[00:00:04] Speaker 00: Case number 15-5016 at L. Christopher Van Hollen Jr. [00:00:08] Speaker 00: vs. Federal Election Commission at L. Center for an Individual Freedom Appellant. [00:00:13] Speaker 00: Ms. [00:00:13] Speaker 00: Kirby for the Appellant. [00:00:14] Speaker 00: Ms. [00:00:14] Speaker 00: Carol for the Appellees. [00:00:51] Speaker 02: I'm Tom Kirby, counsel with the Center for Individual Freedom. [00:00:57] Speaker 02: I'll be arguing on behalf of the appellants. [00:00:59] Speaker 02: I'd like to reserve five minutes for a bottle. [00:01:03] Speaker 02: This appeal concerns the validity of an FEC regulation. [00:01:08] Speaker 02: That regulation provides that if corporations or labor unions independently spend for election year and communications, which is a particular category of political speech, they then must report and disclose contributions they receive, quote, for the purposes of furthering, close quote, that type of speech. [00:01:32] Speaker 02: In a moment of bipartisan unity, the FVC borrowed that standard from the statute that was amended to regulate electioneering communications. [00:01:45] Speaker 02: That standard applied to contributions made to parties engaged in so-called express advocacy. [00:01:51] Speaker 02: Express advocacy being speech that explicitly advocates for or against an identified candidate, using one of the Buckley magic words, vote for, elect, defeat, that sort of thing. [00:02:04] Speaker 02: Plaintiff, appellant, congressman, to give him all of his titles that I know of, Van Hollen, persuaded the district court initially that this regulation, that borrowing this standard from the underlying statute, violated the statute itself. [00:02:22] Speaker 02: and the district court struck down the regulation at step one of Chevron, holding there was a clear prohibition of the use of this regulatory standard. [00:02:34] Speaker 02: We appealed, and this court reversed. [00:02:38] Speaker 02: This court held that if you look at the statutory language on its face, or using all of the traditional tools of statutory construction, [00:02:49] Speaker 02: There is room for this regulation, for this regulatory standard. [00:02:53] Speaker 02: It was not clearly prohibited. [00:02:55] Speaker 02: There was a gap for the FEC to fill. [00:02:58] Speaker 02: And this court remanded to the district court to consider Chevron step two and to consider related APA arbitrariness issues that the district court had not reached because it had found a clear statutory prohibition of this regulation. [00:03:14] Speaker 02: On remand, [00:03:16] Speaker 02: The district court, nothing daunted, again struck down the regulation. [00:03:22] Speaker 02: The district court said, okay, the statute doesn't preclude this regulation, but this regulatory standard. [00:03:29] Speaker 02: But nonetheless, this standard is forbidden by the statutory language and purpose. [00:03:35] Speaker 02: And because it violates the statutory purpose clearly, [00:03:39] Speaker 02: It's also arbitrary and capricious to use this regulatory standard. [00:03:44] Speaker 02: And so once again, the district court struck the statute down. [00:03:50] Speaker 02: Once again, we have the theory. [00:03:53] Speaker 02: In our briefs, we discuss a number of reasons that we respectfully disagree with the district court. [00:04:00] Speaker 02: But there are two overarching points that I'd like to focus on this morning, subject to the guidance of the court, of course. [00:04:07] Speaker 02: And the first of those points is this. [00:04:10] Speaker 02: Contrary to the district court's belief, this statute does not require the Federal Election Commission to maximize contributor disclosures at all costs. [00:04:24] Speaker 02: It is certainly true that when Congress decided to go beyond regulating express advocacy and regulate election and communications, Congress intended for the contributions related to election and communications to be subject to disclosure provisions. [00:04:39] Speaker 02: And in that sense, these election and communication amendments were intended to increase disclosure. [00:04:47] Speaker 02: But Congress never said we have to have absolute disclosure without regard for costs or other considerations. [00:04:55] Speaker 02: Secondly, and this I think is interesting as well, there is no evidence [00:05:02] Speaker 02: that imposing the broader contributor disclosure standard on electronic communications, the standard for which Congressman Van Hollen advocates, there is no evidence that imposing that more intrusive and more burdensome standard would produce more contributor disclosure. [00:05:19] Speaker 02: And the reason is very simple. [00:05:22] Speaker 02: election communications and express advocacy are mutually exclusive. [00:05:27] Speaker 02: Under the statute, if you've got express advocacy, you do not have an election and communication. [00:05:33] Speaker 02: The statute provides an explicit standard of disclosure for express advocacy, namely contributors who contributed for the purpose of supporting that speech. [00:05:43] Speaker 02: So if anyone faced [00:05:46] Speaker 02: what they thought was a burdensome or intrusive disclosure standard because they were engaging in electionary communication. [00:05:53] Speaker 02: And remember, an electionary communication already mentions a candidate, or it's not an electionary communication. [00:05:59] Speaker 02: All they have to do is drop in one of the bubbly magic words, vote for, reelect, beat, something like that. [00:06:06] Speaker 02: That kicks them over into the statutory regime for express advocacy, and their only obligation at that point is to disclose contributors who contributed for the purpose of supporting the speech. [00:06:18] Speaker 02: Now, we don't have to speculate that that would happen because we had a laboratory experiment during the time that the district court's first ruling was in effect, and as we discussed in our papers, that's exactly what happened. [00:06:31] Speaker 02: Well, let me come back to this first point, which I think is really ultimately the determinative point, that the statute simply doesn't have this unlimited disclosure purpose that seems to underlie the whole district court. [00:06:49] Speaker 03: sufficiently inconsistent with what the district court ruled. [00:06:55] Speaker 03: sufficiently ambiguous that she should have ruled