Opinion ID: 187188
Heading Depth: 1
Heading Rank: 3

Heading: The Content Standard

Text: Under the `content' element of the original rule, communications made within 120 days of a general election or primary and `directed' at the relevant electorate [could] qualify as `coordinated' if they refer[red] to a political party or `clearly identified candidate for Federal office.' Shays II, 414 F.3d at 98 (quoting 11 C.F.R. § 109.21(c)(4) (2003)). Before the 120-day mark, however, the rule cover[ed] only communications that either recycle[d] official campaign materials or ` expressly advocate[d] the election or defeat of a clearly identified candidate for federal office.' Id. (emphasis added) (quoting 11 C.F.R. § 109.21(c)(2)-(3) (2003)). Thus, more than 120 days before a federal election, the FEC's original rule allowed candidates to coordinate with outside groups so long as the ads those groups funded did not include the magic words or recycle campaign materials. Challenging the rule, Shays argued that limiting regulation outside the 120-day window only to advertisements containing certain types of content violated the Act's plain language and purpose, and that the Commission had failed to provide any good reason for doing so. The district court rejected Shays's Chevron step one argument but found that the regulation failed Chevron step two because exclud[ing] certain types of communications based solely on their content regardless of whether or not they are coordinated would create an immense loophole that would facilitate the circumvention of the Act's contribution limits, thereby creating `the potential for gross abuse.' Shays I, 337 F.Supp.2d at 65 (quoting Orloski v. FEC, 795 F.2d 156, 165 (D.C.Cir.1986)). In Shays II, we agreed with the district court that the rule was invalid, but for slightly different reasons. Like the district court, we reject[ed] Shays's . . . argument that FECA precludes content-based standards under Chevron step one, Shays II, 414 F.3d at 99, but we disagree[d] with the district court's suggestion that any standard looking beyond collaboration to content would necessarily `create an immense loophole,' thus exceeding the range of permissible readings under Chevron step two, id. at 99-100 (emphasis added) (quoting Shays I, 337 F.Supp.2d at 65). Rather, we saw no need to reach the Chevron step two question whether this particular content standard violated BCRAbecause contrary to the APA, the Commission offered no persuasive justification for the provisions challenged. . ., i.e., the 120-day time-frame and the weak restraints applying outside of it. Id. at 100; see also id. at 97 ([W]e need not decide whether [this rule] represent[s an] altogether impermissible interpretation[] of FECA and BCRAthe Chevron step two inquirybecause in any event the FEC has given no rational justification for [it], as required by the APA's arbitrary and capricious standard. (citation omitted)). Remanding the rule, we directed the FEC to provide some cogent explanation for it, not least because it effectively allowed a coordinated communication free-for-all for much of each election cycle. Id. at 100. As we explained: Under the[se] . . . rules, more than 120 days before an election or primary, a candidate may sit down with a well-heeled supporter and say, Why don't you run some ads about my record on tax cuts? The two may even sign a formal written agreement providing for such ads. Yet so long as the supporter neither recycles campaign materials nor employs the magic words of express advocacyvote for, vote against, elect, and so forththe ads won't qualify as contributions subject to FECA. Id. at 98. On remand, the Commission published a new notice of proposed rulemaking, took comments, held hearings, and analyzed extensive data on television advertising by candidates for federal office. It then issued a revised regulation identical to the original regulation except that it shortened the length of stricter regulation in congressional races to 90 days. The revised regulation prohibits coordinated advertisements refer[ring] to a clearly identified House or Senate candidate . . . in the clearly identified candidate's jurisdiction 90 days or fewer before the clearly identified candidate's general, special, or runoff election, or primary or preference election. 