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READER'S DIGEST ASSN., INC. v. FEC

March 19, 1981

The READER'S DIGEST ASSOCIATION, INC., Plaintiff,
v.
FEDERAL ELECTION COMMISSION, John W. McGarry, Frank P. Reiche, Joan D. Aikens, Thomas C. Harris, Robert O. Tiernan, Vernon W. Thomson, William F. Hildenbrand and Edmund L. Henshaw, Jr., as Members of the Federal Election Commission, Defendants



The opinion of the court was delivered by: LEVAL

OPINION AND ORDER

The Reader's Digest Association (RDA) sues to enjoin the Federal Election Commission (FEC) from proceeding with an investigation into whether RDA violated certain sections of the Federal Election Campaign Act of 1971, 2 U.S.C. § 431 et seq., "by making expenditures to disseminate to other media outlets video tapes of a computer reenactment of Senator Kennedy's accident at Chappaquiddick...." According to the RDA, the video tape was part of a study commissioned from an engineer, Raymond McHenry, an expert in auto accident reconstruction, as research for a Reader's Digest article on the accident that appeared in the February 1980 issue. RDA states that on January 14, 1980, it distributed copies of the February issue, along with a press release, the McHenry study, six copies of the video tape, and a tidal current study, to major television networks, local television stations, and other media outlets. The article and the results of the studies contained in it were discussed on network news shows, and the NBC broadcast included a 12-second segment of the video tape. Affidavit of Fulton Oursler, Jr., a Reader's Digest Managing Editor.

 In August, 1980, the FEC received a complaint alleging that RDA had violated the Act by making "an illegal corporate expenditure to negatively influence" the 1980 presidential election, based on RDA's purchase, in connection with the February 1980 article, of (1) a computer study of the speed at which Senator Kennedy's car was traveling when it crashed into the water; and (2) a study of the tides and currents in the area of Chappaquiddick Island, and (3) the production and distribution of video tapes of the computer reenactment to major media outlets. The Act, 2 U.S.C. § 441b(a), makes it illegal for "any corporation whatever ... to make a contribution or expenditure in connection with any" federal election or primary. Section 441b(b)(2) defines "contribution or expenditure" as:

 
"any direct or indirect payment, distribution, loan, advance, deposit or gift of money, or any services, or anything of value ... to any candidate, campaign committee or political organization, in connection with any (federal) election ..."

 The statute creates an exclusion for:

 
any news story, commentary or editorial distributed through the facilities of any broadcasting station, newspaper, magazine or other periodical publication, unless such facilities are owned or controlled by any political party, political committee, or candidate ...

 2 U.S.C. § 431(9)(B)(i).

 Pursuant to the statute, RDA was notified, and mailed a copy, of the complaint. RDA responded with a letter claiming that the article was protected by the First Amendment and the news story exemption of 2 U.S.C. § 431(9)(B)(i), and that "requiring (RDA) to respond substantively ... would impinge on its constitutional rights."

 Thereupon, on November 11, 1980, pursuant to 2 U.S.C. § 437g(a)(2), the FEC found "reason to believe" that RDA violated the statute, with regard to an expenditure to disseminate to other media the computer reenactment video tapes. The FEC's reason-to-believe finding did not mention the funding of background research nor the publication of the article itself. The FEC then sent a letter to RDA requesting answers to 15 questions and production of a copy of the video tape; the letter did not order that any reply be made, nor was any subpoena issued. The 15 questions concern the content of the video tape, how it was obtained, and what use RDA made of it. After receiving an extension of time in which to respond, RDA filed this suit and did not otherwise answer the letter. *fn1"

 Plaintiff claims the investigation is having, and will continue to have, a severe effect on its right to speak freely and comment on newsworthy events. RDA claims that since there is no time limit imposed by the Act or the regulations, the investigation may continue indefinitely and serves as a constant reminder that articles about political figures may result in governmental scrutiny and "interrogation," disclosure of news sources, and attendant economic burdens. RDA asserts that responding to the investigation will require a great deal of time, effort, and money, for attorneys' fees, searching documents, and preparing written responses, with the claimed result of making publishers more reluctant to take on controversial political stories. This, plaintiff claims, is a "chilling effect" prohibited by the first amendment.

 RDA also claims that the statute was not meant to regulate this type of activity. In support, RDA cites the news-story exemption noted above, 2 U.S.C. § 431(9)(B)(i), and the regulations issued pursuant to the statute, which provide that "any cost incurred in covering or carrying a news story, commentary, or editorial by a broadcasting station, newspaper, magazine, or other periodical publication is not an expenditure ..." 11 C.F.R. § 100.8(b) (2). RDA claims that its expenditures are excluded from the Act, and that these exclusions are required to avoid a conflict between the Act and the First Amendment. *fn2"

 The FEC contends that this investigation is at its most preliminary stage, at which point it has no detrimental effect on RDA. After this investigation is completed, the Office of the General Counsel can recommend that the FEC find probable cause to believe a violation occurred. 2 U.S.C. § 437g(a)(3). If that happens, RDA will be given a copy of the General Counsel's brief and an opportunity to reply, raising all factual and legal arguments. Id. After reviewing the briefs, the FEC can determine there is probable cause to believe a violation occurred. If probable cause is found, there is a mandatory requirement that the FEC try, for not less than 30 days, nor more than 90 days, to reach a voluntary agreement with the alleged violator. 2 U.S.C. § 437g(a) (4)(A)(i). If no agreement is reached, the FEC would then vote on whether to bring action in the district court, where the defendant would be entitled to a de novo trial. 2 U.S.C. § 437g(a)(6)(A). The FEC also emphasizes that it has not served a subpoena upon RDA; if it does, RDA could move to quash the subpoena.

 The FEC therefore contends both that the Act provides adequate remedies at law for plaintiff's claim, thereby obviating the need for equitable relief, and that the claim lacks ripeness. The test of ripeness for review of agency determinations comes from Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S. Ct. 1507, 18 L. Ed. 2d 681 (1967). This is a two-part test, requiring the Court to evaluate (1) the fitness of the issues for judicial decision, including a determination of whether the issue tendered is legal or factual, and whether the conduct is "final agency action" within § 10 of the Administrative Procedure Act, 5 U.S.C. § 704; and (2) the hardship to the parties of withholding court consideration.

 In the recent case of Federal Trade Commission v. Standard Oil Company of Calif., 449 U.S. 232, 101 S. Ct. 488, 66 L. Ed. 2d 416 (1980) ("Socal "), the Supreme Court held that an FTC complaint, finding reason to believe that Socal was violating the FTCA, was not final agency action and therefore was not ripe for judicial review under Abbott. Under the relevant provisions of the FTCA, the respondent could present evidence at a hearing before an Administrative Law Judge, whose decision would be appealable to the full FTC. If the FTC entered a cease and desist order, the respondent would not be bound by the decision until judicial review was complete or the opportunity for review had lapsed. The reason to believe finding was therefore "a prerequisite to a definitive agency position ... but itself ... a determination only that adjudicatory proceedings will commence." The Court found that the "reason to believe" complaint did not have the legal force or effect upon the defendant's daily business that the court had found in Abbott, where the defendants would either "risk serious criminal and civil penalties" for non-compliance, or have to change all their labels, advertisements, and printed materials to ...


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