i 

UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLUMBIA 

____________________________________ 

 ) 

Stop the Insanity, Inc. ) 

EMPLOYEE LEADERSHIP FUND, et al ) 

 ) 

 Plaintiffs, ) 

 ) 

v. ) Civil Case No. 12-1140 (BAH) 

) 

FEDERAL ELECTION COMMISSION ) 

 ) 

 Defendant. ) 

____________________________________) 

PLAINTIFFS’ REPLY MEMORANDUM IN SUPPORT OF 

MOTION FOR PRELIMINARY INJUNCTION 

Stephen M. Hoersting* 

Dan Backer (D.C. Bar No. 996641) 

DB CAPITOL STRATEGIES, PLLC 

209 Pennsylvania Avenue SE, Suite 2109 

 Washington, DC 20003 

 202.210.5431 

 937.623.6102 

shoersting@dbcapitolstrategies.com 

dbacker@dbcapitolstrategies.com

 

Attorneys for Plaintiffs 

 *Admitted Pro Hac Vice 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 1 of 24
ii 

TABLE OF CONTENTS 

TABLE OF AUTHORITIES iii 

INTRODUCTION 1 

RECAPITULATION OF FACTS 4

 

ARGUMENT 6

I. The FEC Cannot Choose Another Association To 

Exercise ELF’s Speech Rights 6

II. The Granting Of A Legislative Benefit/Exemption Cannot 

Be Conditioned On The Surrender Of First Amendment Rights 10

III. FEC’s Order That Plaintiffs Operate Two Political 

Committee To Speak, When A Separate Carey 

Account Will Do, Is Unconstitutional 11

IV. The Narrowly Tailored Option Is For Congress To Curtail 

Its Disclosure Exemption In Light Of Citizens United 12

V. FEC’s Concerns for Coercion Are Addressed by 

Plaintiffs’ Plan of Action 16

VI. Plaintiffs Are Entitled To Immediate Injunctive Relief 17

CONCLUSION 19

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 2 of 24
iii 

TABLE OF AUTHORITIES 

Cases Page(s) 

American Tradition Partnership, Inc. v. Bullock, 11-1179, 

slip op., (June 25, 2012) (per curiam) 8, 17 

Austin v. Michigan Chamber of Commerce, 

494 U.S. 690 (1990), rev’d. Citizens United v. FEC, 

130 S. Ct. 876 (2010) 8, 10, 13 

Branch v. FEC, 824 F.3d 37 (D.C. Cir. 1987) 4 

*Buckley v. Valeo, 424 U.S. 1 (1976) passim

*Carey v. FEC, 791 F. Supp. 2d 121 (D.D.C. 2011) 1, 7, 18, 19

*Citizens United v. FEC, 130 S. Ct. 876 (2010) passim 

*EMILY’s List v. FEC, 581 F.3d 1 (D.C. Cir. 2009) passim 

FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. 238 (1986) 12 

FEC v. Nat'l Right to Work Committee, 

459 U.S. 197 (1982) (“NRWC”) 14 

FEC v. Wisc. Right to Life, Inc. 551 U.S. 449 (2007) 15 

First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978) 13 

Freedman v. Maryland, 380 U.S. 51 (1965) 18 

Johnson v. Robison, 415 U.S. 361 (1974) 4 

Meyer v. Grant, 486 U.S. 414 (1988) 10 

NAACP v. Alabama, 357 U.S. 449 (1958) 13 

Pickering v. Board of Education Township High School 

 Dist. No. 205, Will County, 391 U.S. 563 (1968) 11 

Robertson v. FEC, 45 F.3d 486 (D.C. Cir. 1995) 4 

*SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir. 2010) passim 

Speiser v. Randall, 357 U.S. 513 (1958) 11

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 3 of 24
iv 

Van Hollen v. FEC, Civ. No. 11-766, 2012 WL 1066717 

(D.D.C. Mar. 30, 2012) 4, 15, 16 

Codes, Rules and Statutes 

2 U.S.C. § 431(4)(B) 9, 10 

2 U.S.C. § 431(8)(A) 9 

2 U.S.C. § 431(17) 9 

2 U.S.C. § 434(a) 9, 11 

2 U.S.C. § 434(c) 11 

2 U.S.C. § 437f 18 

2 U.S.C. § 441a(a)(1)(C) 5, 9 

2 U.S.C. § 441a(a)(3) 5, 9 

2 U.S.C. § 441b(a) 5 

2 U.S.C. § 441b(b)(2)(C) 5, 10, 14 

2 U.S.C. § 441b(b)(3)(B)-(C) 6 

2 U.S.C. § 441b(b)(4)(A)(i) 5, 9 

2 U.S.C. § 441b(b)(4)(B) 6 

2 U.S.C. § 441b(b)(4)(C) 2 

26 U.S.C. § 501(c)(4) 1 

26 U.S.C. § 527 1 

122 CONG. REC. H2612 (daily ed. March 31, 1976) 

(statement of Rep. Thompson) 6 

Federal Election Campaign Act Amendments of 1976, 

Pub. L. No. 94-283, § 112(2), 90 Stat. 475, 490-92 (1976) 2, 10 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 4 of 24
v 

Other Authority 

Dan Eggen, “Influence Industry: IRS may consider tightening rules for 

nonprofits that influence elections,” WASH POST, July 25, 2012, available at 

http://www.washingtonpost.com/politics/the-influence-industry-irs-saysit-will-consider-changes-to-nonprofit-politicsrules/2012/07/25/gJQArQtu9W_story.html 1 

Dave Manual, Median Household Income in the United States, 

available at http://www.davemanuel.com/median-household-income.php 

(last visited Aug. 22, 2012) 17 

FEC Advisory Opinion 2010-09 (Club for Growth) July 22, 2010, 

http://saos.nictusa.com/aodocs/AO%202010-09.pdf 8, 9 

FEC Advisory Opinion 2012-01 (Employee Leadership Fund) 

March 1, 2012, http://saos.nictusa.com/aodocs/1191325.pdf 18 

How Much Does the Average American Make?, available at 

http://www.mybudget360.com/how-much-does-the-average-americanmake-breaking-down-the-us-household-income-numbers/ (last visited 

Aug. 22, 2012) 17 

Julie Bycowicz, “IRS Says It Will Examine Rules for Nonprofit Political 

Activity,” Bloomberg, July 23, 2012, available at 

http://www.bloomberg.com/news/2012-07-23/irs-says-it-will-examinerules-for-non-profit-political-activity.html 1 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 5 of 24
1 

INTRODUCTION 

“[D]isclosure requirements [can] ‘impose no ceiling on campaign-related activities.’ 

