-14-
or a particular party"); 117 Cong. Rec. 43,409, 1971 Leg. Hist.
at 787 (remarks of Rep. Conte); 117 Cong. Rec. 28,814, 1971
Leg. Hist. at 460 (remarks of Sen. Prouty).

The other major revision of the Corrupt Practices Act was
contained in the 1976 amendments to FECA. At that time section
610 was repealed and its text transferred to FECA
(2 U.S.C. § 441b), thereby making a violation of its prohibitions
primarily a civil offense. In addition, Congress adjusted the
balance it had struck in the 1971 legislation by adding several
new provisions to permit corporations to use corporate funds to
solicit contributions to their separate segregated funds from
certain constituencies which had not been recognized in the 1971
Act. See, H.R. Rep. No. 917, 94th Cong. 2d Sess. 7 (1976),

reprinted in FEC, Legislative History of the Federal Election

Campaign Act Amendments of 1976, 807 (GPO 1977) (hereafter "1976

Leg. Hist.").

The 1976 legislative history clearly demonstrates that
Congress did not change the scope or application of the pro-
hibition on corporate expenditures contained in that provision as
applied to this case. As explained by Sen. Cannon, the floor
manager of the bill, "if [corporations and unions] are trying to
elect or defeat someone for Federal office they are not exempt"
122 Cong. Rec. S. 3,556, 1976 Leg. Hist. at 388. See also,

122 Cong. Rec. H2,655, 1976 Leg. Hist. at 949 (remarks of
Rep. Wiggins); H.R. Rep. No. 94-917, 94th Cong., 2d

Sess. 7 (1976), 1976 Leg. Hist. at 807; 122 Cong. Rec. H3,779,


-34-

Court. Village of Schaumburg v. Citizens for a Better

Environment, 444 U.S. 620, 632 (1980) ("Solicitation is
characteristically intertwined with informative and perhaps
persuasive speech seeking support for particular causes or for
particular views on economic, political, or social issues, and
- . - without solicitation the flow of such information and

advocacy would likely cease.") See also, Secretary of State of

Maryland v. Joseph H. Munson Co., 104 S.Ct. 2839, 2849 (1984);

Heffron v. International Society For Krishna Consciousness, 452

U.S. 640, 647 (1981). Indeed, MCFL's special election flyer
included a solicitation for contributions to support further
election advocacy (J.A. 307).

The district court also found that because the expenditures
involved in this case came from the treasury of a non-profit,
ideological corporation, application of section 441b serves no
compelling governmental interest. Section 441b, however, does
not differentiate between non-profit and profit-making
corporations, nor between ideological and commerical

corporations.21/ In factthe National Right to Work Committee is

21/ the very language of the provision states that it applies to
"any corporation whatever," and Senator Taft expressly stated
that it would apply even to religious corporations. 93 Cong.

Rec. 6,440, 1967 Leg. Hist. at 1534-55.


-30-

Bank of Boston v. Bellotti, 435 U.S. 765 (1978), and in

Buckley v. Valeo, 424 U.S. at 44-51, preserves the ability of the
corporations and unions it regulates to engage fully in political
speech through separate segregated funds. There is nothing in
the record before the court to indicate that this statutory
scheme has had the effect of reducing corporate political speech.
To the contrary, the Commission's records of the level of
activity by separate segregated funds 20/ demonstrate that the
balance drawn by Congress in Section 441b has accommodated a
substantial flow of political information and opinion about
federal candidates from corporations and unions to the
electorate. The statute has merely required that such activity
be financed by funds contributed expressly for that purpose. In
fact, in 1980 MCFL itself established a separate segregated fund
(J.A. 25), and there is nothing in the record to indicate that it
has not thereby been able to engage fully in political advocacy
in the manner permitted by Congress.

B. The Supreme Court Has Found That Section 441b
Serves Compelling Governmental Interests.

Even if the district court had been correct in concluding

20/ Although the financial data for the entire 1983-84 election
cycle is not yet complete, separate segregated funds have
reported expending 93.4 million dollars during the first 18
months of the cycle (January 1, 1983 through June 30, 1984). In
contrast, during the first 18 months of the 1979-80 election
cycle, the disbursements of corporate and union separate
segregated funds totaled 45.4 million dollars. See FEC Press
((Release, "FEC Releases 18-Month PAC Study" (October 26, 1984).


~B-
A, The Use Of Corporate Treasury Funds For The Printing
And Distribution of Election Flyers Constitutes An
Expenditure Prohibited By 2 U.S.C. § 441lb(a)
Regardless Of Whether They Were Coordinated With
A Candidate's Campaign

The district court concluded that the contested corporate
disbursements were not expenditures within the meaning of section
441b(a) because the election flyers were "uninvited by any
candidate and uncoordinated with any campaign” (J.A. 488). This
conclusion is contrary both to the legislative history of the
statute and to the Supreme Court's decisions interpreting it.
Indeed, the legislative history of section 441lb demonstrates that
the statute was amended in 1947 precisely to cover “expenditures,"
such as those in this case, which express to the public the corpora-
tion's own views on candidates for federal office.

The Federal Corrupt Practices Act of 1925 broadly prohibited
corporate contributions of “anything of value" to federal
candidates. 4/ In the War Labor Disputes Act of 1943, 57 Stat.
167, Congress responded to the enormous rise in the economic
power and political activity of unions during the late 1930's by
extending the Federal Corrupt Practices Act's prohibition on
contributions to apply to unions, as well as corporations, for

the duration of the war.

4/ In response to corporate excesses in the 1904 presidential
elections, Congress passed the Tillman Act, 34 Stat. 864 (1907),
prohibiting “any corporation whatever" from making "money contri-
butions" in connection with federal elections.

(Footnote continued on next page)


-18-
courts 8/ and incorporated into the Commission's regulations, 11
C.F.R. § 114.4(b) (4) and (5), establishes that MCFL's election
flyer was within the prohibition of the Act.

However, in this case the court need not reach the question
whether section 441b prohibits expenditures "in connection with"
a federal election that do not contain express advocacy, for
MCFL's special election edition flyers unquestionably did contain
express advocacy of the election or defeat of specified
candidates. 9/ The term "express advocacy" derives from the
Supreme Court's construction of a different section of the Act in
Buckley v. Valeo, 424 U.S. at 44, n.52, to apply only "to
communications containing express words of advocacy of election
or defeat, such as ‘vote for,' 'elect,' ‘support,’ ‘cast your
ballot for,' ‘Smith for Congress,' ‘vote against,' 'defeat,
‘reject.'" Even a quick perusal of MCFL's special election
flyers (J.A. 206-209, 260-263, 300-307) reveal that they contain

precisely the words of advocacy mentioned by the Supreme

8/ United States v. Lewis Food Company, 366 F.2d 710, 712 (9th
Cir. 1966) ("The 'Notice to Voters' also makes it plain that, in
Lewis' opinion, those office holders given low ratings on their
votes 'in favor of constitutional principles' should not be
re-elected."). See also United States v. UAW, 352 U.S. at 592
(distinguishing between "active electioneering" and merely
"stat[ing] the record of particular candidates on economic
issues"). .

a/ The district court's assertion (J.A. 484) that the
Commission had not contended that the special election editions
contained express advocacy for any candidate is erroneous. The
Commission clearly did contend, as we have here, that although
express advocacy is not required under 2 U.S.C. § 441b, MCFL's
flyers contained express advocacy (J.A. 460-465).


-35-
also a so-called "ideological" corporation, and the court of
appeals in that case found, like the district court here, that
application of the Act to such a corporation would not serve the
compelling governmental interests behind section 441b.

National Right to Work Committee v. FEC, 665 F.2d 371, 374-376

(D.C. Cir. 1981). However, the Supreme Court rejected that
rationale and upheld Congress' authority in this area to enact a
prophylactic rule applicable to all corporations:

FEC v. National Right to Work Committee, 459 U.S. at 210. 22/

While § 441b restricts the solicitation of
corporations and labor unions without great
financial resources, as well as those more
fortunately situated, we accept Congress'
judgment that it is the poténtial for such
influence that demands regulation. Nor will
we second-guess a legislative determination
as to the need for prophylactic measures
where corruption is the evil feared.

22/ The district court's reliance on First National Bank of
Boston v. Bellotti, 435 U.S. 765 (1978), is also misplaced. As
the Supreme Court stated in NRWC:

Our discussion in First National Bank of
Boston v. Bellotti, 435 U.S. 765 (1978), is
entirely consistent with ‘our conclusion

here. . . The Court explicitly stated in
Bellotti that its decision did not involve
"the constitutionality of laws prohibiting or
limiting corporate contributions to political
candidates or committees, or other means of
influencing candidate elections." Id, at 788,
n.26 (emphasis added). In addition, oe

the Court specifically pointed out that in
elections of candidates to public office,
unlike in referenda on issues of general
public interest, there may well be a threat
of real or apparent corruption. As discussed
in text, Congress has relied on just this
threat in enacting § 441b.

