1

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

 

 )

REPRESENTATIVE CHRISTOPHER ) 

SHAYS, et al., )

 ) 

Plaintiffs, )

 ) Civil Action No. 04-1597 (EGS)

v. )

 )

FEDERAL ELECTION COMMISSION, ) 

 )

Defendant. )

 )

MEMORANDUM OPINION

Plaintiffs, Representatives Christopher Shays and Martin

Meehan, brought this suit under the Administrative Procedures Act

(“APA”) to compel defendant, the Federal Election Commission

(“FEC”), to issue regulations concerning the applicability of

campaign finance laws to “527 groups.” In March 2006, this Court

remanded the matter to the FEC to institute rulemaking or

properly explain why it was employing case-by-case adjudication

rather than rulemaking to regulate 527 groups. The FEC issued

its revised explanation and justification in February 2007. 

Pending before the Court are plaintiffs’ motion for further

relief and defendant’s renewed motion for summary judgment. Upon

consideration of the motions and supporting memoranda, the

responses and replies thereto, the applicable law, the arguments

made at the motions hearing on July 31, 2007, and the entire

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 1 of 25
2

record, the Court determines that the FEC’s revised explanation

is sufficient under the APA to justify its choice not to engage

in rulemaking. Therefore, for the reasons stated herein,

plaintiffs’ motion for further relief is DENIED, and defendant’s

motion for summary judgment is GRANTED. 

BACKGROUND

In its 2006 opinion, the Court set out in detail the

statutory background and procedural history at the agency level, 

Shays v. FEC, 424 F. Supp. 2d 100, 105-08 (D.D.C. 2006), so it

need only be summarized here. Section 527 of the Internal

Revenue Code permits income tax exemptions for a “political

organization.” 26 U.S.C. § 527(a). A political organization, or

“527 group,” is defined as a “party, committee, association,

fund, or other organization (whether or not incorporated)

organized and operated primarily for the purpose of directly or

indirectly accepting contributions or making expenditures, or

both, for an exempt function.” Id. § 527(e)(1) (emphasis added). 

An “exempt function” is “the function of influencing or

attempting to influence the selection, nomination, election, or

appointment of any individual to any Federal, State, or local

public office or office in a political organization, or the

election of Presidential or Vice Presidential electors.” Id. §

527(e)(2).

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 2 of 25
3

The Federal Election Campaign Act (“FECA”) and related

campaign finance laws regulate “political committees.” 2 U.S.C.

§ 431(4). Once an organization is defined as a political

committee, it is subject to a host of regulations: it must file a

“statement of organization” with the FEC, 2 U.S.C. § 433; file

periodic disclosure reports of its receipts and disbursements,

id. § 434; and adhere to contribution limits, id. § 441a-1(a)(1)-

(2). A political committee is subject to these regulations even

if it is engaged only in spending independent from any particular

political party or candidate. 11 C.F.R. § 110.1(n). 

A “political committee” is statutorily defined as “any

committee, club, association, or other group of person which

receives contributions aggregating in excess of $1,000 during a

calendar year or which makes expenditures aggregating in excess

of $ 1,000 during a calendar year.” 2 U.S.C. § 431(4). In

addition, the Supreme Court has construed “political committee”

only to “encompass organizations that are under the control of a

candidate or the major purpose of which is the nomination or

election of a candidate.” Buckley v. Valeo, 424 U.S. 1, 79

(1976) (emphasis added). This “major purpose” test has never

been codified in a regulation, but is applied by the FEC in its

enforcement actions against individual organizations. Shays, 424

F. Supp. 2d at 106.

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 3 of 25
4

Beginning in March 2004, the FEC considered promulgating

additional rules concerning a variety of issues involving the

definitions of “political committee,” “contribution,” and

“expenditure.” Id. at 106-07. The agency issued a notice of

proposed rulemaking, received thousands of comments, and heard

testimony from 31 witnesses. Id. The FEC specifically

considered two proposals – the “Thomas-Toner proposal” and its

General Counsel’s recommendation – for regulations that would

codify standards for the “major purpose” test, specifically with

regard to 527 groups. Id. at 107-08. Both proposals were

rejected and the FEC instead issued an Explanation and

Justification on November 23, 2004, explaining why it took no

action to re-define “political committee.” Id. at 108. Thus,

the FEC elected to continue applying the general “political

committee” definition and “major purpose” test on a case-by-case

basis instead of promulgating more detailed regulations. Id. at

108, 112-13. 

