No. 11-3386

_____________________________________

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

_____________________________________

JACK and RENEE BEAM,

Plaintiffs-Appellants,

vs.

CAROLINE C. HUNTER, FEDERAL

ELECTION COMMISSION CHAIR,

Defendant(s)-Appellee.

_____________________________________________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

Case No. 07-cv-1227

Honorable Rebecca R. Pallmeyer

______________________________________________________

BRIEF FOR APPELLANTS

______________________________________________________

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DISCLOSURE STATEMENT

Pursuant to Federal Rule of Appellate Procedure 26.1 and Circuit Rule 26.1, the

undersigned counsel provides the following information:

1. The full name of every party that the attorney represents in the case:

Jack Beam and Renee Beam.

2. Names of all law firms whose partners or associates have appeared for the party

in this case (including proceedings in the district court, or before any administrative agency), or

are expected to appear in this Court.

Jack Beam

Beam & Raymond

954 W. Washington Blvd., Suite 215

Chicago, Illinois 60607

Michael R. Dezsi

Geoffrey N. Fieger

Fieger, Fieger, Kenney, Johnson & Giroux, P.C.

19390 W. Ten Mile Road

Southfield, Michigan 48075

3. The party represented is not a corporation.

Attorney’s Signature: Date: August 15, 2012

Attorney’s Printed name: Jack Beam

Please indicate if you are Counsel of Record for the above listed parties pursuant to Circuit Rule

3(d). Yes.

Address: 954 W. Washington Blvd., Suite 215, Chicago, Illinois 60607

Phone Number: (312) 733-0930 Fax Number: (312) 733-0921

E-Mail Address: jbeam@beamandraymond.com

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i

TABLE OF CONTENTS

STATEMENT IN SUPPORT OF ORAL ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

STATEMENT OF JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

STATEMENT OF ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

STATEMENT OF CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

A. Renee Beam & Jack Beam: Federal Campaign Contributors & Activists . . . . . . . . . 6

B. The Beam Suit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

C. The Fieger Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

D. The Basis of the Underlying Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

E. The Beam Trial Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

a. Michael Kendall Day’s Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

b. Audra Wassom Bayes’ Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

c. Thomas Anderson’s Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

d. Roger Hearron’s Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

e. Phillip Olaya’s Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

F. The Beam Trial and Conclusion of the District Court Case. . . . . . . . . . . . . . . . . . . . 13

SUMMARY OF THE ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Statement of the Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

I. The District Court Abused Its Discretion in Awarding Defendant’s Costs Where the

Defendant Engaged in Misconduct or Litigated in Bad Faith . . . . . . . . . . . . . . . . . . 16

II. This Was Public Interest Litigation Rooted in the First Amendment and Therefore

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the District Court Erred in Finding that Being Recklessly and Flagrantly Threatened

with Felony Prosecutions Was a Mere “Inconvenience.” . . . . . . . . . . . . . . . . . . . . . . 21

III. The District Court Erred in Granting Defendant’s Bill of Costs Because the

Plaintiffs’ Brought their Action in Good Faith and the Issues Presented were

Close and Complex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

IV. The District Court Erred in Determining the Defendant was the

Prevailing Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

V. Even if the Court Agrees that Costs Should Be Taxed Against Plaintiffs,

the District Court Erred by Awarding the Total Amount Requested

by the Defendants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

CR 30(a) APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

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TABLE OF AUTHORITIES

CASES

Austin v. Mich. State Chamber of Commerce, 494 U.S. 652 (1990) . . . . . . . . . . . . . . . . . . . . . . 21

Baez v. United States Dept. of Justice, No. 79-1881 (D.C. Cir. 1981) . . . . . . . . . . . . . . . . . . . . 23

Chicago Sugar Co. v. American Sugar Refining Co., 176 F.2d 1, 11 (7th Cir. 1949). . . . . . .16, 23

Citizens United v. Federal Election Com’n, 130 S.Ct. 876 (2010) . . . . . . . . . . . . . . . . . . . . . . . 21

Congregation of the Passion v. Touche, Ross & Co., 854 F.2d 219, 222 (7th Cir. 1988) . . . 16, 17

Gavoni v. Dobbs House, Inc.,164 F.3d 1071, 1075 (7th Cir. 1999). . . . . . . . . . . . . . . . . . . . . . . 16

Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 25

Hewitt v. Helms, 482 U.S. 755, 761 (1987). . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 25

Hudson v. Nabisco Brands, Inc., 758 F.2d 1237, 1242 (7th Cir. 1985). . . . . . . . . . . . . . . . . . . . 16

In re Paoli R.R. Yard PCB Litig., 221 F.3d 449, 466 (3d Cir. 2000). . . . . . . . . . . . . . . . . . . . . . 23

Johnson v. LaFayette Fire Fighters Assoc., 51 F.3d 726, 730 (7th Cir. 1995) . . . . . . . . . . . . . . 26

Jones v. Schellenberger, 225 F.2d 784, 794 (7th Cir. 1955) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

McConnell v. FEC, 540 U.S. 93 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Muslin v. Frelinghuysen Livestock Managers, 777 F.2d 1230, 1236 (7th Cir. 1985) . . . . . . . . . 23

Nadeau v. Helgemoe, 581 F.2d 275, 278-279 (1st Cir. 1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Remington Products, Inc. v. North American Philips, Corp., 763 F. Supp. 683, 688 (D. Conn.

1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Richmond v. Southwire Co., 980 F.2d 518, 520-21 (8th Cir. 1992). . . . . . . . . . . . . . . . . . . . . . . 27

Rivera v. City of Chicago, 469 F.3d 631 (7th Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Sun Ship, Inc. v. Lehman, 655 F.2d 1311, 1315 (D.C. Cir. 1981) . . . . . . . . . . . . . . . . . . . . . . . . 23

United States v. E. J. Biggs Const. Co., 116 F.2d 768, 775 (7th Cir. 1940). . . . . . . . . . . . . . . . . 16

Case: 11-3386 Document: 31 Filed: 08/15/2012 Pages: 37
iv

White & White, Inc. v. American Hosp. Supply Corp., 786 F.2d 728, 731, 733 (6th Cir.1986). . 24

Williams v. Northern Indiana Public Service Co.,131 F.R.D. 676, 677 (N.D. Ind. 1990). . . . . . 17

Zinn v. Shalala, 35 F.3d 273, 274, 276 (7th Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

STATUTES

Title 2 of United States Code, Section 441 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 9, 22

Title 12 of United States Code, Section 3401 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 8, 23

Title 28 of United States Code, Section 1331 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

PUBLIC LAWS

Bipartisan Campaign Finance Reform Act of 2002, Pub. L. No. 107-155, 116

Stat 2356 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

RULES

Federal Rules of Appellate Procedure 34(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Local Rule 34(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Rule 54(d)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 16, 25

OTHER AUTHORITY

Merritt, Judges on Judging: The Decision Making Process in Federal Courts of Appeals, 51 Ohio

St. L.J. 1385, 1386-1387 (1991). . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2

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STATEMENT IN SUPPORT OF ORAL ARGUMENT

Pursuant to FRAP 34(a) and Local Rule 34(f), Plaintiff-Appellant requests oral argument.