[The desire for disclosure cannot] ‘prevent anyone from speaking.’” 

-- Citizens United v. FEC, 130 S. Ct. 876, 914 (2010) (internal citations omitted). 

Turn to any news outlet covering politics and you will find the biggest issue being 

debated in campaign-finance law today is whether an incorporated social welfare organization 

exempt from taxation under section 501(c)(4) of the Internal Revenue Code, like Karl Rove’s 

Crossroads GPS, should continue to engage in independent political activity without registering a 

full-fledged political committee.1

 Yet the Federal Election Commission (FEC) receives an 

advisory opinion request from a social welfare organization and a “political committee” that 

want to make communications from a political committee, and three FEC commissioners will not 

permit it to do so. 

The FEC makes three dumfounding arguments. First, it argues that if a 501(c)(4) 

organization were investigated by the FEC and found to have crossed over the ill-defined, 

subjective “major purpose” threshold, which would transform it into a “political committee” 

under federal campaign law and transfer its exempt status from section 501(c)(4) to section 527 

under Internal Revenue law,2

 that organization could run all of its political advertising out of one

non-connected committee. Opp’n at 8; see Carey v. FEC, 791 F. Supp. 2d 121 (D.D.C. 2011). 

But if the same 501(c)(4) organization were to register a political committee of its own volition it 

would have to register two committees—one “separate segregated fund” and one “independentexpenditure-only political committee”—or else sacrifice its right to solicit the public to finance 

 

1

 Dan Eggen, “Influence Industry: IRS may consider tightening rules for nonprofits that influence elections,” WASH

POST, July 25, 2012, available at http://www.washingtonpost.com/politics/the-influence-industry-irs-says-it-willconsider-changes-to-nonprofit-politics-rules/2012/07/25/gJQArQtu9W_story.html; Julie Bycowicz, “IRS Says It 

Will Examine Rules for Nonprofit Political Activity,” BLOOMBERG, July 23, 2012, available at 

http://www.bloomberg.com/news/2012-07-23/irs-says-it-will-examine-rules-for-non-profit-political-activity.html 2

 Any organizations whose “major purpose” under campaign law were found to be “campaign activity,” see Buckley 

v. Valeo, 424 U.S. 1, 79 (1976), would, by the same determination, have determined its “primary purpose” under tax 

law to be political activity, see 26 U.S.C. § 527, not social welfare. See 26 U.S.C. § 501(c)(4). 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 6 of 24
2 

independent expenditures. Opp’n at 8. The FEC’s first argument boils down to this: no “separate 

segregated fund” may make unlimited and unrestricted independent expenditures, despite the fact 

that SSFs are distinct legal entities imbued with First Amendment rights. Id. This stance is 

egregious in light of federal court opinions in Citizens United, SpeechNow.org, EMILY’s List and 

Carey. It derives, in part, from an advisory opinion based on faulty assumptions issued by the 

FEC shortly after the D.C. Circuit Court of Appeals handed down SpeechNow.org v. FEC, 599 

F.3d 686 (D.C. Cir. 2010) (en banc). The errors in this advisory opinion are discussed below. 

The FEC’s second argument arises from a holdover provision in the Act: a 

Congressional exemption for unions and corporations enacted in 1976,3

 long before anyone 

could have predicted the high court’s opinion in Citizens United. That provision (still) permits 

corporations and unions to pay for the solicitations of their SSFs, even as applied to solicitations 

for independent expenditures, without having to report the expense to the general public. 2 

U.S.C. § 441b(b)(4)(C). The FEC argues that Congress’ failure to clean-up the exemption to 

accord with new case law in the past three years is a legitimate reason to restrict an SSF’s 

independent speech; that the Act’s holdover “tail” can wag the First-Amendment “dog.” Opp’n 

at 11 (“the statutory disclosure exemption for corporate payments covering the SSF’s solicitation 

expenses ... would mean that significant corporate political spending would go undisclosed if the 

SSF could operate a [Carey] account”).4

 The FEC’s position badly misunderstands that 

Congressional enactments and agency interpretations must bend to First Amendment rights. 

 

3 See Federal Election Campaign Act Amendments of 1976, Pub. L. No. 94-283, § 112(2), 90 Stat. 475, 490-92 

(1976). 

4

 The FEC asserts that the term “Carey accounts” is “neither a term of art nor a widely used descriptor akin to ‘PAC’ 

or ‘super PAC.” Opp’n at 8, n. 2. The FEC is wrong. Though the D.C. District Court decision creating Carey

accounts only occurred in 2011, the FEC itself, the media and other interested parties have widely referred to 

unlimited non-contribution accounts created in the wake of the Carey decision as Carey accounts. The FEC 

summary of the advisory opinion request that lead to the present litigation states “ELF asks whether it may open a 

separate non-contribution account, or ‘Carey Account.’” FEC Weekly Digest Week of January 9-13, January 13, 

2012, at http://fec.gov/press/press2012/20120113digest.shtml, see also FEC litigation update page at 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 7 of 24
3 

The FEC’s third argument is related: Congress’ exemption would also allow a 

corporation like STI to pay for ELF’s solicitations, but the funds used would “not constitute a 

contribution or an expenditure that would trigger the $1,000 threshold for [STI’s] political 

committee status.” Opp’n. at 18. Here again, the answer is for Congress to curtail the exemption, 

not for the FEC to abrogate the independent speech rights of all SSFs. 