Plaintiffs filed this suit in September 2004, claiming that

the FEC’s failure to issue a rule governing when 527 groups must

register as political committees is arbitrary and capricious. 

Id. at 103. Plaintiffs asked the Court to direct the FEC to

promulgate regulations defining when a 527 group must register as

a political committee. Id. In 2006, the Court ruled on the

parties’ cross-motions for summary judgment. As an initial

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 4 of 25
5

matter, the Court concluded that plaintiffs had standing to bring

their claims and that the claims were ripe for adjudication. Id.

at 110-12. On the merits, the Court concluded that the agency’s

decision to pursue adjudication over rulemaking of 527 groups was

not, per se, an abuse of discretion. Id. at 114. 

The Court, however, concluded that the FEC had failed to

provide a reasoned explanation for its decision to regulate 527

groups through adjudication instead of rulemaking. Id. at 116. 

The Court found that the agency had described why the regulation

of 527 groups is complicated, but had failed to explain “how the

problem becomes any less complicated or any more manageable if

the FEC pursues case-by-case adjudication.” Id. at 115. The

Court also expressed concerns over whether regulation through

case-by-case adjudication would be: (1) sufficiently definitive

to satisfy First Amendment and Due Process concerns; (2) more

effective than rulemaking in carrying out Congress’s intent to

prevent the flow of “soft money” into federal campaigns; (3)

executed on a timely basis within an election cycle; and (4)

resolved in a way that would provide guidance to other 527 groups

more generally. Id. at 115-16. In issuing a remedy, the Court

refused to direct the FEC to promulgate rules regarding 527

groups and the definition of “political committee,” and instead

remanded the case to the agency to either better explain its

decision or institute new rulemaking. Id. at 116.

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 5 of 25
6

In response to the Court’s order, the FEC issued a

supplemental explanation and justification in February 2007. 

Political Committee Status, Supplemental Explanation and

Justification, 72 Fed. Reg. 5595 (Feb. 7, 2007). The explanation

began by setting forth the agency’s view of the operative

regulatory regime, specifically with regard to the

“contribution,” “expenditure,” and “major purpose” requirements

of the definition of “political committee.” Id. at 5596-97. In

this analysis, the FEC asserted that the Supreme Court in Buckley

limited “expenditure,” when applied to communications made

independently of a candidate, to only include “express advocacy.” 

Id. at 5597 (citing Buckley, 424 U.S. at 44, 80). In the

explanation’s second part, the agency established why all 527

groups may not qualify as a “political committees.” Id. at 5597-

99. In the explanation’s third part, the agency demonstrated

that Congress has heretofore decided not to classify every 527

group as a “political committee.” Id. at 5599-5601. In the

explanation’s fourth part, the agency asserted that application

of the “major purpose” test requires the flexibility of case-bycase analysis of an organization’s conduct that is incompatible

with rulemaking. Id. at 5601-02. In the explanation’s fifth

part, the agency claimed that two rules enacted in 2004

concerning the definition of “contribution” and the allocation of

federal funds strengthened its regulation of 527 groups. Id. at

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 6 of 25
7

5602-03. Finally, in the explanation’s sixth part, the agency

asserted that recent resolutions of several administrative

enforcement matters involving 527 groups established the

effectiveness of its adjudicative approach. Id. at 5603-06. For

these reasons, the FEC stated that it would continue applying the

general “political committee” definition and “major purpose” test

on a case-by-case basis. Id. at 5606.

