Opinion ID: 682427
Heading Depth: 2
Heading Rank: 1

Heading: the legal framework of this dispute

Text: 22 We have never before been called upon to consider the extent to which--or under what circumstances--a candidate for federal office, or the treasurer of such a candidate's unincorporated principal campaign committee, may be held personally liable for a contractual debt incurred by such a committee. Accordingly, we must determine which jurisdiction's body of substantive law governs such situations, then apply that law to the facts of this case.
23 The district court applied substantive state law in concluding that Thornburgh was liable for the Committee's debts. Thornburgh argues that state law is inapposite, as Congress, by enacting the Federal Election Campaign Act of 1971 (FECA), 13 preempted the application of state law by immunizing candidates for federal office from personal liability. In its amicus role, the RNC argues that because the resolution of this dispute will have a significant impact on important federal interests, federal common law, not state law, should govern. We address each argument in turn. 24
25 For the first time on appeal, Thornburgh contends that by enacting FECA, Congress has preempted the field, thereby barring the application of state law to all situations involving the liability of candidates for federal office for the debts of their principal campaign committees. We will ordinarily consider an argument advanced for the first time on appeal only if the issue is a purely legal one and if consideration of the argument is necessary to avoid a miscarriage of justice. 14 In light of the importance of clarifying the extent to which candidates for federal office may be held personally liable for the debts of their campaign committees, the legal nature of that issue, the thorough briefing given the issue by both parties, and the extensive interest that has been evidenced in the outcome of this case, we have elected in this exceptional case to exercise our broad discretion by reversing our ordinary practice and considering Thornburgh's preemption argument. Our extraordinary decision to do so here should not be mistaken as any relaxation of our virtually universal practice of refusing to address matters raised for the first time on appeal. 26 To bolster his argument that FECA expressly preempts state law, Thornburgh relies on 2 U.S.C. Sec. 453: [T]he provisions of this Act, and the rules prescribed under this Act, supersede and preempt any provision of State law with respect to election to federal office. Thornburgh insists that here Congress expressly stated its intent that federal law preempt state law, 15 so that the court's sole task is to  'identify the domain expressly preempted.'  16 27 Although Thornburgh attempts to stretch Sec. 453 far enough to create a preemptive bar to applying state law to hold federal candidates personally liable, we cannot read FECA as extending that far. First, a strong presumption exists against preemption, 17 and courts have given section 453 a narrow preemptive effect in light of its legislative history. 18 In addition, nowhere in the text of FECA or accompanying regulations is the personal liability of a candidate addressed. Finally, the Federal Election Commission (FEC) has opined that state law supplies the answer to the question who may be held liable for campaign committee debts. 19 Accordingly, in light of the FEC's view, the strong presumption against preemption, the historically narrow reading of Sec. 453, and FECA's silence on the issue of candidate liability, we conclude that Thornburgh's argument for express preemption must fail. 20 28 Thornburgh also claims conflict preemption, i.e., that state law cannot be enforced if it stands as an obstacle to the accomplishment of a federal purpose 21 --one of which under FECA is, according to Thornburgh, to separate a federal candidate from the raising and disbursing of funds for his campaign. The primary purpose of FECA, however, is to regulate campaign contributions and expenditures in order to eliminate pernicious influence--actual or perceived--over candidates by those who contribute large sums, 22 not to prevent candidates from spending their own money to get themselves elected. In fact, FECA merely requires that candidates reveal how much of their own money they spend; it does not keep a candidate from spending his own money on his own campaign for federal office or limit the amount that he may spend. We therefore reject Thornburgh's second preemption contention that the application of state law in this case obstructs FECA's purposes, thereby creating conflict preemption. 29
30 To govern the liability of candidates for federal office for the contractual debts of their principal campaign committees, the RNC entreats us to abandon state law in favor of what, in essence, would amount to a federal common law. The RNC argues that such a radical approach is necessary because the application of state law to the facts of this case would jeopardize two vital and related federal interests: (1) attracting candidates to seek federal elective office, and (2) ensuring the vigor of the entire federal electoral process itself. As federalism imparts to all states a duty not to interfere with preeminent federal policy, the RNC entreats, we should interpret state law in a manner that will least affect these federal interests. 