459 U.S. at 210 n.7. (emphasis in original).


Page
Statutes and Regulations
11 C.F.R. § 114.1(a) (1). 21
et ee iia +223

114.4 (b) (4). 1iil16,18
11424 (b) (5). : oon DIT Iie) 18
114.4 (e)...s000. Lill22"

44 Fed. Reg. 76,735 (1979)... ..ceeccccccceccece eee 24
Act of January 26, 1907 (Tillman Act), 34 Stat. 864 (1907)..... 8

Federal Corrupt Practices Act of 1925, 43 Stat. 1070 (1925)... 9

War Labor Disputes Act of 1943 (Smith-Connally Act), 57
Stat. 167 (1943)... cece crc ccc cece cece cere c eee ce eens seesceece 8

Labor Management Relations Act of 1947 (Taft-Hartley Act), 61
Stat. 136 (1947) ..cccccccccccccccccccccccccccccceccssscecceeee 9

Federal Election Campaign Act Amendments of 1979, Pub. L. No.
96-187, 93 Stat. 1339 (1980)... cece ecccccccrccccccecccceces 2

Legislative History

93 Cong. Rec. 6,437 (1947)...
93 Cong. Rec. 6,438 (1947)...
93 Cong. Rec. 6,439 (1947).....
93 Cong. Rec. 6,440 (1947)....

117 Cong. Rec. 28,814 (1971)....
117 Cong. Rec. 43,380 (1971).
117 Cong. Rec. 43,381 (1971).
117 Cong. Rec. 43,382 (1971)......
117 Cong. Rec. 43,384-5 (1971).
117 Cong. Rec. 43,386 (1971)...
117 Cong. Rec. 43,389 (1971)...
117 Cong. Rec. 43,409 (1971)... cece ccc ccc ccccccccccccccece 14

122 Cong. Rec. H2,537 (1976)...
122 Cong. Rec. H2,597 (1976)...
122 Cong. Rec. H2,655 (1976)...
122 Cong. Rec. S3,555 (1976)...
122 Cong. Rec. S3,556 (1976)......
122 Cong. Rec. S3,557-8 (1976).....
122 Cong. Rec. S3,678 (1976)...
122 Cong. Rec. H3,777 (1976)...
122 Cong. Rec. H3,779 (1976)...


-28-
A. Section 441b Does Not Prohibit Independent
Political Speech By Corporations And Unions.
Contrary to the district court's assumption, even though
MCFL's special election edition falls within the prohibition of
2 U.S.C. § 441b(a), the Act does not actually prohibit
corporations such as MCFL from engaging in such political
advocacy. Although section 441b(a) broadly proscribes the use of
corporate treasury funds in connection with federal elections,
the provision's subsections draw three express exceptions to
section 441b's overall prohibition: a corporation may use
corporate funds to communicate with its stockholders and
executive or administrative personnel and their families on any
subject (section 441b(b) (2) (B)); a corporation may use corporate
funds to conduct non-partisan registration and get-out-the-vote
campaigns aimed at its stockholders and executive or
administrative personnel and their families (section
441b(b) (2) (B)); and a corporation may use treasury funds for the
establishment, administration, and solicitation of contributions
to a voluntary separate segregated fund to be used for political

purposes (section 441b(b) (2) (C)).

19/ (footnote continued)

F. Supp. 581, 588-591 (S.D.N.Y. 1975) affirmed, 533 F.2d 40, 51
n.12 (2d Cir.), cert. denied, 429 U.S. 829 (1976); International
Assn. of Machinists v. FEC, 678 F.2d 1092, 1099-1118 (D.C. Cir.)
(en _banc),' affirmed, mem., 459 U.S. 983 (1982);

Bread Political Action Committee v. FEC, 635 F.2d 621, 626-633
(7th Cir. 1980) (en banc), reversed on other grounds 455 U.S.
577 (1982); United States v. Boyle, 482 F.2d 755, 763-764 (D.C.
Cir.), cert. denied, 414 U.S. 1076 (1973); United States v.
Pipefitters, 434 F.2d 1116 1122-1123 (8th Cir. 1970), adhered to
en banc, 434 F.2d 1127, 1128 rev'd on other grounds, 407 U.S.
385 (1972); FEC v. National Education Association, 457 F. Supp.
1102, 1109 (D.D.C. 1978); FEC v. Weinsten, 462 F. Supp. 243,
246-249 (S.D.N.Y. 1978); United States v. Clifford, 409 F. Supp.
1070, 1071, 1072 (E.D.N.Y. 1976); United States v. Brewers!
Association, 239 F.2d 163 (W.D.Pa. 1916).



-15-

1976 Leg. Hist. at 1079 (remarks of Rep. Ullman); 122

Cong. Rec. H2,597, 1976 Leg. Hist, at 927 (remarks of

Rep. Burton); 122 Cong. Rec. H3,777, 1976 Leg. Hist. at 1077

(remarks of Rep. Hays); 122 Cong. Rec. H2,537, 1976 Leg. Hist.

at 907 (remarks of Rep. Brademas); 122 Cong. Rec. $3,555,

3,557-58, 1976 Leg. Hist. at 387, 389-390 (remarks of

Sen. Packwood); 122 Cong. Rec. S3,678, 1976 Leg. Hist. at 396

(remarks of Sen. Griffin).

In sum, it has been clear since 1947 that the Act was
intended to prohibit corporate "expenditures" in connection with
federal elections whether or not they are coordinated with a
candidates' campaign. The district court's contrary conclusion,
that because MCFL's “publication was uninvited by any candidate
and uncoordinated with any campaign" (J.A. 488) it was not within
the scope of section 44lb, cannot be sustained.7/

B. Section 441b(a) Applies To MCFL's Special Election Flyers
Whether Or Not They Expressly Advocated The Election Of A
Candidate.

A second reason the district court gave for finding MCFL's
flyers to be outside congressional intent in prohibiting
corporate expenditures is that they "listed the positions of
hundreds of candidates on a single political issue, without
however expressly advocating the election or defeat of any

particular candidate . .. ." (J.A. 488). However, neither the

7/ The district court drew support for its conclusion from
Buckley v. Valeo, 424 U.S. 1 (1976), the Supreme Court decision
that invalidated the provision of FECA which imposed a ceiling on
independent expenditures. However, nothing in Buckley discusses
congressional intent in enacting the prohibition Of corporate
expenditures, which are treated separately under section 441lb of

the FECA.




-17-

However, while it is true that the MCFL flyers stated the records

and positions of a number of candidates on certain issues, it did

not do so in a neutral fashion. Rather it also urged readers to

vote for those candidates indentified as supporting the pro-life

position. During the debate over inclusion of "expenditures" in

the predecessor of section 441b in 1947, Senator Taft expressly

stated that such distributions of voting records presented in a

partisan manner were to be prohibited.

Mr. PEPPER. I wish to ask the Senator
from Ohio whether he agrees . .. that if a

labor organization used its funds to
disseminate the voting record of a candidate
for office, during the time of the campaign,
that would not be unlawful. ...

Mr. TAFT, I think it would depend upon
all the circumstances of the case. If it was
Merely a bare statement of actual facts and
simply direct quotations of what the man had
said in the course of certain speeches on
certain subjects, and was not colored in any
way, I would rather agree... . But I think
it would depend, in each case, on the
character of the publication.

Mr. PEPPER. Of course, the language is
"in connection with." The provision does not
contain any statement as to whether the
Statement is colored or not . . . I do not
see how the Senator could say that the
publication of a voting record, in the midst
of a campaign, was not an expenditure in the
midst of an election.

Mr. TAFT, That is not a very practical
question, because no one would do just that.
Either it is an argument for him or against
him, or it is not.

93 Cong. Rec. 6,437, 1947 Leg. Hist. at 1548.

See also, 93 Cong.

Rec. 6,437, 1947 Leg. Hist. at 1546 (colloquy between Sens. Taft

and Ball). This distinction, which has been applied by the


-29-

Section 441b(b) (2) (C) allows corporations, such as MCFL, to
use their treasury funds to operate a voluntary separate
segregated fund for political purposes. A "separate segregated
fund may be completely controlled by the sponsoring corporation
or union, whose officers may decide which political candidates
contributions to the fund will be spent to assist."

FEC v. National Right to Work Committee, Inc., 459 U.S. at 200

n.4. "[S]uch a fund must be separate from the sponsoring union
[or corporation] only in the sense that there must be a strict
segregation of its monies" from the organization's other funds.