The appeal is sufficiently complex to warrant oral argument which would afford the Court the

opportunity to pose any questions it may have concerning the facts or the specifics of the parties’

respective positions.

Plaintiffs’ counsel sincerely believes that participation in oral argument will be

beneficial, and that the decisional process will be significantly aided by this Court’s grant of oral

argument.

As Sixth Circuit Senior Judge Gilbert S. Merritt has stated:

At its core, the adversary process is oral argument. The presence of live

human beings in verbal combat engages the attention of judges and makes

them think, question, discuss and reconsider a case as can nothing else,

including able briefs and judicial opinions on analogous points. It focuses

thought and reflection more than discussion and debate with law clerks in

chambers even when the law clerks are better lawyers than the lawyers in the

case.

* * *

The oral tradition runs deep in Anglo-American jurisprudence for good

reason. It is a safeguard against inattentiveness and unreflection. Oral

argument, as Karl Llewellyn observed, is one of the ‘major steadying factors’

which produce ‘reckonability’ in ‘[o]ur institution of law-government.’

“In oral argument lies counsel’s one hedge against misdiagnosis

and misperformance in the brief, the one last chance of locating a

postern missed in the advance survey. In oral argument lies the

opportunity to catch attention and rouse interest among men [and

women] who must be got to read – or to reread – this brief not as a

routine duty nor under the undiscriminating press or other

business, but with the pointed concentration this cause merits.

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[citing K. Llewellyn, The Common Law Tradition: Deciding

Appeals, 18-19 (1960)].”

Merritt, Judges on Judging: The Decision Making Process in Federal Courts of Appeals, 51 Ohio

St. L.J. 1385, 1386-1387 (1991).

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STATEMENT OF JURISDICTION

Jurisdiction of the District Court

The jurisdiction of the U.S. District Court for the Northern District of Illinois (hereafter “District

Court”) arose under Title 28 of United States Code (U.S.C.), Section 1331 and Title 12 U.S.C.

Section 3401 et seq.

Jurisdiction of the Circuit Court

The jurisdiction of the U.S. Court of Appeals for the Seventh Circuit arises under Title 28 of

U.S.C., Section 1291, pertaining to, inter alia, final decisions of the district courts.

In the present appeal, the Plaintiff-Appellant appeals from the Order of September 22, 2011

granting Defendant’s Motion for Bill of Costs.

The Notice of Appeal was filed on October 21, 2011. The due date of the Appellant's Brief was

established by this Court to be December 19, 2011 pursuant to Circuit Rule 33. It was

subsequently extended due to mediation until June 11, 2012.

This case is a direct appeal from the decision of U.S. District Court Judge Rebecca R. Pallmeyer.

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STATEMENT OF ISSUES

1. Whether the District Court Abused Its Discretion in Awarding Costs to the Defendant

where the Defendant Engaged in Misconduct or Litigated in Bad Faith.

2. Whether This Was Public Interest Litigation Rooted in the First Amendment and

Therefore the District Court Erred in Finding that Being Recklessly and Flagrantly

Threatened with Felony Prosecutions Was a Mere “Inconvenience.”

3. Whether the District Court was Mistaken in Awarding Costs to the Defendant when the

Plaintiffs Brought Their Action in Good Faith and the Issues Presented were Close and

Complex.

4. Whether the District Court Erred in Awarding Costs to the Defendant when the

Defendant was Not the Prevailing Party.

5. Whether the District Court Erred in Awarding the Total Amount Requested by the

Defendants.

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STATEMENT OF CASE

This is an appeal from the District Court’s order granting costs to the Defendant pursuant

to Rule 54(d)(1). In September of 2006, Jack Beam and Renee Beam (hereinafter “Plaintiffs”)

received “Reason to Believe” (“RTB”) letters from the Federal Election Commission

(“Defendant” or “FEC”), threatening Plaintiffs with felony prosecution for allegedly making

illegal contributions to John Edwards’ 2004 Presidential campaign. Plaintiffs promptly sent

letters to the FEC vigorously denying all allegations. Months passed, and Plaintiffs never

received any response that either acknowledged the false nature of the FEC’s allegations or

otherwise admitted that the FEC would not be pursuing the matter.

In March of 2007 Plaintiffs brought suit against Defendant, the FEC, and the Department

of Justice (“DOJ”) alleging among other things that the FEC had obtained financial records in

violation of the Right to Financial Privacy Act of 1978 (“RFPA”), 12 U.S.C. § 3401 et seq. All

allegations against the DOJ were dismissed soon thereafter.

After a two-day bench trial, the Court entered a judgment in favor of Defendant opting to

believe an FEC witness, who had recanted his unfavorable discovery deposition testimony

twelve months after providing this dispositive testimony and six months prior to trial. On

October 29, 2010, Defendant filed a motion for bill of costs. The District Court granted

Defendant’s motion and awarded the total requested amount of $8,300.64 to the Defendant.

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STATEMENT OF FACTS

A. Renee Beam & Jack Beam: Federal Campaign Contributors & Activists

For decades the Beams had been politically active. Following his tenure with the DOJ

and the U.S. Attorneys’ Office for the District of Delaware, where Jack Beam (“Beam”) served

as an Assistant U.S. Attorney and Director of an FBI Strike Force, Beam ran for the Michigan

State Senate with the endorsement of former President Gerald R. Ford. In 2002, Beam was

elected to and served on the Glen Lake Michigan School Board. In the early 1980’s Renee Beam

performed campaign advance work for former Illinois Attorney General Tyrone Fahner and

worked on women’s issues with, among others, the late Geraldine Ferraro. In the late 1980’s, the

Beams were high-profile supporters and fundraisers for Federico Peña, the former Mayor of

Denver and the former U.S. Secretary of Transportation. All of this information is a matter of

public record and was available to the FEC.

In the RTB letter signed by then FEC Chairman Michael Toner, the FEC falsely claimed

that The Beams “had never contributed to a Federal political committee prior to his contributions

to the Edwards campaign.” (Documents: 193-2, 193-3). Before the FEC threatened Beams with

felonies, the Beams had made campaign contributions to the following U.S. Senate campaigns:

Harvey Gantt of North Carolina, Mark Udall of Colorado, Barack Obama of Illinois, Debbie

Stabenow of Michigan, Carl Levin of Michigan, Tom Strickland of Colorado, Tim Wirth of

Colorado, Ned Lamont of Connecticut and Joe Sestak of Pennsylvania. A contribution was also

made by the Beams to Michael Dukakis’ Presidential campaign. As conceded by the FEC at

trial, the Beams lengthy history of donating to federal campaigns had always been available to

the FEC (Trial Testimony of Roger Hearron, Direct Examination).