Following issuance of the supplemental explanation,

plaintiffs moved for further relief. Plaintiffs contend that the

new explanation also violates the APA and that the Court should

order the FEC to issue an appropriate regulation focused on 527

groups within 90 days of the Court’s order. Specifically,

plaintiffs argue that the FEC still has not provided a reasoned

explanation for its decision to eschew rulemaking for 527 groups,

and that its new explanation is premised on a fundamental

misinterpretation of the law. The FEC opposes this motion and

also moves for summary judgment, contending that its actions now

satisfy the APA. Specifically, the FEC argues that its revised

explanation easily passes muster under the highly deferential

standard of review that the Court must apply. 

STANDARD OF REVIEW

Summary judgment should be granted only if the moving party

has shown that there are no genuine issues of material fact and

that the moving party is entitled to judgment as a matter of law. 

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 7 of 25
8

Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 325

(1986); Waterhouse v. Dist. of Columbia, 298 F.3d 989, 991 (D.C.

Cir. 2002). In determining whether a genuine issue of material

fact exists, the Court must view all facts in the light most

favorable to the non-moving party. See Matsushita Elec. Indus.

Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The

non-moving party’s opposition, however, must consist of more than

mere unsupported allegations or denials and must be supported by

affidavits or other competent evidence setting forth specific

facts showing that there is a genuine issue for trial. Fed. R.

Civ. P. 56(e); see Celotex Corp., 477 U.S. at 324. 

When reviewing agency action pursuant to the APA, the Court

must determine whether the challenged decision is “arbitrary,

capricious, an abuse of discretion, or otherwise not in

accordance with law.” 5 U.S.C. § 706(2)(A); see NLRB v. Bell

Aerospace Co., 416 U.S. 267, 294 (1974) (holding that an agency’s

decision to choose either rulemaking or case-by-case adjudication

is subject to reversal only if the agency committed an “abuse of

discretion or a violation of [law].”). In applying the

“arbitrary and capricious” standard, a court “may not supply a

reasoned basis for the agency’s action that the agency itself has

not given,” but a court should “uphold a decision of less than

ideal clarity if the agency’s path may reasonably be discerned.” 

Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 8 of 25
9

U.S. 29, 43 (1983). Upon review of an agency’s action, the Court

must engage in a “thorough, probing, in-depth review” to

determine “whether the decision was based on a consideration of

the relevant factors and whether there has been a clear error of

judgment.” Citizens to Preserve Overton Park v. Volpe, 401 U.S.

402, 415-16 (1971). 

While the court’s inquiry must be “searching and careful,”

the standard of review is also a highly deferential one; the

agency’s actions are “entitled to a presumption of regularity,”

and the Court cannot “substitute its judgment for that of the

agency.” Id. Moreover, “an agency’s burden of supplying a

‘reasoned analysis’ justifying its policy is lower where, as

here, an agency is continuing a long-standing policy compared to

where the agency is suddenly changing that policy.” Bellevue

Hosp. Center v. Leavitt, 443 F.3d 163, 176 (2d Cir. 2006). 

Finally, a court will “sustain an agency decision resting on

several independent grounds if any of those grounds validly

supports the result.” Carnegie Natural Gas Co. v. FERC, 968 F.2d

1291, 1294 (D.C. Cir. 1992). 

Courts have espoused the view that regulation through

rulemaking is preferable where possible. See SEC v. Chenery

Corp., 332 U.S. 194, 202 (1947) (“Since the Commission, unlike a

court, does have the ability to make new law prospectively

through the exercise of its rule-making powers, it has less

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 9 of 25
10

reason to rely upon ad hoc adjudication to formulate new

standards of conduct.”); Trans-Pac. Freight Conference of

Japan/Korea v. Fed. Mar. Comm’n, 650 F.2d 1235, 1244-45 (D.C.