differently. [00:06:59] Speaker 03: That's right. [00:07:02] Speaker 02: But she really does. [00:07:04] Speaker 02: I'm sure I can just say she read the decision, but of course she read the decision. [00:07:08] Speaker 02: I don't mean to say that. [00:07:10] Speaker 02: But you really, as you read her decision, she relies on the belief time after time after time that there is this intent on the part of Congress to require essentially a maximum disclosure, unlimited disclosure, [00:07:23] Speaker 02: And then she says, and these various considerations undermine that purpose. [00:07:28] Speaker 02: But that's not what Congress did. [00:07:30] Speaker 01: There is constitutional interest on the other side, which has always been a puzzle to me. [00:07:37] Speaker 01: Because there's a line of Supreme Court cases. [00:07:40] Speaker 01: It's not just McIntyre. [00:07:41] Speaker 01: It's the Stratton and the Watchtower case and several others that say that part of the freedom of speech is the right to make [00:07:52] Speaker 01: anonymous speech. [00:07:53] Speaker 01: That's right. [00:07:54] Speaker 01: And the Supreme Court in upholding the McCain-Feingold law failed to mention that. [00:08:00] Speaker 01: The line of authority is still there. [00:08:03] Speaker 01: And so, and I noticed that the Federal Election Commission at least hints at it. [00:08:08] Speaker 01: It doesn't cite the cases or whatever. [00:08:10] Speaker 01: But it's a puzzle about how to square the McCain-Feingold decision or the McConnell decision with that line of authority. [00:08:19] Speaker 01: In fact, there's an opinion by Judge Easterbrook on the Seventh Circuit. [00:08:23] Speaker 01: I don't know if you're familiar with Majors versus Abel. [00:08:27] Speaker 01: where he filed an opinion, and it was not concurring, or not dissenting, or anything. [00:08:34] Speaker 01: It was just called, I don't know. [00:08:37] Speaker 02: Du batante. [00:08:41] Speaker 02: Your Honor, here's my best [00:08:45] Speaker 02: effort at reconciling those principles for purposes of this case. [00:08:49] Speaker 02: I happen to think the ability to speak anonymously is very important and has gotten short shrilled. [00:08:54] Speaker 01: So did the Federalists. [00:08:57] Speaker 02: But shifting to what is necessary for the disposition of this case, the Supreme Court in Buckley and its progeny have said that at minimum you have to recognize the compelled disclosures that this type are a substantial burden on speech. [00:09:14] Speaker 02: Now, they've said that burden can be sustained if it's reasonably tailored and sufficiently necessary to achieving a sufficiently important government interest. [00:09:25] Speaker 02: But what the Supreme Court has told us at least is where you're imposing this burden of disclosure, you have to have tailoring of some kind. [00:09:34] Speaker 02: You have to show that what you're doing is necessary. [00:09:38] Speaker 02: Now, the district court seemed to believe that because the Supreme Court had allowed compelled disclosure in a number of cases, that there was no longer any constitutional concern. [00:09:47] Speaker 02: And the law can just freely compel disclosure willy-nilly. [00:09:52] Speaker 02: But that's not what the Supreme Court has said. [00:09:53] Speaker 02: And one of the things the FEC said in adopting this regulation was, we're trying to balance these various associational privacy rights [00:10:06] Speaker 02: against the needs of the statute, and we think we've achieved that because we have adequately tailored the statute. [00:10:12] Speaker 02: They tailored the statute by limiting the scope of disclosure with respect to election and communications to what the Supreme Court had said in Massachusetts Citizens for Life was exactly the kind of disclosure necessary with respect to express advocacy. [00:10:28] Speaker 02: The district court's decision with respect to that was to say, let me see if I actually copied that down. [00:10:35] Speaker 02: It certainly was a striking statement. [00:10:41] Speaker 02: I didn't actually quote it in my notes, but what the district court said was Congress didn't order tailoring, Congress ordered exactly the opposite. [00:10:49] Speaker 02: Well, I don't think Congress did, number one, but number two, there would be a very interesting question whether Congress, in the regulation of core political speech, could order that there'd be no tailoring. [00:11:00] Speaker 02: I don't think it did. [00:11:01] Speaker 02: I think the Federal Election Commission undertook tailoring here, and I think that's one of the many reasons. [00:11:08] Speaker 01: the district court gave, summarized the opinion and gave three reasons at the beginning of that opinion. [00:11:15] Speaker 01: The second reason that strikes me as totally incorrect on the basis of the record says that there was no [00:11:25] Speaker 01: to include a purpose requirement. [00:11:28] Speaker 01: That's just not accurate. [00:11:30] Speaker 01: The advice for justice asks exactly for that. [00:11:34] Speaker 02: That is right. [00:11:35] Speaker 02: Moreover, in the notice of proposed rulemaking, [00:11:39] Speaker 02: The agency told everyone, here are the two polar possibilities of regulations we might adopt, but we're also thinking about doing something in the middle. [00:11:48] Speaker 02: And they said we'd like comments on whether or not it would be wise to adjust the disclosure standard. [00:11:54] Speaker 02: It's almost in the language they end up using. [00:11:57] Speaker 02: In fact, there were comments that supported that particular approach, Your Honor, but even if there had not been, [00:12:04] Speaker 02: Once the agency up front discloses this is the kind of thing we're thinking about doing, then they're free to go ahead and do it, even if nobody likes to comment at all. [00:12:14] Speaker 02: But you're right, there were comments, and the comments did support the outcome that we have here. [00:12:19] Speaker 02: And that outcome is consistent with the important message [00:12:23] Speaker 02: As I said, I'll talk about anything you want me to talk about, but my message today is what the FEC did is fully consistent with the language of the statute, and we know that for four reasons. [00:12:34] Speaker 02: The first reason we know, we've already talked about a little bit, is it's consistent with the language of the statute, both on its