appeared that no settlement could be reached that the FEC filed this suit. Moreover, since this action predominately involved issues of law, neither party should have expected the proceedings to be particularly lengthy or complex.
Further, review of an agency's action, such as the FEC's, is frequently prompt and uncomplicated, as a court must uphold the agency action unless the agency's interpretation is found to be "unreasonable." Chevron, U.S.A. Inc. v. National Resources Defense Council, Inc., 467 U.S. 837, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984).
(iii) Consistency of the Government's Position
In Spencer, the D.C. Circuit held that if the Government was found to have "'singled out' particular private parties . . . [and] adopted a general policy in dealing with cases of a given variety but taken a different position inexplicably or maliciously in one or a few cases," it was necessary for the Government to present an especially powerful justification for its position in order to avoid paying the prevailing party's attorneys' fees and expenses. Spencer, 712 F.2d at 560-1. The FEC's position in the underlying action manifested none of the above attributes.
Since the FEC had not previously interpreted its regulation, and had not attempted to classify organizations as either similar to the specifically prohibited "list brokers" or to the explicitly exempted "newspapers," prior to AO 1986-25 issued to PCA, it is not possible that the FEC's position was inconsistent. Moreover, the FEC's position in this action greatly resembled the position of the plaintiff in the primary precursor to this case, NRCC. NRCC, 795 F.2d 190 254 U.S. App. D.C. 145.
Furthermore, in this case, the Government never changed its position during the course of the proceedings or acknowledged the merit of its adversary's claims. In Myers, where three of the four consolidated plaintiffs were awarded attorneys' fees, the Secretary of Health and Human Services or the Appeals Council for the agency ultimately awarded Social Security benefits which originally had been denied by the Secretary.
Myers, 916 F.2d at 662-64. This implicit admission that the Secretary improperly denied benefits lends significant weight to the conclusion that the Government's position was not "substantially justified." In this case, however, the FEC neither capitulated, nor adopted a different or more harsh position with PCD than with other possible violators. Accordingly, this Court finds that the FEC's position satisfies each prong of the Spencer test.
Beyond the Spencer analysis, the Court finds that the position adopted and pursued by the FEC had a "reasonable basis both in law and fact" as "could satisfy a reasonable person." Pierce, 487 U.S. at 565.
The Court of Appeals found both the FEC's interpretation of 2 U.S.C. § 438(a)(4) and the FEC's application of that interpretation to PCD to be "unreasonable." Consequently, PCD would have this Court adopt the conclusion that the FEC's position cannot satisfy the "reasonable" standard established in Pierce. But it is a well-established rule that a court defers to an agency's interpretation unless it finds it to be "unreasonable." See Chevron, U.S.A. Inc. v. National Resources Defense Council, Inc., 467 U.S. at 844 (1984). Thus, using PCD's analysis, any decision overruling an agency's interpretation would automatically result in the Government paying attorneys' fees and expenses to the other party. As Spencer concluded, however, Congress did not intend 28 U.S.C. § 2412(d)(1)(A) to be an automatic fee-shifting device. Spencer, 712 F.2d at 550. Accordingly, this Court may not terminate its inquiry with the Court of Appeals' conclusion that the FEC's interpretation was "unreasonable," but rather, the Court must examine the legal basis for the FEC's interpretation of the Regulation and the factual basis for the FEC's determination that PCD was akin to a "loan broker."
As set forth above, the FEC adopted its interpretation of the Regulation and its corresponding litigation position in the absence of any contrary, or even clear, guidance from either Congress or the courts. Moreover, there was never any indication prior to this litigation that the FEC's interpretation was unreasonable. In fact, the NRCC Court discussed the Regulation, yet never suggested that the Regulation's "principal purpose" clause
(the FEC's interpretation of which the Court of Appeals subsequently found "unreasonable") would affect the reasonableness of the FEC's interpretation, or that the clause varied from congressional intent.
NRCC, 795 F.2d at 193.
Further, in adopting the Regulation and issuing AO 1986-25, the FEC was forced to reconcile the two conflicting goals of FECA, namely "total" disclosure and the protection of public-spirited contributors. In trying to accommodate these competing objectives, the FEC fashioned a distinction between use of contributor information which was "incidental" to sales, and use for which the "primary focus" was creating sales (the former deemed permissible and the latter prohibited). AO 1986-25, at 4.
Ultimately, the Court of Appeals found this distinction to be "unreasonable," as it impermissibly narrowed the "media exception" of the Regulation and the "newspaper exception" of 2 U.S.C. § 438(a)(4).
Federal Election Com., 943 F.2d. at 196. The Court of Appeals thus placed greater emphasis on the importance of public disclosure than the FEC had, but the FEC had not abandoned the pursuit of disclosure in its interpretation; it simply had attempted to establish a compromise, alleviating the inherent tension between the two goals. Given the conflict between FECA's terms, the lack of congressional and judicial guidance, the ambiguous gap which the FEC was required to fill, and that the legislative history only established a "newspaper exception," not an exception encompassing "similar communications,"
this Court finds that the FEC's position had a reasonable basis in law and was "substantially justified."
