Court Opinion

ID: 766476
Source: CourtListenerOpinion
Date Created: 2012-04-18 08:04:24+00
Date Added: 2024-06-11T17:55:22.403441
License: Public Domain

194 F.3d 139 (D.C. Cir. 1999)
Public Office Corporation, et al.,Appellantsv.Clinton for President Committee, et al.,Appellees
No. 99-7002
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 5, 1999Decided October 29, 1999

Appeal from the United States District Court for the District of Columbia(No. 95cv01264)
Michael E. Geltner argued the cause and filed the briefs  for appellants.
John C. Keeney, Jr., argued the cause for appellees.  With  him on the brief was Kelleen McGinnis Scott.
Before:  Edwards, Chief Judge, Wald and Williams,  Circuit Judges.
Opinion for the Court filed by Circuit Judge Wald.
Wald, Circuit Judge:

1
Appellants, the Public Office Corporation ("POC") and its directors, provided computer systems services to appellees, the Clinton for President Committee  and its auxiliaries ("Committee").  As part of a routine audit  mandated by federal election campaign law, auditors for the  Federal Election Commission ("FEC" or "the Commission")  issued an interim report in which they identified possible  discrepancies in the Committee's accounts.  In response to  this audit report, the Committee attributed these disparities  in part to the actions of an unnamed computer vendor. Alleging that the Committee had made libelous statements  about them in its response to the report, appellants filed suit. Appellees moved to dismiss the libel suit under 2 U.S.C.  § 437d(c), which provides statutory immunity against civil  liability for disclosing information "at the request of the  Commission."  2 U.S.C. § 437d(c).  This is an appeal from  the district court's order dismissing the suit.  Appellants  argue that the allegedly libelous statements made by the  Committee were not immune because they were not made "at  the request of the Commission."  Id.  We hold in conformity  with the district court that the Commission's audit report did  constitute a request for information.  Thus, the Committee's  statements in response to that report were immunized under  § 437d(c).

I. Background

2
Appellants, POC and its directors, William and Patricia  Anderson, provided data processing services and assistance in  complying with federal election laws to political campaigns. Appellees, the Clinton for President Committee and the Clinton/Gore '92 General Election Compliance Fund, retained  POC to provide computer systems support during the primary and general election campaigns.  As is customary under  federal election campaign law, the FEC conducted an audit of  the Committee's accounts;  in their report the auditors found  discrepancies.  In response to an interim report issued by the  FEC's auditors, the Committee attributed some of these  disparities to errors made by one of its vendors.  Alleging  that their professional reputation had been damaged by three  statements, POC and its directors sued to recover damages for libel against the Committee and its attorney.1  This  appeal arises from an order issued by the district court  granting the appellees' motion to dismiss appellants' libel suit  under 2 U.S.C. § 437d(c), which provides statutory immunity  against civil liability for disclosing information "at the request  of the Commission."  2 U.S.C. § 437d(c).

3
The Committee received federal election campaign funds  under the Presidential Primary Matching Payment Account  Act ("PPMPAA"), 26 U.S.C. § 9031 et seq.  As a condition of  receiving such funds, a campaign committee is required to  "agree to an audit and examination by the Commission."  26  U.S.C. § 9033(a)(3).  The PPMPAA and implementing regulations set out a mandatory procedural framework for conducting an audit.  See 2 U.S.C. § 9038(a);  11 C.F.R. § 9038.1.The auditing process involves four steps.2  First, the Committee must submit documentation to the FEC's auditors to be  utilized in conducting the audit.  Second, the audit staff  releases an interim audit report detailing its preliminary  findings and recommendations.  See 11 C.F.R. § 9038.1(c)(1).These recommendations may include tentative repayment  amounts, if the Committee is found to have received federal  funds in excess of actual eligibility.  Third, the Committee  "will have an opportunity to submit, in writing ... legal and  factual materials disputing or commenting on the contents of  the interim report."  11 C.F.R. § 9038.1(c)(2).  Fourth, after  consideration of the Committee's responses, the Commission publicly releases its final audit report, which may differ from  its interim audit report.  The Commission may publish a  committee's responses in its own final report.

4
In this case, the interim audit report discussed several  alleged discrepancies in the Committee's accounts, including  excessive redesignations.  Contributions made to a primary  campaign may, in certain limited circumstances, be transferred to the general election campaign by written redesignation.  See 11 C.F.R. §§ 103.3, 110.1, 110.2, and 9003.3.  The  audit staff found that in many instances, the "redesignations  pursued by the Committee were not permissible."  Joint  Appendix ("J.A.")  at 250.