face and when read using traditional tools of statutory construction, and we know that because this Court has told us so. [00:12:49] Speaker 02: So we can start with that proposition that this regulation is consistent with what the statute actually says. [00:12:57] Speaker 03: Secondly, the regulation changed from the contribute language to dominate language. [00:13:04] Speaker 03: Is there an explanation for [00:13:06] Speaker 03: A, why they did that, and B, what they thought the effect of it was. [00:13:09] Speaker 02: Well, Your Honor, the first time they established this regulation in this area... Let's go with the one we've got now. [00:13:17] Speaker 02: When they got to the one we got now, they went back to contribute. [00:13:21] Speaker 02: I don't know why they went back to contribute, but it is the statutory language. [00:13:25] Speaker 02: They said they were borrowing the language relating to express advocacy, and I suppose they thought that made sense. [00:13:34] Speaker 02: The original regulation dealing only with individuals and partnerships [00:13:38] Speaker 03: So they went back and forth between donations and tributes. [00:13:41] Speaker 03: That's right. [00:13:41] Speaker 03: I guess it doesn't matter why. [00:13:43] Speaker 02: It doesn't matter. [00:13:44] Speaker 02: That's entirely a red herring, Your Honor. [00:13:47] Speaker 02: There weren't any individuals in partnership asking for any changes with respect to this proposal. [00:13:51] Speaker 01: Second piece of the road was that herring road. [00:13:55] Speaker 02: That's exactly right, Your Honor. [00:13:58] Speaker 02: But the second reason we know that what the regulation did is consistent with the regulatory purpose [00:14:04] Speaker 02: is this business of how the Federal Election Campaign Act, which is the controlling statute here, treats express advocacy. [00:14:13] Speaker 02: You'll recall that the statute that provides for regulation of election and communications is an amendment to FECA. [00:14:22] Speaker 02: FECA is the overriding statute. [00:14:25] Speaker 02: FECA is explicit [00:14:28] Speaker 02: that with respect to express advocacy, people explicitly saying vote for or elect this candidate, it's enough if they disclose contributors who contributed to support that kind of speech. [00:14:40] Speaker 02: Now if Congress really intended through FICA to demand unlimited disclosure of all contributions without regard to contributor purpose, it would make no sense [00:14:51] Speaker 02: to have that very limited disclosure with respect to the clearest form of political advocacy. [00:14:56] Speaker 02: So we know from the structure of the statute that Congress was not in this statute attempting to achieve unlimited disclosure with respect to its contributions. [00:15:07] Speaker 01: It's hard for me to understand where the application of this falls in the corporate field. [00:15:15] Speaker 01: It seems that it's just got to be nonprofits. [00:15:19] Speaker 01: I mean, people don't donate money to Microsoft or Ford Motor Company or whatever. [00:15:26] Speaker 01: They're the general treasury. [00:15:28] Speaker 01: Do they? [00:15:30] Speaker 02: I think, Your Honor, the primary effect is upon non-profit corporations. [00:15:35] Speaker 02: Many non-profit entities are, in fact, incorporated. [00:15:39] Speaker 02: Uh, and the statute and regulation doesn't distinguish between business corporations and nonprofit corporations. [00:15:46] Speaker 02: They're all covered by this regulation. [00:15:48] Speaker 01: I think with business corporations see three corporations have to disclose in their returns. [00:15:55] Speaker 01: filed with the Internal Revenue Service, the names of people that give them gifts and contributions? [00:16:04] Speaker 02: There is some such disclosure requirement, Your Honor. [00:16:06] Speaker 02: If you push me very far into that, I'm not a tax lawyer, but it is true that there is a requirement of disclosure. [00:16:13] Speaker 01: Now, I'm not sure... Is that considered, are the names of the contributors considered return information that the IRS has prohibited from disclosure? [00:16:22] Speaker 02: I'm going to turn around and look to my co-counsel. [00:16:25] Speaker 02: It is not publicly available. [00:16:28] Speaker 02: May I consult with my expert here? [00:16:30] Speaker 02: It's on the confidential part of the form, and I'm told names and addresses are not just those. [00:16:45] Speaker 02: I believe that to be true, but this is the gentleman who notes this out. [00:16:50] Speaker 02: So this is a disclosure that wouldn't be required otherwise. [00:16:54] Speaker 02: As to whether for-profit businesses sometimes receive contributions, Your Honor, it gets into the whole question of what do you mean by a contribution. [00:17:02] Speaker 02: There are contributions to capital. [00:17:05] Speaker 02: There may be contributions to retirement funds that are owned by the corporation. [00:17:09] Speaker 02: The corporation may have charitable operations or employee picnic areas or all sorts of things that may get contributions of one kind or another. [00:17:18] Speaker 02: And this all sounds very far removed [00:17:20] Speaker 02: from federal election campaign issues, except that. [00:17:25] Speaker 02: If you accept Congressman Ben Holland's position that whenever the corporation makes substantial expenditure out of its general funds, it has to identify all of its contributors, that's the kind of disclosures you start getting. [00:17:37] Speaker 02: A for-profit corporation spends money on a radio ad up in Washington State, and they got a contribution to an employee area down in Louisiana, and they've got to disclose that, is that it means something with respect to their speech up in Washington State. [00:17:52] Speaker 02: Your Honor, I see that I'm into my rebuttal time here. [00:17:55] Speaker 02: I would like to reserve that time. [00:17:58] Speaker 04: Thank you. [00:18:11] Speaker ?: Okay. [00:18:17] Speaker 06: morning at least the court kathleen carroll on behalf of happily congressman chris and holland uh... i want to start by saying that we agree completely with mister curvy's proposition that the statute here doesn't call for totally unbounded disclosure clearly has the threshold that has the option of the segregated account the problem with this rulemaking though is that it swings the pendulum completely