Cir. 1980) (“Rule-making is an essential component of the

administrative process and indeed is often the preferred

procedure for the evolution of agency policies.”). Rulemaking

has the advantage of being more precise, including all interested

parties in its formation, and providing clear prospective

guidance to regulated entities. Trans-Pac. Freight, 650 F.2d at

1245. On the other hand, not “every principle essential to the

effective administration of a statute can or should be cast

immediately into the mold of a general rule.” Chenery, 332 U.S.

at 202. An “agency may not have had sufficient experience with a

particular problem to warrant rigidifying its tentative judgment

into a hard and fast rule, [or] the problem may be so specialized

and varying in nature as to be impossible of capture within the

boundaries of a general rule.” Id. at 202-03. 

Therefore, the decision of whether to proceed through

case-by-case adjudication or by general rulemaking lies largely

within the agency’s discretion. Id. at 203 (“the choice made

between proceeding by general rule or by individual, ad hoc

litigation is one that lies primarily in the informed discretion

of the agency”); Nat’l Small Shipments Traffic Conference, Inc.

v. ICC, 725 F.2d 1442, 1447 (D.C. Cir. 1984). In fact, the D.C.

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 10 of 25
11

Circuit has stated that “agency discretion is at its peak in

deciding such matters as whether to address an issue by

rulemaking or adjudication.” American Gas Ass’n v. FERC, 912

F.2d 1496, 1519 (D.C. Cir. 1990); see also Massachusetts v. EPA,

127 S. Ct. 1438, 1459 (2007) (“Refusals to promulgate rules are

thus susceptible to judicial review, though such review is

‘extremely limited’ and ‘highly deferential.’”).

ANALYSIS

I. FEC’s Misinterpretation of Buckley

Plaintiffs contend that the FEC’s new explanation contains a

fundamental mistake of law and that this error fatally undermines

the FEC’s reasoning. At issue is the definition of “expenditure”

within the larger definition of “political committee.” A

“political committee” is statutorily defined as a group “which

receives contributions aggregating in excess of $1,000 during a

calendar year or which makes expenditures aggregating in excess

of $ 1,000 during a calendar year.” 2 U.S.C. § 431(4)(A). The

statute defines “expenditure” and “contribution” to encompass any

spending or fundraising, respectively, “for the purpose of

influencing” an election. Id. §§ 431(8)(A)(i); 431(9)(A)(i).

In discussing the Supreme Court’s Buckley decision, the FEC

stated that in order to address First Amendment concerns, “the

Supreme Court held, when applied to communications made

independently of a candidate or a candidate’s committee, the term

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 11 of 25
12

‘expenditure’ includes only ‘expenditures for communications that

in express terms advocate the election or defeat of a clearly

identified candidate for federal office.’” Supplemental

Explanation, 72 Fed. Reg. at 5597 (citing Buckley, 424 U.S. at

44, 80). In other words, the FEC believes that there is an

“express advocacy requirement for expenditures on communications

made independently of a candidate,” which applies to all

organizations regardless of whether they satisfy the “major

purpose” test. Id.; see also id. at 5604 (describing how the FEC

applied the express advocacy requirement to organizations that

satisfied the “major purpose” test).

As plaintiffs contend, this is a misreading of Buckley. In

Buckley, the Court addressed constitutional concerns that the

statutory definition of “political committee” was overbroad and,

to the extent it incorporated the definition of “expenditure,”

vague as well. 424 U.S. at 78-79. The Court found the term

“expenditure” caused “line drawing problems” by potentially

“encompassing both issue discussion and advocacy of a political

result,” so that the “political committee” standard might “reach

groups engaged purely in issue discussion.” Id. at 79. The

Court resolved these concerns by imposing two different limiting

constructions. First, it narrowed the definition of “political

committee” to encompass only “organizations that are under the

control of a candidate or the major purpose of which is the

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 12 of 25
13

nomination of election of a candidate.” Id. For such “major

purpose” groups, there is no concern about vagueness of the

“expenditure” definition because disbursements by such groups

“can be assumed to fall within the core area sought to be

addressed by Congress. They are, by definition, campaign

related.” Id. Second, “when the maker of the expenditure is not

within these categories [–] when it is an individual other than a

candidate or a group other than a ‘political committee,’” the

Court narrowly construed the term “expenditure” to reach “only

funds used for communications that expressly advocate the

election or defeat of a clearly identified candidate.” Id. at

79-80.

