United States District Court, N.D. Illinois
January 21, 2004.
COX FOR U.S. SENATE COMMITTEE, INC, and JOHN H. COX, Plaintiffs,
FEDERAL ELECTION COMMISSION, Defendant
The opinion of the court was delivered by: GEORGE LINDBERG, Senior District Judge
MEMORANDUM AND ORDER
On May 30, 2003, Plaintiffs Cox for U.S. Senate Committee, Inc.
("Committee") and John H. Cox ("Cox") (collectively, "Plaintiffs") filed
their four-count complaint for declaratory and injunctive relief.
Plaintiffs' complaint, inter alia, asks this Court to: (1)
declare that the penalties set forth in 11 C.F.R. § 111.44 are
unconstitutional, (2) enjoin Defendant Federal Election Commission from
enforcing its April 30, 2003 Final Determination and its assessment of a
civil money penalty in the amount of $22,150.00, and (3) set aside
Defendant's April 30, 2003 Final Determination and vacate Defendant's
assessment of the aforementioned penalty.
Plaintiffs and Defendant have filed cross-motions for summary judgment.
Plaintiffs' motion is hereby denied and Defendant's motion is hereby
Legal Standards Summary Judgment
It is well-established that "[c]ross-motions for summary judgment are
the standard method for presenting a case to a district court for
decision on the record compiled by the administrative tribunal that the
court is reviewing." Dale M. v. Bd. of Educ. of Bradley-Bourbonnais
High Sch. Dist., 237 F.3d 813, 816 (7th Cir. 2001) (citations
omitted). This Court will grant summary judgment when "there is no
genuine issue as to any material fact and . . . the moving party
is entitled to a judgment as a matter of law." Fed.R.Civ.P.
56(c); In re Chambers, 348 F.3d 650, 654 (7th Cir. 2003) ("All
facts and inferences" are viewed in the light most favorable to each
nonmoving party. . . .") (citation omitted).
Factual and Procedural Background
Although the parties' statements of material facts are quite similar,
each statement will be presented individually so as to avoid confusion as
to whether the parties have established that summary judgment is
appropriate in this case.
I. Statement of Material Facts Supporting Plaintiffs' Motion
Cox was a candidate for election to the United States Senate in 2002,
and the Committee was the principal campaign committee supporting his
candidacy. At all relevant times, Cox served as Treasurer of the
Committee. Defendant is an independent, federal administrative agency
responsible for enforcing the Federal Election Campaign Act ("FECA") and
investigating violations of the same.
Cox's candidacy was supported primarily by Cox's personal loans to the
Committee. Cox publicly stated on several occasions that he had pledged
one million dollars of his own funds to his campaign. In actuality, he
lent in excess of one million dollars to the Committee. Cox's loans were
made over a period of one year and at no time did Cox attempt to conceal
or hide his personal contributions.
From February 28, 2002 to March 16, 2002, the Committee was required to
report any campaign contribution in excess of $1,000.00 within
forty-eight hours of the Committee's receipt of the same ("48-Hour
Reporting Period"). Cox delegated responsibility for filing reports
during the 48-Hour Reporting Period to a Committee employee, Cheryl
Warren. Two loans from
Cox to the Committee, one for $75,000.00 and another for $144,
507.47, were not reported as required by Defendant even though they were
received during the 48-Hour Reporting Period. These omissions were
inadvertent in nature and neither of the loans was extraordinary or
unusual. Moreover, both loans were subsequently reported by the Committee
in its post-election April 2002 Quarterly Report.
The $75,000.00 loan was received by the Committee in the form of a
check on March 5, 2002. Although Warren received the check from Cox, she
was uncertain as to whether the loan needed to be reported during the
48-Hour Reporting Period. Warren did not take steps to determine whether
such reporting was required and failed to bring the issue to Cox's
attention. Instead, she spent the better part of March 6, 2002 consoling
a fellow Committee employee and helping him to find temporary lodging
after his apartment had burned in a fire earlier that day.
The $144,507.47 loan was wired directly to the Committee's bank
account on March 12, 2002. The wire confirmation was mailed directly to
the Committee and never provided to Warren. As such, Warren overlooked
and, therefore, did not report the March 12, 2002 loan. Cox was unaware
than this loan was not reported within forty-eight hours of receipt by
On September 18, 2002, Defendant found reason to believe that
Plaintiffs violated 2 U.S.C. § 434(a)(6)(A)*fn1 for failing to
properly report three contributions of $1,000.00 or more that
were received during the 48-Hour Reporting Period. The three
unreported contributions totaled $224,507.47. Two of these contributions
were the above-described loans from Cox to the Committee. Based on the
schedule of civil money penalties set forth in
11 C.F.R. § 111.44*fn2 ("Schedule"), a penalty of $22,750.00
($100.00 for each non-filed contribution, plus 10% of the dollar amount
of the contributions not timely reported) was calculated.