11 C.F.R. § 109.21(c)(4)(i). It prohibits coordinated advertisements refer[ring] to a clearly identified Presidential or Vice Presidential candidate . . . in a jurisdiction during the period of time beginning 120 days before the clearly identified candidate's primary or preference election in that jurisdiction, or nominating convention or caucus in that jurisdiction, up to and including the day of the general election. Id. § 109.21(c)(4)(ii). Outside the 90/120-day windows, however, the regulation still prohibits only coordinated advertisements that disseminate[], distribute[], or republish[] ... campaign materials prepared by a candidate, or expressly advocate[] the election or defeat of a clearly identified candidate. Id. § 109.21(c)(2)-(3). Again challenging the rule, Shays argued that the 90/120-day windows were unsupported by the evidence, violating the APA, and that the lax standard applying outside the windows was both unexplained and contrary to BCRA's purpose, violating the APA and failing Chevron step two review. The district court concluded that the FEC had adequately justified the 90/120-day windows because the record showed that the vast majority of candidate advertising occurred within those periods. Shays III, 508 F.Supp.2d at 42; see id. at 40-43. It also rejected Shays's claim that the lax pre-window standard would undermine the Act's purposes. The district court nonetheless struck down the revised regulation as arbitrary and capricious because the FEC ma[de] no attempt whatsoever to justify the Commission's continued reliance on the express advocacy standard outside the windows, id. at 47, thus fail[ing] to meet the APA's standard of reasoned decisionmaking, id. at 48-49. The FEC appeals this finding, but before we can reach the merits, we face a jurisdictional question. In Shays II we held that Shays had standing to challenge the regulations at issue there because he satisfied standing's three requirements, demonstrat[ing] that he ha[d] suffered `injury in fact,' that the injury [wa]s `fairly traceable' to the actions of the defendant, and that the injury w[ould] likely be redressed by a favorable decision. Bennett v. Spear, 520 U.S. 154, 162, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). The injury in fact was the FEC's illegal structuring of [the] competitive environment in which Shays ran for Congress, Shays II, 414 F.3d at 85, that injury was traceable to the Commission because it promulgated the challenged rules, id. at 92-95, and a favorable decision could redress the injury by striking down the rules, id. at 95. The FEC suggests that this case is different, saying [i]t is unclear whether the Court has jurisdiction to rule on Shays'[s] challenge to the portion of the regulation governing the presidential election because he has never been, or stated any intention to be, a candidate for president. Appellant's Reply Br. 25 n. 12. The Commission first raised this argument in a footnote in its reply brief, having failed to mention it either in the district court or in its opening brief here. Moreover, although the Commission assured us in its brief that it was not challeng[ing] Shays'[s] standing, but rather only highlighting this issue for the court because we have our own obligation to determine that [we have] jurisdiction over each of [Shays's] claims, id., the Commission changed its tone at oral argument, asserting that Shays lacked standing to challenge the 120-day window applicable to presidential candidates, Oral Arg. at 47:16-:38. Normally we would not consider an argument first raised in a reply brief, Carter v. George Washington Univ., 387 F.3d 872, 883 (D.C.Cir.2004), much less one raised only in a footnote, Hutchins v. District of Columbia, 188 F.3d 531, 539-40 n. 3 (D.C.Cir.1999) (en banc). But because this argument goes to our jurisdiction, we must consider it, see United States v. Hylton, 294 F.3d 130, 136 (D.C.Cir. 2002), though we are disappointed in the FEC for raising this issue so late that Shays had no adequate opportunity to respond. That said, Shays plainly has standing under FEC v. Akins, 524 U.S. 11, 118 S.Ct. 1777, 141 L.Ed.2d 10 (1998). Indeed, after some prodding at oral argument, FEC counsel virtually conceded as much, Oral Arg. at 47:45-49:15. In Akins, the petitionersa group of voters seeking information about the political activities of the American Israel Public Affairs Committee (AIPAC)challenged the FEC's determination that AIPAC did not qualify as a political committee, a decision that meant AIPAC had no obligation to report information about its members, contributions, and expenditures. Id. at 16, 118 S.Ct. 1777. The Court held that petitioners had suffered an injury in fact, namely their inability