Thus, the Court imposed the narrowing gloss of express

advocacy on the term “expenditure” only with regard to groups

other than “major purpose” groups. Id. at 80. The Court has

since reaffirmed this position. In the 2003 McConnell case, the

Court, quoting Buckley, noted that “a general requirement that

political committees disclose their expenditures raised no

vagueness problems because the term ‘political committee’ ‘need

only encompass organizations that are under the control of a

candidate or the major purpose of which is the nomination or

election of a candidate’ and thus a political committee’s

expenditures ‘are, by definition, campaign related.’” McConnell

v. FEC, 540 U.S. 93, 169 n.64 (2003). Therefore, having

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 13 of 25
14

misinterpreted Buckley, the FEC is applying the express advocacy

requirement to expenditures in cases where it is unnecessary. 

While the FEC has erred in its legal interpretation of

Buckley, this error is harmless with regard to plaintiffs’ claims

in this case. Under the APA, courts must consider whether errors

are harmless or prejudicial. See Nevada v. DOE, 457 F.3d 78, 90

(D.C. Cir. 2006). Even if the FEC does not apply the express

advocacy test to organizations that meet the “major purpose”

test, the agency must still evaluate whether the organization’s

spending is an “expenditure,” i.e. whether it is spending “for

the purpose of influencing” an election. See 2 U.S.C. §

431(9)(A)(i). Therefore, the decision of whether to codify

detailed standards for the “major purpose” test in a general rule

— the subject of this suit — is separate and apart from the

question of the proper interpretation of “expenditure.”

Plaintiffs argue that the issues are nonetheless connected

because the FEC, by improperly expanding the application of the

express advocacy test, commits to evaluating the “expenditures”

of an organization before evaluating its “major purpose,” and

thus turns the “major purpose” inquiry into a “hollow shell.” 

Plaintiffs support this argument by pointing to the FEC’s

analysis of particular organizations where the agency determined

an organization’s purpose by examining their spending and

fundraising. However, this procedure is not unlawful in any way. 

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 14 of 25
15

While plaintiffs would like the agency to first determine an

organization’s major purpose, with particular focus on whether

they are a 527 group, neither the statute nor judicial precedent

establishes any particular “order of operations” in making the

“political committee” determination. Therefore, the FEC’s

erroneous interpretation of law is a harmless error.

II. FEC’s Less Convincing Arguments

Plaintiffs contend that the FEC’s new explanation still

fails to provide a reasoned basis for its decision to regulate

527 groups through case-by-case adjudication instead of

rulemaking. Plaintiffs are correct that the FEC’s revised

explanation contains several justifications for its decision that

are either irrelevant or insufficient. First, the FEC belabors

the point that organizations cannot qualify as “political

committees” solely because they are 527 groups. Supplemental

Explanation, 72 Fed. Reg. at 5597-99. This fact, however, does

not speak to whether rulemaking is appropriate because a rule can

take into account other factors besides an organization’s 527

status. In fact, the proposed rules put before the agency in

2004 explicitly accounted for additional factors, and did not

simply equate 527 groups with “political committees.” See Shays,

424 F. Supp. 2d at 107 n.2 (describing Thomas-Toner proposal,

which stated that 527 groups did not meet the “major purpose”

test if, for instance, they were organized solely to promote

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 15 of 25
16

candidates for a non-Federal office). Thus, the agency’s

simplistic analysis fails to provide a logical reason for

rejecting a rulemaking approach.

