United States District Court, D. Nebraska
ROBERT C. MCCHESNEY, in his official capacity as Treasurer of Bart McLeay for U.S. Senate, Inc.; and BART MCLEAY FOR U.S. SENATE, INC., Plaintiffs,
MATTHEW S. PETERSON, in his official capacity as Chair of the Federal Election Commission; FEDERAL ELECTION COMMISSION; and UNITED STATES OF AMERICA, Defendants.
MEMORANDUM AND ORDER
Smith Camp Chief United States District Judge.
matter is before the Court on the Motions to Dismiss filed by
Defendants Federal Election Commission (the
“Commission”) and Matthew S. Peterson
(“Peterson”), ECF No. 21, and the United States
of America, ECF No. 25. Plaintiffs have moved to dismiss
their claims against the United States without prejudice.
Accordingly, their Notice of Dismissal, ECF No. 28, will be
approved and Defendant United States of America will be
dismissed. For the reasons stated below, the Motion filed by
the Commission and Peterson will be granted.
this case turns on the Commission's interpretation of
federal administrative and election law, a discussion of the
statutory and regulatory scheme involved is helpful to an
understanding the nature of Plaintiffs' claims. The Court
will also summarize the promulgation and administration of
the relevant fine program at issue. Finally, the Court will
provide background regarding how the statutes, regulations,
and fine program were applied to Plaintiffs.
FECA and its Enforcement
The Commission and FECA Enforcement in General
Commission is an independent agency of the United States
government with exclusive jurisdiction over civil enforcement
of the Federal Election Campaign Act of 1971, as amended, 52
U.S.C. § 30101, et seq. (“FECA”).
See 52 U.S.C. §§ 30106(b)(1), 30107(a),
30109. The Commission is composed of six Commissioners,
including Defendant Petersen, who currently serves as
Chairman. Under FECA, if at least four Commissioners find
“reason to believe” that a FECA violation has
occurred, the Commission's General Counsel may conduct an
investigation, leading to a recommendation as to whether
there is “probable cause to believe” a violation
has occurred. 52 U.S.C. § 30109(a)(1)-(3). If at least
four Commissioners then find probable cause exists, the
Commission must attempt to resolve the matter by
“informal methods of conference, conciliation, and
persuasion, and to enter into a conciliation agreement”
with the respondent. 52 U.S.C. § 30109(a)(4)(A)(i). If
the Commission is unable to resolve the matter through
voluntary conciliation, the Commission may file a de
novo civil suit to enforce the Act in federal district
court. 52 U.S.C. § 30109(a)(6).
Political Committees and “48 Hour” Disclosure
requires political committees to designate a treasurer to
maintain the committee's financial records. See
52 U.S.C. § 30102(a)-(d). The term “political
committees” as used in FECA, includes candidate
campaigns, political parties, and other political
organizations. See 52 U.S.C. § 30101(4)-(6).
Under FECA, the treasurer must sign and file periodic reports
on behalf of the political committee, including reports
regarding the committee's receipts and disbursements. 52
U.S.C. § 30104(a)-(b). These reports must be filed in
compliance with the schedule established in FECA and its
implementing regulations. See 52 U.S.C. §
3010411(a)(11), (b); 11 C.F.R. § 104.14(d). Reports for
the principal campaign committee of a candidate for the
office of U.S. Senator must be filed with the Secretary of
the Senate. 52 U.S.C. § 30102(g); 11 C.F.R. §
30104(a)(6)(A) requires principal campaign committees to
report in writing any contribution of $1, 000 or more
received by the committee after the 20th day, but more than
48 hours before, any election. Such notifications
“shall be made within 48 hours after the receipt of
such contribution and shall include the name of the candidate
and the office sought by the candidate, the identification of
the contributor, and the date of receipt and amount of the
contribution.” 52 U.S.C. § 30104(a)(6)(A).
The Administrative Fines Program
1999, Congress amended FECA to create an enforcement system
for violations of the periodic filing requirements.
See Treasury Postal Serv. and General Government
Appropriations Act, 2000, Pub. L. No. 106-58, § 640, 113
Stat. 430, 476-477 (1999) (codified at 52 U.S.C. §
30109(a)(4)(C)). Congress authorized the Commission to
directly assess civil money penalties for violations of 52
U.S.C. § 30104(a), including violations of the deadlines
for political committees' disclosure reports. Pursuant to
this authority, after the Commission finds reason to believe
a political committee and its treasurer have failed to file a
report within the established deadlines, the Commission may:
require the person to pay a civil money penalty in an amount
determined under a schedule of penalties which is established
and published by the Commission and which takes into account
the amount of the violation involved, the existence of
previous violations by the person, and such other factors as
the Commission considers appropriate.