31 The RNC contends that citizens will be discouraged from seeking federal office if, as candidates, they can be held liable under state law for the debts incurred by their campaign committees. As this case illustrates, the RNC continues, modern campaigns involve significant amounts of money and require a wide range of services that often must be procured from numerous vendors scattered throughout the country. Consequently, deduces the RNC, if each state's law is applied to determine whether a candidate for federal office is liable for debts incurred in that state by his campaign committee, then the candidate will be exposed to a nightmarish specter of liability, and will run the risk of being haled into court in any state to answer under each state's substantive law. 32 The RNC also maintains that the application of each state's law to determine the liability of a candidate for federal office will harm the entire election process. The RNC posits that applying each state's law could result in more cautious and less informative campaigning, as the fear of personal liability might make candidates reluctant to take advantage of the various methods and media available to communicate their message. The RNC perceives these policy concerns to be somewhat analogous to those that prompted the development of the doctrine of official immunity and thus asks us to look by analogy to immunity jurisprudence in fashioning a federal common law rule to apply today. 33 The RNC does not go so far as to advocate a rule that would immunize candidates from all liability: Rather, the RNC urges that candidates be held liable only in circumstances [w]here a candidate expressly and intentionally (even if unwisely) assents to personal liability. The RNC argues that this standard dovetails neatly with the common law of agency as applied by some states, which, according to the RNC, provides that neither the candidate nor campaign officials will be held personally liable for campaign debts except insofar as such debts are personally and specifically authorized by the individual in question. 23 34 Although mindful of the concerns raised by the RNC, we decline its invitation either to abandon the established law of Texas or Pennsylvania in favor of another state's law or to fabricate from the whole cloth a new and entirely untested federal common law. 24 We are not convinced that candidates for federal office are so imperiled by the application of state law to determine their liability for their committees' debts as to warrant either such extreme measure. 25 35 A candidate for federal office already has at least two methods by which he could protect himself from personal liability for the contracts entered into by his principal campaign committee. First, he could incorporate his campaign committee. 26 If the committee were incorporated, then the candidate--whether or not he is a shareholder--is shielded from personal liability by the corporate entity, 27 assuming, of course, that he takes no personal action that creates liability apart from the corporation's. Second, a candidate could include in all contracts entered into by his principal campaign committee a provision expressly stipulating that the contracting party may look only to the committee and its assets for compensation, 28 thereby eschewing the candidate's personal liability, either directly or indirectly. 36 The test of time, we believe, confirms that these options are sufficient to protect candidates. Independent of the briefs filed with this court, our research has revealed remarkably few cases in which vendors have sought to hold candidates, or the officers of campaign committees for that matter, liable for the debts of the committee. We find this particularly noteworthy in light of the significant number of elections held periodically and the huge sums spent in such campaigns. We speculate that those few vendors who do not insist on payment in full in advance simply assume the risk of nonpayment, especially from losing candidates, lest such vendors acquire an undesired reputation within the political industry. Also, we gather that some losing candidates, looking ahead to possible future campaigns, seek to avoid an equally unsavory reputation in that industry by paying the financial obligations incurred by their campaign committees. Thus, there is a dearth of caselaw on the subject. 29 37 We are not convinced that any of the traditional reasons for abandoning settled law is present here. Applying state law has not heretofore proved to be significantly unworkable or inequitable. Courts have not abandoned this approach; neither have the circumstances surrounding the liability of candidates generally so changed of late as to rob this approach of its past relevance or justification. 30 Although the RNC argues that the application of state law to determine a candidate's liability exposes him to a nightmarish specter of liability and lawsuits, these precise concerns were raised in dissent and rejected by the majority when the question was considered by the Tennessee Court of Appeals more than thirty-five years ago: 38 It is now a matter of general knowledge that a state-wide race for public office, either in a primary or general election, requires the expenditure of many, many thousands of dollars through many different hands for many different purposes.... Obviously, the candidate himself cannot supervise all of these many activities and many others not mentioned above, though he knows and intends that they will be done for him in behalf of his candidacy. In my humble opinion it would not be in the public interest to saddle upon every candidate for state-wide office a potential liability of so many thousands of dollars and the possibility of multiple claims against him with such limited opportunity to protect and indemnify himself against such liability. 31 39 Finally, we remain cognizant of the salient fact that this case is before us on diversity jurisdiction. We therefore sit as an Erie court, relegated to applying the applicable state law to the facts before us; federalism instructs us that it is not our place within the constitutional firmament to conjure up a new legal paradigm to replace one already fashioned by our learned colleagues in the state judiciary, or to supplant their considered judgment with that from another state. 32 Accordingly, contrary to the RNC's exhortation to spin new gold out of old straw, we discern this case to burden us with a far more modest, albeit equally difficult, task: to apply faithfully and federalistically the appropriate state law to the facts of this dispute. This, of course, requires that we next determine which state's laws to apply.