5
Moreover, according to the report, the excessive redesignation effort caused the Committee to receive matching funds  in excess of entitlement.  By redesignating funds from the  primary election campaign to the general election campaign,  it appeared that the Committee did not have sufficient private  funds in its primary campaign to meet its financial obligations.  J.A. at 248-50.  Therefore, the primary campaign  remained eligible for matching funds.  However, the Commission staff contended that most of the funds were improperly  redesignated and should have been considered available to  the primary campaign to discharge its financial obligations.Thus, it concluded that "the Candidate had received matching  funds in excess of his entitlement."  J.A. at 249.  Given this  finding, the report recommended that "the Committee provide evidence to demonstrate that it did not receive matching  funds in excess of entitlement."  J.A. at 251.

6
The issue in this case is whether three statements about  POC that the Committee made in its response to the interim  audit report fall within the statutory grant of immunity for  information given "at the request of the Commission."  2  U.S.C. § 437d(c).  The first alleged defamatory statement  involves the Committee's response to the report's finding that  the Committee had received excessive public funds, primarily  due to the volume of improper redesignations.  Since the  propriety of this finding depended on whether the Committee  had improperly conducted redesignations, the Committee  sought to explain its redesignation efforts.  Agreeing that many redesignations were "superfluous," J.A. at 101, the  Committee referred to an unnamed vendor whose "contract  ... included an incentive for the vendor to treat contributions  as though additional documentation or affidavit was necessary."  J.A. at 100.  This statement was later published by  the FEC in its final audit report.  Contending that this  statement was libelous, POC asserted that the clear implication was that it had conducted improper redesignations to  augment its profits.  POC further argued that although the  vendor was not named, it could easily be identified since a  vendor list was published with the final report.

7
In the second and third "defamatory" statements, appellants also alleged that the Committee essentially tried to shift  blame for its accounting discrepancies to POC.  The second  statement concerned the Committee's assertion that discrepancies in its account balances were "essentially due to errors  by one of the Committee's computer vendors who failed to  reconcile her records."  J.A. at 63.  POC asserted that while  she was not named, the "her" was an obvious reference to its  director, Patricia Anderson, who performed these functions  and was widely known to have done so.  In the third statement, the Committee explained record keeping errors by stating that "[d]uring this period, the Committee experienced  significant difficulties with the vendor preparing the Primary  Committee's reports."  Id.

8
In response to the lawsuit, appellees filed a motion arguing  that 2 U.S.C. § 437d(c), the provision that provides statutory  immunity for information disclosed at the FEC's request,  mandated dismissal.  The district court granted the defendant's motion to dismiss, finding that the statements made by  the Committee to the FEC were in fact "privileged against  civil liability under § 437d(c)."  Memorandum Opinion at 13  (reprinted in J.A. at 18).  The court determined that  § 437d(c) set forth a "two-fold test" for immunity:  "the  statements must be (1) at the request (2) of the Commission."Memorandum Opinion at 7 (reprinted in J.A. at 12).  The  court determined that the report "contain[ed] unequivocal  requests for information."  Memorandum Opinion at 9 (reprinted in J.A. at 14).  The court also held that the second  prong of § 437d(c) was satisfied, rejecting the argument that the audit staff was a separate entity from the Commission. However, the court declined to accept appellees' ambitious  contention that all audit submissions necessarily constitute  responses to Commission requests that fall within § 437d(c)'s  scope.

9
On appeal, appellants assert that the statements do not  meet § 437d(c)'s bifurcated test.  Noting that § 437d(c)'s  grant of immunity is contingent on the issuance of a "request," appellants first contend that the statements in the  Commission's interim report were not "requests."  Appellants  also assert that because the report was not issued by the  Commission, but by its audit staff, which is an entity distinct  from the Commission, the statements fail to meet the second  prong of § 437d(c)'s test.

II. Discussion

10
The viability of appellants' libel suit turns on whether the  allegedly defamatory statements fall within the immunity  provision's scope.  See 2 U.S.C. § 437d(c).  Recalling the  Supreme Court's holding that "in any case of statutory construction, our analysis begins with the language of the statute," we turn to the text of § 437d(c).  Hughes Aircraft Co. v.  Jacobson, 252 U.S. 432, 119 S.Ct. 755, 760 (1999) (internal  quotation marks omitted).

11
That text is straightforward.  Section 437d(c) provides that  "n[o] person shall be subject to civil liability to any person  (other than the Commission or the United States) for disclosing information at the request of the [Federal Election]  Commission."  2 U.S.C. § 437d(c).  Thus, the contested statements must be made in response to a request by the Commission.