in the opposite direction the purpose limitation that the f e c enacted [00:18:44] Speaker 06: opens up a significant loophole that, just as in this court's decision in Shays, makes it not only eminently possible for groups to circumvent the disclosure requirement, but actually provides a clear roadmap for doing so. [00:18:59] Speaker 06: That puts this case on all fours with the Shays decision, because the FEC completely and totally failed to even think about the problem, the obvious likelihood of mass circumvention of this rule. [00:19:14] Speaker 01: Do you agree that the disclosure requirements for express advocacy have a purpose element to them that the donation has to be for the purpose of allowing that speech? [00:19:32] Speaker 06: There is language in the statute applicable to those disbursements that calls for that. [00:19:37] Speaker 01: Is there evidence of what you call the mass circumvention of that disclosure regime? [00:19:43] Speaker 06: I mean, I think that concerns have been raised over time about the way that the Commission has implemented that language. [00:19:49] Speaker 01: Is there mass circumvention? [00:19:54] Speaker 01: Is that a huge loophole? [00:19:56] Speaker 06: I mean, as I said, I think that concerns have been raised about whether it does lead to precisely the same sort of problem, which is one reason why when the Commission was enacting this rule, it needed to think about maybe if the Commission had [00:20:10] Speaker 06: explained that it was considering the possibility of evasion, that it was considering the differences. [00:20:15] Speaker 01: I'm not sure that those categories, by the way, make any sense anymore. [00:20:18] Speaker 01: But if they ever did, electioneering and express advocacy. [00:20:26] Speaker 01: But in looking at it, the only difference between the disclosure [00:20:31] Speaker 01: requirement is that for express advocacy, it's a $200 threshold, and for issue advertising, naming a candidate, it's a $1,000 threshold. [00:20:43] Speaker 01: Is that it? [00:20:43] Speaker 06: That's not the only difference, and it's interesting that in the 2003 rulemaking, it was suggested to the Commission that in applying the disclosure requirements under BICRA to the small category of corporations, the qualified nonprofits, [00:20:58] Speaker 06: that would be subject to disclosure, it was suggested that the commission should adopt for the purpose of rules from the FECA independent expenditure category. [00:21:09] Speaker 06: And the commission at that time said, you know, we've thought about that, but we don't think it would make sense here for a few reasons. [00:21:16] Speaker 06: One is that the thresholds are different. [00:21:18] Speaker 06: But a second important difference that the commission acknowledged at that time and totally ignored this time [00:21:24] Speaker 06: was that in BICRA, Congress's way of tailoring the disclosure requirement was instead of an earmarking rule, we're going to offer up the alternative of the segregated account. [00:21:37] Speaker 06: If you only want to disclose contributors that contributed to make electioneering communications, then all you have to do is pay for them out of the segregated account. [00:21:47] Speaker 01: The commission was not faced with [00:21:49] Speaker 01: the result of allowing corporations and unions to engage in the communications. [00:21:59] Speaker 06: So they didn't even have to run their tables on... To be sure, the landscape was different in the 2007 rulemaking, but nevertheless, was it reasonable for the Commission, just four years after it had rejected [00:22:15] Speaker 06: a parallel regime to then adopt that parallel regime without even acknowledging the change in position, without explaining why the fact that the segregated account was available, which was a reason it had relied on in 2003, was suddenly no longer adequate to resolve its concerns. [00:22:32] Speaker 06: And I think that's consistent also with another significant defect in the reasoning of the rulemaking, which is that there's this assumption [00:22:41] Speaker 06: When the commission gets around to giving its rationale, we're worried about burden, we're worried about misleading disclosure that's not really going to capture who's supporting it. [00:22:51] Speaker 06: Those rationales rest entirely, and this is at JA 311, on the assumption, totally unexamined assumption, that [00:23:00] Speaker 06: customers and investors and corporations that union members and so on would count as donors within the meaning of the pre-existing rule. [00:23:10] Speaker 06: Now it had been suggested and discussed at length in the administrative hearing that that was not a necessary assumption at all. [00:23:17] Speaker 06: Many people suggested, you know, the Commission could take a different approach and say, [00:23:21] Speaker 06: You know, we don't think someone who buys a good or service from a corporation or who invests in a corporation or who's a member of a union would count as a donor. [00:23:32] Speaker 06: And yet there is no consideration, zero, in the rulemaking about whether that's an adequate resolution. [00:23:38] Speaker 03: What I was wondering about the change between donor and contributor back and forth is where are we on that now? [00:23:44] Speaker 06: So the language was changed in the 2003 rulemaking and the current regs continue to use the phrase donation. [00:23:52] Speaker 06: And if you go to the 2003 rulemaking, it explains why [00:23:56] Speaker 06: the commission was adopting that language and it's part of their explanation of why we're not importing the rules applicable to contributions under FECA because the commission recognizes that [00:24:09] Speaker 06: donations that people make toward electioneering activity are not the same thing as contributions. [00:24:15] Speaker 06: And in fact, BICRA doesn't use the word contribution. [00:24:18] Speaker 06: It uses contributors who contributed. [00:24:20] Speaker 06: And the commission explained, well, we don't think this was meant to bring in the concept of a contribution, which is subject to all of these additional rules under FECA. [00:24:29] Speaker 03: Bottom line, what are you saying the commission did here that it couldn't do? [00:24:35] Speaker 06: four things. [00:24:36] Speaker 06: Well, really one thing with four subparts, if I can. [00:24:40] Speaker 06: What it couldn't do here was