Pipefitters v. United States, 407 U.S. at 414-417. "In short,

the separate segregated funds are simply political arms of the

parent organizations." Bread Political Action Committee v. FEC,

635 F.2d at 624 n.3. See also, Buckley v. Valeo, 424 U.S. at 28

n.31. Any corporation may solicit contributions for its separate
segregated fund from its own stockholders, executive and
administrative personnel and their families, and membership
corporations can also solicit contributions from their members.
2 U.S.C. § 441b(b) (4) (C). Thus, although the corporation is
precluded from expending its treasury funds to publicize its
support for or opposition to a federal candidate, it is permitted
through its separate segregated fund to contribute up to $5,000
directly to a candidate and to make unlimited independent
expenditures communicating to the public its support for or
opposition to any federal candidate.

This statutory scheme, unlike the statutes limiting

independent expenditures that were struck down in First National


-12-

influences in federal elections resulting
from the use of money by those who exercise
control over large aggregations of capital.
More particularly, this Court would have to
ignore the history of the statute . .. As
indicated by the reports of the Congressional
Committees that investigated campaign
expenditures, it was to embrace precisely the
kind of indirect contribution alleged in the
indictment that Congress amended § 313 to
proscribe "expenditures." . . . Because such
conduct was claimed to be merely "an
expenditure [by the union] of its own funds
to state its position to the world," the
Senate and House Committees recommended and
Congress enacted, as we have seen, the
prohibition of "expenditures" as well as
"contributions" to "plug the existing
loophole."

352 U.S. at 585 (brackets in original).

This provision has undergone only two major amendments since
1967, and Congress expressed no intention in either instance to
modify the scope of the prohibition on corporate and union
expenditures.

In the Federal Election Campaign Act of 1971 Congress reaffirmed
the general prohibition on federal campaign contributions and
expenditures by corporations and unions. That Act contained what
has come to be known as the Hansen Amendment, which clarified the
Corrupt Practices Act, then codified at 18 U.S.C. § 610, to incorporate
expressly the judicial gloss that had been placed on the statute.

S/ Pipefitters v. United States, 407 U.S. at 399, 410-411, 427.

According to Representative Hansen, the purpose of his amendment

was to accommodate

&/ The Hansen Amendment retained the prohibition on
contributions and expenditures, but expressly exempted from the
definition: (1) communications by a corporation to its

(Footnote continued on next page)


-4-
statement, -in small print, that "this special election edition
does not represent an endorsement of any particular candidate."
(J.A. 307).

Every candidate for each office in Massachusetts was listed,
and was identified as either supporting a pro-life position or
opposing a pro-life position on three issues which MCFL chose to
survey. A "y" meant the candidate to be pro- life, and an "n"
meant the candidate opposed MCFL's pro-life position. An
asterisk was placed next to the name of certain incumbent candi-
dates to indicate their "special contribution to the unborn in
maintaining a 100% pro-life voting record in the state house by
actively supporting MCFL legislation" (J.A. 302).

The flyer also featured the pictures of thirteen candidates
out of the hundreds listed who were running for political office.
Each one of these thirteen candidates had received a triple "y"
rating. Many of the thirteen were further identified in writing
as having a 100% pro-life voting record (J.A. 301, 306-307). No
candidate was pictured who had received even one "n" rating.

MCFL also distributed a newsletter at irregular intervals
(J.A. 26-27). Each of these regular newsletters was identified
as such and carried a volume and an issue number. These regular
newsletters contained articles of interest to MCFL members,
information on relevant legislation, opinions and commentary on
pro-life issues, and entertainment information. Generally,

between 3,000 and 6,000 copies of the regular MCFL newsletter


-26-

Mr. TAFT. I think if the paper is, so to
speak a going concern, it can take whatever
position it wants to.

93 Cong. Rec. 6,437-38, 1947 Leg. Hist. at 1528-1530.

In short, the Act permits the press to report and comment on
political campaigns in the course of their normal publications
produced for sale to their usual customers; it does not permit
media corporations, any more than other corporations, to
distribute election advocacy to the general public free of
charge. As the Supreme Court commented long ago,

It is one thing to say that trade or labor
union periodicals published regularly for
members, stockholders or purchasers are
allowable under § 313 [now § 441b] and quite
another to say that in connection with an
election occasional pamphlets or dodgers or
free copies widely scattered are forbidden.

United States v. CIO, 335 U.S. 106, 123
(1948) .187

In sum, the statutory language, its legislative history,

relevant judicial precedent, and plain common sense all indicate

18/ As this quotation demonstrates, the Supreme Court's decision
in CIO supports the Commission's position in this case, contrary
to the district court's view (J.A. 491). The crucial fact in CIO
was that the newspaper containing the political endorsement was
distributed in the regular course of its publication only to
those CIO members and other purchasers who normally received the
paper. 335 U.S. at 123. It was on this basis that the Supreme
Court distinguished that case from the indictment it found valid
in United States v. UAW, 352 U.S. at 589:

[U]nlike the union-sponsored political broadcast
alleged in this case, the communication for which
the defendants were indicated in C.I.0. was neither
directed nor delivered to the public at large. The
organization merely distributed its house organ

to its own people. The evil at which Congress has
struck in § 313 is the use of corporation or union
funds to influence the public at large to vote for
a particular candidate or a particular party.


-23-
(JA. 397-398), and apparently made the remainder available in
public places to anyone who passed by (J.A. 475).16/ MCFL's
aggressive efforts to promote its political views to a public far
beyond the regular readership of its newsletter does not
constitute the normal operation of the news media protected by
the Act; rather, it was exactly the sort of active electioneering
with corporate funds that section 44lb was designed to prohibit.
As one court has explained,

{I]n exempting the “distribu[tion] of
news or commentary "through the facilities of
any broadcsting station, newspaper, magazine or
other periodical publication. . .", the statute
would seem to exempt only those kinds of distribution
that fall broadly within the press entity's legitimate
press function. It would not seem to exempt any
dissemination or distribution using the press entity's
personnel or equipment, no matter how unrelated to its
press function. If, for example, on Election Day a
partisan newspaper hired an army of incognito
propaganda distributors to stand on street corners
denouncing allegedly illegal acts of a candidate

16/ In the district court, MCFL argued that its distribution
fell within the exemption from the definition of "expenditure"
permitting a membership corporation to communicate with its
Members on any subject. See, 2 U.S.C. § 441b(b) (2) (A); 11 C.F.R.
§ 114.3. MCFL claimed that both its dues paying "members" and
the additional 50,000 individuals placed on its mailing list
because the corporation had concluded that they were sympathetic
to MCFL's goals (J.A. 21, 396-397) were "members" of the
corporation within the meaning of the Act. However, the Supreme
Court's decision in FEC v. National Right to Work Committee, 459
U.S. 197, 202-206 (1982) makes clear not only that the 50,000
individuals on MCFL's mailing list lack all the relevant indicia
of "members" under the statute, but that MCFL could not have had
any “members” at all in 1978 since it was incorporated under the
laws of Massachusetts at that time as a nonmembership
corporation. See p.2, supra. Thus, it must be conceded that
MCFL's special election edition was distributed to the general
public, rather than merely to MCFL's members as permitted by the
Act.



IN THE UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

NO. 84-1719

THE FEDERAL ELECTION COMMISSION,
Appellant,
v.
THE MASSACHUSETTS CITIZENS FOR LIFE, INC.,

Appellee.

BRIEF FOR APPELLANT

STATEMENT OF ISSUES PRESENTED

1. Whether Massachusetts Citizens for Life, Inc. violated
2 U.S.C. § 441b by expending general corporate treasury funds for
the printing and distribution of its special election flyers to
the general public, advocating the election of pro-life
candidates in federal elections.

2. Whether 2 U.S.C. § 441b violates the First Amendment to
the United States Constitution.

STATEMENT OF THE CASE

This case is before the court on an appeal of the Federal

Election Commission (the "Commission") from a judgment of the

United States District Court for the District of Massachusetts.


Page
Legislative History

H. R. Rep. No. 79-2739, 79th Cong., 2d Sess. (1946).........10
H. R. Rep. No. 93-1239, 93d Cong., 2d Sess. (1974)..........25
H. R. Rep. No. 94-917, 94th Cong., 2d Sess. (1976)..........14
Miscellaneous

FEC, Legislative History of the Federal Election Campaign
Act of 1971 (GPO 1981)... cece cece cece cree ceeeecceceeceees 13, 16

FEC, Legislative History of the Federal Election Campaign
Act Amendments of 1974 (GPO 1977) ..ccccccccccccccecereccceee ad

FEC, Legislative History of the Federal Election Campaign
Act Amendments of 1976 (GPO 1977) ..cccccccccccceeeeeececsceel4, 15

FEC Press Release, "FEC Releases 18-Month PAC Study"
(October 26, 1984) ....ceccccccccnccccevece eee cence cee neeee 30

II NLRB, Legislative History of the Labor Management
Relations Act of 1947 (GPO, 1948)... 0c... ccc eee we ee ee eee ee passim



-13-
legitimate interests in engaging in group political activity
without undermining the important purposes section 610 was
intended to serve.

