The opinion of the court was delivered by: STANTON
The LaRouche Campaign ("TLC"), TLC's treasurer Edward Spannaus, Frederic Henderson, Patrick K. Barrett and Terry Edward Allen brought this action against the defendant Federal Election Commission ("FEC" or "Commission") for declaratory and injunctive relief, alleging that the Commission's investigative, enforcement and other regulatory actions against§ TLC are motivated by bad faith and are interfering with plaintiffs' campaign activities and infringing their First Amendment rights. The Commission moves pursuant to Fed. R. Civ. P. 56(b) for summary judgment on the grounds that plaintiffs cannot demonstrate either (1) bad faith or an improper purpose on the part of the Commission or (2) an infringement of their First Amendment rights. The motion is granted.
Plaintiff TLC is the principal authorized campaign committee for the 1984 presidential-primary campaign of Lyndon H. LaRouche, Jr., who was a candidate for the Democratic Party nomination for President of the United States in 1984. Plaintiff Spannaus is the Treasurer of TLC, and is responsible for reporting TLC contributions and expenditures under the Federal Election Campaign Act of 1971, as amended (2 U.S.C. § 431 et seq.) ("the Act"); plaintiff Henderson is a volunteer worker for TLC, who solicits campaign contributions; and plaintiffs Barrett and Allen are contributors to TLC and otherwise support its campaign activity. Defendant FEC is the agency of the federal government charged with the administration and civil enforcement of the Act and of the Presidential Primary Matching Payment Account Act, as amended (26 U.S.C. § 9031 et seq.) ("the Matching Fund Act").
On October 21, 1983 TLC registered with the FEC as the principal authorized campaign committee to support the candidacy of Lyndon H. LaRouche for the 1984 Presidential nomination of the Democratic Party. It applied in December 1983 to the FEC for certification of eligibility to receive federal primary matching funds for use in the 1984 campaign. On January 26, 1984 the Commission, following the recommendation of its General Counsel, preliminarily decided to deny certification of eligibility to TLC. TLC appealed the determination to the United States Court of Appeals for the District of Columbia, and on April 4, 1984 that appeal was dismissed. The Commission did certify TLC as eligible to receive federal primary matching funds on April 12, 1984. TLC has received approximately $500,000 in such funds.
From July 23 to August 21, 1984 the Commission conducted a routine audit of TLC, as required by 26 U.S.C. § 9038(a) ("the Commission shall conduct a thorough examination and audit of the qualified campaign expenses of every candidate and his authorized committees who received [matching funds]"). On November 15, 1984 the Commission approved an interim audit report for TLC, see 11 C.F.R. § 9038.1(c)(1) ("[a]fter the completion of the fieldwork [portion of the audit] . . . the Commission will issue an interim audit report to the candidate and his or her authorized committee"), which notified TLC that "[a] matter noted during the audit was referred to the Office of the General Counsel" for review and possible investigation. The Commission received TLC's response to the report on December 19, 1984. See 11 C.F.R. § 9038.1(c)(2) ("[t]he candidate . . will have an opportunity to submit, in writing, . . . legal and factual material disputing or commenting on the . . . interim audit report").
Between about October 1, 1984 and January 16, 1985, the date plaintiffs filed this law suit, the Commission notified Spannaus by letter of the opening of ten Matters Under Review ("MURs")
involving possible violations of the Act and the Matching Fund Act by plaintiffs TLC and Spannaus. Eight of those MURs are complaint-generated, i.e., based on sworn complaints various persons have filed with the Commission, and two (numbers 1797 and 1852) are internally-generated, i.e., based on findings made by the Commission in the normal course of performing its functions. See 2 U.S.C. 437g(a)(2) ("[i]f the Commission, upon receiving a complaint . . . or on the basis of information ascertained in the normal course of carrying out its supervisory responsibilities, determines . . . that it has reason to believe that a person has committed, or is about to commit, a violation of this Act or [the Matching Fund Act], the Commission shall . make an investigation of such alleged violation . . .").