adopt a rule that completely failed to consider the relevant aspects of the problem and completely failed to explain... That's a general rule that you can't do that. [00:24:53] Speaker 03: Tell me, what in this case was it that the Commission did that it couldn't do? [00:25:01] Speaker 06: Number one, it couldn't enact a rule that opens the door to massive evasion without [00:25:06] Speaker 06: Considering that possibility and without what excuse me to I'm sorry massive evasion of the disclosure requirements essentially we're going to a zero donor disclosure rule and It doesn't address that possibility. [00:25:18] Speaker 06: That is exactly the problem that led this court to vacate the coordinated the content standard in a chaise so that's problem number one problem number two I [00:25:33] Speaker 01: It's the people that are making the donation. [00:25:38] Speaker 06: Correct. [00:25:40] Speaker 06: Well, in McConnell and Citizens United, I think the court explains kind of what it is that was the real motivating concern behind the new provisions in BICRA. [00:25:52] Speaker 06: And you're quite right. [00:25:53] Speaker 06: It's not about corporations, which is why it's a little bit odd that the commission was so fixated on this concept of [00:26:00] Speaker 06: profit corporations in their rulemaking. [00:26:02] Speaker 06: The real concern was groups hiding behind what the Supreme Court called misleading and dubious names, like your Citizens for Better Medicare or your Republicans for Clean Air, who weren't disclosing the donors behind that rule. [00:26:18] Speaker 06: And the Commission had a situation where, you know, maybe it had a line to navigate. [00:26:23] Speaker 06: Maybe it needed to figure out a way [00:26:25] Speaker 06: How do we capture disclosure of those donors, but not necessarily disclosure of customers and investors? [00:26:32] Speaker 01: But it didn't. [00:26:33] Speaker 01: Something I can't quite figure out in this maze of regulations and statutes and Supreme Court rules is if I give a donation to a nonprofit, the American Cancer Society, and I do it anonymously, [00:26:54] Speaker 01: What is the, under your thinking about the disclosure, what disclosure does the American Cancer Society have to make under the regulation that you envision? [00:27:08] Speaker 01: Does it say anonymous? [00:27:11] Speaker 06: It's testing my knowledge of whether that sort of thing is permissible under the rules. [00:27:18] Speaker 01: It's commonplace for charitable organizations to receive anonymous donations. [00:27:27] Speaker 01: It's commonplace. [00:27:29] Speaker 01: But under your rule, that what you're proposing, I'm wondering whether that would be prohibited because it wouldn't comply with the Federal Election Act to disclose anonymous. [00:27:41] Speaker 01: That doesn't tell you anything. [00:27:42] Speaker 06: I'm not sure that it would be, but I want to be very clear that the question before the court is not what do I think is the best rule. [00:27:51] Speaker 06: The question before the court is whether the rule the Commission adopted. [00:27:55] Speaker 01: I understand, but what do you think is the best rule? [00:27:58] Speaker 06: I mean, I think Congress wrote a statute that calls for disclosure of all contributors. [00:28:03] Speaker 06: Now, we'd have to figure out who's a contributor. [00:28:05] Speaker 03: And as I was saying, I think... That's where we are in the ruling. [00:28:08] Speaker 06: Right. [00:28:08] Speaker 06: And I agree that there, especially in light of this Court's earlier decision, there was a line drawing exercise for the Commission to engage in. [00:28:16] Speaker 03: Yeah, there is an ambiguity. [00:28:17] Speaker 03: We've already said that. [00:28:17] Speaker 06: Exactly. [00:28:18] Speaker 06: And the question here is, when the Commission decided where to draw that line, [00:28:23] Speaker 06: Did it provide an adequate justification? [00:28:25] Speaker 06: Now, I started to explain the four things. [00:28:28] Speaker 03: The first of the four items was that they, in your explanation, created the possibility of massive evasion without a discussion record. [00:28:38] Speaker 03: Correct. [00:28:39] Speaker 06: That's the Shays problem. [00:28:40] Speaker 06: That's the issue that's indistinguishable from Shays. [00:28:43] Speaker 06: Second, the unexamined assumption that donors [00:28:48] Speaker 06: would include customers, investors, union members, and so on, even though, and I think there's a couple of interesting points on this. [00:28:56] Speaker 03: Number one, it was... Well, weren't they dealing with that problem by what they did here? [00:29:00] Speaker 03: Well... By the purpose you've [00:29:05] Speaker 03: Right, but I think as Your Honor pointed out... So forget that one. [00:29:09] Speaker 03: You're not there on that one. [00:29:11] Speaker 03: I want to push on it a little bit because... They're not going to deal with it expressly. [00:29:16] Speaker 06: I'm sorry. [00:29:16] Speaker 03: Okay, go ahead. [00:29:17] Speaker 06: I want to push on that because I think as Your Honor pointed out in Republican National Committee versus FEC, when the Commission has an obvious alternative solution to a problem it has pointed out, [00:29:28] Speaker 06: and totally fails to explain why that solution, why it's rejecting that solution, that's a problem of unreasoned decision-making. [00:29:37] Speaker 03: Did you offer them an alternative initiative? [00:29:38] Speaker 06: Yes, absolutely. [00:29:39] Speaker 06: That suggestion that customer business revenue and union members could be excluded was suggested repeatedly, and I can give you the pages in the joint appendix. [00:29:51] Speaker 06: The other interesting thing about that is that the commission itself [00:29:55] Speaker 06: in two places took an approach just like this. [00:30:00] Speaker 06: One was in the 2003 rulemaking when it was discussing what the obligations would be for individual spenders. [00:30:08] Speaker 06: They said, well, individuals who spend money on electioneering communications have to disclose their contributions. [00:30:14] Speaker 06: But of course, we make clear that that does not include an individual's salary or wages. [00:30:20] Speaker 06: Nobody thinks that that's a contribution. [00:30:22] Speaker 01: The second place it did that... [00:30:25] Speaker 01: I seem to recall in the rulemaking that