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Consequently, as to Plaintiffs, the genesis of this case lies in the fact that the Beams took

great umbrage at being threatened with spurious felony prosecutions in violation of their First

Amendment rights. But for the unfounded RTB letters threatening the Beams with felony

prosecutions, and the failure of the FEC to ever acknowledge that their allegations were utterly

devoid of merit, the Beams would not have had any need to defend themselves.

The allegations in the RTB letters were patently false. Even a scintilla of due diligence

by the FEC to search its own records and/or the internet would have revealed the Beam’s long

history of federal campaign contributions and political activism. Thus, it is apparent that the

Beams were caught up in the reckless and expensive FEC/DOJ dragnet strategy to prosecute a

prominent trial attorney, Geoffrey Fieger—perhaps for the purpose of being “flipped.” Both

Toner’s FEC1as well as the Gonzales DOJ were on what has been characterized as a

“witchhunt” to convict attorney Geoffrey Fieger. Mr. Fieger is the same trial attorney that

President Bush had disparagingly referred to in a televised interview as “that Kevorkian lawyer,”

after Fieger aided his Arizona neighbor Senator John McCain in his upset victory over the

President in the 2000 Michigan Republican Primary.

The FEC never responded to the letter of Renee Beam or the letter of Jack Beam, both of

which vehemently denied the reckless and false allegations contained in the FEC’s RTB letters.

B. The Beam Suit

As a result of the FEC’s RTB letters threatening felony prosecution and the FEC’s failure

to respond to Plaintiffs’ letter, the Plaintiffs filed suit against the Attorney General, the Chairman

of the FEC and unknown FBI agents alleging violations of the Right to Financial Privacy Act

1

Perhaps inspired by the flood of money earmarked for “Super-PACs”, the former FEC Chairman Toner

advocated for the former Senator John Edwards in the media (e.g. in interviews with Chuck Todd on

MSNBC) and was listed as an expert by Mr. Edward’s defense team in Mr. Edward’s recent FEC criminal

trial. (MSNBC’s The Daily Rundown with Chuck Todd, Apr 26, 2012)

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[“RFPA”], FECA, and retaliatory conduct for engaging in constitutionally-protected speech.

Thereafter, Plaintiffs filed an amended complaint, reasserting their RFPA and retaliation claims,

and adding a claim under the Fifth Amendment for selective and vindictive prosecution. The

court dismissed all of Plaintiffs' claims except for the RFPA claim which alleged that Defendant

FEC obtained their bank records from the DOJ without a written certification, in violation of the

RFPA.2

C. The Fieger Investigation

In 2005, the DOJ commenced a criminal investigation of the Michigan law firm, Fieger,

Fieger, Kenney & Johnson (“Fieger Firm”). The probe in question examined alleged and

ultimately unsubstantiated violations of the Federal Election Campaign Act (“FECA”), 2 U.S.C.

§ 441f.3The DOJ claimed that the Fieger Firm violated FECA by reimbursing employees in

return for their contributions to John Edwards' 2004 presidential campaign. The federal

prosecutors sometimes refer to these matters as “conduit contribution cases,” in which a third

party or entity advances or reimburses campaign contributions of a donor in a way that the donor

is not the true source of the funding.

In 2006, the FEC began a contemporaneous civil investigation of the Fieger Firm for

suspected violations of FECA. In the course of their investigation, the FEC cross-referenced

several names that were listed on the Fieger Firm’s website with information gleaned from the

2

“Financial records originally obtained pursuant to this chapter shall not be transferred to another agency

or department unless the transferring agency or department certifies in writing that there is reason to

believe that the records are relevant to a legitimate law enforcement inquiry.” RFPA, 12 U.S.C. § 3412.

3

In August 2007, the DOJ's investigation of the Fieger firm led to the indictment of two partners of the

firm: Geoffrey Fieger and Vernon Johnson. In June of 2008, a jury acquitted Fieger and Johnson of all 10

counts that they were indicted on.

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FEC database of contributors to Edwards’ campaign. The FEC found several names, including

the Plaintiff Jack Beam, who was concomitantly listed on both sources. When these references

to Mr. Beam were queried against the information in the FEC’s database, the results showed that

he and his wife, Plaintiff Renee Beam, had each contributed $2,000 to the Edwards campaign in

2003, for which the Beams were never reimbursed by Fieger nor anyone else.

D. The Basis of the Underlying Case

By virtue of the fact that there were parallel investigations being coordinated by the DOJ

and FEC into Plaintiffs’ alleged campaign contribution violations, their staff members

undisputedly shared information concerning the targets of these investigations. Plaintiffs’

primary claims against the FEC pertained to violations of RFPA; specifically, whether the FEC

accessed their banking records in the course of the above described investigation without

following proper legal procedures. Thus, the thrust of Plaintiffs’ case against the FEC focused on

factual issues; specifically, whether a transfer of Plaintiffs' financial records had transpired.

Plaintiffs offered three main points in support of their claim that such a transfer did

occur: (1) the FEC, as a matter of course, obtains and reviews bank records to substantiate a

violation of FECA;4(2) FEC staff attorneys admittedly obtained more than one CD of trial

materials prior to and/or from the Fieger trial from the DOJ;5and (3) Phillip Olaya, an FEC

4 This contention is factually based on the testimony of FEC Assistant General Counsel for Litigation

Colleen Sealander: “In my experience at the FEC, if the Commission wants to prove that somebody has

violated Section 441f, ... it frequently uses bank records to prove that fact or not.” (Document 142-4,

Deposition of Colleen Sealander, March 10, 2009, pg. 13); as well as the testimony of FEC Assistant

General Counsel for Enforcement Mark D. Shonkwiler: “[i]f there was an allegation that someone was

reimbursed, and they said no, I was never reimbursed, we might seek financial records to see if there were

deposits made into a bank account in some proximity to the contribution.” (Document 142-4, Deposition

of Mark D. Shonkwiler, March 11, 2009, pg. 19-22)

5 The Department of Justice indicted Geoffrey N. Fieger with violations of 2 U.S.C 441(b) and 2 U.S.C

441(f), as well as several other parallel charges stemming from these alleged violations. Mr. Fieger was

eventually acquitted of any and all wrongdoing.

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lawyer, testified under oath in his deposition that he had seen both Jack and Renee Beam’s

financial records in the DOJ documents. Defendant argued they had never received the

Plaintiffs’ bank records and moved for summary judgment on these claims. The Court denied

the FEC’s motion based on Olaya’s deposition testimony (Document: 147). Defendant moved

for summary judgment on these claims a second time, closer to trial, which the court denied

(Document: 181).