A."At the Request" Of

12
We first determine whether the statements in this case  were made "at the request" of the FEC and in that pursuit,  we begin with a careful reading of the FEC's interim audit  report.  If we find there are such requests we will decide  whether the Committee's statements were responsive to  them.  The first disputed statement is as follows:

13
The auditors focused here on whether these contributions were properly redesignated to the Compliance Fund, but, in fact, in order to have been considered primary contributions in the first instance, the regulations required that they be designated in writing for the primary.  Very few of them were so designated.  The Committee's vendor who processed these contributions treated them as "redesignations" even though they were not.  That vendor's contract had been negotiated early in the campaign by the Committee's original counsel and included an incentive for the vendor to treat contributions as though additional documentation or affidavit was necessary.  Under the contract, the vendor received an additional amount per contribution for which additional documentation or an affidavit was obtained.  The Committee staff did not see these contributions until well after the election, but relied solely on the vendor's expertise to handle the contributions appropriately .

14
J.A. at 100 (emphasis in original).

15
That statement directly responds to that portion of the  interim report in which the audit staff contended that the  Committee was conducting impermissible redesignations.  In  a section entitled "Receipt of Matching Funds in Excess of  Entitlement," the interim audit report finds that the Committee received funds in excess of its actual eligibility, primarily  due to the volume of improper redesignations.  J.A. at 24751.3  In its conclusion to that section, the audit staff issued  the following recommendation:

16
The Audit staff recommends that within 30 calendar days of service of this report, the Committee provide evidence to demonstrate that it did not receive matching funds in excess of entitlement.  Absent such a demonstration, the Audit staff will recommend ... that the Committee repay $3,674,353 to the U.S. Treasury.

17
J.A. at 251 ("Recommendation Ten") (emphasis added).

18
Appellants' contention that this recommendation is not a  request is hardly credible.  Surely a recommendation that the  committee "provide evidence" to demonstrate that it was not  violating the law is a genuine request for more information in  ordinary parlance and especially in the context of a government audit.

19
Moreover, even if this language were not sufficiently clear,  the transmittal letter accompanying the audit report removes  all doubts that Recommendation Ten was in fact a "request."Prominently featured in the letter accompanying the report is  the following instruction:

20
This report is to formally advise you of the findings and recommendations of the Audit staff resulting from the audit of the Clinton for President Committee.  You are requested to comply with the recommendations by May 4,1994.

21
J.A. at 205 (emphasis added).  Recommendation Ten, read in  conjunction with the transmittal letter, clearly confirms that  the report did in fact contain a specific request to which the  Committee was responding in its first disputed statement.4

22
Appellants accurately point out that the other two disputed  statements were responsive to sections of the report in which  the audit staff recommended that no further action be taken. See J.A. at 211, 212.  From that fact, appellants argue that there is no need for any response and no reason to construe  the audit report as calling for one.  The second statement in  which the Committee attributed misstatements in its accounting to errors by an unnamed computer vendor, was made in  response to a section of the report entitled "Misstatement of  Financial Activity."  J.A. at 210-11.  This section delineated  discrepancies in the Committee's accounts and charged the  Committee with failure to maintain supporting documentation  that might have explained away these discrepancies.  While  this section of the audit report does not so clearly cry out for  a response as Recommendation Ten, it confirms a clear  implication of past wrongdoing by the Committee.

23
For example, the audit report notes that although the  Committee claimed to have identified all disbursements in its  pre-audit inventory, further research by the auditors revealed  "significantly different" disbursements.  J.A. at 210-11.Moreover, the report states that although the Committee  later corrected these misstatements, it failed to maintain the  supporting documentation that would have allowed the audit staff to "identify the reasons for the misstatements."  J.A. at  211.  The Committee could quite reasonably construe such a  suggestion of accounting discrepancies and shoddy record keeping as a request for explanatory information, in the  absence of which the auditors' tentative conclusion of wrongdoing would remain on the record, even if no remedies were  sought.  The Committee's issuance of an explanatory statement in an effort to account for the discrepancies falls within  the scope of a "request."

24
The third statement in which the Committee referred to  difficulties with an unnamed vendor who prepared its reports,  was made in response to a section entitled "Itemization of  Receipts."  J.A. at 211-12.  Although this section of the audit  report was admittedly more neutral so far as any implication  of wrongdoing was concerned than the section just described,  it essentially highlighted the Committee's failure to itemize  its records.  For example, the report noted that a significant  percentage of the contributions which required itemization  were not correctly itemized.  J.A. at 211.  Given the inevitably tense atmosphere of an audit, especially one of a Committee which does ongoing business with the agency and whose  members can be expected to be repeat supplicants for federal  money, the auditee will understandably feel it imperative to  provide answers to questions raised by the audit report. Additionally, it bears noting that the report was an interim  one.  Even the recommendation for no further action would  not become final until the Commission acted upon it--hence  the felt need of the subject to provide any exculpatory  information.