The Commission opened MUR 1797 based in part upon a letter it received, which indicated both that TLC might have accepted from the letter's author contributions in excess of the amount permitted by the Act and that TLC might have accepted contributions from a corporation, also in violation of the Act. Although the letter was unsworn and thus could not be the basis of a complaint-generated MUR, the Commission found reason to believe plaintiffs had violated the Act based on the letter and on information found in a review of TLC's reports of receipts and expenditures on file at the FEC.
The Commission opened MUR 1852 based upon the information referred to it by the Audit Division during its audit of TLC and upon information brought to the attention of the General Counsel's Office in the form of "proper and improper complaints and other inquiries." FEC Local Rule 3(g) Statement, P 17.
A letter notifying TLC of the Commission's "reason to believe" finding in MUR 1797 was mailed to TLC on October 2, 1984. A letter notifying it of the "reason to believe" finding in MUR 1852 was allegedly mailed on December 21, 1985 but plaintiffs claim they did not receive that letter and were not formally notified of the MUR until December 29, 1984, after several TLC contributors informed TLC they were being questioned by FEC investigators and TLC's attorney telephoned the Commission to ask why it was approaching the contributors.
In connection with MUR 1852 the Commission mailed to TLC a subpoena for documents and an order to answer interrogatories. It also mailed contributor verification letters and questionnaires to a number of individuals who were reported by TLC to be contributors to the committee, including plaintiffs Barrett and Allen. TLC and Spannaus made a timely motion to quash or modify the subpoena on the grounds that it was without statutory authority, in bad faith and overly broad. The motion was denied by the Commission on January 31, 1985. The FEC has applied to this court pursuant to 2 U.S.C. § 437d(b) for enforcement of that subpoena. That petition is decided separately today in Fed. Elec. Com'n v. TLC, M18-304 (LLS) and is not under consideration here.
Since the filing of this law suit, the Commission has determined pursuant to 2 U.S.C. 437g(a)(2) that there is no reason to believe that violations of the Act have occurred with respect to three of the original ten MURs, and found reason to believe violations occurred in five of the MURs and merged those matters with MUR 1852. The Commission also notified plaintiffs Spannaus and TLC of the opening of twelve additional MURs (ten complaint-generated and two internally-generated), four of which have since been closed when the Commission found no reason to believe that violations had occurred. It found reason to believe violations of the Act had occurred in seven of the MURs, and merged six of them with MUR 1852.
Plaintiffs claim that the Commission transgressed its statutory guidelines in its investigations, and even where it has followed statutory procedures its actions are motivated by bad faith and have infringed plaintiffs' First Amendment rights.
A. Summary Judgment Standards
Summary judgment will be granted where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Schwabenbauer v. Board of Education et al., 667 F.2d 305, 313 (2d Cir. 1981). "Not only must there be no genuine issue as to evidentiary facts, but there must also be no controversy as to the inferences to be drawn from them." Ibid.; Cali v. Eastern Airlines, Inc., 442 F.2d 65, 71 (2d Cir. 1971)(summary judgment is inappropriate where the undisputed facts disclose competing material inferences as to which reasonable minds can differ). "In determining whether or not there is a genuine factual issue, the court should resolve all ambiguities and draw all reasonable inferences against the moving party." Schwabenbauer v. Board of Education, 667 F.2d at 313; Goshen Litho, Inc. v. Kohls, 582 F. Supp. 1561, 1563 (S.D.N.Y. 1983). "The moving party is 'entitled to judgment as a matter of law' [where] the non-moving party has failed to make a sufficient showing on an essential element of [its] case with respect to which [it] has the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986).