 The seemingly reasonable position of the FEC—have another association speak for you, 

one that better cures the disclosure exemption that Congress has yet to correct after Citizens 

United—ignores Citizens United. All entities, no matter their form, have a right to engage in 

independent expenditures without limitation. 130 S. Ct. 876, 913 (2010). 

The FEC ignores the fact that STI and ELF are not the same legal entity, but rather 

separate legal entities, each possessing a right to speak. Id. It ignores the holding in EMILY’s List

that a limit on ELF’s ability to accept or solicit contributions for independent expenditures works 

an unconstitutional limit on its independent expenditures. 581 F.3d 1, 12 (D.C. Cir. 2009). It 

ignores the bedrock Constitutional principle that Congress’ granting of a benefit to 

corporations—that is, allowing them to pay the administrative and solicitation costs of its SSF 

without those amounts being treated as “expenditures” or “contributions” for any purpose before 

corporations could speak to the public about politics pre-Citizens United, and for reporting 

purposes now—cannot be conditioned on the surrender of the Constitutional right to engage in 

unrestricted independent advocacy. 

 http://www.fec.gov/pages/fecrecord/2012/august/stopthisinsanityvfec.shtml. Campaigns & Elections magazine has 

referred to the opening of a “Carey account.” Sean J. Miller, “Will the FEC grant 'super' fundraising powers?” 

Campaigns & Elections, Jan. 24, 2012, available at http://www.campaignsandelections.com/campaigninsider/291277/will-the-fec-grant-and39superand39-fundraising-powers.thtml. American Future Fund referred to a 

“Carey account” in its advisory opinion request earlier this year. Advisory Opinion Request 2012-25 (American 

Future Fund/American Future Fund Political Action/McIntosh), April 10, 2012, available at 

http://saos.nictusa.com/aodocs/1214774.pdf. In a comment submitted to the FEC, the Campaign Legal Center also 

referred to a “Carey account.” Campaign Legal Center Comment on Advisory Opinion Request 2012-25, August 3, 

2012, available at http://saos.nictusa.com/aodocs/1216314.pdf. The use of the term “Carey account” is accordingly 

a well-known and well-understood descriptor within the regulated community. 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 8 of 24
4 

By contrast, Plaintiffs’ Motion for Preliminary Injunction wholeheartedly accords, rather 

than contradicts, cf. Opp’n at 20, the ruling in Van Hollen v. FEC, Civ. No. 11-766, 2012 WL 

1066717 (D.D.C. Mar. 30, 2012), that an administrative agency cannot wish away a statute 

Congress leaves in place because its application creates an “anomalous effect” Congress would 

not have contemplated. Id. It also accords the principle of narrow tailoring. Any association of 

persons possesses the right to speak independently about candidates without restriction after the 

opinions in EMILY’s List Citizens United, SpeechNow.org and Carey, and to solicit funds for the 

same. If Congress wants to ensure that solicitations to the public for funds to make independent 

expenditures are properly disclosed to the public, Congress’ proper, Constitutional remedy is to 

curtail the exemption it created and foster more public disclosure of corporate solicitations for 

SSFs. 

Doing so accords the principle that Congress may not do indirectly what it is prohibited 

from doing directly. Congress may not leave in place an exemption whose enforcement has the 

effect of nullifying ELF’s right to engage in, and solicit funds for, independent speech. Nor may 

the FEC point to the anomalous effect of the exemption in failing to approve ELF’s plans.5

Plaintiffs’ injuries are real. They are entitled to injunctive relief. 

RECAPITULATION OF FACTS 

Stop This Insanity Inc. Employee Leadership Fund (ELF) is the “separate segregated 

fund” of the incorporated 501(c)(4) social welfare organization Stop This Insanity, Inc. (STI). 

ELF wants to open a Carey account to solicit contributions from the general public to finance 

 

5

 The FEC cites to Johnson v. Robison, 415 U.S. 361 (1974) and Robertson v. FEC, 45 F.3d 486 (D.C. Cir. 1995) to 

support its argument that the FEC lacks the power to decide whether certain interpretations of statutes are 

unconstitutional. Opp’n at 21, n.15. While it is true that agencies are generally considered unable to adjudicate the 

constitutionality of enactments, agencies may be “influenced by constitutional considerations in the way [they] 

interpret or appl[y] statutes.” Branch v. FEC, 824 F.2d 37, 47 (D.C. Cir. 1987). That FEC was unable to determine 

whether an association has the right to engage in unlimited and unrestricted independent expenditures after the 

opinions in Citizens United, EMILY’s List, SpeechNow.org and Carey takes its fealty to Johnson, supra, and 

Robertson, supra, too far. 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 9 of 24
5 

independent expenditures. ELF plans to distribute banner advertisements over various websites 

during the 2012 election cycle and Plaintiffs have prepared scripts for such ads and are prepared 

to raise funds to support their distribution. VC ¶¶ 27, 38, 55. 

At least two Plaintiffs, at least one of whom is outside the restricted class of ELF, are 

each willing and able to contribute $10,000 this year to the independent expenditure advertising 

campaign. VC ¶ 39. Contribution limits at §§ 441a(a)(1)(C) and 441a(a)(3), however, and 

specifically the FEC’s incorrect interpretation after EMILY’s List and Carey, prevent ELF from 

accepting the individual Plaintiffs’ contributions and frustrate Plaintiffs’ rights to speech and 

association. 

ELF seeks to enjoin the contribution limits at 2 U.S.C. §§ 441a(a)(1)(C) and 441a(a)(3), 

the source prohibitions at § 441b(a), the solicitation restrictions at § 441b(b)(4)(A)(i), and 

applicable regulatory requirements as they apply to Plaintiffs. ELF will not solicit STI for funds 

to its Carey account to finance independent expenditures, as STI has no interest in jeopardizing 

its pending 501(c)(4) status with the Internal Revenue Service.6

 ELF will accept funds from STI 

only to pay its administrative expenses and solicitation costs pursuant to 2 U.S.C. § 

441b(b)(2)(C). VC ¶ 11. 