[T]here is broad agreement as to the essence
of the proper balance in regulating corporate
and union political activity required by
sound policy and the Constitution. It
consists of a strong prohibition on the use
of corporate and union treasury funds to
reach the general public in support of, or
opposition to Federal candidates and a
limited permission to corporations and
unions, allowing them to communicate freely
with members and stockholders on any

subject . . .and to make political
contributions and expenditures financed by
voluntary donations which have been kept in a
separate segregated fund. This amendment
writes that balance into clear and
unequivocal statutory language.

117 Cong. Rec. 43,381 (1971), reprintéd in FEC, Legislative

History of the Federal Election Campaign Act of 1971, 759 (GPO

1981) (hereafter "1971 Leg. Hist."). See also, 117 Cong. Rec.

43,384-85, 1971 Leg. Hist. at 762-63 (remarks of Reps. Thompson
and Udall); 117 Cong. Rec. 43,386, 1971 Leg. Hist. at 764
(remarks of Rep. Crane); 117 Cong. Rec. 43,389, 1971 Leg. Hist.
at 767 (remarks of Rep. Gude) (referring to the "evil" section
610 was intended to correct as the "use of union funds to

influence the public at large to vote for a particular candidate

&/ (Footnote continued)

stockholders and their families and by a labor organization to
its members and their families "on any subject," (2) nonpartisan
get-out-the-vote campaigns aimed at a corporation's stockholders
and their families or a union's members and their families, and
(3) "the establishment, administration, and solicitation of
contributions to a separate segregated fund to be utilized for
political purposes" by a corporation or labor organization.


-3-
Appendix (hereafter "J.A.") 154-157. MCFL published and
distributed a Special Election Edition flyer in September 1978,
prior to the September 19, 1978 primary election (J.A. 300-307).
The flyer was later reedited and a partial complimentary copy
redistributed (J.A. 355-358). The flyers cost MCFL $9,812.76 to
prepare, print and distribute (J.A. 12). The source of the
$9,812.76 spent on the election flyer was the corporation's
general corporate treasury funds (J.A. 12).

Over 100,000 copies of the Special Election Edition flyers
were printed for distribution (J.A. 473-474). They were
distributed to 5,986 people who had contributed or paid dues to
MCFL and to 50,674 other people whom MCFL had identified as
supporters of its goals. (J.A. 21-30, 396-397, 468). The
remaining copies apparently were left in public areas to be
picked up by those who happened to be in the vicinity at the time
(J.A. 475). These flyers were complimentary-- no payment of any
kind was required to receive one (J.A. 355-358).

The leading caption on the flyer read “EVERYTHING YOU NEED
TO KNOW TO VOTE PRO-LIFE" (J.A. 300). Statements with similar
messages were made throughout the flyer. For instance, on the
first page it requested the reader to join "in voting in the
primary and together let us make our votes shout against the
continuing killing of the unborn." The back page of the flyer
had "VOTE PRO-LIFE" written on it in large bold-faced capital

letters. On the same page, opposite this exhortation was another


-19-
Court.10/ Headed in large print "EVERYTHING YOU NEED TO KNOW TO
VOTE PRO-LIFE," the special election edition states on its first
page:

As you read this edition, you will see that

the final election or defeat of pro-life

candidates in November will really be
determined by the outcome of the September 19

primary. No pro-life candidate can win in
November without your vote in September ....
Thus, your vote in the primary will make the
critical difference in electing pro-life
candidates.
The pamphlet then goes on in the next few pages to list the
candidates running in each upcoming primary race, and next to
each one for whom a response could be determined are three
letters representing their votes on three issues relating to
abortion, "y" representing what MCFL states is the pro-life

position, and "n" meaning the candidate opposes what MCFL states
is the pro-life position. Only candidates running for office
were listed in the flyer; if an incumbent were not up for
reelection his pro-life stance was not listed. The flyer grouped
the candidates together according to the race in which they were
involved; incumbents were identified in capital letters and
further identified for quick reference as to whether they had a
100% pro-life voting record. Only the pictures of selected
pro-life candidates were featured; all opponents were identified

and their views on the pro-life issues indicated whenever known.

Finally, on the last page was a form, entitled "VOTE PRO-LIFE,"

10/ of course, the Supreme Court listed only examples of such
phrases, and did not indicate that its list was intended to be
exclusive.


UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 84-1719

FEDERAL ELECTION COMMISSION,
Appellant,
v.
MASSACHUSETTS CITIZENS FOR LIFE, INC.,

Appellee.

On Appeal from the United States
District Court for the District of Massachusetts

BRIEF FOR APPELLANT
FEDERAL ELECTION COMMISSION

CHARLES N. STEELE
General Counsel

RICHARD B. BADER
Assistant General Counsel

LISA E. KLEIN
Attorney

CAROL A. LAHAM
Law Clerk

FEDERAL ELECTION COMMISSION

1325 K Street, N.W.

Washington, D.C. 20463
December 13, 1984 (202) 523-4000



-6-

The district court found that MCFL's corporate expenditures
were not direct or indirect "expenditures in connection with a
federal election" under § 441b because "[t]he publication was
uninvited by any candidate and uncoordinated with any campaign"
(J.A. 488). Second, the court held the flyers were not "expendi-
tures" because they fell within the exception in 2 U.S.C. § 431(9)
(B) (i) for “periodical publications" (J.A. 489). Third, the court
held that "[i]f § 441b were intended by Congress to prohibit MCFL's
expenditures of printing and distributing the newsletters in question,
it would be unconsitutional under the First Amendment as applied
to MCFL because violative of MCFL's freedoms of speech, press and
association" (J.A. 492). The court based this last holding on
three features of the expenditures: that they "were (a) independent
of any candidate or party, (b) by a nonprofitmaking corporation
formed to advance an ideological cause and (c) for the purpose of
publishing direct political speech" (J.A. 492).

The Commission filed a timely notice of appeal on August 24,
1984.

ARGUMENT

I. MCFL'S USE OF CORPORATE TREASURY FUNDS TO PUBLISH AND

DISSEMINATE “SPECIAL ELECTION” FLYERS TO THE PUBLIC VIOLATED

2 U.S.C. § 441b(a)

Section 441b(a) of the Act makes it unlawful for “any
corporation whatever" to use corporate treasury funds to make "a

contribution or expenditure in connection with" a federal


-5-
were printed for distribution (J.A. 27-28). They were
distributed by mail, and only to the approximately 6,000 people
who had contributed or paid dues to MCFL (J.A. 27-30, 395-397,
421).

Upon the foregoing facts, the Commission found probable
cause to believe that MCFL had violated 2 U.S.C. § 44lb(a) by
using corporate funds to prepare, print and distribute its
special election edition to members of the general public. When
the Commission was unable to successfully conciliate the matter
it authorized the filing of the instant action against MCFL to

enforce section 441b of the Act. See, 2 U.S.C. § 437g(a) (4) (A).

B. The District Court Proceedings

On February 22, 1982, the Commission filed its complaint in
this case pursuant to 2 U.S.C. § 437g(a) (6) (A), seeking a civil
penalty and such other relief as the court deemed appropriate
(J.A. 6-9). MCFL admitted that it had caused to be prepared,
printed and distributed the Special Election Edition and Com-
plimentary Partial Copy but claimed that the money spent on it
was not an "expenditure" under the Act, and that 2 U.S.C. § 441b
was unconstitutional (J.A. 10-17). Both parties filed motions
for summary judgment (J.A. 141-142, 458-459) and on June 29,
1984, the district court granted summary judgment in favor of

MCFL (J.A. 481).


ATTACHMENT A

Text of 2 U.S.C. §441b


-25-

The media exemption was first added to the Act in 1974 with
little controversy or discussion. The House Report that
accompanied the amendment stated merely that it was intended to
reaffirm prior law by assuring "the unfettered right of the
newspapers, TV networks and other media to cover and comment on
political campaigns." H.R. Rep. No. 93-1239, 93d Cong. 2d Sess.

4 (1974); reprinted in FEC, Legislative History of the Federal

Election Campaign Act Amendments of 1974 638 (GPO 1977). As this

Report indicates, section 441lb's predecessors had never been
intended or construed to interfere with the ability of the press
to cover political campaigns. Indeed, the line between permitted
press activities and prohibited corporate expenditures had been
thoroughly explicated in the legislative history of the 1947
amendment that first extended the statute to cover corporate and
union expenditures.

Mr. TAFT. I would say the word "expenditure"
does not mean the sale of newspaper for money for their
worth. If they are sold to subscribers and if the
newspaper is supported by subscriptions, then I
would not say that constituted such an expenditure.
But if the newspaper were given away--even an
ordinary newspaper--I think that would violate the
Corrupt Practices Act. That act would be violated,
it seems to me, if such a newspaper were given away
as a political document in favor of a certain
candidate. I think that would have been so under the
present law, and I think we make it more clearly so,
perhaps, by this measure.

