Furgatch, 807 F.2d 857, 864. (9th Cir. 1987)).

4. Disclosure v. Regulation of Campaign Activity – A Historical Perspective

As the debates on campaign finance reform continue into 1998, we should remember that the arguments for regulation and/or disclosure are not new. The following passages are from Prof. Louise Overacker’s Money in Elections, published in 1932:

In the United States the earlier movement for control of campaign funds was a demand for publicity. Very soon, however, "publicity" laws became "corrupt practices" laws . . . with the unhappy result that the real aim of publicity has been lost sight of and the raising and spending of all campaign funds has become associated in the public mind with corruption.

Money in Elections at 378. Overacker’s solution:

[A]ny effective program of control must make it possible to bring into the light the sources and amounts of all funds used in political campaigns, and the way in which those funds are expended . . . . Negatively, it must not attempt to place legal limitations upon the size of contributions or expenditures.

Such a program places the emphasis upon publicity rather than upon prohibition. This is in the firm conviction that there can be no fair test of popular government until the voters have a chance to know who is paying their political bills and how the money is spent. Those who scoff at publicity as a solution should remember that if we cannot compel publicity it is obviously impossible to secure compliance with a law which attempts to go further. They should remember too that although we have talked much about publicity and passed a great many so-called "publicity" laws, we have had little real publicity. Like Christianity and democracy, publicity of campaign funds has not been tried and found wanting, but being found hard has not been tried at all.

Id. at 380. For readers interested in more Overacker, her books are available by special order through the Web.

*Allison R. Hayward is an attorney at Wiley, Rein & Fielding in Washington D.C. She can be reached at AHayward@wrf.com. None of the views expressed here are necessarily the views of the Firm or its clients.