A material issue of fact alleged here is the Commission's motive or intent concerning its investigations of plaintiffs. Plaintiffs assert that the Commission's intent was to harass them. Summary judgment is usually inappropriate where "'the inferences which the parties seek to have drawn deal with questions of motive, intent, and subjective feelings and reactions.'" Cali v. Eastern Airlines, Inc., 442 F.2d at 71, (quoting Empire Electronics Co. v. United States, 311 F.2d 175, 180 (2d Cir. 1962)). Nevertheless, "it is an overstatement to contend that summary judgment may never be justified in such cases." Morgan v. Prudential Group, Inc., 527 F. Supp. 957, 959 (S.D.N.Y. 1981), aff'd 729 F.2d 1443 (2d Cir. 1983). It is appropriate "when the movant party can show that the nonmovant party's interpretation [of the facts] is unreasonable". See Goshen Litho, Inc. v. Kohls, 582 F. Supp. at 1565; New York State Energy Research and Development Authority v. Nuclear Fuel Services, Inc., 666 F.2d 787 (2d Cir. 1981).
B. Plaintiffs' Allegations, and their Merits
1. Matching Fund Certification
Plaintiffs claim that there was no legal basis for the Commission's initial decision to deny TLC eligibility for matching funds, since TLC's application for them fully complied with the requirements of the statute. Moreover, plaintiffs claim the denial was improper because certain FEC employees involved in the review of TLC's application openly disagreed with LaRouche's political and social ideas. Plaintiffs assert that as a result of the Commission's decision, LaRouche was denied placement on the ballot for the North Carolina primary election and his campaign was "unable to commence its activities on the scale and to the extent that it otherwise would have been allowed." Plts. Mem., p. 3.
The Commission's decision appears legally sound.
Its initial recommendation to deny was based upon the failure by LaRouche and his 1980 campaign committee, Citizens for LaRouche, to pay to the FEC a $54,671.84 repayment determination from LaRouche's 1980 campaign and a $15,000 civil penalty. See Complaint, P 25; FEC Exh. 1, Mem. to Commission Concerning Eligibility of LaRouche to Receive Funds. To be eligible for funds, a candidate must agree to pay the amounts that the FEC determines are owed based on its audits of the candidate's campaign. 26 U.S.C. 9033(a)(3). LaRouche submitted such an agreement in connection with his 1984 campaign, but the FEC found it to be inadequate because LaRouche had failed to honor a virtually identical agreement made in connection with his 1980 presidential campaign. See Exh. 1, Statement of Reasons, p. 11 ("to deem Mr. LaRouche eligible to receive such matching funds on the basis of certifications and agreements upon which the Commission; cannot depend would be to undermine the entire purpose of the eligibility requirements established at 26 U.S.C. 9033 and in the Commission's regulations.")
In April 1984 the FEC did certify TLC to receive federal matching funds, after LaRouche and his former campaign committee paid in full the repayment and civil penalty amounts. See Complaint, P 27.
In a suit by LaRouche challenging his lack of placement on the North Carolina ballot as a result of the initial denial of certification, the Court of Appeals for the Fourth Circuit held that since the FEC legitimately denied LaRouche eligibility to receive funds, the North Carolina State Board of Election properly decided not to put his name on the ballot. LaRouche v. State Board of Elections, 758 F.2d 998, 1000 (4th Cir. 1985).
Plaintiffs contend that the decision to deny TLC eligibility was motivated by bad faith since certain FEC employees involved in the review of TLC's application for eligibility openly disagree with LaRouche's ideas. The sole basis for this contention is testimony by an FEC employee that he and other FEC employees in the Audit Division "don't see eye-to-eye" with LaRouche. Plts. Exh. B, Stoltz Deposition, p. 198. Mr. Stoltz continued "[o]f course, I don't see eye-to-eye with many of the candidates on many things, and I don't think that I would be unusual in that sense." Ibid. Absent further connection with the Commission's determination, this testimony fails to raise an issue of fact regarding the propriety of the FEC's handling of the application.
The FEC conducted a routine audit of TLC in July and August 1984. Plaintiffs claim that (1) there was an inordinate delay of three months between the time the fieldwork portion of the audit was completed and the date the interim audit report was provided to TLC; (2) the report TLC received stated that "[a] matter noted during the audit was referred to the Office of General Counsel", yet TLC never received any factual specifics as to the nature of the matter referred; and (3) the FEC began ...