52 U.S.C. § 30109(a)(4)(C)(i)(II). A respondent who
objects to the Commission's imposition of an
administrative fine may seek judicial review of the
Commission's determination in federal district court
“by filing in such court . . . a written petition
requesting that the determination be modified or set
aside.” 52 U.S.C. § 30109(a)(4)(C)(iii).
2000, the Commission promulgated regulations establishing the
procedures that apply to administrative fine matters and the
schedules of penalties authorized by 52 U.S.C. §
30109(a)(4)(C)(i)(II). See Administrative Fines, 65
Fed. Reg. 31, 787 (May 19, 2000) (“May 2000
Administrative Fines Rule”); 11 C.F.R. §§
111.43(a)-(c), 111.44. These civil penalty schedules
contained factors to consider when assessing a penalty,
including whether the untimely report was election sensitive,
how late it was filed, the dollar amount of the receipts and
disbursements involved, and the number of prior violations by
the respondent. See 11 C.F.R. § 111.43(a)-(c).
The regulation formulas established specific penalties for
48-hour notices. 11 C.F.R. § 111.44(a)(1). Under §
111.44(a)(1) the current civil penalty for each untimely
48-hour notice is $137 plus ten percent of the “amount
of the contribution(s) not timely reported.”
the Commission determines that it has “reason to
believe” that a respondent has violated 52 U.S.C.
§ 30104(a), the Commission notifies the respondent of
the Commission's finding, including the proposed civil
money penalty. 11 C.F.R. § 111.32. Upon receipt of this
notification, the respondent may either pay the penalty, 11
C.F.R. §§ 111.33-111.34, or challenge the finding
and/or the penalty by filing a written response within 40
days of the date of the Commission's finding. 11 C.F.R.
§ 111.35(a), (e). The written response must assert one
of three possible grounds for such a challenge: (1) factual
errors in the Commission's finding; (2) inaccurate
calculation of the penalty; or (3) a showing that the
respondent used “best efforts” to file in a
timely manner but was prevented from doing so by
“reasonably unforeseen circumstances . . . beyond the
respondent's control, ” and the respondent filed
the report no later than 24 hours after such circumstances
ended. 11 C.F.R. § 111.35(b)(1)-(3).
filed responses challenging the Commission's
reason-to-believe finding are reviewed by a Commission
“Reviewing Officer.” 11 C.F.R. § 111.36(a).
The Reviewing Officer submits a written recommendation to the
Commission, that is also provided to the respondent. 11
C.F.R. § 111.36(e), (f). The respondent may file a
written response to the recommendation within ten days, but
generally may not raise new arguments beyond those in the
original written response. 11 C.F.R. § 111.35(f).
receiving the Reviewing Officer's recommendation and any
timely additional response from the respondents, the FEC
makes a final determination by an affirmative vote of at
least four Commissioners as to whether the respondent
violated 52 U.S.C. § 30104(a), and, if so, the amount of
the civil penalty. 11 C.F.R. § 111.37. The reasons
provided by the Reviewing Officer for the recommendation
serve as the reasons for the Commission's action, unless
otherwise indicated by the Commission. 11 C.F.R. §
respondent then has 30 days in which to petition for the
judicial review authorized by 52 U.S.C. §
30109(a)(4)(C)(iii). Judicial review is limited to the issues
and facts raised before the Commission during the
administrative proceeding. 11 C.F.R. § 111.38.
Modifications to the Administrative Fines
amendments to FECA in 1999 that created the Administrative
Fines Program initially applied to violations occurring
between January 1, 2000, and December 31, 2001. Extension of
Administrative Fines Program, 79 Fed. Reg. 3302-01 (Jan. 21,
2014) (to be codified at 11 C.F.R. Part 111). Congress later
extended the Commission's statutory authority for the
Administrative Fines Program several times, including, most
recently, in December 2013. In December 2013, Congress
extended the Administrative Fines Program through December
31, 2018. See Act of Dec. 26, 2013, Pub. L. No.
113-72, § 1 (referred to herein as the “2013
Congressional Extension”). Relevant to this case, the
civil penalty formula under the Administrative Fines Program
for untimely 48-hour notices was first established in May
2000. Administrative Fines, 65 Fed. Reg. 31, 787 (Friday, May
19, 2000). The civil penalty formula has been adjusted once,
in 2005, to its current amount. See Inflation
Adjustments for Civil Monetary Penalties, 70 Fed. Reg. 34633,
34636 (June 15, 2005) (“June 2005 Inflation
Adjustment”) (adjusting civil penalty formula for
48-Hour Notices that are not timely filed as “$110
(.10 x amount of the contribution(s) not timely
the 2013 Congressional Extension, the Commission's
regulations implementing the Administrative Fines Program, 11
C.F.R. § 111.30, specified the end date of the program.