Second, the FEC relies on the fact that Congress has neither

specifically stated in a statute that all 527 groups are

“political committees,” nor has directed the FEC to adopt revised

regulations regarding “political committees” or 527 groups. 

Supplemental Explanation, 72 Fed. Reg. at 5599-5601. Again, the

former fact is beside the point because no party has ever argued

that all 527 groups are political committees, or that the

rulemaking would necessarily institute such a standard. As for

the latter fact, this Court has already reached the same

conclusion. See Shays, 424 F. Supp. 2d at 114. Neither of these

facts, however, bear of the question of which statutorilypermitted method the agency should use to determine whether a

particular 527 group is a “political committee.”

Third, the FEC advances the argument that two recently

enacted regulations mitigate the need for rulemaking with regard

to 527 groups. Supplemental Explanation, 72 Fed. Reg. at 5602-

03. The first regulation expands the regulatory definition of

“contribution” to capture funds solicited for the specific

purpose of supporting or opposing the election of a federal

candidate. See 11 C.F.R. § 100.57. As with the dispute over the

proper interpretation of “expenditure,” however, adjusting the

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 16 of 25
17

definition of “contribution” is separate and apart from

plaintiffs’ principle contention – that the FEC should adopt a

rule that codifies the “major purpose” test. In addition, an

academic report, submitted along with defendant’s motion,

concluded that the regulation is not relevant to the majority of

527 groups. Campaign Finance Institute (“CFI”), Soft Money in

the 2006 Election and the Outlook for 2008, at 4 (2007), Def.’s

Ex. 8. The second regulation places limits on the non-Federal

funds a registered political committee may use to engage in

certain activities, such as voter drives and campaign

advertisements, which have a clear federal component. See 11

C.F.R. § 106.6; see also CFI, Soft Money in the 2006 Election, at

4 (noting that the regulation only applies to 2% of political

committees and is easily circumvented). This regulation is

irrelevant to the issue at hand because it only applies once an

organization is classified as a political committee, and has no

bearing on making that determination in the first place. 

Fourth, the FEC stated that “even if the Commission were to

adopt a regulation encapsulating the judicially created major

purpose doctrine, that regulation could only serve to limit,

rather than to define or expand, the number or type of

organizations regarded as political committees.” Supplemental

Explanation, 72 Fed. Reg. at 5602. The logic of this

justification escapes the Court. Regardless of whether the FEC

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 17 of 25
18

utilizes rulemaking or case-by-case adjudication, the major

purpose doctrine must be applied. See Buckley, 424 U.S. at 79-

80. Thus, the same organizations should qualify as political

committees whether rulemaking or adjudication is employed. The

question before the FEC and the Court is whether regulation under

the doctrine will be more effective with rulemaking or not.

Finally, the FEC claims that rulemaking has no advantage

over adjudication because any “revised rule adopted by the

Commission would still have to be interpreted and applied through

the very same statutory enforcement procedures as currently

exist.” Id. Under this logic though, the FEC’s extensive set of

existing campaign finance regulations are all superfluous because

adjudication would ultimately occur anyway. This argument is

plainly flawed because many regulated entities comply with

codified regulations without having to be prosecuted. Thus,

plaintiffs claim that codifying the major purpose test would be

more effective because it would create more voluntary compliance

than the uncertainty of the adjudicatory process alone. 

