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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Clear Statutes & Unforeseen Circumstances: The Danger of Overreach

Posted in Constitutional Issues in Regulations, Judicial Review & Remedies, Legislation

The United States District Court for the District of Columbia has invalidated the Federal Election Commission (FEC) electioneering contributor disclosure limitations, or campaign donor advertising, regulations.  The court found that statutory rulemaking delegation did not authorize the FEC to promulgate rules to respond to changes occasioned by Supreme Court decisions that parts of the statute were unconstitutional, even though the Supreme Court decisions vastly increased the application of the financing disclosure provision of the statute.  Debate on the ruling in the current election cycle has begun – e.g. Huffington Post, Business Week, the electionlawblog and other forums – and will increase.  The regulatory lesson of the ruling is quite clear:

Congress does not (and cannot) delegate to agencies the authority to rewrite statutes, even when the courts fundamentally alter the legal landscape.

Where the plain language of the statute applies, an agency may not promulgate a regulation that is inconsistent with the text of the statute because intervening events produce an absurd, difficult, or problematic result.

The Decision:  Judge Jackson summarized her decision succinctly:

In sum, the Court finds that Congress spoke plainly, that Congress did not delegate authority to the FEC to narrow the disclosure requirement through agency rulemaking, and that a change in the reach of the statute brought about by a Supreme Court ruling did not render plain language, which is broad enough to cover the new circumstances, to be ambiguous.  The agency cannot unilaterally decide to take on a quintessentially legislative function; if sound policy suggests that the statute needs tailoring in the wake of [FEC v. Wisconsin Right to Life, Inc., 551 U.S. 449 (2007) (WRTL)] or [Citizens United v. FEC, 558 U.S. —, (No. 08-205, January 21, 2010) (Citizens United)], it is up to Congress to do it.

Background.  To oversimplify, Congress imposed restrictions on, and required disclosure of, certain contributions and expenditures by corporations and other organizations, including unions in the Bipartisan Campaign Reform Act (“BCRA”).  In WRTL, the Supreme Court struck down as unconstitutional a statutory prohibition of expenditures by corporations and unions for advertisements that did not constitute “express advocacy” or the “functional equivalent of express advocacy.”  The FEC adopted regulations to implement the Supreme Court’s decision in WRTL.  The regulation tracked the statutory reporting the sources of the funds used to make electioneering communications, but the FEC also changed the meaning.

The Supreme Court then decided Citizens United, completely invalidating the prohibition on the use of corporate and union treasury funds to finance electioneering communications, but upholding the disclosure provisions of the statute.  Thus, a statutory limitation was removed and the statutory disclosure requirement remained.

Congressman Van Hollen challenged the regulations under the Administrative Procedure Act (APA), claiming, among other things, that the FEC exceeded its authority.  The district court agreed and invalidated the regulation.

The Regulatory Impact:  The danger of statutory clarity and overbreadth lies in the agency’s inability to save the statutory purpose by regulation.  Here, the Supreme Court struck down limitations on political donations, leaving the statute’s plain disclosure language applicable to a much larger population of organizations.

Rules Applied:  Courts must determine whether a statute is clear and, if so, give effect to the statute.  If the statute is not clear, a court must defer to agency implementing regulation interpretation of that ambiguity.  In this case, the underlying statutes barred most corporations from certain electioneering and other political activities, and the remainder who could undertake those activities were required to report certain contributions.  When the restriction on corporate political activities was struck down as unconstitutional in Citizens United, the reporting requirements directly under the statute ballooned.  The FEC’s attempt to implement WRTL narrowly could only stand if the statute was ambiguous; otherwise plan statutory text was beyond the FEC’s authority to interpret.  While the application of the Supreme Court decisions is relatively new and the District Court decision “unprecedented,” the principle that the agency may not exceed the authority constitutionally delegated by Congress is well established.

The FEC is likely to seek further judicial review, I think, but further regulatory attempts may be futile as long as Judge Jackson’s decision stands.  Meanwhile, the administrative burden of disclosure has ballooned for corporations, unions, other organizations, and the FEC.

A Caution about a Common Problem:  Every regulatory agency faces this issue – how a number of different regulations are affected if a statute or related regulation is invalidated.  The Supreme Court’s pending decision on the constitutionality of Affordable Care Act (ACA) may loom large in regulatory development.  If the individual mandate is held unconstitutional and not severable from the remainder of the ACA, the Administration will need to rapidly rethink the efficacy of any regulations promulgated, at least in part, under the ACA.