to obtain informationlists of AIPAC donors . . . and campaign-related contributions and expendituresthat, on [their] view of the law, the statute require[d] that AIPAC make public, id. at 21, 118 S.Ct. 1777; see also id. ([A] plaintiff suffers an `injury in fact' when the plaintiff fails to obtain information which must be publicly disclosed pursuant to a statute.) (citing Pub. Citizen v. DOJ, 491 U.S. 440, 449, 109 S.Ct. 2558, 105 L.Ed.2d 377 (1989)). Here, as in Akins, Shays's injury in fact is the denial of information he believes the law entitles him to. Specifically, under the FEC's definition of coordinated communications, presidential candidates need not report as contributions many expenditures that Shays believes BCRA requires them to report. Thus, Shays claims the regulation illegally denies him information about who is funding presidential candidates' campaigns. We see no difference between this injury and the injury deemed sufficient to create standing in Akins. Here, as there, the information would help [Shays] (and others to whom [he] would communicate it) to evaluate candidates for public office ..., and to evaluate the role that [outside groups'] financial assistance might play in a specific election. Id. And here, as there, Shays's injury consequently seems concrete and particular. Id. Finally, as in Akins, Shays's injury is fairly traceable to the FEC because it is caused by the Commission's rule, and the injury would be redressed were this court to invalidate the rule. Id. at 25, 118 S.Ct. 1777. Assured of Shays's standing to challenge this rule in its entirety, we turn to the merits. Shays claims the rule suffers from two flaws. First, the FEC failed to justify the length of the 90/120-day windows, violating the APA. And second, the lax standard the Commission imposed outside those windows not only runs counter to BCRA's purpose, but also was entirely unjustified, failing both Chevron step two and APA review. After describing the evidence before the Commission, we address each argument in turn. On remand the Commission gathered extensive evidence about the timing of advertising in federal election campaigns. Reviewing data from the Campaign Media Analysis Group regarding television ads run by federal candidates in the 2004 election cycle, the Commission found that Senate candidates aired only 0.87 percent and 0.39 percent of their advertisements more than 90 days before their primary and general elections, respectively, while House candidates aired only 8.56 percent and 0.28 percent of their advertisements more than 90 days before their primary and general elections, respectively. Coordinated Communications, 71 Fed.Reg. 33,190, 33,194 (2006). In the 2004 presidential campaign, 8.44 percent of all candidate TV ads in the primary ran outside the 120-day window, as did 16 percent of all candidate TV ads in Iowa before its crucial caucus. Shays III, 508 F.Supp.2d at 45. While these percentages are small, the total amount spent on pre-window ads was substantial, totaling into the millions of dollars. See id. In addition to evidence about spending by candidates, the Commission had before it many examples of expenditures by outside groups before the 90/120-day windows. For example, in the 2004 Alaska Senate race, the U.S. Chamber of Commerce began running TV ads supporting Senator Lisa Murkowski nine months before the primary election. In the 2004 Florida Senate race, the illuminatingly-named People for a Better Florida began running ads attacking candidate Mel Martinez over five months before the primary. In the 2006 Pennsylvania Senate race, a group called Americans for Job Security spent $500,000 on TV ads supporting Senator Rick Santorum starting six months before the primary. In the 2004 South Dakota Senate race, the Club for Growth began running ads attacking Senator Tom Daschle fifteen months before the general election. The group ran similar ads against Rhode Island Senator Lincoln Chafee beginning nine months before his 2006 primary. Because none of these ads contained the magic words of express advocacy, all could have been coordinated with candidates under the Commission's rule. The record also reveals that the vast majority of campaign ads omit express advocacy. In the 1998 election cycle, just 4% of candidate advertisements used magic words; in 2000, that number was a mere 5%. McConnell, 540 U.S. at 127 n. 18, 124 S.Ct. 619. Indeed, campaign professionals told Congress while it was considering BCRA that the most effective campaign