E. The Beam Trial Testimony

Michael Kendall Day’s Testimony

The trial testimony primarily focused on the cooperation between Defendant FEC and the

DOJ. The court heard testimony from Michael Kendall Day (“Day”), an attorney at the DOJ,

and Audra Wassom Bayes (“Bayes”), an FEC staff attorney. Day and Bayes served as primary

contacts for each other at their respective agencies and met many times over the progression of

their investigations. Day testified that after learning of the FEC civil investigation in late 2006

or early 2007, the DOJ sent several of its non-grand jury investigative reports, or FBI 302

reports, on the Fieger firm to the FEC (Jack Beam was “Of Counsel” to the Fieger firm).

Furthermore, Day attested that the DOJ had served Merrill Lynch with a grand jury subpoena in

April 2007 to obtain Plaintiffs' bank records for its criminal investigation.6 When reviewing

these records, the DOJ did not find any shred of evidence indicating that the Plaintiffs'

participated in the alleged reimbursement scheme and Plaintiffs were never charged with any

criminal or civil wrongdoing. Day testified that he met with Bayes and provided her with a CD

6 The DOJ continued its criminal investigation of the Fieger firm through the spring of 2007, but the FEC

deferred pursuing its civil investigation during this time. While the FEC does have the power to conduct

administrative discovery, it declined to issue administrative subpoenas for the Plaintiffs’ bank records

while the civil investigation was on hold.

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of the DOJ's trial exhibits, including charts which allegedly documented the flow of money from

the Fieger firm to its members for use as campaign donations.

Audra Wassom Bayes’ Testimony

Successive to the Fieger acquittal, Ms. Bayes initiated contact with the DOJ to obtain

copies of the trial transcripts and exhibits so that the FEC could continue its civil investigation.7

In her deposition, Bayes stated that she recalled receiving more than one CD from the DOJ, but

she further qualified her statement by asserting that she might have been confused and conflated

the number of original disks with the number of copies that she made for use in her office. She

identified as many as four or five CDs of pertinent information that were relayed to her office

from the DOJ.

Thomas Anderson’s Testimony

Mr. Day also testified that he met with a potential expert witness, Thomas Anderson,

prior to the Fieger trial. Mr. Anderson was the acting Assistant General Counsel of the FEC at

the time. Day explained that it was customary to show a witness exhibits that would be used at

trial, but he also claimed that even though Plaintiffs' financial records were subpoenaed, the DOJ

did not use any of the records as exhibits during the Fieger criminal trial. Moreover, Anderson

testified that he did not see Plaintiffs' bank records, nor did he take any documents with him at

the conclusion of his meeting with Day. Anderson further testified that after their second meeting

in late March or early April 2008, he received a packet of trial materials from Day, which

contained one CD with financial contribution information on at least hundreds, if not thousands,

of contributors to the Edward’s campaign. Anderson reported that he did not share this

information with anyone at the FEC, although he himself was an official with the FEC and acting

7 Day had previously testified and substantiated that he had provided the discs containing records used in

the Fieger trial to Bayes in this meeting.

Case: 11-3386 Document: 31 Filed: 08/15/2012 Pages: 37
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in his official capacity. Mr. Anderson further testified that any discs that his agency had received

had been [fortuitously] lost or destroyed prior to the Beams’ discovery investigation.

Roger Hearron’s Testimony

On March 10, 2009, Roger Hearron, a FEC Investigator, had been involved in research

regarding financial records for the FEC’s investigation of the Beams that were being used in the

DOJ investigation against Mr. Fieger. Mr. Hearron testified regarding the RTB letter sent to the

Beams, as well as his subsequent contact with several CDs of financial materials that were used

in both the DOJ and FEC investigations. He stated that he received the first CD “sometime after

the RTB letters were sent out.” He also indicated that a second, separate CD of materials were

forwarded to him after the criminal trial of Geoffrey N. Fieger had concluded. Mr. Hearron

further testified that he had received the first and second CD of information electronically, either

via a hard disc or email. His indication that there were two CDs of information relayed to the

FEC conflicted with the testimony of both Bayes and Anderson, who each averred a different

number of discs. Moreover, Mr. Hearron testified that he had, in the past, been involved in the

transfer of banking and financial records between different federal agencies, such as the

Department of Justice. However, Mr. Hearron could not recall if he had or had not seen the

Beams’ financial information listed in the CDs in question.

Phillip Olaya’s Testimony

Philip Olaya, a staff attorney at the FEC, assumed primary responsibility for the civil

investigation after Bayes was promoted, and he received all of the files that Bayes kept on the

case. In his deposition, Olaya testified that among the files he received was a CD containing

financial records used as exhibits in the Fieger trial. When questioned further about the exact

names associated with these financial records, Olaya responded clearly and unequivocally that he

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had seen both Jack and Renee Beam’s financial records. However, nearly a year after his initial

testimony and with the trial on the matter in question quickly approaching, Mr. Olaya submitted

a declaration recanting his deposition testimony that he had seen Beams’ records.

At trial, Mr. Olaya cited several excuses why he was recanting his prior sworn deposition

testimony. Mr. Olaya stated that the reason he had admitted to seeing the Plaintiffs’ bank

records from DOJ in his deposition was because he had answered in the affirmative to the two

previous questions, without fully considering the questions of Plaintiffs’ counsel. Mr. Olaya

further stated that he was not being specific enough and he should have asked for clarification

regarding where he saw those particular records. (Trial Testimony of Mr. Olaya, CrossExamination, pg. 311-324) Although Mr. Olaya is a licensed attorney for a governmental

agency, he testified at trial that he was flustered by the deposition, and not used to the litigation

environment or what his responsibilities were in the context of a deposition (Id.). At trial, the

District Court believed Mr. Olaya’s explanation for recanting his admission, despite the fact that

the District Court had previously disregarded Olaya’s exact same declaration in its Order

denying Defendant’s Motion for Summary Judgment (Document: 148).

F. The Beam Trial and Conclusion of the District Court Case

The District Court conducted a two-day bench trial and heard testimony from various

DOJ and FEC officials, as well as Plaintiffs themselves. The Plaintiffs were disparagingly

referred to throughout the investigation and trial as “conduits” although they had never been

reimbursed by the Fieger firm nor anyone else for their contributions to Edwards. The Court

heard testimony from various FEC officials, including the pivotal revamped testimony of Mr.

Olaya. The Court elected to believe Mr. Olaya’s recanted version at trial. Consequently, the

Court found in favor of Defendant. Subsequent to the trial, the FEC submitted its bill of costs,

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which was objected to by the Plaintiffs. The District Court granted the Defendant’s motion for

bills of costs which is now being presented as an issue on appeal.