III. Complexity and Recent Adjudicatory Decisions

Putting aside the FEC’s unpersuasive arguments, the crux of

the FEC’s revised justification is that the complexity of

applying the “major purpose” test to a particular organization

requires that it be done through adjudication instead of

rulemaking. According to the agency, “[a]pplying the major

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 18 of 25
19

purpose doctrine . . . requires the flexibility of a case-by-case

analysis of an organization’s conduct that is incompatible with a

one-size-fits-all rule.” Supplemental Explanation, 72 Fed. Reg.

at 5601. The FEC described several factors that are part of this

“major purpose” analysis for an organization: (1) whether there

is sufficiently extensive spending on federal campaign activity;

(2) the content of public statements, including consideration of

the form and nature of the statements as well as the speaker’s

position within the organization; (3) internal statements of the

organization; (4) all manner of the organization’s spending; and

(5) the organization’s fundraising appeals. Id. Notably, the

agency did not list an organization’s tax status as a relevant

factor, though it could be considered a public statement of

purpose. The FEC concluded that none of the proposed rules

raised in 2004 “would have accorded the Commission the

flexibility needed to apply the major purpose doctrine

appropriately,” and thus declined to adopt them. Id. at 5602.

The agency also asserted that the Supreme Court’s decisions

in Buckley and FEC v. Massachusetts Citizens For Life, Inc., 479

U.S. 238 (1986) (“MCFL”), “make clear that the major purpose

doctrine requires a fact-intensive analysis of a group’s . . .

activities.” Supplemental Explanation, 72 Fed. Reg. at 5602. 

Those cases, however, in no way compel that conclusion. Buckley

established the major purpose test, but did not describe its

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 19 of 25
20

application in any fashion. See Buckley, 424 U.S. at 79-80. And

the Court in MCFL only made the lone statement that an

organization’s “independent spending [may] become so extensive

that the organization’s major purpose may be regarded as campaign

activity.” MCFL, 479 U.S. at 269. Thus, the FEC’s factintensive approach may be compelled by the nature of the inquiry,

but is not compelled by any judicial precedent.

The FEC has also recently applied the “political committee”

definition to several 527 groups through the resolution of

administrative enforcement matters. Supplemental Explanation, 72

Fed. Reg. at 5603-06 (describing enforcement actions against

Swiftboat Veterans and POWs for Truth, League of Conservation

Voters, and the MoveOn.org Voter Fund). These proceedings

resulted in Conciliation Agreements, which are settlement

agreements between the agency and regulated party that are

reached in the pre-litigation stage of the enforcement process. 

See, e.g., Conciliation Agreements for 527 Groups, Def.’s Exs. 2-

7. Through the agreements, the regulated entities agree not to

contest the agency’s conclusions, promise to comply with the

campaign finance laws in the future, and agree to a civil

penalty. In these recent actions, the agency has found that

several 527 groups should have been registered as political

committees, and the groups agreed to fines between $45,000 and

$750,000. Id.; see also CFI, Soft Money in the 2006 Election, at

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 20 of 25
21

4-10 (noting that the agency’s actions have left many 527 groups

unaffected, but also spurred some to convent their groups into

unregulated 501(c) groups). 

The agreements provide factual and legal analysis supporting

the agency’s finding that the organizations should have

registered as political committees. In analyzing spending, the

agency erroneously applied the express advocacy test for

expenditures and examined the organizations’ advertisements that

were run, including when and where they ran, and how much they

cost, as well as other activities such as door-to-door canvassing

and phone banks. Supplemental Explanation, 72 Fed. Reg. at 5604. 

In analyzing fundraising, the agency examined the content of

fundraising appeals, including email messages, telephone calls,

and personal meetings. Id. at 5604-05. In analyzing the major

purpose of each organization, the agency again evaluated

fundraising solicitations, contribution sources, public

statements and internal documents, and the full range of campaign

activities. Id. at 5605. Each of these analyses were very factspecific for each organization. Notably though, the agency did

not rely on the organizations’ statuses as 527 groups. 

Nonetheless, the FEC contends that this case-by-case approach

provides “a very effective mechanism for regulating organizations

that should be registered as political committees under FECA,

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 21 of 25
22

regardless of that organization’s tax status,” and “places the

regulated community on notice of the state of law.” Id. at 5606.

