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FULANI v. BENTSEN

September 13, 1994

DR. LENORA B. FULANI, LENORA B. FULANI FOR PRESIDENT and MARIA ELIZABETH MUNOZ, Plaintiffs,
v.
LLOYD BENTSEN, Secretary of the Treasury, and MARGARET RICHARDSON, Commissioner of Internal Revenue, Defendants.



The opinion of the court was delivered by: SHIRLEY WOHL KRAM

 SHIRLEY WOHL KRAM, U.S.D.J.

 Plaintiffs Dr. Lenora B. Fulani ("Fulani"), an independent candidate for President of the United States in the 1992 election, her running mate, Maria Elizabeth Munoz ("Munoz"), and her campaign committee, Lenora B. Fulani for President (collectively, "plaintiffs") brought this action seeking an order revoking the tax-exempt status of the Commission on Presidential Debates (the "CPD"), a District of Columbia not-for-profit organization. Presently before the Court is the defendants' motion, pursuant to Federal Rules of Civil Procedure 12(b)(1), (6), (7) and 19, to dismiss the complaint for lack of subject matter jurisdiction, failure to state a claim upon which relief can be granted and failure to join a party. For the reasons that follow, defendants' motion is granted.

 BACKGROUND1

 I. Section 501(c)(3)

 Federal Election Commission ("FEC") regulations provide that nonpartisan candidate debates *fn2" may be staged by, inter alia, nonprofit organizations that are exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3) ("Section 501(c)(3)"). See 11 C.F.R. § 110.13(a).

 Section 501(c)(3), in turn, exempts from federal income taxation organizations operating exclusively for charitable or educational purposes. See 26 U.S.C. § 501(c)(3); Fulani v. League of Women Voters Educ. Fund, 882 F.2d 621, 623 (2d Cir. 1989). To be eligible for Section 501(c) status, however, the organization must not:

 
Participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

 26 U.S.C. § 501(c)(3). The Treasury Department has defined activities that constitute participation or intervention in a political campaign on behalf of, or in opposition to a candidate to include "the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate." 26 C.F.R. § 1.501(c)(3)-1(c) (3)(iii).

 On February 19, 1987, the Democratic and Republican parties incorporated the CPD under the District of Columbia Non-Profit Corporation Act. The CPD's Articles of Incorporation provide, inter alia, that the corporation is not authorized to conduct any activities that would prevent it from qualifying for exemption under Section 501(c)(3). At the time of its incorporation, the CPD described itself as a "bipartisan, non-profit organization" committed to "strengthening the two-party system." To further this purpose, the CPD sought to become the sole sponsor of all general election presidential debates.

 II. The 1988 Election

 On June 24, 1987, Fulani publicly announced her candidacy for President of the United States as an independent party in the 1988 general election. That year, the League of Women Voters Education Fund (the "League"), a tax-exempt organization under Section 501(c)(3), was the sole sponsor of two presidential primary debates. Pursuant to the League's criteria for selection of debate participants, only Democratic candidates were invited to participate in the Democratic primary debate, and only Republican candidates were invited to participate in the Republican primary debate. In December 1987, Fulani requested that the League invite her to participate in its presidential primary debates. The request was denied on the grounds that Fulani was not a publicly-announced candidate for either the Democratic or Republican parties.

 As a result, in April 1988, Fulani, together with her running mate and campaign committee, moved for a temporary restraining order and preliminary injunction, seeking, inter alia, to compel the government to cause the League to conduct the debates in a nonpartisan manner or, in the alternative, to revoke the League's Section 501(c)(3) status. See Fulani v. League of Women Voters Educ. Fund, 684 F. Supp. 1185 (S.D.N.Y. 1988), aff'd, 882 F.2d 621 (2d Cir. 1989). Finding that Fulani had failed to establish either a likelihood of success on the merits or sufficiently serious questions going to the merits, the Court denied plaintiffs' motion for a preliminary injunction. The Court also dismissed the complaint against the federal defendants. On appeal, the Second Circuit affirmed the district court's dismissal of the action on the merits. See Fulani v. League of Women Voters Educ. Fund, 882 F.2d at 621 ("Fulani I"). As an initial matter, however, the Court determined that Fulani had standing to compel the revocation of the League's tax-exempt status. In concluding that Fulani had standing to assert her claims, the Court stated that:

 
The loss of competitive advantage flowing from the League's exclusion of Fulani from the national debates constitutes sufficient "injury" for standing purposes, because such loss palpably impaired Fulani's ability to compete on an equal footing with other significant presidential candidates.

 Id. at 626. The Court next stated that Fulani's asserted injury, i.e., the partisan restriction of the opportunity to communicate her political ideas to the voting public, was "'fairly traceable' to her exclusion from the League-sponsored debates." Id. at 627. Finally, the Court concluded that:

 Id. at 628.