Hopefully, this appeal will not be viewed as an “inconvenience” to the Court of Appeals.

Eight thousand dollars is not an inconsequential sum for any parents with children at university.

Of course, that sum pales by comparison to the sums expended in response to the FEC’s threats

of felony prosecutions during the years that this litigation dragged on because of the FEC’s

reckless failure to exercise due diligence before threatening the Beams, and thereafter as a result

of Olaya’s sworn deposition testimony; testimony which became the sine qua non of Plaintiffs’

case once the District Court dismissed all the other claims and denied Defendant’s Motion for

Summary Judgment based on Olaya’s deposition testimony.

Case: 11-3386 Document: 31 Filed: 08/15/2012 Pages: 37
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SUMMARY OF THE ARGUMENT

The District Court erred in granting the Defendant-Appellees’ Motion for bill of costs.

First, the District Court abused its discretion holding that the Defendant did not engage in

misconduct or litigate in bad faith. Second, this was public interest litigation rooted in the First

Amendment and therefore the District Court erred in finding that being recklessly and falsely

threatened with felony prosecutions was a mere “inconvenience.” Third, the District Court

should not award costs to the Defendant when the Plaintiffs brought their action in good faith

and the issues presented were close and complex. Fourth, even if the Court determines that the

Defendant litigated in good faith, the District Court erred by stating that the Defendant was the

prevailing party. Finally, the District Court erred in granting Defendant’s bills of costs in its

entirety given the delay and excessive cost over-runs engendered by the FEC.

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ARGUMENT

______________________________________________________________________________

Statement of the Standard of Review

______________________________________________________________________________

The proper interpretation of Rule 54(d)(1) presents a question of law that is determined

de novo on appeal. Gavoni v. Dobbs House, Inc.,164 F.3d 1071, 1075 (7th Cir. 1999) (holding

that where a party's entitlement to costs rests on a legal interpretation of a rule of civil procedure,

review is de novo); See also, Rivera v. City of Chicago, 469 F.3d 631 (7th Cir. 2006).

I. The District Court Abused its Discretion in Awarding Defendant’s Costs Where the

Defendant Engaged in Misconduct and Litigated in Bad Faith

______________________________________________________________________________

Rule 54(d) of the Federal Rules of Civil Procedure, 28 U.S.C.A. contains a presumption

that the losing party will pay costs, but grants the court discretion to direct otherwise. The

Seventh Circuit has adhered to this interpretation and has reversed exercises of discretion which

go beyond it. United States v. E. J. Biggs Const. Co., 116 F.2d 768, 775 (7th Cir. 1940);

Chicago Sugar Co. v. American Sugar Refining Co., 176 F.2d 1, 11 (7th Cir. 1949); Jones v.

Schellenberger, 225 F.2d 784, 794 (7th Cir. 1955) (“reprehensible” conduct by the prevailing

party triggered the “fullest extent” of discretion against him). Several factors have been

identified to scrutinize when determining whether costs should be awarded to the prevailing

party, including some fault, misconduct, default, or action worthy of a penalty on the part of the

prevailing side. Hudson v. Nabisco Brands, Inc., 758 F.2d 1237, 1242 (7th Cir. 1985);

Congregation of the Passion v. Touche, Ross & Co., 854 F.2d 219, 222 (7th Cir. 1988).

Examples of such defections include the calling of unnecessary witnesses, raising unnecessary

issues, encumbering the record, or causing delay in raising an objection fatal to the plaintiff's

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case. Congregation of the Passion, 854 F.2d at 222 (7th Cir. 1988); Williams v. Northern Indiana

Public Service Co.,131 F.R.D. 676, 677 (N.D. Ind. 1990) (defendant’s lack of diligence causing

increased costs and waste of judicial resources was declared conduct worthy of penalty); Also

see, Remington Products, Inc. v. North American Philips, Corp.,763 F. Supp. 683, 688 (D. Conn.

1991) (costs denied because prevailing party refused to provide discovery and did not comply

with the rules governing discovery proceedings constituting bad faith).

The Defendant’s reckless indifference and lack of due diligence prior to threatening the

Plaintiffs was the catalyst that triggered Plaintiffs to file suit. Such conduct unworthy of reward.

Williams v. Northern Indiana Public Service Co., 131 F.R.D. 676, 677 (N.D. Ind. 1990) (holding

that the defendant’s lack of diligence in failing to raise challenge to diversity jurisdiction until

motion to set aside judgment and waste of judicial resources made an award of costs to defendant

inappropriate). The record is undisputed that the FEC had absolutely no factual basis whatsoever

to send the Plaintiffs RTB letters.

Roger Hearron, the investigator for the Defendant, grudgingly conceded that the

information within the factual and legal analysis was a “mistake and was worded incorrectly.”

(Trial Testimony of Mr. Hearron, Direct Examination, 70). Among other things the factual and

legal analysis attached to the RTB letters from the Defendant to the Plaintiffs states that neither

Plaintiff has contributed to a federal political committee prior to their contributions to the

Edwards committee (Documents: 193-2, 193-3). Anyone, even an FEC employee “simply

putting in his 20,” performing a modicum of due diligence would find that both Plaintiffs have a

long history of contributions to federal political candidates. (Documents: 185-2, 185-3).

Defendant nevertheless threatened Plaintiffs, without any basis in fact, with federal offenses with

constructive knowledge that the allegations were false. It was these fabricated threats of

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prosecution that led Plaintiffs to file suit against Defendant. Had the FEC done their homework;

had the FEC checked information that was literally at their fingertips, they would have had

“Reason To Believe” that the Beams had not committed felonies. As discussed infra, the

conduct of the Defendant was not simply “inconvenient” and “unfair” to the Plaintiffs, it is the

type of conduct for which our Circuit Courts deny the so-called prevailing party their costs---as

conduct declared worthy of a penalty.8

In addition to the misconduct of the FEC in threatening the Beams, Defendant’s dilatory

tactics throughout discovery and their failure to raise fatal objections to Plaintiffs’ case

prolonged the litigation and ultimately led to increased costs.

Most significantly, Defendant’s Staff Attorney handling this matter, Phillip Olaya, gave

sworn testimony during a discovery deposition that he had seen the Plaintiffs’ financial records,

a statement which was relied upon by the Plaintiffs and the Court. Specifically, during Mr.

Olaya’s deposition, he was asked if he recalled seeing Jack Beam and Renee Beam’s names on

the financial records generated by financial institutions that were part of Mr. Olaya’s file at the

FEC. He answered, yes. (Document: 147, Deposition of Phillip Olaya, pg. 28).

Olaya’s testimony was the sine qua non of the remaining claim against the FEC.

This testimony caused the District Court to deny Defendant’s motion for summary judgment and

prompted a trial on the merits as the remaining issue in Plaintiffs’ suit was whether the Plaintiffs’

bank records had been transferred to the Defendant by the DOJ in violation of the RFPA.