Neither ELF nor STI will solicit STI employees who are not included in STI’s restricted 

class outside the parameters set forth at 2 U.S.C. § 441b(b)(4)(B) and Commission regulations.7

VC ¶ 9. This means ELF will solicit non-executive employees outside of its restricted class only 

twice per year. Cf. Opp’n. at 23. 

 

6

 STI has no desire to make contributions to a Carey account of the SSF to fund independent expenditures because 

STI is a relatively young organization whose status as a social welfare organization is pending before the Internal 

Revenue Service. STI does not want to tilt its “primary purpose” by making political contributions. The FEC 

concedes this is a real possibility. Opp’n at 17, n.11 (If STI, rather than ELF, engages in political activity it “might 

result in STI meeting the criteria to become a PAC.”) 

7

 Congress enacted this restriction to prevent line-level employees outside the restricted class from feeling pressured 

to make contributions on pain of losing their jobs. See 122 CONG. REC. H2612 (daily ed. March 31, 1976) 

(statement of Rep. Thompson). Plaintiffs will abide by this restriction and do not challenge it here. 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 10 of 24
6 

Despite the FEC’s unwarranted suggestion, STI will not be “pressur[ing] its employees.” 

Opp’n at 1. STI and ELF will follow all other applicable laws, whether or not they are 

specifically referred to in this case, including the requirement to “inform each employee it 

solicits ‘of the political purposes of [the SSF]” and “of his right to refuse to contribute without 

any reprisal.” Cf. Opp’n at 23; see also 2 U.S.C. § 441b(b)(3)(B)-(C). 

ARGUMENT 

I. The FEC Cannot Choose Another Association To Exercise ELF’s Speech Rights 

The FEC mischaracterizes the issue in this case from the outset by pretending the 

question is one of disclosure, not the right to speak, and acting as if Plaintiffs sue chiefly to 

vindicate STI’s speech rights, not ELF’s. Opp’n at 1 (“[T]his case is not about a corporation’s 

First Amendment right to finance independent campaign activity. That right is undisputed. 

Rather the question presented here is [one of disclosure]”). But plaintiffs do not sue to vindicate 

the corporation STI’s right to engage in independent campaign activity, they sue to vindicate the 

separate segregated fund ELF’s right to engage in independent campaign activity. 

It is well established that the “[SSF] is a separate association from the corporation.” 

Citizens United v. FEC, 130 S. Ct. 876, 897 (2010). The fact that the plaintiffs may form “a 

separate committee or PAC, as suggested by the Commission in its opposition[,] does not answer 

this constitutional challenge. While the Commission might expound on such alternatives, they do 

nothing to cure the constitutional maladies of its heavy-handed approach.” Carey v. FEC, 791 F. 

Supp. 2d 121, 132 (D.D.C. 2011) (emphasis added). 

The FEC still takes the position, contra Carey and EMILY’s List, that ELF may not 

establish a Carey account to make independent expenditures. Opp’n at 1. (“The Act currently 

prohibits [ELF] from opening such an account”). But the D.C. Circuit Court of Appeals has 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 11 of 24
7 

held, as a matter of constitutional law8

, that “non-profit entities are entitled to make their 

expenditures—such as advertisements, get-out-the-vote efforts, and voter registration drives—

out of a soft-money or general treasury account that is not subject to source and amount limits” 

of the Act. EMILY’s List, 581 F.3d at 12. The Court made clear that these rights are inviolable by 

Congress or the FEC: “A non-profit that makes expenditures to support federal candidates does 

not suddenly forfeit its First Amendment rights when it decides also to make direct contributions 

to parties or candidates. Rather, it simply must ensure, to avoid circumvention of individual 

contribution limits by its donors, that its contributions to parties or candidates come from a hardmoney account.” Id. The District Court of the District Columbia made the same finding on 

constitutional grounds in Carey v FEC, 791 F. Supp. 2d 121, 132 (D.D.C. 2011). The FEC says 

this challenge cannot involve an expenditure limit, Opp’n. at 17, n.12, but the EMILY’s List court 

made clear that subjecting a non-profit association to contribution limits for its independent 

expenditures fails the highest scrutiny. 581 F.3d at 8. 

The FEC believes that those who would associate through ELF must disband and form 

new association or forego the right to solicit the general public for the unlimited and unrestricted 

contributions ELF will need to fund its independent expenditures. Opp’n. at 1. But it is not the 

FEC’s place to tell ELF to disband. “The categorical suspension of the right of any person, or of 

any association of persons, to speak out on political matters must be justified by a compelling 

state need.” Austin v. Michigan Chamber of Commerce, 494 U.S. 652, 679 (1990) (Scalia, J., 

dissenting) (emphasis added), rev’d on other grounds, Citizens United v. FEC, 130 S. Ct. 876 

(2010); Buckley v. Valeo, 424 U.S. 1, 44-45 (1976) (per curiam). That compelling state need is 

 

8

 The EMILY’s List court affirmatively stated that its decision adjudicated the constitutional rights of the plaintiffs. 

“We thus must consider how the constitutional principles outlined above apply to non-profits -- and in particular to 

three different kinds of non-profits: (i) those that only make expenditures; (ii) those that only make contributions to 

candidates or parties; and (iii) those [like ELF] that do both.” 581 F.3d at 8. 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 12 of 24
8 

quid pro quo corruption or the appearance of corruption. Buckley, 424 U.S. at 44-45. And the 

Supreme Court has decided, twice in two years, that “independent expenditures, including those 

made by corporations, do not give rise to corruption or the appearance of corruption.” Citizens 

United, 130 S. Ct. at 884; see also, American Tradition Partnership, Inc. v. Bullock, 11-1179, 

slip op., (June 25, 2012) (per curiam). 

The FEC’s confusion on this issue, and its insistence that ELF disband and create an 

“independent-expenditure-only political committee” to speak, derives in part from an advisory 

opinion it issued when the D.C. Circuit’s opinion in SpeechNow.org v. FEC was fresh, and 

unfamiliar to the way campaign law had been interpreted until that time. 599 F.3d 686 (D.C. Cir. 