the Commission said something to the effect that no one is contending that all sources of revenue that a corporation has should be disclosed. [00:30:38] Speaker 06: Yes, and that's exactly why there's a failure of reason decision-making here, Your Honor, because if the Commission is acknowledging that, then why are they turning around and saying... Why is there a failure as opposed to a part of the decision-making? [00:30:53] Speaker 03: That wouldn't be considered contribution. [00:30:55] Speaker 03: Therefore, we're enacting this rule that says it isn't. [00:30:59] Speaker 06: Because it was suggested that they had an alternative, and they didn't explain why that alternative wouldn't suffice. [00:31:05] Speaker 06: And it's the alternative that they took, actually, in the interim between the district courts. [00:31:10] Speaker 01: Actually, the suggestion, as I read it, if we're talking about the same thing, was not an across-the-board suggestion. [00:31:18] Speaker 01: It wasn't even a suggestion at all. [00:31:20] Speaker 01: There was commentary saying that nonprofit corporations on line one of their internal revenue service form have to disclose whatever it is, contribution, et cetera, et cetera, et cetera. [00:31:33] Speaker 01: But that was number one, it was only nonprofit. [00:31:37] Speaker 01: And number two, it wasn't a suggestion because the comment went on to say, [00:31:42] Speaker 01: We urge the commission to enact a regulation that has the purpose element in it. [00:31:52] Speaker 01: So who made this suggestion other than the Alliance for Justice that you're talking about? [00:31:58] Speaker 06: So there was, looking at JA 189 to 91 and 194, the suggestion was made that customers who pay fair market value for goods and services should not count as contributors. [00:32:08] Speaker 06: J.A. [00:32:09] Speaker 06: 205 to 206 business income is not contributed or donated and shouldn't be required to be disclosed. [00:32:18] Speaker 06: But that's exactly why the commission's analysis makes zero sense because what they were saying is [00:32:29] Speaker 06: If everybody has to disclose customers, investors, union members, and so on, then that will be burdensome, and that will be misleading. [00:32:38] Speaker 03: Therefore, they did what they did here. [00:32:40] Speaker 06: Right. [00:32:41] Speaker 03: Therefore, they did what they did here. [00:32:43] Speaker 03: Your reasoning is not making a lot of sense to me on this point. [00:32:46] Speaker 06: I'm sorry. [00:32:46] Speaker 06: I apologize for that. [00:32:47] Speaker 03: Let me... If they offer a reason for what they're doing that is we shouldn't be including these items, then they enact a rule that says we're not going to include those items. [00:32:56] Speaker 03: That isn't nonsensical on their part. [00:32:58] Speaker 06: But to take the extra step and say, instead of simply excluding those, we're going to go much further and say, even contributors that everybody would agree as a contributor, you still don't have to disclose unless you have earmarked your contribution. [00:33:15] Speaker 06: And the way that that's going to be enforced is spelled out in the rule. [00:33:18] Speaker 03: OK, that may be getting us to point three. [00:33:19] Speaker 03: We have points one and two. [00:33:21] Speaker 03: Now, what is the third thing they can't do? [00:33:23] Speaker 06: Well, I think this goes to the evasion point where the commission says you're not going to be required to disclose unless the funds were received in response to a specific request for electioneering communications money or specifically designated by the donor. [00:33:40] Speaker 03: And I'd like to point to the court to give me points three and four on the things that you say they couldn't do. [00:33:46] Speaker 06: So points two and three were about the failure to consider the segregated account and the failure to consider an alternative approach of just saying under this rule, you don't have to disclose things like customers, investors and so on. [00:34:03] Speaker 06: And that's actually the approach that the commission took during the interim between the district courts. [00:34:08] Speaker 06: first decision and this court's first decision. [00:34:11] Speaker 06: It issued a press release in July 2012 where it said, here's how we're going to enforce the 2003 rule in the interim while we're waiting for the Court of Appeals. [00:34:21] Speaker 01: Is the disclosure requirement for express advocacy a statutory requirement, the purpose part of it? [00:34:29] Speaker 06: That part is, it's a little bit complicated, actually, because there are two provisions of FECA that govern disclosure for independent expenditures, and only one of them includes that language, but yes, it is a statutory provision. [00:34:43] Speaker 01: So if the Commission, in adopting the same rule for electioneering communication, [00:34:48] Speaker 01: is arbitrary and capricious, then Congress was arbitrary and capricious in requiring that, right? [00:34:55] Speaker 06: The Commission was arbitrary and capricious in adopting it without considering the likelihood that this would lead to massive evasion, without considering that it had at least two completely satisfactory alternatives. [00:35:08] Speaker 01: And Congress considered massive evasion? [00:35:11] Speaker 01: I'm sorry? [00:35:13] Speaker 01: In enacting the disclosure rules for express advocacy, did Congress consider massive evasion? [00:35:19] Speaker 06: I think when Congress enacted that language in the 70s, it was acting against a very different backdrop than it acted against when it enacted BICRA and adopted different language. [00:35:28] Speaker 01: Well, one of the problems with that statute, when it was initially enacted, it was a response to the [00:35:35] Speaker 01: Nixon re-election campaign and Herbert Comback going around getting money from corporations and everything. [00:35:42] Speaker 01: But the other things that were addressed in that statute were not things that had been considered problems before. [00:35:51] Speaker 01: They addressed far more than the abuses that came up in the Nixon re-election campaign. [00:35:58] Speaker 06: That sounds right. [00:36:00] Speaker 06: I think in Bicra, though, Congress was acting, as this Court has recognized repeatedly, against a backdrop of the sham issue ads where we did not know, we have groups with these sort