(Document: 148).

8 The Honorable Rebecca Pallmeyer’s stated that “Although Plaintiffs may very well have been

inconvenienced by this process, and found it unfair, it does not support a finding of misconduct in the

instant case.” (Document: 218)

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Although Mr. Olaya is a licensed FEC attorney, knows that depositions are given under

oath, and presumably understood that the Beams’ entire case hinged on whether there was a

transfer of records from the DOJ to the FEC, Olaya testified in his deposition that he saw the

Beams names in the disc from the DOJ investigation. However, a year after his deposition, Mr.

Olaya submitted a declaration recanting his deposition testimony. (Document: 161-4) Mr. Olaya

recanted his testimony, citing ignorance and inattentiveness as the reasoning for his prior

testimony. (Document: 161:3, Trial Testimony of Mr. Olaya, Direct Examination, 304-306, Trial

Testimony of Mr. Olaya, Cross Examination, 310-344) Specifically, Mr. Olaya declared that “he

was just answering ‘yes’ to the names, perhaps not paying attention or had lost [his]

concentration and just responded ‘yes’ to seeing that information.” (Trial Testimony of Mr.

Olaya, Cross Examination, 336).

As a licensed attorney, officer of the Court and witness sworn to “tell the whole truth,”

Mr. Olaya was required to pay attention and provide accurate testimony during his deposition.

Mr. Olaya’s statements affirming that he had in fact examined the Plaintiffs’ financial records,

and his declaration and testimony, a year later, recanting those statements, when combined with

the fact that he was employed by the FEC, and the fact that such conduct substantially extended

the litigation, amounts to conduct worthy of penalty and should be construed as such for the

purposes of denying Defendant’s Bill of Costs. At the very least, if Mr. Olaya had told the

“truth” the first time, the litigation would have been concluded sooner vis a vis summary

judgment and without the necessity of a trial.9

In addition to Olaya’s, euphemistically speaking, perplexing revision, the FEC engaged

in a pattern of conduct designed to obstruct the discovery process and inevitably increase costs.

9 Of course, only the District Court Judge knows why she discounted/disregarded Mr. Olaya’s declaration

(Document 161-4,) recanting his deposition testimony, only to believe his trial testimony months later,

but that was solely her prerogative as the fact finder in a non-jury trial.

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After the District Court denied Defendant’s motion to dismiss and/or for summary judgment

based on the sworn deposition testimony of Mr. Olaya (Document: 107), the Plaintiffs served

Defendant discovery requests for interrogatories, documents and depositions. (Document: 43-2).

Defendant objected to each of Plaintiffs’ deposition notices, refused to produce any documents

under a vague claim of privilege and objected to nearly all of Plaintiffs’ interrogatories.

(Documents: 43-4, 43-5). Due to the Defendant’s noncompliance with the rules governing

discovery, Plaintiffs’ filed their first motion to compel discovery. (Document: 73). At the

hearing on Plaintiffs’ motion to compel, the Court ordered Defendant to comply with Plaintiffs’

discovery requests and to provide a privilege log for any documents being withheld under a

claim of privilege. (Document: 117). During a subsequent hearing, the Court ordered the

Defendant to make witnesses available for the depositions requested by Plaintiffs. (Document:

141). When Defendant finally complied with the Court’s order and produced the requested

witnesses for deposition, Defendant continuously objected on the grounds of “law enforcement

privilege” to the very questions tailored toward garnering facts that would have been dispositive

to the case, intending to obstruct the discovery process.

This might all be considered fair game in a state court case, but discovery standards are

presumably higher in federal court. The FEC’s handling of their witness attorney Anderson

clearly was bad faith even by state court discovery standards. Thomas J. Anderson, an FEC

attorney, testified in his deposition that he had seen bank records of employees of the Fieger firm

produced to him from the DOJ. (Document: 145-3, p. 21). When asked if he happened to recall

the individual’s name on the bank records, he answered “I have a fairly good recollection of the

individual’s name.” (Document :145-3 p.21). Anderson was thereafter asked if he could state

whose name that was and Defendant objected to “law enforcement privilege.” Based upon Mr.

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Anderson’s testimony, Plaintiffs had good reason to believe Mr. Anderson had illegally seen the

Plaintiffs bank records (the only pendent issue at trial). At trial, however, the Defendant allowed

the very same question to be answered without objecting to privilege. When Plaintiff’s counsel

asked Mr. Anderson whose name he saw on the bank records, he testified: “I can tell you with

certainty the first four letters of that name ... B-i-a-l.” (Trial Testimony of Mr. Anderson, Direct

Examination, 132-33).

This active obstruction of the discovery process and more importantly attorney Olaya’s

“one-eighty” prolonged the litigation resulting in increased costs to the parties and the Court.

Providing evidence that materially absolved the Defendant prior to trial was the Defendant’s

responsibility to both the Plaintiffs and the Court, and by failing to do so, the Defendant has

engaged in gross misconduct rendering the award of costs unjustified.

II. This Was Public Interest Litigation Rooted in the First Amendment and

Therefore the District Court Erred in Finding that Being Recklessly and Falsely

Threatened with Felony Prosecutions is a Mere “Inconvenience.”

_____________________________________________________________________________________

In her Memorandum Opinion and Order awarding costs against the Beams and in favor of

the FEC, the District Court judge writes:

“Although Plaintiffs may well have been inconvenienced by this

process, and found it unfair, it does not support a finding of

misconduct in the instant case. Indeed, Plaintiffs offer no legal

support for such and argument.” (Document 218)

What is it about U.S. citizens, who in the exercise of their First Amendment Rights are

willfully and recklessly threatened with felonies by a federal agency, that is not inconvenient and

not unfair? See Citizens United v. Federal Election Com’n, 130 S.Ct. 876 (2010) (where the

Supreme Court overturned Austin v. Mich. State Chamber of Commerce, 494 U.S. 652 (1990)10

10 The Austin Court held that the government has an interest in preventing distortion of the electoral

system through limiting the political speech of certain speakers and therefore sustained a Michigan statute

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and portions of McConnell v. FEC, 540 U.S. 93 (2003)11 and struck down the portions of the

Bipartisan Campaign Reform Act of 200212 (“BCRA”) that prohibited expenditures on

electioneering communications by corporations, leaving corporations and unions free to speak

and spend independently of candidates during elections without facing a felony conviction with

serious sanctions.)

Using “inconvenience” to describe what the FEC did to the Beams speaks volumes about

this Federal judge. At the very least, the judge’s chilling word choice is quite inapposite to two

esteemed English authors, whose usage of the word “inconvenience” is considered exemplary by

the editors of the Oxford English Dictionary (“OED”). Mr. Murray’s venerated lexicon cites

Evelyn Waugh, to wit: “An umbrella under his left arm further inconvenienced him.”