2010) (en banc). In Advisory Opinion 2010-09 (Club for Growth), the Club for Growth, “an 

incorporated social welfare membership organization exempt from taxation under section 

501(c)(4) of the Internal Revenue Code,” asked the FEC whether it may establish a political 

committee to solicit the general public. See Request of Club for Growth, in FEC Advisory Op. 

2010-09, http://saos.nictusa.com/aodocs/AO%202010-09.pdf (July 22, 2010). The Club, through 

its counsel, was aware that any political committee tied to a corporation would be characterized 

as a “separate segregated fund” under the Act, but that the Act (still) prohibited an SSF from 

soliciting the general public. Club request at 5. Rather than risk the delay that would have 

attended addressing this constitutional infirmity head on, the Club took a different tack. It argued 

in its advisory opinion request that the SpeechNow.org opinion should be read as permitting the 

incorporated Club to create a political committee that was not really a “separate segregated 

fund,” despite the plain language of 2 U.S.C. § 431(4)(B).9

 Rather, the Club argued that the new 

SpeechNow.org opinion permitted a corporation to create a new animal, what the Club would 

 

9

 The FEC restates this error in its Opp’n Memo at 7: “Such corporation-established super PACs are not SSFs, 

[citing Advisory Op. 2010-09, p.5] so they are not bound by FECA’s prohibition on soliciting the general public for 

contributions to SSFs.” 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 13 of 24
9 

call an “independent expenditure only political committee,” or “IEOPC.” Club Request at 5 

(“The Club’s IEOPC would not be a separate segregated fund and the funds raised would not be 

contributions as understood in the Act apart from the registration and reporting provisions”). The 

Club next argued that the funds the new IEOPC would take in are not really “contributions” 

under the Act—again understanding that a quick and favorable ruling on that point would cure 

the Club’s inability to solicit the general public for the funds the Club would need to finance its 

independent expenditures. Cf. 2 U.S.C. § 441b(b)(4)(A)(i). 

With due respect to the Club, and to the Commission that ratified its argument, this is 

nonsense. Of course funds contributed for independent expenditures after SpeechNow.org are 

“contributions.”10 They are something “of value” given “for the purpose of influencing a federal 

election.”11 2 U.S.C. § 431(8)(A) (definition of contribution). What the court in 

SpeechNow.org—and in EMILY’s List and Carey—actually held is that it is unconstitutional to 

apply the Act’s contribution limits to those contributions. It is equally true, despite arguments 

from the Club in Advisory Opinion 2010-09 and ratified by the Commission, that a political 

committee registered by a corporation is a “separate segregated fund.” This comes directly from 

the Act in section 431(4)(B) and by operation of section 441b(b)(2)(C). Corporations “may 

establish” a “separate segregated fund,” which is a kind of political committee. The Act does not 

contemplate corporations creating other types of political committees. Id. What the Club should 

have challenged was the Act’s prohibition on soliciting beyond the restricted class as-applied to 

the contributions the Club would need to finance an SSF’s independent expenditures. ELF makes 

 

10 Counsel to SpeechNow.org had the opportunity to refer to the funds in question in that case as “donations” not 

“contributions” but did not take it. The D.C. Circuit also chose not to refer to the funds in question as “donations.” 

The funds were “contributions,” whether under the limits that constitutionally could not apply, see 2 U.S.C. §§ 

441a(a)(1)(C) and 441a(a)(3), or the reporting requirements that did. See 2 U.S.C. §§ 434(a) and (c). 11 Indeed, the definition of independent expenditure at 2 U.S.C. § 431(17) includes the terms “expressly advocates” 

and express advocacy is the interpretation the Buckley Court employed to save the phrase “for the purpose of 

influencing an election” from overbreadth and vagueness. 424 U.S. at 80-81. 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 14 of 24
10 

that challenge here, as it is well settled that the “First Amendment protects [plaintiffs’] right not 

only to advocate their cause but also to select what they believe to be the most effective means 

for so doing.” Meyer v. Grant, 486 U.S. 414, 424 (1988). 

II. The Granting Of A Legislative Benefit or Exemption Cannot Be Conditioned On 

The Surrender Of First Amendment Rights 

In the days before Citizens United v. FEC, 130 S. Ct. 876 (2012), when labor unions and 

corporations could not speak to the public about politics at all, Congress permitted unions and 

corporations to speak to their members and members of their restricted class, respectively. See 2 

U.S.C. § 441b(b)(2)(A) & (C); see generally, Austin v. Michigan Chamber of Commerce, 494 

U.S. 652 (1990), rev’d on other grounds, Citizens United v. FEC, 130 S. Ct 876 (2010). The 

easiest way to achieve that result was to remove those communications from the definition of 

“contribution or expenditure” in section 441b. See Federal Election Campaign Act Amendments 

of 1976, Pub. L. No. 94-283, § 112(2), 90 Stat. 475, 490-92 (1976). Congress also allowed 

corporations to pay the administrative and solicitation expenses of their SSFs by removing from 

the definition of “contribution or expenditure” the “establishment, administration, and 

solicitation of contributions to a separate segregated fund to be utilized for political purposes by 

a corporation, labor organization, membership organization, cooperative, or corporation without 

capital stock.” 2 U.S.C. § 441b(b)(2)(C). It may be that Congress has thus far failed to curtail the 

dispensation in the form of exemptions it gave to corporations 36 years ago, and that 

dispensation may rightly be viewed as a special advantage Congress continues to give 

corporations and unions today. But it is elemental that the government cannot exact as the price 

of a special advantage the forfeiture of First Amendment rights. See Pickering v. Board of 

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11 

Education Township High School Dist. No. 205, Will County, 391 U.S. 563 (1968); Speiser v. 

Randall, 357 U.S. 513 (1958). 