of anodyne misleading names, we don't know who's behind them, and so therefore it adopted a regime that differed in some ways. [00:36:17] Speaker ?: Anonymous speech. [00:36:18] Speaker 06: Exactly, and I think that's why when the Commission enacted this rule, it had to add a minimum. [00:36:27] Speaker 06: Maybe it could have reached the same conclusion after considering the consequences on both sides, considering whether is our rule going to capture the kinds of disclosure that Congress was really worried about. [00:36:41] Speaker 06: considering and explaining why it's not adequate to rely on the segregated account, why it's not adequate to simply clarify, as it has done in other circumstances, that customers are not donors, investors are not donors, union members are not donors. [00:36:57] Speaker 06: Those were options that were available to it that would have fully and completely resolved the concerns as it expressed, yet it gives no explanation why it does not take that approach. [00:37:08] Speaker 06: And it gives no explanation why it's parting ways from what it did in the 2003 rulemaking just four years earlier, where it was suggested that it should simply parallel the independent expenditure regime. [00:37:20] Speaker 06: And the Commission said, no, here are several reasons why we think that doesn't make sense. [00:37:25] Speaker 06: It didn't consider any of that in the 2007 rulemaking. [00:37:30] Speaker 06: And we think that's essentially why there's a failure here of reasoned decision making. [00:37:35] Speaker 06: And it's a failure that has created a world where instead of having the tailored disclosure that Congress sought, we instead have a situation where there's essentially zero disclosure. [00:37:46] Speaker 06: And I have yet to hear an explanation from the interveners of how this case differs in any meaningful respect from this court's decision in Shays, which I think requires affirmance of the district court's judgment. [00:38:01] Speaker 06: Unless the court has further questions, I see my 10 seconds are waning. [00:38:07] Speaker 06: Thank you very much. [00:38:17] Speaker 02: Being a lawyer, Your Honors, I have a great deal I would like to say, but I don't think there's anything I need to say. [00:38:22] Speaker 02: I propose to submit. [00:38:25] Speaker 04: Well, I do have one question. [00:38:28] Speaker 04: How does this case differ from Shays? [00:38:30] Speaker 02: This case differs from Shays in that the commission here was faced with a situation in which it had clear evidence of a burden that it was trying to address. [00:38:43] Speaker 02: And it addressed it in a way that Congress had specifically laid out as an appropriate way to address this kind of situation. [00:38:50] Speaker 02: and as to which there was no evidence of the kind of evasion that you've been told is going to happen. [00:38:56] Speaker 02: Where were the rule-making comments that said you've had this standard for electioneering communications and with respect to electioneering communications that's being evaded because there are people out there that have large sums of money that want to give it to speakers without imposing any restrictions on how it's used and without regard to the grounds on which it was requested. [00:39:17] Speaker 02: Now if there really are people like that, I'd like to know who they were because I'd like to get in on that. [00:39:22] Speaker 02: But that wasn't shown to be real in this rulemaking and what the FEC did was entirely rational. [00:39:29] Speaker 03: What do you say about the question of massive evasion and the Commission's failure to deal with it? [00:39:37] Speaker 02: Well, first, where was the evidence of that in the record? [00:39:40] Speaker 03: Well, we have said even recently that you don't always have to have evidence if you've got common sense. [00:39:46] Speaker 03: Now, the suggestion of the other side is that common sense says that if you can get around a rule that easily, somebody's going to do it. [00:39:56] Speaker 02: Well, first of all, that shows that they couldn't accomplish anything more because you can always just do express advocacy and you're going to have the regulatory standard we're talking about. [00:40:06] Speaker 02: But secondly, Your Honor, I put it to you, where are these people? [00:40:11] Speaker 02: that are giving away large sums of money. [00:40:13] Speaker 03: I left the world of politics long ago, and one of the reasons I was glad to do so was I didn't have to raise money anymore. [00:40:20] Speaker 03: I don't know where they are, and I don't understand why you're asking me that. [00:40:24] Speaker 02: My point is, Your Honor, their whole theory is there are people giving away money without earmarking it, and with our regard to why it's being asked for. [00:40:31] Speaker 02: I don't think there are such people. [00:40:33] Speaker 03: What they are suggesting is that the person comes into the corporation and says, [00:40:39] Speaker 03: wink wink wink i'm not giving you this for that advocacy of that election during communication that you're making wink wink wink and give them the money they're not saying that people really are giving it away that's the whole meaning of their invasion you're talking about a different category of donor than the one they're concerned about shouldn't the commission have dealt with that question [00:40:58] Speaker 02: I think the Commission dealt adequately with it by adopting the best standard they could given the structure of the statute and in the absence of any evidence that this had been a problem with respect to express advocacy, Your Honor. [00:41:14] Speaker 02: I just said we're not looking for the best regulation here. [00:41:17] Speaker 02: We're looking for an adequate regulation, and we got one that complies with the statute. [00:41:20] Speaker 02: We know that we got one that uses an approach that Congress has endorsed. [00:41:25] Speaker 02: We know that there's no evidence on the record that shows that that approach was irrational, and that's sufficient to withstand the very lenient review at step to the Chevron. [00:41:36] Speaker 04: ms carol says several times this was not reason decision making so the argument seems to be it's not that they couldn't have done this they just didn't do a very good job of explaining why they were doing it came with this burden [00:41:49] Speaker 04: and you know misleading