ads . . . avoid the use of the magic words. Id. at 127, 124 S.Ct. 619. Because campaign advertisements rarely use magic words, the Supreme Court has declared the express advocacy test functionally meaningless. Id. at 193, 124 S.Ct. 619. In sum, the record demonstrates several key points: (1) the vast majority of advertising by candidates occurs in the 90/120-day windows the FEC regulates more strictly; (2) candidates and outside groups nonetheless run a significant number of ads before the 90/120-day windows; and (3) very few ads contain magic words. These facts lead us to two inexorable conclusions: the FEC's decision to regulate ads more strictly within the 90/120-day windows was perfectly reasonable, but its decision to apply a functionally meaningless standard outside those windows was not. Id. at 193, 124 S.Ct. 619. Beginning with the windows, we made clear in Shays II that nothing in BCRA forbids the FEC from dr[awing] distinctions based on content, time, and place; its failure then was that it provided no evidence in support of the window it chose. 414 F.3d at 100. But given the record evidence showing that the vast majority of federal campaign advertisements run within the more strictly regulated windows, the FEC now appears to have drawn the line in a reasonable place based on the data available to it. Shays III, 508 F.Supp.2d at 43. The next issue is whether the FEC's decision to regulate only ads containing express advocacy outside the 90/120-day windows fails Chevron step two review or violates the APA. As our cases explain, these inquiries overlap, for [w]hether a statute is unreasonably interpreted is close analytically to . . . whether an agency's actions under a statute are unreasonable. Gen. Instrument Corp. v. FCC, 213 F.3d 724, 732 (D.C.Cir.2000). At Chevron step two and under the APA, [courts] must reject administrative constructions of [a] statute . . . that frustrate the policy that Congress sought to implement. Cont'l Air Lines, 843 F.2d at 1453 (quoting Democratic Senatorial Campaign Comm., 454 U.S. at 32, 102 S.Ct. 38). While that policy may sometimes be unclear, here it is not: BCRA's fundamental purpose [is] prohibiting soft money from being used in connection with federal elections. McConnell, 540 U.S. at 177 n. 69, 124 S.Ct. 619; see also id. at 132, 124 S.Ct. 619 (BCRA's central provisions are designed to address Congress' concerns about the increasing use of soft money and issue advertising to influence federal elections.). Recall that soft money refers to political donations made in such a way as to avoid FECA's restrictions. See Shays II, 414 F.3d at 80. The question, then, is this: Does the challenged regulation frustrate Congress's goal of prohibiting soft money from being used in connection with federal elections? McConnell, 540 U.S. at 177 n. 69, 124 S.Ct. 619. We think it does. Outside the 90/120-day windows, the regulation allows candidates to evadealmost completely BCRA's restrictions on the use of soft money. As FEC counsel conceded at oral argument, Oral Arg. at 0:46-2:00, the regulation still permits exactly what we worried about in Shays II, i.e., more than 90/120 days before an election, candidates may ask wealthy supporters to fund ads on their behalf, so long as those ads contain no magic words. 414 F.3d at 98. Indeed, pressed at oral argument, counsel admitted that the FEC would do nothing about such coordination, even if a contract formalizing the coordination and specifying that it was for the purpose of influencing a federal election appeared on the front page of the New York Times. Oral Arg. at 7:34-8:03. Thus, the FEC's rule not only makes it eminently possible for soft money to be used in connection with federal elections, McConnell, 540 U.S. at 177 n. 69, 124 S.Ct. 619, but it also provides a clear roadmap for doing so, directly frustrating BCRA's purpose. Moreover, by allowing soft money a continuing role in the form of coordinated expenditures, the FEC's proposed rule would lead to the exact perception and possibility of corruption Congress sought to stamp out in BCRA, for expenditures made after a `wink or nod' often will be `as useful to the candidate as cash,' id. at 221, 124 S.Ct. 619 (quoting FEC v. Colo. Republican Fed. Campaign Comm., 533 U.S. 431, 442, 446, 121 S.Ct. 2351, 150 L.Ed.2d 461 (2001)), and [i]t is not only plausible, but likely, that candidates would feel grateful for such donations and that donors would seek to exploit that gratitude, id. at 145, 124 S.Ct. 619. The FEC offers four reasons why we should nonetheless uphold this lax standard. First, explaining that it chose the standard to protect the First Amendment rights of outside groups conducting independent expenditures, it argues that any standard more vague than express advocacy would unacceptably chill the speech of such groups. We applaud the Commission's sensitivity to First Amendment values, but as we said in Shays II, regulating nothing at all would achieve the same purpose, and that would hardly comport with the statute. 