And Congress may not do indirectly what it is prohibited from doing directly. Congress 

may not leave in place an exemption whose enforcement can allow the FEC to nullify ELF’s 

right to engage in, and solicit funds for, independent speech. Speiser, 357 U.S. 513, 526 (1958) 

(“this device must necessarily produce a result which the State could not command directly [and] 

can only result in a deterrence of speech which the Constitution makes free”). 

The FEC makes much of the fact that the Act’s disclosure provisions were upheld in 

SpeechNow.org. Opp’n at 18. What the FEC does not mention is that the question there was 

whether the plaintiffs in that case had to follow one statutory disclosure scheme or another; 

either section 434(a) for political committees or section 434(c) for organizations other than 

political committees. 599 F.3d at 696. There is no applicable disclosure exemption in the Act that 

would have applied to SpeechNow.org. SpeechNow.org is an unincorporated association that 

could not have formed an SSF subject to the exemptions Congress provided in 1976. The 

SpeechNow.org court held that SpeechNow.org could be held to the disclosure scheme 

delineated by the statute. 599 F.3d at 696-98. It did not hold, as FEC seems to suggest, that 

SpeechNow.org could be made to disclose or surrender its speech rights despite the existence of 

disclosure provisions in the applicable statute, or despite an exemption had one been available. 

III. FEC’s Order That Plaintiffs Operate A Second Political Committee To Speak, 

When A Separate Carey Account Will Do, Is Unconstitutional 

The FEC cannot require ELF to clone itself to make independent expenditures. EMILY’s 

List and Carey make clear that the proper remedy is to allow ELF to use a traditional 

“contribution account” from which to make contributions to candidates and a Carey account to 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 16 of 24
12 

make its independent expenditures, not force Plaintiffs to create and administer another political 

committee. “That the avenue left open is more burdensome than the one foreclosed is ‘sufficient 

to characterize [a regulatory interpretation] as an infringement on First Amendment activities.’” 

Austin, 494 U.S. at 708 (Kennedy, J., dissenting); quoting FEC v. Massachusetts Citizens for 

Life, Inc., 479 U.S. 238, 255 (1986) (“MCFL”). The additional requirements “may create a 

disincentive for [plaintiffs] to engage in political speech. Detailed record-keeping and disclosure 

obligations, along with the duty to appoint a treasurer and custodian of the records, impose 

administrative costs that many small entities may be unable to bear. Furthermore, such duties 

require a far more complex and formalized organization than many small groups could manage.” 

MCFL, 479 U.S. at 254-55. 

The FEC suggests that Plaintiff Todd Ceferatti is qualified to operate two political 

committees. Opp’n Memo. at 27. Plaintiffs note that seasoned political operative, David Bossie, 

of the Citizens United organization, is no less qualified. But that fact hardly constitutes a 

legitimate, let alone compelling, governmental interest. See Citizens United, 130 S. Ct. at 897 

(establishing a PAC is burdensome); MCFL, 479 U.S. at 263 (“While the burden on MCFL's 

speech [establishing a political committee] is not insurmountable, we cannot permit it to be 

imposed without a constitutionally adequate justification”). 

IV. The Narrowly Tailored Option Is For Congress To Curtail Its Disclosure Exemption 

In Light Of Citizens United

The FEC argues that Congress has foreclosed the possibility of SSFs engaging in fullthroated independent expenditures because Congress has allowed corporations to solicit on 

behalf of SSFs without reporting the costs as contributions or expenditures. Opp’n. at 11. But 

“[i]n the realm of protected speech, the legislature is constitutionally disqualified from dictating 

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13 

... the speakers who may address a public issue.” Austin v. Michigan Chamber of Commerce,

494 U.S. 652, 698-99 (1990) (Kennedy, J., dissenting), rev’d on other grounds, Citizens United 

v. FEC, 130 S. Ct 878 (2010); First National Bank of Boston v. Bellotti, 435 U.S. 765, 784-785 

(1978). ELF has a right to solicit funds for independent expenditures because soliciting those 

funds furthers speech that cannot be dampened without furthering a compelling state interest, and 

because engaging in those solicitations is a form of political association. “The First and 

Fourteenth Amendments guarantee ‘freedom to associate with others for the common 

advancement of political beliefs and ideas.'" Buckley v. Valeo, 424 U.S. 1, 15 (1976), quoting 

Kusper v. Pontikes, 414 U.S. 51, 56-57 (1973) (additional citation omitted). Governmental 

“action which may have the effect of curtailing the freedom to associate is subject to the closest 

scrutiny.’" NAACP v. State of Alabama, ex. rel. Patterson, 357 U.S. 449, 460-461 (1958). 

 The FEC makes two arguments that must fail. First, FEC argues that, even after Citizens 

United, SpeechNow.org, EMILY’s List and Carey, corporations may only solicit their restricted 

class to fund independent expenditures “because those are the only kind of solicitations that SSFs 

can engage in” under the statute. Opp’n at 21. Second, the FEC argues “there is no statutory 

basis for concluding that spending for solicitations to the general public should be exempt from 

disclosure.” Id. What the FEC misses is the operation of the Courts’ constitutional holdings. The 

solicitation restrictions (that do not further the limited purpose of preventing the coercion of 

employees) are now unconstitutional as applied to fundraising for independent expenditures 

because they pose a burden that cannot meet “the closest scrutiny” in light of Citizens United, 

SpeechNow.org, Carey, and related cases. The disclosure exemptions passed in 1976, however, 

are not unconstitutional—Congress may exempt groups from disclosure without constitutional 

consequence at any time. Citizens United, 130 S. Ct. at 916. This is a tough pill for the FEC to 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 18 of 24
14 

swallow, but the facts are immutable. After Citizens United and related cases all associations 

have a fundamental right to associate by soliciting contributions to fund independent 

expenditures.12 Therefore, both of the FEC’s arguments—that solicitations to the restricted class 

“are the only kind of solicitations that SSFs can engage in” and that “there is no statutory basis 

for concluding that spending for solicitations to the general public should be exempt from 

disclosure”—are wrong. The Constitution commands that all associations be allowed to solicit 

the general public to fund independent expenditures (with the exception of employees who may 

only be solicited twice annually under certain conditions to prevent coercion). That those 

associations’ spending for solicitations to the general public should be exempt from disclosure is 

Congress’ doing. 2 U.S.C. § 441b(b)(2). Congress must correct it in a manner that respects the 

right of SSFs to engage in unlimited independent expenditures. 