* * * * * * *

Mr. TAFT. . .If the newspaper is prepared and
distributed and circulated by means of the expenditure
of union funds, then how could a line be drawn between
that and political literature or pamphlets or
publications of that nature? It is perfectly easy
for a labor union to publish lawfully a bona fide
newspaper and to charge subscriptions for that
newspaper, either by itself or as a corporation.

* x x * * * *


-24-

and sent sound trucks through the streets blaring

the same denunciations, all in a manner unrelated to
the sale of its newspapers, this activity would not
come within the press exemption -- even though it might
comply with a technical reading of the statutory
exemption, being a "news story . . . distributed
through the facilities of . . . [a] newspaper."

Reader's Digest Assn. v. FEC, 509 F.Supp. 1210, 1214 (S.D.N.Y.
1981).

The district court's broad interpretation of the media
exemption would completely eviscerate the prohibitions of section
441b, for it would permit any of the many corporations and unions
that operate house organs to use their treasury funds to
distribute election propaganda to the general public merely by

putting the house organ's logo at the top and printing it on

similar paper.17/ It is safe to assume that if Congress had
intended to create such a gaping loophole in the law, that
intention would be spelled out in the legislative history.
However, as we show below, what legislative history there is
clearly supports the Commission's balanced interpretation of the

media exemption rather than the district court's expansive one.

17/ in fact, the special election edition does not even bear the
full logo of the MCFL newsletter. While the newsletter is
entitled "Massachusetts Citizens For Life Newsletter" (J.A. 300),
the special election edition did not include "Newsletter" in its
caption (J.A. 300). Moreover, each of the regular newsletters
was printed with a volume and issue number (J.A. 402), while the
special election edition was not--only later was a volume and
issue number added by hand to a copy provided to the Commission
(J.A. 403), and even this number had already been used for one of
the regular newsletters (J.A. 200). Finally the election flyers
were not produced by the staff that generally produced the
newsletters; instead, the election flyers were primarily the work
of Mrs, Rea-Luthin, who later became chairman of MCFL's political
action committee, but who had never worked on the regular
newsletter (J.A. 26, 424, 428-429).


-2-
On cross-motions for summary judgment, the district court held
that Massachusetts Citizens for Life, Inc. ("MCFL") did not
violate 2 U.S.C. § 44lb(a), a provision of the Federal Election
Campaign Act of 1971 ("the Act" or "FECA"), 2 U.S.C. § 431 et
seq., which prohibits expenditures of corporate funds in
connection with any federal election. The court also held that
the election flyers distributed to the public by MCFL were
exempted from the definition of expenditure by 2 U.S.C. §
431(9) (B) (i) 2/7 In the alternative, the court found application
of 2 U.S.C. § 44l1b to MCFL would violate its rights to freedom of
speech, press, and association under the First Amendment to the
United States Constitution. The district court's opinion was
issued on June 29, 1984. This court has jurisdiction of the
proceeding under 28 U.S.C. § 1291 and 2 U.S.C. § 437g(a) (9).
A. Background
MCFL was incorporated on January 26, 1973, as a non-stock,

non-membership corporation under Massachusetts law. 2/ Joint

1/ The alleged violation of FECA occurred in 1978. In 1979,
FECA was amended, Federal Election Campaign Act Amendments
of 1979, Pub. L. No. 96-187, 93 Stat. 1339 (1980). The
numbering of statutory sections in effect in 1978,
therefore, may not always comport with the present amended
version of FECA. However, no change made by the 1979
amendments has any substantive effect on the statutory
provisions relied upon by the FEC in this action.
Accordingly, unless otherwise noted, all statutory citations
in this memorandum will be to the current version of the
Act.

2/° After the FEC began its administrative enforcement
proceeding, MCFL filed amended articles of incorporation
with the state of Massachusetts, which apparently converted
it into a membership corporation (J.A. 369-370).


-16-
wording nor the legislative history of section 44lb indicates
that express advocacy of the election or defeat of a candidate is
a prerequisite to finding a violation of that section. To the
contrary, section 441b only requires that an expenditure be "in
connection with" a federal election. For example, a corporation
that conducted a get-out-the-vote campaign limited to members of
the public listed as registered Democrats would have made a
prohibited corporate expenditure regardless of whether any
candidate's election or defeat was advocated in the process.
See, 2 U.S.C. § 441b(b) (2) (B) and 2 U.S.C. § 431 (8) (ii). See
also, 117 Cong. Rec. 43,380-81, 1971 Leg. Hist. at 758-759
(remarks of Rep. Hansen); 117 Cong. Rec. 43,382, 1971 Leg. Hist.
at 760 (colloquy between Reps. Anderson and Hansen). As the
Supreme Court has noted, "[t]he evil at which Congress has struck
in § 313 [now section 441b] is the use of corporation or union
funds to influence the public at large to vote for a particular

candidate or a particular party," United States v. UAW, 352 U.S.

at 589, and MCFL has admitted (J.A. 410, 445) that the special
election edition flyers were distributed to influence readers to
vote for candidates identified therein as supporting the pro-life
position. This is enough to make the expenditures unlawful under
section 441b.

The Cammission has not suggested that the mere dissemination
of candidates positons on issues in a nonpartisan fashion would

violate section 441b. See 11 C.F.R. § 114.4(b) (4) and (5).


-32-
tures by corporations or labor organizations in connection with
federal elections," the statute "permits some participation of
unions and corporations in the federal electoral process by
allowing them to establish and pay the administrative expenses of
‘separate segregated funds', which may be ‘utilized for political
purposes.' 2 U.S.C. § 441b(b)(2)(C)." 459 U.S. at 201. The
Court recognized that this statutory scheme was designed to serve
at least two important governmental purposes: "to ensure that
substantial aggregations of wealth amassed by the special
advantages which go with the corporate form of organization
should not be converted into political ‘war chests' which could
be used to incur political debts from legislators who are aided
by the contributions"; and "to protect the individuals who have
paid money into a corporation or union for purposes other than
the support of candidates from having that money used to support
political candidates to whom they may be opposed." 459 U.S. at
207-8. Noting that "'[t]he importance of the governmental
interest in preventing [the corruption of elected officials] has
never been doubted,'" the Court found that these dual purposes
were sufficient to overcome the corporation's First Amendment
objections to the statute. 459 U.S. at 207, quoting First
National Bank of Boston v. Bellotti, 435 U.S. 765, 788 n.26

(1978). Finally, the Court concluded that "the statutory
prohibitions and exceptions we have considered are sufficiently
tailored to these purposes" to avoid unnecessary infringement of

First Amendment rights. 459 U.S. at 207.


-33-

Thus, while acknowledging that "Congress aimed a part of its
regulatory scheme at corporations," the Court concluded that
"[t]he statute reflects a legislative judgment that the special
characteristics of the corporate structure require particularly
careful regulation," and refused to "second guess a legislative
determination as to the need for prophylactic measures where
corruption is the evil feared." 459 U.S. at 209-210.

As can be seen from this summary, the Supreme Court in NRWC
upheld the constitutionality of the integrated scheme of
"prohibitions and exceptions" contained in section 441b, as being
properly balanced to serve important purposes without
unnecessarily infringing on First Amendment activities. See,

Athens Lumber Company v. FEC, 718 F.2d 363 (llth Cir. 1983) (en

banc) (finding that NRWC controlled question whether section
441b's prohibition of independent expenditures by corporations
violated the First Amendment [Question (2), set out in 689 F.2d
at 1015-1016].

The district court in this case found that the decision in
NRWC only applied to limits on corporate solicitation of
political contributions (J.A. 485-86). However, it is clear that
the statutory limitations on corporate solicitation could not
stand alone; rather, the Supreme Court upheld that provision
because of its role in the statutory scheme as a whole. In
addition, the district court's assumption that solicitation of
contributions merits less constitutional protection than other

forms of speech has repeatedly been rejected by the Supreme


-21i-

by the Supreme Court in Buckley v. Valeo, 424 U.S. at 44.12/

In sum, the MCFL special election edition clearly falls
within section 441b's proscription on expenditures “in connection
with" an election, whether or not that language is interpreted to
apply only to express advocacy of the election or defeat of a
specified candidate.

Cc. The Special Election Edition Flyers Are Not "Periodical
Publications" Exempt From The Prohibition On Corporate
Expenditures.

Section 431(9) (B) (i) of the Act exempts from the general
definition of expenditure "any news story, commentary, or
editorial distributed through the facilities of any broadcasting
station, newpaper, magazine, or other periodical
publication. . .." The district court found that MCFL's special
election edition constituted a "periodical publication" under
this provision, and was therefore exempted from section 44lb(a)'s
prohibition on corporate expenditures (J.A. 489).13/ This
finding was based upon the district court's conclusion

that the special election edition looked like MCFL's

12/ Compare FEC v. CLITRIM, 616 F.2d 45, 49 (2d. Cir. 1980) (en
banc) (circular found not to contain express advocacy because "no
mention is made of any particular federal election, the political
affiliation of any congressman, the fact that he is or is not a
candidate for elective office, or the name or views of any
electoral opponent of any congressman.")