The FEC's factual determination that PCD's activities were prohibited under 2 U.S.C. § 438(a)(4) was also reasonable. The legislative history suggests a broad continuum along which permitted and prohibited activities are to be classified, but Congress failed to indicate how particular classifications should be determined. The NRCC Court found FECA "ambiguous" as to which activities were similar to newspapers and which were similar to list brokers and provided that the FEC was the proper body to determine an activity's permissibility. NRCC, 795 F.2d at 192.
Relying upon the following factors, the FEC reasonably characterized PCD as akin to prohibited list brokers: (i) the list format in which the information was distributed; (ii) the individualization and specialization of the lists available to accommodate PCD's clients' needs; (iii) PCD was incorporated exclusively for the purpose of advertising, marketing, and selling printed compilations of the FEC information; (iv) political parties or candidates and-political consultants -- clients who reasonably could be expected to make solicitations -- comprised two-thirds of PCD's customers; and (v) during the FEC's investigation of PCD's customers, two customers indicated that they had intended to use PCD's list to solicit money for future campaigns. Federal Election Com., 753 F. Supp. at 1130.
The Court of Appeals found that because only two of PCD's clients had purchased the reports for solicitation purposes and neither had actually used the lists for those purposes, PCD's activities constituted "similar communications," exempted under the Regulation's "media exception." But that some of PCD's clients were interested in the lists for the exact purpose prohibited by 2 U.S.C. § 438(a)(4) indicates that the FEC did have a reasonable basis in fact to believe that PCD's activities may have violated the prohibition. Although PCD's lists did not contain street addresses or telephone numbers, they were hardly useless to a buyer aiming to make solicitations based on the information contained. Contributors' names, towns, states, and zip codes, and occasionally occupations, were distributed along with the amount of the respective contributions. Given this information, it would be quite simple to gather the missing information or contact the people despite its absence. Additionally, that a warning existed is not dispositive, as it is certainly conceivable that list brokers, clearly prohibited enterprises under 2 U.S.C. § 438(a)(4), could also include a warning in an effort to limit their own liability.
Had PCD distributed a standard list of contributors' names and donations, as well as other information concerning political committees' funding, spending, activities, and had PCD's clients been primarily professors and research institutes, the FEC might not have been "substantially justified" in arguing that PCD's activities violated the "commercial purpose" prohibition. But PCD's actual lists and clients were not nearly so definitively exempted.
Finally, the "incident to" and "primary focus" terms used in AO 1986-25 which led the Court of Appeals to find the FEC's interpretation to be "unreasonable" and contrary to the general purpose of FECA, were not the sole factors inducing the FEC to file suit against PCD. while the FEC did find PCD's use of the FEC records to be more than incidental to sales, the FEC grouped PCD with "list brokers," rather than with "similar communications" for additional reasons as well. The factors enumerated above, concerning the format of PCD's product, its clients, and its exclusive purpose, also supported the PCD's "list broker" classification. These factors may have reasonably led the FEC to the same conclusion, even in the absence of the flawed "incident to""primary focus" distinction. Consequently, this Court finds that the FEC's position that PCD was "actively akin" to list brokers, rather than newspapers, was reasonably based in fact, and thus, "substantially justified."
This Court further rejects PCD's contention that the Court of Appeals' opinion, which was "sharply critical of the FEC's argument," precludes a finding that the FEC's position was substantially justified. Memorandum of Law In Support of Defendant's Application For An Award Of Attorneys' Fees And Litigation Costs, at 4-5. PCD's argument effectively ignores the Supreme Court's decision in Pierce. Pierce held that even a "string of losses" or a "string of successes" could only be "indicative" of whether the government's position was "substantially justified." Pierce, 487 U.S. at 565. Such a rule of law certainly would not permit this Court to find that a single decision against the FEC by the Court of Appeals necessitates, or even suggests, a finding that the FEC was not "substantially justified." PCD's argument is particularly weak in light of this Court's earlier decision favoring the FEC, which at the very least invites doubt to the proposition that the government's position was not "justified to a degree that could satisfy a reasonable person." Pierce, 487 U.S. at 565. Nor does the Court of Appeals' deciding the case on summary judgment indicate that the FEC was not "substantially justified," as Pierce held that where "the dispute centers upon questions of law rather than fact," the "objective fact that the merits were decided at the pleadings stage" only proves that the judge was "efficient," not that the Government had a weak position. Pierce, 487 U.S. at 568-69. Accordingly, PCD's argument does not alter this Court's finding that the FEC was "substantially justified" under Pierce and the Spencer test.
III. Appropriate Monetary Award
As this Court finds that no attorneys' fees and expenses should be awarded under 28 U.S.C. § 2412(d)(1)(A), there is no need to determine the appropriate hourly rate to be afforded to PCD's attorneys.
For the reasons set forth above, the Court finds that PCD's application for an award of attorneys' fees and costs, pursuant to the Equal Access for Justice Act, was untimely and is thus denied. The Court further finds that even if the application was timely, the award would be denied, as the FEC was "substantially justified" in bringing suit against PCD.
SHIRLEY WOHL KRAM
UNITED STATES DISTRICT JUDGE
DATED: New York, New York
July 30, 1992