The FEC argues that “the holding of Van Hollen supports the decision not to grant ELF’s 

advisory opinion request.” Opp’n. at 21. The truth is, Van Hollen supports plaintiffs’ position 

because the FEC has Van Hollen’s application to this case completely backward. Van Hollen v. 

FEC, Civ. No. 11-766, 2012 WL 1066717 (D.D.C. Mar. 30, 2012) counsels that even though the 

disclosure exemptions passed by Congress in 1976 lead to anomalous results with regard to 

campaign disclosure in a post-Citizens United world, the FEC is not free to craft advisory 

opinions or regulatory interpretations that create a disclosure regime Congress “would have 

wanted.” Like it or not, the disclosure exemption for corporations is unambiguous and remains 

until Congress ends it.13

 

12 The FEC still fails to acknowledge that any solicitation restriction to members of the restricted class upheld by the 

Supreme Court in FEC v. National Right to Work Committee, 459 U.S. 197 (1982) (“NRWC”), was based upon an 

anti-distortion rationale thoroughly rejected by the Supreme Court in Citizens United v. FEC, 130 S. Ct. 876, 909 

(2010). (rejecting the antidistortion rationale). See Plaintiffs’ Memorandum of Law in Support of Preliminary 

Injunction at 34. 

13 “For purposes of this section. . . the term “contribution or expenditure”. . . shall not include (A) communications 

by a corporation to its stockholders and executive or administrative personnel and their families. . . (B) nonpartisan 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 19 of 24
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Indeed, it is remarkable how much the FEC’s explanation of Van Hollen at pp. 20-21 of 

their Opposition Memorandum actually makes Plaintiffs’ case when a) the regulations discussed 

in Van Hollen that the Commission crafted in response to Wisconsin Right to Life, 551 U.S. 449 

(2007), are substituted with the advisory opinions the FEC crafted in response to Citizens United

and SpeechNow.org, and b) the provisions Congress enacted pre-WRTL to disclose spending on 

electioneering communications are replaced in the FEC’s text with the disclosure exemption 

Congress passed (in 1976) pre-Citizens United and pre-SpeechNow.org. Read again the FEC’s 

argument at pages 20-21, this time with those substitutions in place: 

At issue there w[ere advisory opinions] the Commission had promulgated in 

response to [Citizens United v. FEC, 130 S. Ct. 876 (2010) and SpeechNow.org v. 

FEC, 599 F.3d 686 (D.C. Cir. 2010) (en banc)]. [Citizens United and 

SpeechNow.org] had struck down a portion of FECA’s corporate electioneering 

prohibition, [citation omitted]; as a result, certain corporate activity that had not 

previously been permissible under FECA was rendered lawful. But Congress had 

not contemplated such corporate activity in enacting FECA’s [corporate] 

disclosure [exemptions in 1976], and the application of the literal text of those 

[exemptions] to the newly permissible category of corporate electioneering 

seemed to lead to results that Congress would not have intended. See Van Hollen, 

2012 WL 1066717, at *10-*11. So the Commission promulgated [advisory 

opinions] that, the court noted, “w[ere] specifically undertaken to address the 

changes wrought by [Citizens United and SpeechNow.org]”—to bridge the gap 

between the statutory [exemption] and the effects of [Citizens United and 

SpeechNow.org] by essentially attempting to determine how Congress would have 

wanted FECA’s disclosure provisions to apply to corporate electioneering. See id.

at *13. In Van Hollen, the Court held that the Commission did not have the 

authority to promulgate such [advisory opinions]. Id. at *15. The Court found that 

the disclosure [exemptions] enacted by Congress were unambiguous on their face, 

and the Commission was bound to enforce the unambiguous text, even if 

intervening court decisions had caused such enforcement to lead to seemingly 

anomalous results. Id. at *11 (citing Mova Pharm. Corp. v. Shalala, 140 F.3d 

1060 (D.C. Cir. 1998). 

Opp’n. at 21-22. 

 registration and get-out-the-vote campaigns by a corporation aimed at its stockholders and executive or 

administrative personnel and their families. . . and (C) the establishment, administration, and solicitation of 

contributions to a separate segregated fund to be utilized for political purposes by a corporation, labor organization, 

membership organization, cooperative, or corporation without capital stock.” 2 U.S.C. § 441b(b)(2) 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 20 of 24
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The FEC has no choice in the matter. The only remedy to this “anomalous result” is for 

Congress to amend the exemptions it created in 1976. Neither Congress nor the FEC has the 

power to cure this anomaly by frustrating ELF’s rights to speak and associate with fellow 

speakers. As the FEC repeatedly argues, nothing in the Constitution prevents Congress from 

requiring corporations that solicit on behalf of SSFs to report those funds as “expenditures,” 

“contributions,” or both. Opp’n at 5-6 (“government can constitutionally require all PACs—

including those exempt from limits on the contributions they receive—to report all of their 

income and spending, ‘no matter whether the [funds] were [given] towards administrative 

expenses or independent expenditures.’ [SpeechNow.org, 599 F.3d] at 698”). Congress, however, 

has not done so yet. Nonetheless, it is a decision for Congress, and the FEC must respect that 

“seemingly anomalous result” until Congress acts.14 Van Hollen, 2012 WL 1066717 at *11. 

V. FEC’s Concerns for Coercion Are Addressed by Plaintiffs’ Plan of Action

Contrary to the FEC’s assertion, Plaintiffs will not solicit employees that are not part of 

the restricted class more than twice per year for either its contribution account or its Carey

account. Cf. Opp’n. at 23. And the FEC’s argument that the ability to solicit unlimited amounts 

for independent expenditures twice yearly will “coerce” employees, because soliciting up to 

$5,000 from employees twice yearly cannot coerce, is nonsense. Opp’n. at 23. The median 

household income in the United States is currently $46,326. See How Much Does the Average 

American Make?, available at http://www.mybudget360.com/how-much-does-the-averageamerican-make-breaking-down-the-us-household-income-numbers/ (last visited Aug. 22, 2012). 