 After winning the primary elections, George Bush and Michael Dukakis, the respective Republican and Democratic presidential nominees, negotiated a Memorandum of Understanding (the "1988 Memorandum") with respect to the number, format, timing and sponsorship of two general presidential debates and one general vice-presidential debate. The 1988 Memorandum provided that one presidential debate be offered to the CPD for sponsorship and the other debate be offered to the League. After initially accepting the offer to sponsor a presidential debate, however, the League revoked its acceptance on the grounds that the Democratic and Republican candidates were attempting to control the format of the debates. As a result, the CPD sponsored both presidential debates during the 1988 election.

 Fulani ran for President as an independent and minor-party candidate. The CPD did not invite Fulani, or any other independent candidate, to participate in the 1988 debates, however, and failed to publish criteria to be used in determining whether an independent candidate would be invited to participate in the debates. Accordingly, on August 5, 1988, Fulani wrote to the CPD to request a statement of criteria for determining whether an independent candidate would be invited to participate in the debates. On August 30, 1988, the CPD responded that it would not invite any candidate who did not have a "realistic chance of winning the election" (the "Selection Criteria"). Thereafter, on September 19, 1988, the CPD denied Fulani's application to be included in the 1988 debates.

 III. The District of Columbia Proceedings

 Accordingly, on September 20, 1988, Fulani, her running mate, Barbara Taylor, and her campaign committee, Lenora B. Fulani's Committee for Fair Elections, brought an action for injunctive relief and damages before the United States District Court of the District of Columbia against defendants Nicholas F. Brady, Secretary of the Treasury, and Lawrence B. Gibbs, Commissioner of Internal Revenue. *fn3" See Fulani v. Brady, 729 F. Supp. 158 (D.D.C. 1990), aff'd, 290 U.S. App. D.C. 205, 935 F.2d 1324 (D.C. Cir. 1991), cert. denied, 116 L. Ed. 2d 812, U.S. , 112 S. Ct. 912 (1992). Fulani also filed separate motions for temporary restraining orders or preliminary injunctions seeking either to enjoin the CPD-sponsored debates from going forward or to compel the CPD to include Fulani in the debates.

 The district court denied Fulani's motion for injunctive relief based on the "'public interest in allowing the presidential debates to go forward and in preserving an orderly political process.'" Id. at 160. The court subsequently granted the defendants' motion to dismiss on the grounds that plaintiffs lacked standing to challenge the CPD's tax-exempt status. The court first set forth the three-prong requirement of standing, stating that a plaintiff must allege "(1) a 'personal injury' that is (2) 'fairly traceable to the defendant's allegedly unlawful conduct,' and (3) which is 'likely to be redressed by the requested relief.'" Id. (quoting Allen v. Wright, 468 U.S. 737, 751, 82 L. Ed. 2d 556, 104 S. Ct. 3315 (1984)). Applying this test, the district court found that "Fulani has not identified a palpable and nonspeculative injury for standing and Article III purposes." 729 F. Supp. at 163. The court held further that Fulani's asserted injury -- the loss of media exposure, voter recognition and support resulting from her exclusion from the debates -- was not traceable to the CPD's tax-exempt status. Finally, with respect to redressability, the court stated that "in light of the absence of any judicially cognizable injury and the lack of causation between any injury and the CPD's 501(c)(3) tax status, the inability of this Court to redress Fulani's injury is obvious." Id. at 164.

 The Court of Appeals for the District of Columbia, over the dissent of Chief Judge Mikva, affirmed the dismissal of the action on the grounds that Fulani lacked standing to challenge the CPD's Section 501(c)(3) tax-exempt status. See Fulani v. Brady, 290 U.S. App. D.C. 205, 935 F.2d 1324 (D.C. Cir. 1991), cert. denied, 116 L. Ed. 2d 812, U.S. , 112 S. Ct. 912 (1992) ("Fulani II"). As an initial matter, the D.C. Circuit noted that third-party litigation of an organization's tax-exempt status "is inconsistent with, if not precluded by, the statutory scheme created by Congress." See Fulani v. Brady, 809 F. Supp. 1112, 1117 (S.D.N.Y. 1993). The Court next considered Fulani's assertion of "competitor standing" to challenge the CPD's tax-exempt status. Rejecting the application of "competitor standing" to Fulani's claims, the Court concluded that "where a party is seeking simply to remove a third party's entitlement to a tax exemption, the exemption likely will not bear sufficient links of traceability and redressability to the alleged injury to warrant standing under Allen v. Wright, [468 U.S. at 737]." Fulani v. Brady, 935 F.2d at 1328.

 The D.C. Court next examined the Second Circuit's holding on the standing issue in Fulani I. Disagreeing with the Second Circuit's reasoning, the D.C. Circuit stated that:

 
By taking the FEC regulation as a given . . . the Second Circuit ignores the fact that the alleged traceability and redressability may be found in League of Women Voters -- and could be found in the present case -- only in ...

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