414 F.3d at 101. Thus, [n]otwithstanding its obligation to attempt to avoid unnecessarily infringing on First Amendment interests, the Commission must establish, consistent with APA standards, that its rule rationally separates election-related advocacy from other activity falling outside FECA's expenditure definition, id. at 101-02 (citation omitted), which, remember, defines expenditure as any purchase, payment, . . . or gift of money or anything of value, made by any person for the purpose of influencing any election for Federal office.  2 U.S.C. § 431(9)(A)(i) (emphasis added). Here the Commission failed to show that its rule rationally separates election-related advocacy from other speech, for many of the ads its rule leaves unregulated are plainly intended to influenc[e] an[] election for Federal office. Id. The FEC claims it has drawn a rational line because ads omitting magic words run by outside groups in coordination with candidates before the windows are generally not intended to influence federal elections. But this is absurd. Because the magic words test is functionally meaningless, McConnell, 540 U.S. at 193, 124 S.Ct. 619, and expenditures made after a `wink or nod' often will be `as useful to the candidate as cash,' id. at 221, 124 S.Ct. 619 (quoting Colo. Republican Comm., 533 U.S. at 442, 446, 121 S.Ct. 2351), there is no question that coordinated ads omitting magic words are often intended to influence federal elections. This is true even outside the 90/120-day windows, for as the FEC itself found,  [a]ny time a candidate uses campaign funds to pay for an advertisement, it can be presumed that this advertisement is aired for the purpose of influencing the candidate's election. 71 Fed.Reg. at 33,193 (emphasis added). We have no reason to think this is any less true of spending that candidates coordinate with outside groups. In sum, although the FEC, properly motivated by First Amendment concerns, may choose a content standard less restrictive than the most restrictive it could impose, it must demonstrate that the standard it selects rationally separates election-related advocacy from other activity falling outside FECA's expenditure definition. Shays II, 414 F.3d at 102. Because the express advocacy standard fails that test, it runs counter to BCRA's purpose as well as the APA. Second, the FEC points to our decision in Orloski v. FEC, 795 F.2d 156 (D.C.Cir. 1986), as support for the rule it chose. Orloski dealt with 2 U.S.C. § 441b(a), which prohibits corporations from making contribution[s] or expenditure[s] in connection with any election to any political office. The FEC interpreted this provision to allow corporations to fund events for federal officeholders so long as those events were non-political, i.e., (1) there is an absence of any communication expressly advocating the nomination or election of the congressman appearing or the defeat of any other candidate, and (2) there is no solicitation, making, or acceptance of a campaign contribution for the congressman in connection with the event. Orloski, 795 F.2d at 160. Upholding the regulation under Chevron, we explained that although it was at the outer bounds of permissible choice, it was still a `reasonable choice within a gap left open by Congress.' Id. at 167 (quoting Chevron, 467 U.S. at 866, 104 S.Ct. 2778). The FEC urges us to reach the same conclusion here, but it ignores the crucial differences separating Orloski from this case. Most important, in Orloski we found that the FEC's interpretation does not create the potential for gross abuse because under the FEC's interpretation, corporations can make little more than insignificant, indirect donations to a candidate's political warchest, which are unlikely to give the corporations improper influence over candidates for federal office or to significantly increase the level of campaign spending. Id. at 165-66. Here, by contrast, the coordinated expenditures the Commission's rule allows often will be `as useful to the candidate