In the year Congress passed these restrictions and exemptions, the year 1976, median household 

 

14 In the alternative, if this Court decides it must choose between an anomalous exemption that frustrates full 

disclosure and ELF’s speech rights, it must choose ELF’s speech rights by ignoring the exemption and requiring 

ELF to list the cost of any solicitations STI may conduct on behalf of ELF on ELF’s reports to the Federal Election 

Commission. 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 21 of 24
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income was $10,962 in nominal terms. Dave Manual, Median Household Income in the United 

States, available at http://www.davemanuel.com/median-household-income.php (last visited 

Aug. 22, 2012). Also in 1976, the nominal contribution limit was nearly half that median 

household income: $5,000. That means Congress allowed a corporation to solicit a maximum 

solicitation of 45.6% of median household income, twice per year. This goes to show it is not the 

contribution amounts that prevent coercion, else Congress would have lowered them; it is the 

restriction on soliciting twice per year that prevents coercion. 

 The FEC also argues that ELF’s plans to engage in independent expenditures, if properly 

recognized by this court, will allow Wal-Mart to solicit, and thereby to coerce, its distributors. 

Opp’n. at 24. This is the same FEC that keeps reminding this court that the STI corporation may 

solicit whomever it wants without restriction. Opp’n at 26. In other words, Wal-Mart may do this 

now. If Congress wants to stop corporations from soliciting distributors for political speech, let it 

try. But, after the high court’s opinion in American Tradition Partnership, Inc. v. Bullock, 11-

1179, slip op., (June 25, 2012) (per curiam), Congress may run into difficulty. Under no 

circumstances, however, can the FEC’s concern for business distributors allow it to trample 

ELF’s rights to engage in political speech and association. 

VI. Plaintiffs Are Entitled To Immediate Injunctive Relief 

“Plaintiffs’ probability of success on the merits is the most critical of the criteria when 

considering a motion for preliminary injunction,” Carey, 791 F. Supp. 2d at 128. Plaintiffs have 

demonstrated that high probability here. There is simply no justification for preventing ELF from 

using a Carey account to engage in full-throated independent expenditures and soliciting others 

to do the same. “The First Amendment does not permit laws that force speakers to retain a 

campaign finance attorney... or seek declaratory rulings before discussing the most salient 

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political issues of our day.” Citizens United, 130 S. Ct. at 889 (2010). But forcing ELF to obtain 

a declaratory ruling is unfortunately what happened here. There is no legitimate reason, 

particularly after Judge Collyer’s opinion Carey, for the FEC to prevent ELF from opening a 

Carey account to fund independent expenditures. 

As the Supreme Court is well aware, “[b]ecause the FEC’s ‘business is to censor, there 

inheres the danger that [it] may well be less responsive than a court ... to the constitutionally 

protected interests in free expression.’” Citizens United, 130 S. Ct. at 896, quoting Freedman v. 

Maryland, 380 U.S. 51, 57-58 (1965). ELF deserves court protection now. On the heels of the 

FEC’s losing a string of cases in Carey, SpeechNow.org, Citizens United and EMILY’s List, ELF 

finds itself caught in the crossfire of what appears to be a rear-guard action to protect the FEC’s 

turf from further diminutions. But this is not the FEC’s role, nor ELF’s concern. 

ELF had the presence of mind to ask the FEC if it may speak, before it spoke, and the 

FEC was bound to answer. See Advisory Opinion 2012-01 (Employee Leadership Fund); 2 

U.S.C. § 437f. “[B]ecause the Commissioners could not agree, the Commission staff has been 

forced into a crabbed reading of EMILY’s List [and Carey] and erroneous proposals to avoid 

recognizing Plaintiffs’ First Amendment rights.” 791 F. Supp. 2d 121, 132 (D.D.C. 2011). 

Whether or not ELF’s motion for preliminary injunction was filed as quickly as humanly 

possible is beside the point. Cf. Opp’n at 26. After all, what justification could possibly preclude 

ELF from speaking in the 74 days between now and the November 6th election? 

What the FEC misses in this challenge is that issuing injunctive relief here furthers noble 

public interests in having citizens being able to associate together and speak out about political 

issues and candidates of the day. As Judge Collyer wrote on June 14 of last year, “The race is on 

right now. Whichever candidates Plaintiffs wish to support and issues they wish to espouse must 

Case 1:12-cv-01140-BAH Document 7 Filed 08/24/12 Page 23 of 24
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be freed immediately from the chill of possible FEC enforcement.” Carey, 791 F. Supp. 2d 121, 

133 (D.D.C. 2011). The protection of dissent, free speech, and effective advocacy is of critical 

public importance, outweighing any supposed governmental interest in maintaining the silencing 

status quo. 

CONCLUSION 

 For the foregoing reasons, the Court should grant Plaintiffs’ motion for preliminary 

injunction and enjoin the contribution limits contained in 2 U.S.C. §§ 441a(a)(1)(C) and 

441a(a)(3), the source prohibitions of 2 U.S.C. § 441b(a) as applied to the Carey account that 

will finance ELF’s independent expenditures, and the solicitation restrictions at 2 U.S.C. § 

441b(b)(4)(A)(i)—but not enjoin the restrictions detailed at §§ 441b(b)(3)(A)-(C) and 

441b(b)(4)(B). 

Dated: August 24, 2012 

 Respectfully submitted, 

 

 Stephen M. Hoersting* 

 /s/ Dan Backer 

 Dan Backer (D.C. Bar No. 996641) 

 DB CAPITOL STRATEGIES PLLC 

P.O. Box 75021 

 Washington, DC 20013 

 937.623.6102 

202.210.5431 

 shoersting@dbcapitolstrategies.com 

 dbacker@dbcapitolstrategies.com 

 

 *Admitted Pro Hac Vice

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