Evaluating the agency’s complexity or “flexibility”

rationale for preferring adjudication is difficult. Plaintiffs

contend that the agency’s approach provides little guidance to

regulated parties, is less effective because it cannot be

completed within an election cycle, and is vulnerable to attacks

under the First Amendment or Due Process. These are also the

concerns expressed by the Court in 2006. Shays, 424 F. Supp. 2d

at 115-16. Nevertheless, the agency’s underlying argument is

that because the major purpose test requires examination of so

many facets of an organization, no articulable rule would reach

the correct result in all cases. And if only case-by-case

analysis is accurate, then the need for flexibility would seem to

trump the other concerns of plaintiffs and the Court. See

Chenery, 332 U.S. at 203 (“the problem may be so specialized and

varying in nature as to be impossible of capture within the

boundaries of a general rule”). Thus, the fundamental question

is whether the FEC’s complexity argument is sufficient to justify

its decision. 

On the one hand, the plaintiffs’ proposed rules, such as the

Thomas-Toner proposal, appear to be sound policies given the

definition of 527 status and political committees. The major

purpose test seeks to identify whether an organization’s “major”

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 22 of 25
23

purpose is the “nomination or election of a [federal] candidate.” 

A 527 group, by definition, has the “primary” purpose of raising

or spending money to influence the election or appointment of an

individual to a political office. Thus, an organization’s usage

of 527 status is inherently indicative of its choice to

principally engage in electoral activity, which goes a long way

to satisfying the major purpose test. A rule that utilizes the

fact of an organization’s 527 status therefore appears to be

quite reasonable, as long as it accounts for circumstances where

527 groups are primarily concerned with unelected or non-federal

offices. In fact, in all cases where the FEC applied the major

purpose test to a 527 group, the test was satisfied.

On the other hand, there may arise complex cases where the

major purpose of a 527 group is a difficult question. Even if an

organization elects to use 527 status, it may engage in many nonelectoral activities so that determining its major purpose

requires a very close examination of various activities and

statements. Or an organization may be engaging in substantial

amounts of both federal and non-federal electoral activity, again

requiring a detailed analysis of its various activities. In such

cases, a rule such as those proposed by plaintiffs may not take

into account all the factors required to reach the correct

determination. While the FEC may not have yet confronted such a

case, the Court cannot reject the possibility out of hand. 

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 23 of 25
24

Finally, the Court recognizes that the FEC has successfully

brought enforcement actions against 527 groups since the 2006

opinion, which demonstrates that the case-by-case approach can be

at least somewhat effective.

Given the arguments on both sides of the balance, the Court

ultimately must rely on the applicable standard of review. As

this discussion illustrates, determining whether a particular

legal issue is too multifaceted to be codified requires a nuanced

understanding of the regulatory scheme and industry in question. 

Thus, this question is exactly the type of question generally

left to the expertise of an agency, and the applicable standard

of review is that “agency discretion is at its peak.” American

Gas Ass’n v. FERC, 912 F.2d 1496, 1519 (D.C. Cir. 1990). 

It is not surprising, therefore, that plaintiffs have been

unable to cite any case where a court, absent a clear directive

from Congress, required an agency to institute rulemaking in the

place of adjudication. This Court will not be the first. Even

if the Court believes as a matter of policy that rulemaking is

viable for the major purpose test, the Court may not substitute

this judgment for the agency’s decision. Therefore, the Court

concludes that the FEC’s revised explanation is sufficient under

the APA and its decision not to employ rulemaking is not

arbitrary and capricious.

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 24 of 25
25

CONCLUSION

For the foregoing reasons, plaintiffs’ motion for further

relief is DENIED, and defendant’s motion for summary judgment is

GRANTED. An appropriate Order accompanies this Memorandum

Opinion. 

Signed: Emmet G. Sullivan

United States District Judge

August 30, 2007

Case 1:04-cv-01597-EGS Document 69 Filed 08/30/2007 Page 25 of 25