as cash,' McConnell, 540 U.S. at 221, 124 S.Ct. 619 (quoting Colo. Republican Comm., 533 U.S. at 446, 121 S.Ct. 2351), and [i]t is not only plausible, but likely, that candidates would feel grateful for such donations and that donors would seek to exploit that gratitude, id. at 145, 124 S.Ct. 619. This create[s] the potential for gross abuse that was absent in Orloski. Orloski, 795 F.2d at 165. Moreover, in Orloski we said [i]f the FEC's interpretation unduly compromises the Act's purposes, it is not a `reasonable accommodation' under the Act, and it would therefore not be entitled to deference. Id. at 164 (quoting Chevron, 467 U.S. at 845, 104 S.Ct. 2778). Here, as we have explained, the rule unduly compromises the Act's purpose of prohibiting soft money from being used in connection with federal elections. McConnell, 540 U.S. at 177 n. 69, 124 S.Ct. 619. Third, the FEC disparages the many examples Shays provides of pre-window expenditures by candidates and outside groups, calling them mere anecdotes and saying Shays failed to offer any evidence of their relative significance. See Appellant's Reply Br. 19-21. But the FEC's own study showed that almost 10% of primary election advertisements by House candidates and presidential candidates in 2004plainly aired for the purpose of influencing the candidate's election, 71 Fed.Reg. at 33,193ran before the windows, and Shays provided numerous examples of pre-window ads funded by outside groups that were obviously intended to influence federal elections. Notably, many of Shays's examples came from media markets excluded from the FEC's study, and they suggest that the percentage of early advertising may be even greater than that captured by the FEC's analysis. Shays's evidence, combined with the FEC's study, proves his point. Given the rule the FEC chose, which regulates virtually no coordinated pre-window ads, the Commission could demonstrate that it met its statutory obligationrationally separat[ing] election-related advocacy from other activity falling outside FECA's expenditure definition, Shays II, 414 F.3d at 102only by showing that a truly insignificant number of ads intended to influence federal elections run before the windows. See Shays II, 414 F.3d at 99 ([T]he FEC lacks discretion to exclude [communications intended to influence federal elections] from its coordinated communication rule.). The evidence in the FEC's own study, as well as the evidence Shays provided, refutes any such contention. Finally, the FEC assures us that we have no reason to worry about lax regulation outside the 90/120-day windows because it has received very few complaints alleging that candidates are currently coordinating expenditures with outside groups before the windows, and there is no evidence that candidates will begin coordinating with outside groups if we uphold the regulation. This argument flies in the face of common sense. Of course the FEC hasn't received many complaints: the challenged rule allows unlimited coordination so long as the resulting advertisements omit express advocacy. In other words, people have had no reason to report this type of coordination because it is perfectly legal under the FEC's rule. Moreover, the Commission's prediction about what will happen in the future disregards everything Congress, the Supreme Court, and this court have said about campaign finance regulation. In passing BCRA, Congress found that ads funded with soft money were often actually coordinated with, and controlled by, the campaigns. McConnell, 540 U.S. at 131, 124 S.Ct. 619 (citing S. REP. No. 105-167, vol. 1, at 49 (1998); id. vol. 3, at 3997-4006). In McConnell, the Supreme Court said, [m]oney, like water, will always find an outlet, id. at 224, 124 S.Ct. 619, and BCRA reflects the hard lesson of circumvention Congress has learned from the entire history of campaign finance regulation, id. at 165, 124 S.Ct. 619. And in Shays II, we said, if regulatory safe harbors permit what BCRA bans, we have no doubt that savvy campaign operators will exploit them to the hilt, reopening the very soft money floodgates BCRA aimed to close. 414 F.3d at 115. Common sense requires the same conclusion here. Under the present rules, any lawyer worth her salt, if asked by an organization how to influence a federal candidate's election, would undoubtedly point to the possibility of coordinating pre-window expenditures. The FEC's claim that no one will take advantage of the enormous loophole it has created ignores both history and human nature.