Additionally, E.M. Forster’s use of the word “inconvenience” is as quoted: “I really came to...

thank you for so kindly giving us your rooms last night. I hope that you have not been put to any

great inconvenience.” Even as our great language has “gone Jersey Shore,” the OED editors

would probably not accept: “It was such an inconvenience for the Beams to come home and find

their apartment mailbox stuffed with junk mail and letters threatening felony prosecution.”

The FEC’s conduct in recklessly fomenting the litigation should be considered when

determining if costs should be assessed against the Plaintiffs. The issues presented in this case

that subjected corporations, but not unions, to restrictions on the kinds of general expenditures that they

could make on election campaigns. 494 U.S. 652 (1990).

11 The McConnell Court upheld Section 441b of the BCRA which prohibited corporations and unions

from using their general treasury funds to make independent expenditures for speech that is an

“electioneering communication” or for speech that expressly advocates the election or defeat of a

candidate. 2 U.S.C. § 441b. Since the Court considered the availability of speech through a corporation’s

associated political action committee an acceptable alternative to direct independent campaign

expenditures, the BCRA provision banning direct expenditures by corporations and unions was

considered only partially speech-restrictive. McConnell, 540 U.S. at 204.

12 Pub. L. No. 107-155, 116 Stat. 81 (codified in scattered sections of 2, 8, 18, 28, 36, and 47 U.S.C.).

Case: 11-3386 Document: 31 Filed: 08/15/2012 Pages: 37
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involve constitutionally protected freedoms and when litigation stems from perceived violations

of such fundamental First Amendment rights, the Court must take into account the potential

“chilling effect” that taxing costs upon the Plaintiffs may have. The Court has denied costs to

the Government when a plaintiff’s suit was not frivolous, unreasonable or without foundation

and plaintiff’s claim pursued was without confessed commercial self-interest. Sun Ship, Inc. v.

Lehman, 655 F.2d 1311, 1315 (D.C. Cir. 1981) quoting, Baez v. United States Dep’t of Justice,

No. 79-1881 (D.C. Cir. 1981). In these situations, “courts have broad discretion to reject claims

for costs made by prevailing defendants under the federal rules in order to avoid discouraging the

prosecution of public interest litigation.” Id. at 1316.

Plaintiffs’ suit was not motivated by any commercial self-interest. Claims arising under

the RFPA have statutory damages in the amount of $100 per violation. (12 U.S.C § 3417(a)(1).)

Moreover, this litigation involved the Plaintiffs’ right to privacy and Plaintiffs’ right not to be

unreasonably threatened by the FEC for exercising their First Amendment Right to make

campaign contributions. Litigating these constitutional issues serve a societal purpose and thus

the court must take a guarded approach to any conduct that may serve to discourage meritorious

litigation on these issues. In re Paoli R.R. Yard PCB Litig., 221 F.3d 449, 466 (3d Cir. 2000);

Muslin v. Frelinghuysen Livestock Managers, 777 F.2d 1230, 1236 (7th Cir. 1985).

III. The District Court Erred in Granting Defendant’s Bill of Costs Because the

Plaintiffs’ Brought their Action in Good Faith and the Issues Presented were Close

and Complex

______________________________________________________________________________

In Chicago Sugar Co. v. American Sugar Refining Co., the Seventh Circuit indicated that

a district court may consider certain equitable factors in arriving at a cost award, including the

“closeness or complexity” of the issues at hand. 176 F.2d 1, 11 (7th Cir.1949). Costs have been

denied on the ground that the losing party prosecuted the action in good faith, the issues

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presented were difficult, novel, or complex, and the winning party could absorb the costs. White

& White, Inc. v. American Hosp. Supply Corp., 786 F.2d 728, 731, 733 (6th Cir.1986) (stating

that in addition to cases of defective conduct by the prevailing party, "close and difficult" cases

also justify cost denials).

When determining the closeness of the issues at hand, it is important to scrutinize

whether the decisions of the court clearly indicate a prevailing party. In denying Defendant’s

motion for summary judgment, but ruling in favor of Defendant at trial, the court clearly

indicated that Plaintiffs’ claims were, prima facie, meritorious. In denying the Defendant’s

motion for summary judgment, the court stated that:

Based on Olaya's testimony and the undisputed fact that Plaintiffs'

financial records were not part of the [Fieger] trial exhibits, a jury

could find that the FEC received the Beam’s financial records

(Document 148).

Only after Olaya recanted his deposition testimony at the two-day bench trial on the

merits did the Court rule in favor of the Defendant. The issues in this case were clearly close and

complex and Defendant should be denied its bill of costs.

IV. The District Court Erred in Determining the Defendant was the Prevailing Party

_____________________________________________________________________________________

Rule 54(d)(1) provides in pertinent part, “[e]xcept when express provision therefore is

made either in a statute of the United States or in these rules, costs shall be allowed as of course

to the prevailing party unless the court otherwise directs.” Fed.R.Civ.P. 54(d)(1). Thus, the

determination of who qualifies as a prevailing party is essential in deciding whether costs are

available.

In cases analyzing what is necessary to show that a party prevailed, the Supreme Court

has eschewed technical considerations for what is essentially a result-oriented approach. The

Supreme Court has instructed that a party prevails “if they succeed on any significant issue in

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litigation which achieves some of the benefit the parties sought in bringing suit.” Hensley v.

Eckerhart, 461 U.S. 424, 433 (1983), quoting, Nadeau v. Helgemoe, 581 F.2d 275, 278-279 (1st

Cir. 1978). The Supreme Court has emphasized that the alteration or termination of conduct is a

determinative factor of whether a plaintiff has prevailed. For example, in Hewitt v. Helms, the

Court stated:

In all civil litigation, the judicial decree is not the end but the

means. At the end of the rainbow lies not a judgment, but some

action (or cessation of action) by the defendant that the judgment

produces—the payment of damages, or some specific performance,

or the termination of some conduct. Redress is sought through the

court, but from the defendant. 482 U.S. 755, 761 (1987).

...

If the defendant ... alters his conduct (or threatened conduct)

towards the plaintiff that was the basis for the suit, the plaintiff will

have prevailed. 482 U.S at 761.

In this case, the Defendant issued RTB letters to the Plaintiffs which contained patently

false accusations and threatened the Plaintiffs with civil and concomitant criminal prosecution.

(Documents: 193-2, 193-3) Moreover, not only was the accusation false but the FEC actually

admitted that it had “reason to believe” [“RTB”] that “a Jack Beam” had previously contributed

to federal candidates. (Trial Testimony of Roger Hearron, Direct Examination, 46-49, 68-81)

Plaintiffs responded to these unsubstantiated threats by filing their complaint requesting,

among other things, the right to be free from selective and vindictive prosecution and alleging

that the Defendants invaded their right to privacy pursuant to RFPA (Document: 1). Although

the selective and vindictive prosecution count was dismissed, the Plaintiffs still prevailed as the

Defendant discontinued all investigation regarding the Plaintiffs. (Document: 193-4, Document:

193-5).