40 All parties concede that if state law is applicable, only the laws of Texas or Pennsylvania could govern this case. All parties also recognize that under such circumstances the outcome of this appeal will be the same regardless of which of those two states' laws we apply. 33 This is because both Texas and Pennsylvania, like the majority of the several states that have considered the issue, have applied by analogy the common law rule governing the liability of a member of an unincorporated nonprofit association to determine the liability of a candidate or a campaign committee official for conventional obligations incurred by that candidate's unincorporated campaign committee. Accordingly, like the district court, we will decide this appeal based on the common law as interpreted by jurisdictions, such as Texas and Pennsylvania, that still follow that rule.
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42 As noted, the common law has neither applied nor created a separate legal regime to resolve disputes concerning the liability of persons affiliated with unincorporated political campaign committees; rather, such disputes have been adjudicated by analogical extension of the law of unincorporated nonprofit associations. 34 That kind of association typically includes such entities as churches, labor unions, and social clubs. 35 43 Pursuant to this law, an individual is not liable for the debts of the association merely because of his status as a member or officer of the association. 36 Rather, principles of the law of agency are applied to the particular facts on a case by case basis to decide whether the individual in question is liable. 37 Fundamentally, a member is personally responsible for a contract entered into by the nonprofit association only if--viewing him as though he were a principal and the association were his agent--that member authorized, assented to, or ratified the contract in question. 38 Both Texas and Pennsylvania have long embraced this rule. 39 In searching for the correct result it is important to remember at all times that this standard differs from the one that governs the liability of members of unincorporated associations organized for profit or to conduct a business, which standard determines liability of members under principles of partnership law, rather than the law of agency. 40 44
45 Nonprofit Associations Liable for Contracts Entered into by the Association 46 At common law it was necessary to hold certain members of an unincorporated association personally liable for the association's contracts to protect third parties with whom the unincorporated association dealt. This was because an unincorporated association was not recognized as a juridical entity and thus could not be held liable for contracts entered into in its name. 41 Consequently, when a member contracted for services on behalf of an unincorporated nonprofit association, the common law treated that member as though he had represented himself to be the agent of a nonexistent principal. Under the law of agency, such a putative agent was and is held liable for the contract entered into on behalf of the nonexistent principal. 42 47 In the modern era, Texas, 43 Pennsylvania, 44 and many other states, 45 have enacted statutes permitting unincorporated associations to sue and be sued. In many of these entity states, third parties who contract with unincorporated nonprofit associations may now pursue a cause of action against the assets of the association itself. In such jurisdictions, therefore, a member of an association who enters into a contract on behalf of the association is not contracting for a nonexistent principal. One could argue, therefore, that it is no longer necessary or even appropriate for the laws of these jurisdictions to permit third parties to sue individually the members of an association for the contract debts incurred by the association in its own name. The argument would go as follows: The third party is no longer being misled or deceived about a nonexistent principal; such a party is contracting with a disclosed, juridical entity, the assets of which can be reached to satisfy any debt that the association may owe. 48 As appealing and logical as that argument might appear, however, that is not the way the law has developed. The courts of the states that have adopted statutes permitting suit against unincorporated associations have not altered or supplanted the preexisting common law rule governing the personal liability of association members. 46 The courts of both Pennsylvania and Texas have continued to hew to this line. 47 49
50 Nonprofit Associations to Political Campaign Committees 51 Not surprisingly, borrowing from the law of unincorporated nonprofit associations to resolve disputes involving unincorporated campaign committees has presented some practical difficulties. Churches and social clubs often have bylaws or other instruments of governance that outline how the particular organization is going to be operated. For example, such documents typically describe the formalities by which one may become a member of the organization, or by which the association may enter into contracts with a third party. 48 As a result, many such associations maintain membership rosters or attendance records of group gatherings and meetings; and frequently, prior to committing the association to a contract with a third party, poll the membership to ascertain whether a consensus exists in support of the contemplated action. By sampling the membership, the association thus determines the number, and often the identity, of those members who assent to the undertaking. 52 Political campaign committees typically are not organized and operated in this manner because they are usually formed for limited purposes and short durations. The typical political campaign committee does not have bylaws; does not create or maintain a membership roster (assuming that membership is even a proper concept in the context of a political campaign committee); and does not consult its members every time the committee incurs a contractual obligation. Accordingly, as the instant case illustrates, the law of unincorporated nonprofit associations can be less than ideally suited to determine precisely who may be held accountable for the contractual debts incurred by an unincorporated campaign committee. Nonetheless, it is our task to resolve the instant controversy based on this body of law. 53