support and that sort of thing. [00:41:52] Speaker 04: What's your best defense of what the commission did here in terms of adequately explaining? [00:42:01] Speaker 02: There's an ENJ and I think the ENJ does provide a reason basis and what it says [00:42:07] Speaker 02: is that we have a problem here. [00:42:09] Speaker 02: We have a situation where we need to tailor this statute. [00:42:14] Speaker 02: It hasn't otherwise been tailored, and we do have privacy interests at stake here and donor privacy interests at stake. [00:42:22] Speaker 02: We also have uncertainty as to what constitutes a reportable contribution. [00:42:29] Speaker 02: And some examples were given that clearly are not. [00:42:32] Speaker 02: For example, somebody who buys a widget from a company, they're not a contributor to a company. [00:42:37] Speaker 02: But if the American Heart Association enters into a joint venture [00:42:41] Speaker 02: perhaps informal with an association somewhere that allows them to use the American Heart Association trademarks and materials, and the money that comes in is divvied up, and part of that's called a royalty, and part of that's called a freewill offering, and who knows what else is called? [00:42:57] Speaker 01: I haven't read the testimony. [00:42:59] Speaker 01: The commission held an evidentiary hearing. [00:43:02] Speaker 01: which is unusual in rulemaking. [00:43:06] Speaker 01: But anyway, was there testimony during the hearing regarding the sort of hypotheticals that you're talking about, not customer money or not union dues or anything, but other things that would clearly be considered a contribution or a donation that have no relationship to elections? [00:43:31] Speaker 02: It occurred at this level, Your Honor. [00:43:33] Speaker 02: There was discussion about the fact there's uncertainty here as to what should be identified and aggregated and reported. [00:43:41] Speaker 02: They didn't really get down in the weeds very far as to what is it exactly you're uncertain about. [00:43:47] Speaker 02: But the commission, whose expertise lies largely in enforcing and implementing disclosure requirements, that's what they've been doing since the 1970s, [00:43:55] Speaker 02: obviously understood what was being talked about there, accepted the fact that there was a problem, and it's easy to understand how something like my American Heart Association example creates a real problem. [00:44:07] Speaker 02: And particularly remember, if the American Heart Association wants to spend $15,000, $10,000 actually, on a radio ad in rural Washington state, [00:44:16] Speaker 02: under the position that's being advocated here, they would have to go through for the last year, almost two years, every money they came in to try to figure out whether it's a contribution or not, and to try to then figure out how to aggravate it, then send it to the lawyers to see which has to be reported. [00:44:32] Speaker 02: And the burden of reporting would swamp [00:44:36] Speaker 02: the expenditure on the speech itself, which is irrational. [00:44:39] Speaker 01: But it's easy to keep track of earmarked donations. [00:44:49] Speaker 02: If you know you're going to have to disclose contributions when you earmark them, [00:44:54] Speaker 02: Either because the donor says it's earmarked, it's easy to say, OK, that goes in a bucket over here. [00:44:58] Speaker 02: Or if you request contributions for the purpose of speech, it's easy to understand you're going to have to keep track of that. [00:45:04] Speaker 02: Nobody said that was a burden. [00:45:06] Speaker 02: There's no evidence that keeping track of earmarked contributions is a burden. [00:45:10] Speaker 02: It's a question when associations with income flowing in in all sorts of ways, perhaps with no thought at the time of engaging in any lecture in communication speech, later wants to speak a little bit. [00:45:22] Speaker 02: And they're told, well, you've got to go back through. [00:45:24] Speaker 02: That's where the burden is. [00:45:26] Speaker 02: The FEC said the burden wasn't identifying what had to be disclosed. [00:45:30] Speaker 01: I want to ask you the same question I asked the opposing counsel. [00:45:34] Speaker 01: What happens if the, whatever it is, the National Rifle Association gets a contribution anonymously? [00:45:44] Speaker 02: They have a problem. [00:45:46] Speaker 02: I do not know that there is an answer to that problem. [00:45:48] Speaker 02: But I can certainly see the position [00:45:52] Speaker 02: that could be taken, that by accepting a contribution where you don't know where it came from, you have disqualified yourself from engaging in election, if it's over $1,000. [00:46:02] Speaker 02: You have disqualified yourself for the next few years from engaging in election and communication. [00:46:07] Speaker 02: Now, it's hard to believe that could be sustained under the First Amendment, but I get surprised every day. [00:46:13] Speaker 02: by cases sustaining things in the First Amendment. [00:46:15] Speaker 01: If that were permissible, then evasion could be rampant. [00:46:25] Speaker 01: But that's not because of any irrationality. [00:46:28] Speaker 01: It's because of the First Amendment. [00:46:30] Speaker 02: That's exactly right, Your Honor. [00:46:32] Speaker 02: And if we had hypothesized that there are these people who are doing the wink, wink, nod, nod, [00:46:38] Speaker 02: I don't know why they can't come in and say, wink, wink, nod, nod, I've got an anonymous source for you who wants to give you a bunch of money in recognition of the great work you're doing. [00:46:48] Speaker 02: And it comes in from anonymous. [00:46:51] Speaker 02: And you have the same sort of evasion. [00:46:54] Speaker 02: But the other flip side of that is maybe if you take anonymous donations, you can't engage in electionary communications. [00:46:59] Speaker 02: Either way, there's a real problem here. [00:47:01] Speaker 02: The FEC was faced with a difficult problem. [00:47:04] Speaker 02: It had a legislative solution that Congress had established. [00:47:08] Speaker 02: When Congress had revisited the Act to set up the electionary communications provisions, Congress hadn't changed that existing standard, and the FEC used that standard. [00:47:18] Speaker 02: That cannot be irrational. [00:47:23] Speaker 04: All right, thank you. [00:47:25] Speaker 04: Case will be submitted.