13/ this finding is inconsistent with the district court's
earlier conclusion (J.A. 487-88) that the Act's general
definition of "expenditure" in section 431(9) does not apply to
the term as used in section 441b, which has its own definition of
"contribution or expenditure" in 2 U.S.C. § 441b(b) (2). The
Commission has always maintained that these two definitions must
be read together, and has adopted regulations which do so. 11
C.F.R. § 114.1(a) (1). The Commission's position is supported by
the fact, apparently recognized by the district court in applying
the media exemption here, that it would make little sense for the
statute's news media exemption not to apply to the provisions
regulating activity of corporations, since most news media are
corporations.


Page
Cases

United States v. Boyle, 482 F.2d 755 (D.C. Cir. 1973), cert.

denied, 414 U.S. 1076 (1973)... cece eee c cece ccc cc ccc cccecce 28
United States v. Brewers’ Association, 239 F.2d

163 (W.D.Pa. 1916)... cece cece ccc eecccce eee ewww eee e rc cnees 28
United States v. Chestnut, 533 F.2d 40 (2d Cir.)

cert. denied 429 U.S. 829 (1976).....ceeeeeeecceee see e cece ee 27
United States v. CIO, 335 U.S. 106 (1948)............ 000 22 26
United States v. Clifford, 409 F.Supp. 1070

(E.D.N.Y. 1976) ..cececcecccece er cceee occ c ec cece cree cence 22 6 28
United States v. Lewis Food Company, 366

F.2d 710 (9th Cir. 1966)... cece eee c cece nce c ence nce cnccecee 18
United States v. UAW, 352 U.S. 567 (1957) ......eeeeeeeee ...-passim

Village of Schaumburg v. Citizens for a
Better Environment, 444 U.S. 620 (1980) eee eeceee sec eeee 22234

Statutes and Regulations

2 U.S.C. § 431(8) (ii).....-. 2-0 eee
431(9) (B) (i)......
431(f) (4) (A).....
437g (a) (4)..
437g (a) (4) (A)..
437g (a) (6) (A)... eee
437g (a) (9) ee eeeceeeee
441b....... ee ecccceee
441D (a). cece eee nee
441b(b) (2) (A)....-0e

441b(b) (2) (B)...---e
441b(b) (2) (C).....0e
441b(b) (4) (C).....
31
former
18 U.S.C. § G10... eee weer eeee eee ee eee cece ence ee eeeecceeee 12

28 U.S.C. § L291... cee ee wees See ry 2


§441b, Contributions or expenditures by national banks, corpora-
tions, or labor organizations

(a) Ivis uniawful for any national bank, or any corporation
organized by authority of any law of Congress, to make a contri-
bution or expenditure in connection with any election to any po-
litical office, or in connection with any primary election or polit-
ical convention or caucus held to select candidates for any poli
cal office, or for any corporation whatever, or any labor organi
zation, to make a contribution or expenditure in connection with
any election at which presidential and vice presidential electors
or a Senator or Representative in, or a Delegate or Resident
Commissioner to, Congress are to be voted for, or in connection
with any primary election or political convention or caucus heid
to select candidates for any of the foregoing offices, or for any
candidate, political committee, or other person knowingly to
accept or receive any contribution prohibited by this section, or
any officer or any director of any corporation or any national
bank or any officer of any labor organization to consent to any
contribution or expenditure by the corporation, national bank, or
labor organization, as the case may te, prohibited by this section.

(>) (1) For the purposes of this section the term “labor
crganization” means any organization of any kind, or any
agency or employee representation committee or pian. in
which employees participate and which exists for the pur-
pose, in whole or in part, of dealing with employers con-
cerning grievances, labor disputes, wages, rates of pay,
hours of employment, or conditions of work.

(2) For purposes of this section and section 79/(h) of
title 15, the term “contribution or expenditure” shall inciude
any direct or indirect payment, distribution, loan, advance,
deposit, or gift of money, or any services, or anything of
value (except a loan of money by a national or State bank
made in accordance with the applicable banking laws and
regulations and in the ordinary course of business) to any
candidate, campaign committee, or political party or organi-
zation, in connection with any election to any of the offices
referred to in this section, but shail not include—

(A) communications by a corporation to its
stockhoiders and executive or administrative personne!
and their families or by a labor, organization to its
sembers and their families on any subject;

(B) nonpartisan registration and get-out-the-vote
campaigns by 2 corporation aimed at its stockholders
and executive or administrative personnel and their
families, or by a labor organization aimed at its mem-
bers and their families; and

(©) the establishment, administration, and solici-
tation of contributions to a separaie segregated fund to
be utilized for political purposes by a corporation,
labor organization, membership organization, coopera-
tive, or corporation without capital stock.

(: shall be unlawful—

(A) for such 2 fund to make a contribution or ex-
diture by utilizing money or anything of value se-
cured by pinysical force, job discrimination, financial
reprisals, or the threat of force, job discrimination. or
financial reprisal; or by dues, fees, or other moneys re-
quired as a condition of sembershio in a labor organi-
zation or as a condition of employment, or 5y moneys
ootained in any commercial transaczon:

) for any person soliciting an empioy
contmbuticn to such a find to fail to inform such «1
ployee of the political purposes of such
time of such soiicitation: and

() for any person soliciting an employee for 2
contribution to such a fund to fail to inform such ¢
ployee. at the time of such solicitation, of his right
refuse to so contribute without any reprisal.

(4) (A) Except as provided in subdparagrao
(C), and (D), it shall be unlawful—

(i). for a corporation. or 2 separate segre-
gated fund established by a corporation, {9 solic:t
contmoutions to such a fund from any person
other than its stockholders and their famiiies and
its executive or admunistrative personne! anc sneir
families, and

(i) for a labor organization. or a scparate
segregated fund established by 3 labor organize
tion, to solicit contributions to such 2 ic irom
any cerson other than its members and the fart:

s (B),

(B) It shall not be unlawful under this section for
a corporation, a labor organization, or a separate segre-
gated fund established by such corporation or such
labor organization, to make 2 written solicitations for
contributions during the calendar year from any stock-
halder, executive or administrative personnel, or em-
ployee of a corporation or the families of such persons.
‘A solicitation under this subparagraph may be made
only by mail addressed to stockholders, executive or
administrative personnel, or employees at their resi-
dence and shall be so designed that the corporation,
labor organization, or separate segregated fund con-
ducting such solicitation cannot determine who makes
a contribution of $50 or less as a result of such solicita-
tion and who does not make such a contribution.

(©) This paragraph shall not prevent a member-
ship organization, cooperative, or corporation without
capital stock, or a separate segregated fund established
by a membership organization, cooperative, or corpo-
ration without capital stock, from soliciting contribu-
tions to such a fund from members of such organiza-
tion, cooperative, or corporation without capital stock.

(D) This paragraph shall not preyent a trade as-
sociation or a separate segregated fund established by a
trade association from soliciting contributions from the
stockholders and executive or administrative personnel
of the member corporations of such trade association
and the families of such stockholders or personnel to
the extent that such solicitation of such stockhoiders
and personnel, and their families, has been separately
and specifically approved by the member corporation
involved, and such member corporation does not 20-
prove any such soiicitation by more than one such
trade association in any calendar year.

(8) Notwithstanding any other law, any method of so-
liciting voluntary contributions or of facilitating the making
of voluntary contributions to a separate segregated fund es-
tablished by a corporation, permitted by law 10 corporations
with regard to stockholders and executive or administrative
personnel, shail also be permitted to labor organizations
with regard to their members.

(6) Any corporation, including its subsidiaries,
branches, divisions, and affiliates, that utilizes a method of
soliciting voluntary contnbutions or facilitating the making
of voluntary contributions, shail make available such
method, on written request and at a cost sufficient oniy: to
reimburse the corporation for the expenses incurred thereby,
to a labor organization representing any members working
for such corporation, its subsidiaries, branches, divisions,
and affiliates.

(7) For purposes of this scction, the term “executive
or administrative personnel” means individuals employed by
a corporation who are paid on a salary, rather than hourly,
basis and who have policymaking, managerial, professional.
or supervisory responsibilitics.