25
Importantly, in this case, there can be little question that  the Committee's statements were relevant and responsive to  the Commission's concerns.  There is then no need to even  consider appellees' contention that any information submitted  within the context of an audit is immunized irrespective of  whether it is germane to the Commission's report.  The  district court reasonably rejected appellees' assertion of an  immunity so broad that it would include even gratuitous  information that was not responsive to the concerns in the  report.

26
In sum, we hold that the Commission's report did indeed  constitute a request for information in the three areas discussed and thus, the Committee's statements in response to  these requests are immunized under § 437d(c).  Having  found that the statements meet § 437d(c)'s first request  prong, we discuss briefly whether these requests were issued  at the request "of the Commission."

27
B."Of the Commission"

28
Appellants allege that even if the statements were responsive to requests contained in the audit report, this report was  not issued by the Commission itself but by its audit staff,  which under the statute constitutes a distinct entity.5  Thus, appellants assert that even if the report did contain requests,  the audit staff had no power to confer immunity under  § 437d(c), since any immunity-conferring requests must be  issued by the Commission itself.  Appellants' strained distinction between the FEC and the staff working under its  direction simply does not cut the mustard.  We agree with  the district court that "it was the Commission, acting pursuant to its statutory authority, that conducted the interim  audit."  Memorandum Opinion at 11 (reprinted in J.A. at 16).6

III. Conclusion

29
For the foregoing reasons, we hold that the Committee's  statements are immunized under § 437d(c).  The decision of  the district court is

30
Affirmed.

Notes:

1
 The Clinton/Gore '92 General Election Compliance Fund was  formed by the Committee to ensure compliance with legal and  accounting functions for the 1992 Clinton/Gore election campaign. For all purposes relevant to this case, the General Election Compliance Fund operated in conjunction with the Committee.  Similarly,  Carolyn ("Lyn") Utrecht was an attorney employed by the Committee with responsibility for FEC audit matters.  Thus, the term  "Committee" when used in this opinion is inclusive of the General  Election Compliance Fund and Utrecht.

2
 This description of the auditing process is based on the 1994  version of section 9038.1.  In 1995, section 9038.1 was revised to  replace the interim audit report with an exit conference memorandum.  All parties agree, however, that the 1994 version is applicable  to the instant case.

3
 The auditors found that:
[d]uring the period when the redesignations were being sought for the contributions deposited into the Suspense Account, the Committee continued to request and receive matching fund payments based on ... statements that apparently did not recognize contributions deposited into the suspense ac-count....  Therefore, as of September 2, 1992, the Candidate had received matching funds in excess of his entitlement. J.A. at 248-49.

4
 Appellants also argue that even if Recommendation Ten does  constitute a request, the Committee's response is not material to  the request.  We may easily dismiss this contention.  To the extent  that the audit staff asserted that the excessive payments were due  to unnecessary redesignations, appellees quite reasonably chose to  address the necessity of such redesignations.

5
 Appellants assert that there is a clear distinction between the  Commission and its staff on the face of the statute. They emphasize  that the statutory provision establishing the FEC states that it  consists of "the Secretary of the Senate and the Clerk of the House  of Representatives or their designees, ex officio and without the  right to vote, and six members appointed by the President, by and  with the advice and consent of the Senate."  2 U.S.C. § 437c(a)(1).On appellants' reading, any person who is not included within this definition may not act on behalf of the Commission, so far as  § 437d(c) is concerned.  The district court dismissed appellants'  argument noting that "this definition describes the membership of  the Committee and not its duties.  By contrast the focus of this case  is the functions of the Commission."  Memorandum Opinion at 10  (reprinted in J.A. at 15).

6
 See, e.g., 2 U.S.C. § 438(b) ("The Commission may conduct  audits and field investigations ... [p]rior to conducting any audit  ... the Commission shall perform an internal review of reports  filed by selected committees.");  26 U.S.C. § 9038(a) ("After each  matching payment period, the Commission shall conduct a thorough  examination and audit.");  26 U.S.C. § 9040(b) ("The Commission is  authorized ... to institute actions ... to seek recovery of any  amounts determined to be payable to the Secretary as a result of an  examination and audit made pursuant to section 9038.");  11 C.F.R.  § 9038.1 (c)(1) (1994) ("The Commission will issue an interim audit  report to the candidate and his or her authorized committee.");  11  C.F.R. § 9038.1(c)(3) ("The Commission will consider any written  legal and factual materials submitted by the candidate or his or her  authorized committee.") (emphasis added in all citations).