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The Seventh Circuit has recognized the catalyst theory in awarding costs. The catalyst

theory applies when a plaintiff receives the desired result because the lawsuit brought about a

voluntary change in governmental conduct. Zinn v. Shalala, 35 F.3d 273, 276 (7th Cir. 1994). In

order to be considered the prevailing party under the catalyst rule, one must satisfy two

requirements: (1) his lawsuit must be causally linked to the achievement of the relief obtained;

and (2) he must not have acted wholly gratuitously (claim was not frivolous, unreasonable or

groundless). Johnson v. LaFayette Fire Fighers Assoc., 51 F.3d 726, 730 (7th Cir. 1995); Zinn,

35 F.3d at 274.

Here, Plaintiffs satisfy the two-prong catalyst test. First, the Plaintiffs lawsuit is causally

linked to Defendant dropping its civil and/or criminal prosecution of Plaintiffs. As outlined

above, the Plaintiffs filed their lawsuit in direct response to the RTB letters. Second, Plaintiffs’

did not act wholly gratuitously as they filed their lawsuit based upon their receipt of the RTB

letter. On the contrary, it was the Defendant’s actions that were frivolous, unreasonable and

groundless. The Defendant’s own investigator, Roger Hearron, testified that the RTB letters as

well as the factual and legal analysis document contained mistaken, inconsistent and false

information. (Trial Transcript, Hearron Redirect Examination, 85-87) The Defendant’s knew

the information was false and still chose to threaten the Plaintiffs. As a result of this accusatory

action, Plaintiff’s filed their lawsuit and eventually Defendant’s investigations of Plaintiffs were

terminated. Therefore, Plaintiffs satisfy the catalyst test as the prevailing party.

V. The District Court Erred by Awarding the Total Amount Requested by the

Defendants

_____________________________________________________________________________________

It is further deemed proper for district courts to withhold or reduce costs when the

prevailing party has increased its costs unnecessarily. If the allegedly prevailing party prolongs

litigation but fails to clearly prevail in a case, that party may not be entitled to costs, or if they are

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so entitled, such costs award may be reduced. Richmond v. Southwire Co., 980 F.2d 518, 520-21

(8th Cir. 1992).

There are many reasons why, as addressed above, that the Defendant should not be

entitled to costs or at the very least, any award of costs should be reduced. If Philip Olaya had

never testified on March 11, 2009 that he had seen the Plaintiffs financial records, the bill of

costs would have been de minimis, as the case would have ended shortly thereafter. However,

attorney Olaya did state he had seen the Plaintiffs financial records from DOJ in his deposition

on March 11, 2009; therefore, the Defendants motion for summary judgment was denied and the

case proceeded to trial over a year later on August 25, 2010. At the very least, the Defendant’s

request for costs after Olaya’s deposition should be denied. In this instance, the case should be

remanded to the District Court for a finding of what additional costs were incurred due to Mr.

Olaya’s false deposition testimony.

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CONCLUSION

Of course, it was profoundly frustrating to have Judge Pallmayer believe the recanted

testimony of attorney Olaya based upon excuses that would have caused most lay jurors to roll

their eyes out of their heads. However, on appeal issues involving questions of fact are usually

resolved in favor of the fact finder.

The issues raised on this appeal are not questions of fact. The issues here involve

fundamental rights of citizens to protect themselves from reckless and abusive conduct by their

government. As such, the District Court’s decision to grant Defendant FEC’s Bill of Costs

should be reversed.

s/ Jack Beam

Jack Beam

Atty. No. 6285383

Attorney for Plaintiff-Appellant

BEAM AND RAYMOND

954 W. Washington Blvd.

Ste. 215

Chicago, IL 60607

Ph. (312) 733-0930

Fx. (312) 733-0921

Case: 11-3386 Document: 31 Filed: 08/15/2012 Pages: 37
CIRCUIT RULE 30(d) STATEMENT

Pursuant to Circuit Rule 30(d), counsel certifies that all material required by Circuit Rule 30(a)

are attached hereto and materials required by Circuit Rule 30(b) are included in the separate

appendix.

s/ Jack Beam

Jack Beam

Atty. No. 6285383

Attorney for Plaintiff-Appellant

BEAM AND RAYMOND

954 W. Washington Blvd.

Ste. 215

Chicago, IL 60607

Ph. (312) 733-0930

Fx. (312) 733-0921

Case: 11-3386 Document: 31 Filed: 08/15/2012 Pages: 37
CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME

LIMITATION, TYPEFACE REQUIREMENTS, AND TYPE STYLE REQUIREMENTS

This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because this

brief contains 7573 words including footnotes and excluding the parts of the brief exempted by

Fed. R. App. P. 32(a)(7)(B)(iii).

This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style

requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally

spaced typeface using Microsoft Word in size-12 Times New Roman font.

s/ Jack Beam

Jack Beam

Atty. No. 6285383

Attorney for Plaintiff-Appellant

BEAM AND RAYMOND

954 W. Washington Blvd.

Ste. 215

Chicago, IL 60607

Ph. (312) 733-0930

Fx. (312) 733-0921

Case: 11-3386 Document: 31 Filed: 08/15/2012 Pages: 37
CERTIFICATE OF SERVICE

I hereby certify that on the 15th day of August, 2012, I electronically filed the foregoing with the

Clerk of the Court for the United States Court of Appeals for the Seventh Circuit by using

the CM/ECF system.

Participants in the case who are registered CM/ECF users will be served by the CM/ECF

system.

I further certify that some of the participants in the case are not or may not be CM/ECF users. I

have mailed the foregoing document by First-Class Mail, postage prepaid, or have dispatched it

to a third-party commercial carrier for delivery within 3 calendar days, to the following

non-CM/ECF participants:

Phillip Christopher Hughey

Acting General Counsel

David Kolker

Associate General Counsel

Harry J. Summers

Assistant General Counsel

Benjamin A. Streeter III

Attorney

Holly J. Baker

Attorney

Attorneys for the Defendant,

Federal Election Commission and its

Chairman

999. E Street, NW

Washington, D.C., 20463

(202) 694-1650

s/ Jack Beam

Jack Beam

Atty. No. 6285383

Attorney for Plaintiff-Appellant

BEAM AND RAYMOND

954 W. Washington Blvd.

Ste. 215

Chicago, IL 60607

Ph. (312) 733-0930

Fx. (312) 733-0921

Case: 11-3386 Document: 31 Filed: 08/15/2012 Pages: 37