-9-

The unions, however, proved capable of circumventing the
prohibitions of the Corrupt Practices Act by making political
expenditures in support of the candidates they supported, rather
than by contributing directly to the candidates' campaign funds.
As a result, Congress enacted Section 304 of the Labor Management
Relations Act of 1947 ("Taft-Hartley Act"), 61 Stat. 136, which
not only permanently extended the Federal Corrupt Practices Act
to unions as well as corporations, but also broadened its
proscription to include "expenditures" as well as contributions.
As Senator Taft explained:

[W]e have long prohibited corporations from
contributing money for political purposes,
and it was always supposed that the law
prevented a corporation from operating
newspapers for that purpose’or advertising in
Newspapers for that purpose, until labor
organizations were included . . . and then it
was said that the law prohibited
contributions, but that political
advertisements and political pamphlets could
be published by the union or corporation
itself.

So what we are proposing to do is to subject
labor organizations to exactly the same
prohibition to which corporations have been
subjected, and, so far as I know, including
the things which I think the original law
covered but regarding which doubt was raised
by labor organizations.

4/ (Footnote continued)

The Federal Corrupt Practices Act, 43 Stat. 1070, was signed into
law in 1925. Section 313 of that Act strengthened the
prohibition on corporate contributions by extending it to cover
"a gift, subscription, loan, advance, or deposit of money, or
anything of value, [including] a contract, promise, or agreement
whether or not legally enforceable, to make a contribution." 43
Stat. 1071. The 1925 Act also made acceptance of a corporate
contribution a crime, as well as the giving of one. See United
States v. UAW, 352 U.S. 567, 570-577 (1957).


-1l-

the Senator from Ohio, if he should be the
Republican nominee for the Presidency,
stating that President Truman was a friend of
labor and that the Senator from Ohio was not
friendly to labor? Would that be called a
political expenditure on the part of the
labor organization?

Mr. TAFT. If it were supported by union
funds contributed by union members as union
dues it would be a violation of the law, yes.
It is exactly as if a railroad itself, using
stockholders' funds, published such an
advertisement in the newspaper supporting one
candidate as against another .... The
prohibition is against a labor organization
using its funds either as a contribution to a
political campaign or as a direct
expenditures of funds on its own behalf.

93 Cong. Rec. 6,437-38 (1947) (emphasis added); 1947 Leg. Hist.
at 1526-27. Similar statements were repeated throughout the
legislative history of the Taft-Hartley amendments. See e.g., 93
Cong. Rec. 6,437, 6,438, 6,439, 6,440, 1947 Leg. Hist. at 1528-35
(remarks of Sens. Pepper, Taft and Magnusen).

The Supreme Court firmly recognized Congress' intent to
prohibit corporate and union independent expenditures in United
States v. UAW, 352 U.S. 567 (1957). - The UAW had used union funds
"to sponsor commercial television broadcasts designed to
influence the electorate to select certain candidates for
Congress in connection with the 1954 elections." 325 U.S. at
585. In reversing the district court's dismissal of the
indictment, the Court stated:

To deny that such activity, either on the
part of a corporation or a labor
organization, constituted an “expenditure in
connection with any [federal] election" is to

deny the long series of congressional efforts
calculated to avoid the deleterious


MCFL TABLE OF AUTHORITIES

Cases

Athens Lumber Co., Inc. v. FEC, 689 F.2d 1006
(llth Cir. 1982), 718 F.2d 363 (llth Cir. 1983) (en banc),

appeal dismissed, cert. denied, 104 S.Ct. 1580 (1984).......27, 33

Bread Political Action Committee v. FEC, 635 F.2d 621
(7th Cir. 1980) (en banc), rev'd 455 U.S. 577 (1982)........28, 29

Buckley v. Valeo, 424 U.S. 1(1976)........ecee ec ceeeeceeee passim

California Medical Association v. FEC,
453 U.S. 182 (1981)... cece cere cece cence cee e cree cece ceseecceal

Civil Service Commission v. National Ass'n of Letter
CarrierS 413 U.S. 548 (1973)... cece eee ec eee creer ee cecceese dl

FEC v. CLITRIM, 616 F.2d 45 (2d Cir. 1980)..........-..26---21

FEC. v. Democratic Senatorial Campaign Committee,
454 U.S. 27 (1981). cece cece ccc w cece cece cence enc cecseeceeece led

FEC v. National Education Association, 457 F.Supp.
1102 (D.D.C. 1978)... cc cee ccc cece cece cece eee n ence cc eceeeee ee lB

FEC v. National Right to Work Committee,
459 U.S. 197 (1982)... cece cc cc cece cece cc ccceevececececcees spassim

FEC v. Weinsten, 462 F.Supp. 243(S.D.N.Y.1978)......ee00002 228

First National Bank of Boston v. Bellotti,
435 U.S. 765 (1978)... ccc ececcccvccccccceccevccccecececsess spassim

Heffron v. International Society .
for Krishna Consciousness, 452 U.S. 640 (1981)..............34

International Assn. of Machinist v. FEC, 678 F. 2d 1092
(D.C. Cir.) (en_ banc), aff'd mem. 459 U.S. 983 (1982).......28

Pipefitters v. United States, 407 U.S. 385, (1972), rev'g
434 F.2d 1127 (8th Cir. 1970) (en_banc), 434 F.2d 1116 (8th

eee cece cere eee eceeceeee spassim

Reader's Digest Association v. FEC, 509 F.Supp. 1210
(S.D.N.Y. 1981)... cc cece cece ccc cece cece e rece cece ence eee ld

[oh ee Pe

Secretary of State of Maryland v. Joseph H. Munson Co.,
104 S.Ct. 2839 (1984)... cece ccrccnncccccerccccvrerevcccrecce edd

Shelton v. Tucker, 364 U.S. 479 (1960) ...ccecccccceceeneeeee dl


-31-
that section 441b infringes upon MCFL's ability to. engage in
political advocacy, the statute would still have to be upheld.
The constitutional rights of free political speech and
association lie "at the foundation of a free society."

Buckley v. Valeo, 424 U.S. at 25, quoting Shelton v. Tucker, 364

U.S. 479, 486 (1960). It is well settled, however, that these

rights are not immune from appropriate governmental regulation.

[I]t is clear that "[n]either the right to
associate nor the right to participate in
political activities is absolute."

CSC v. National Assn. of Letter Carriers, 413
U.S. 548, 567 (1973). Even "'significant
interference' with protected rights of
political association" may be sustained if
the State demonstrates a sufficiently
important interest and employs means closely
drawn to avoid unnecessary abridgement of
associational freedoms.

Buckley v. Valeo, 424 U.S. at 25. Accord, FEC v. National Right

to Work Committee, 459 U.S. at 206-7.

In FEC v. National Right to Work Committee, 459 U.S. 197

(1982), the Supreme Court rejected First and Fifth Amendment
challenges to a subsection of section 441b, 2 U.S.C. § 441b(b) (4)
(C), which restricts expenditures of corporate funds to solicit
contributions to the corporation's separate segregated fund. The
Court's discussion of the constitutional issues in NRWC plainly
establishes that the district court below erred in finding
section 441b unconstitutional.

In NRWC, the Court observed that, although "[t]he statutory

purpose of § 44lb . . . is to prohibit contributions or expendi-


~20-

to be filled in with the pro-life candidates in the reader's
district, and clipped out to take to the polls.

There can be no doubt that this flyer contained express
advocacy, It identified by name which candidates in each
electoral contest MCFL considered to be "pro-life" and explicitly
urged the reader to vote for pro-life candidates. That the flyer
advocated the election of a category of candidates does not make
it any less express, for it carefully listed the names of each
candidate in each election that was in the category of "pro-life"
candidates the reader was to vote for. 11/ This is no different
than a flyer that urged the reader to "vote for Democrats" and
then specified which candidates in each electoral race were
Democrats, and which were not. Such a flyer could not reasonably

be described as anything other than "express advocacy" as defined

11/ The district court found it significant that "[w]hen
competing candidates were on the same side of the abortion issue,
it did not suggest a preference." (J.A. 488). MCFL's failure to
state a preference in some electoral races does not detract from
the fact that the flyer expresses support for pro-life candidates
in all those races that presented a choice. Nothing in the Act
requires that a distribution contain only advocacy of an election
choice to violate section 441b. Nor could it reasonably make a
difference that the district court believes that MCFL's support
of a candidate is more likely to hurt than help him (J.A. 488),
for the statute makes expenditures unlawful whether they are made
by a corporation espousing popular or unpopular views. Moreover,
since the flyer was distributed primarily to individuals already
identified as supporting MCFL's cause, the validity the of
district court's observation is questionable.