Each time Congress has extended the statute that authorizes
the Administrative Fines Program, the Commission revised the
end date in § 111.30. However, in response to the 2013
Congressional Extension, the Commission revised § 111.30
to state that the Administrative Fines Program applied to
reporting periods that “end on or before the date
specified in 2 U.S.C. § 437g(a)(4)(C)(v).”
See Extension of Administrative Fines Program, 79
Fed. Reg. 3, 302-01 (January 21, 2014) (referred to herein as
the “2014 Regulatory Extension”). The Commission
also deleted 11 C.F.R. § 111.41, an administrative
provision requiring that fines be paid by check or money
order. Id. These were the only changes made to the
implementing regulations in the 2014 Regulatory Extension.
the Commission made changes to the regulations without notice
or opportunity to comment, it provided an explanation of its
reasoning contemporaneous with the changes to the
regulations. In its explanation, the Commission first noted
that because Congress did not enact the most recent statutory
extension until December 2013, “there [was] a short gap
between the end date of the Commission's current
regulations and the effective date of this final rule on
January 21, 2014.” Id. The Commission directed
that “[r]eports covering reporting periods that end
during this gap are not subject to the [Administrative Fines
Program]; they are instead subject to the Commission's
enforcement procedures set forth at 11 CFR part 111, subpart
A.” Id. (citing 11 CFR 111.31(a)).
Commission further explained that it implemented the 2014
Regulatory Extension of the Administrative Fines Program
“without advance notice or an opportunity for comment
because [the extension] falls under the ‘good
cause' exemption of the Administrative Procedure
Act.” Id. (citing 5 U.S.C. § 553(b)(B))
(permitting agencies to dispense with the notice and comment
period when “impracticable, unnecessary, or contrary to
the public interest.”). The Commission concluded that
its action fell within the good cause exception because
“this final rule merely extends the applicability of
the existing [Administrative Fines Program] and deletes one
administrative provision; the final rule makes no substantive
changes to the [Administrative Fines Program].”
Id. The Commission further explained that the 2014
Regulatory Extension “[fell] within the ‘good
cause' exception to the delayed effective date provisions
of the Administrative Procedure Act and the Congressional
Review Act.” Id. Thus, the Commission
concluded that the final rule “[would be] effective
upon publication in the Federal Register.” Id.
(citing 5 U.S.C. §§ 553(d), 808(2)).
Challenge in This Case
McLeay Committee is the principal campaign committee of
Bartholomew L. McLeay, who was a candidate in the United
States Senate primary election in Nebraska on May 13, 2014.
ECF No. 1, Compl. ¶ 2; Page ID 1. Plaintiff Robert C.
McChesney was the Treasurer of the McLeay Committee.
Id. ¶¶ 1, 2; Page ID 1-2.
connection with that election, Plaintiffs were required to
file 48-hour notices for contributions and loans of $1, 000
or more received between April 24 and May 10, 2014. 52 U.S.C.
§ 30104(a)(6)(A); 11 C.F.R. § 104.5(f). On June 29,
2015, the Commission notified Plaintiffs that the Commission
had reason to believe that Plaintiffs violated FECA by
failing to file 48-hour reports for several contributions.
Compl. ¶ 29, Page ID 11; ECF No. 21-3, Page ID 82.
Specifically, the Commission alleged that Plaintiffs did not
timely file 48-hour notices for fourteen contributions
received between April 24 and May 9, 2014, totaling $112,
425.06. Compl. ¶ 29, Page ID 11; ECF No. 21-3, Page ID
82, 86. In its notification, the Commission made a
preliminary determination that a civil penalty of $12, 122
should be assessed for such violations, based on the penalty
formula set forth at 11 C.F.R. § 111.44. ECF No. 21-3,
Page ID 82. The Commission's notice designated the
penalty as an Administrative Fine (“AF”). Compl.
¶ 29, Page ID 11; ECF No. 21-3, Page ID 82.
31, 2015, Plaintiffs provided written responses to the
Commission, asserting that the proposed civil penalty was not
based on an authorized schedule of penalties lawfully
established by the Commission. Therefore, according to
Plaintiffs, the 48-hour notice reporting requirements did not
apply to the candidate loans at issue, and an alternative
method of calculating the proposed civil ...