TABLE OF CONTENTS
STATEMENT OF ISSUES PRESENTED... cc cece ec cece cee ccn scree cceccreee
STATEMENT OF THE CASE... . ccc cece cece cece erect cece ere e cece ee eeene

A. B= Tol fe bolt) oc nS
B. The District Court Proceedings.

72061 0)012) \) Ue iy

I. MCFL'S USE OF CORPORATE TREASURY FUNDS TO PUBLISH AND
DISSEMINATE "SPECIAL ELECTION" FLYERS TO THE PUBLIC VIOLATED
2 U.S.C. § 441D(a) ... cece cece creer e cece ene n eee ce ne en cence

A. The Use of Corporate Treasury Funds For The Printing
and Distribution of Election Flyers Constitutes An
Expenditure Prohibited By 2 U.S.C. § 441b(a)

Regardless Of Whether They Were Coordinated With A
Candidate's Campaign... ...ceeeccccccceccccccccccecccccs

B. Section 441lb(a) Applies to MCFL's Special Election
Flyers Whether Or Not They Expressly Advocated The
Election Of A Candidate... .. ce cece ccc c cece cece nce ccees

Cc. The Special Election Flyers Are Not "Periodical
Publications" Exempt From The Prohibition On Corporate
EXPCNdituresS. .cceccecccccccccccceenccceeeceesssccceees

II. THE CONGRESSIONAL PROHIBITION AGAINST USING CORPORATE
FUNDS TO MAKE EXPENDITURES IN CONNECTION WITH FEDERAL
ELECTIONS DOES NOT VIOLATE THE FIRST AMENDMENT ............-

A. Section 441b Does Not Prohibit Independent Political
Speech By Corporations and Unions..........eeeeeeeeeee

B. The Supreme Court Has Found That Section 441b Serves
Compelling Governmental IntereStS.,.......eeceeeeeecees

III. CONCLUSION... cece ccc cece cece cee ce mene cece eee e ee eeeeeseees

Page
1

OEN)

15

21

27

28

30

36


-27-
that MCFL's special election edition flyers, distributed free
and unrequested to tens of thousands of people who never received
MCFL's regular newsletter, do not fall within the media exemption

from the Act's prohibition on corporate political expenditures.

II. THE CONGRESSIONAL PROHIBITION AGAINST USING CORPORATE FUNDS

TO MAKE EXPENDITURES IN CONNECTION WITH FEDERAL ELECTIONS

DOES NOT VIOLATE THE FIRST AMENDMENT

The district court concluded that section 441b would violate
MCFL's First Amendment rights if it were construed to prohibit
MCFL from distributing its special election edition to the
public, primarily because the court found the election edition to
constitute direct political speech by an ideological corporation
that was independent of any candidate (J.A. 492). However, as we
show below, section 441b does not prevent corporations and unions
from engaging in independent political speech; rather, it only
regulates the manner in which such speech is financed. Moreover,
even if the statute did infringe upon First Amendment activities,
to some extent the Supreme Court has already found that it serves
sufficiently compelling governmental interests to withstand First
Amendment attack. In fact, although the statute has been
challenged on First Amendment grounds many times, the courts have

consistently upheld it.19/

19/ FEC v. National Right To Work Committee, 459 U.S. 197,
206-211 (1982); Athens Lumber Co., Inc. v. FEC 718 F.2d 363 (11th
Cir. 1983) (en banc) (answering in the negative questions listed
at 689 F.2d 1006, 1015-1016 1982), appeal dismissed, cert.
denied, 104 S.Ct. 1580 (1984); California Medical Association v.
FEC, 453 U.S. 182 193-201 (1981); United States v. Chestnut, 394
(footnote continued on next page)



-36-

In sum, the Supreme Court in NRWC has already upheld the
constitutionality of 2 U.S.C. § 441b as being narrowly tailored
to serve compelling governmental interests, and has rejected the
approach of the court of appeals in that case, and the district
court here, of reassessing the applicability of the governmental
interests in each specific instance. Accordingly, the district
court's conclusion that section 44lb is unconstitutional cannot
be sustained.

CONCLUSION

For the reasons set forth, above, the Commission submits
that this court should reverse the district court's judgment that
MCFL's printing and distribution of its special election flyers
did not constitute an expenditure in connection with a federal
election in violation of 2 U.S.C. § 44lb(a). The court should
also reverse the district court's alternative holding that
2 U.S.C. § 441b is unconstitutional under the First Amendment.

Respectfully submitted,

CHARLES N. STEELE
General Counsel

RICHARD B. BADER
Assistant General Counsel

LISA KLEIN
. Attorney

CAROL LAHAM
Law Clerk

December 12, 1984 FEDERAL ELECTION COMMISSION
1325 K Street, N.W.
Washington, D.C. 20463
(202) 523-4000


-22-
regular newsletter ,14/ which the district court apparently
believed was a periodical publication within the meaning of the
statute. However, even if the regular MCFL newsletter were a
"periodical publication" under the Act, the special election

edition was still a prohibited political expenditure.15/ Thus,

although the regular MCFL newsletter had never been distributed
to anyone beyond the corporation's 3,000 to 6,000 dues paying or
contributing "members" (J.A. 27-30, 395-397, 421), the
corporation printed up 100,000 copies of the special election
edition, mailed free and unrequested copies to more than 50,000

individuals who had never received the regular newsletter

14/ “[T]hey were similar in newsprint, sheet form, size and
format" (J.A. 490).

i5/ Although it is unnecessary to this case to determine whether
the regular MCFL newsletter is a periodical publication under the
Act, it appears that it would not qualify. The Commission, whose
interpretation of the Act is entitled to substantial deference,
FEC v. Democratic Senatorial Campaign Committee, 454 U.S. 27, 34
(1981), has interpreted "periodical publication" to mean "a
publication in bound pamphlet form appearing at regular

intervals . . . containing articles of news, information, opinion
or entertainment, whether of general or specialized interest
which ordinarily derive their revenues from subscriptions and
advertising." Explanation and Justification of 11 C.F.R.

§ 114.4(e), 44 Fed. Reg. 76,735(1979). Although this regulation
deals with the sponsorship of candidate debates, as the district
court noted (J.A. 490 n.7), it was explicitly promulgated "in
light of congressional acknowledgement of the media's role in
election campaigns as expressed in 2 U.S.C. § 431(f£) (4) (A) [now
§ 431(9)(b)(i)]." Id. at 76,734-76,735. See also Buckley v.
Valeo, 424 U.S. at 51 n.56 ("the Act exempts most elements of the
institutional press"). Since MCFL's newsletter does not appear
at regular intervals (J.A. 26-27) and is published with corporate
funds and distributed free of charge, rather than deriving its
revenues from subscriptions and advertising (J.A. 12), it would
not appear to fall within this definition. As shown infra, p.25,
this distinction is consistent with the legislative history of
section 441b.



-7-

election 3/. The facts supporting the Commission's position that
MCFL violated this statutory provision are virtually undisputed.
MCFL is organized and operates as a corporation under the laws of
Massachusetts (J.A. 11, 154). The corporation disbursed
$9,812.76 of its treasury funds to pay for the printing and
distribution to the public of "special election edition" flyers
in connection with the September, 1978 federal primary elections
(J.A. 12). These facts are sufficient to make out a violation of
section 441b,.

The district court, however, concluded that MCFL's activity
did not violate section 441b. First, the court found that
because the expenditures were not made in coordination with any
candidate, they were not prohibited by section 441b. The court
also concluded that the flyers did not expressly advocate the
election or defeat of candidates, and therefore found they were
permissible under section 441b. Finally, the court determined
that the flyers were "periodical publications" and thus exempted
from the definition of "expenditure" by section 431(9) (B) (i). As
demonstrated below, each of these conclusions is premised on a

misconstruction of the statute.

3/ The full text of section 441b has been reprinted at the
conclusion of this brief as Attachment A.


-10-
93 Cong. Rec. 6,437 (1947), reprinted in II NLRB, Legislative

History of the Labor Management Relations Act of 1947, 1527 (GPO,

1948) ("1947 Leg. Hist.").

There can be no doubt that the Taft-Hartley Act was designed
to proscribe expenditures made independently to express the
corporation's own views. The new provision was adopted partly in
response to a recommendation by the House Special Committee to
Investigate Expenditures that the Corrupt Practices Act, be
amended to:

provide that expenditures of money for
salaries to organizers, purchase of radio
time, and other expenditures by the
prohibited organizations in connection with
elections, constitute violations of the
provisions of said section, whether or not
said expenditures are with or without the
knowledge or consent of the candidates.
H.R. Rep. No. 2739, 79th Cong., 2d Sess. 46 (1946), quoted in,

United States v. UAW, 352 U.S. at 582-3. Moreover, in response

to questions posed during the Senate debate on the legislation,
Senator Taft, the manager of the bill, consistently stated that
expenditures would be prohibited, whether or not made in
coordination with a candidate. 5/ For example, the following
colloquy between Senators Pepper and Taft demonstrates the
applicability of the term "expenditure" to this case:
Mr. PEPPER... . Would the newspaper

oalled Labor, which is published by the

Railway Labor Executives, be permitted to put

out a special edition of the paper, for

example, in support of President Truman, if

he should be the Democratic candidate for the
presidency next year, and in opposition to

5/ The Supreme Court has found Senator Taft's explanation of

the scope of this provision to be "controlling." Pipefitters v.
United States, 407 U.S. 385, 409 (1972).