Plaintiffs responded to Defendant's September 18, 2002 finding on
October 25, 2002, arguing, inter alia, that (1) the Committee's
failure to timely report the loans was inadvertent and (2) the Schedule
was excessive and punitive. Thereafter, Defendant's Office of
Administrative Review recommended on March 27, 2003 that a final
determination be made that Plaintiffs violated
2 U.S.C. § 434(a)(6)(A) and the civil money penalty be reduced from
$22,750.00 to $22,150.00 to reflect the two unreported Cox loans
totaling $219,507.47. The Office of Administrative Review concluded
that Plaintiffs' challenges did not fall within the list of defenses
11 C.F.R. § 111.35(b), and, therefore, the statutory penalty as calculated in
11 C.F.R. § 111.44 should be assessed.
Plaintiffs responded to the March 27, 2003 recommendation on April 10,
2003. On April 29, 2003, Defendant adopted the Office of Administrative
Review's March 27, 2003 recommendation, made a final determination that
Plaintiffs violated 2 U.S.C. § 434(a)(6)(A), and assessed a civil
money penalty of $22,150.00.
Plaintiffs filed their complaint on May 30, 2003, within 30 days of
Plaintiffs' receipt of Defendant's notice of adverse determination.
II. Statement of Material Facts Supporting Defendant's
The facts supporting Defendant's motion are nearly identical to those
discussed with respect to Plaintiffs' motion. Cox was an Illinois
candidate for the United States Senate in 2002 and the Committee was his
principal campaign committee. Cox served as Treasurer of the Committee at
all relevant times. Defendant is an independent federal agency with
exclusive jurisdiction over the administration, interpretation, and civil
enforcement of the FECA. In particular, Defendant is authorized to assess
civil money penalties for certain violations of the reporting provisions
of the FECA.
On February 11, 2002, Defendant sent a Primary Election Report Notice
to Plaintiffs which explained that campaign contributions of $1,000.00
or more received during the 48-Hour Reporting Period must be properly
reported within forty-eight hours of the Committee's receipt of the same.
The notice also emphasized that contributions of $1,000.00 or more
included personal loans from the candidate.
On March 5, 2002, Cox loaned the Committee $75,000.00 by giving a
check in that
amount to Warren. However, Warren did not determine whether the
loan needed to be reported, and, thus, it was inadvertently not reported
within forty-eight hours of its receipt. On March 12, 2002, Cox loaned
the Committee $144,507.47 by wiring the funds directly into the
Committee's bank account. Warren was not notified of this loan and,
therefore, it went similarly unreported during the 48-Hour Reporting
Period. The two unreported loans totaled $219,507.47 and both
contributions should have been reported within forty-eight hours of their
receipt by the Committee.
On September 18, 2002, Defendant found reason to believe that
Plaintiffs had violated 2 U.S.C. § 434(a)(6)(A) for failing to timely
report three contributions of $1,000.00 or more, totaling $224,507.47,
received during the 48-Hour Reporting Period. Defendant also made a
preliminary determination that the civil money penalty for these three
violations was $22,750.00 based on the Schedule. On September 19, 2002,
Defendant notified Plaintiffs of Defendant's finding and the civil money
penalty calculated at $22,750.00.
Plaintiffs submitted a response to the September 18, 2002 finding which
was received by Defendant on October 28, 2002. In summary, Plaintiffs
conceded that the March 5, 2002 and March 12, 2002 loans should have been
reported.within forty-eight hours of their receipt and that the Committee
had failed to do so. Although the two loans were not reported in a timely
fashion, Plaintiffs argued: (1) Cox had announced his intention to make
the loans prior to doing so; (2) the loans were subsequently disclosed in
the Committee's post-election April 2002 Quarterly Report; (3) both loans
were from the candidate himself; (4) the omissions were inadvertent; and
(5) a campaign staff member's apartment fire and the payment of the March
12, 2002 loan by wire transfer contributed to the oversights. However,
Plaintiffs did not contend that there were extraordinary circumstances
within the meaning of 11 C.F.R. § 111.35(b) to excuse their failure
to report the loans
in a timely fashion; instead, Plaintiffs admitted that the factual
circumstances surrounding the March 5, 2002 and March 12, 2002 loans may
not strictly constitute extraordinary circumstances that would excuse
On October 29, 2002, the matter was referred to Defendant's Office of
Administrative Review. After reviewing Defendant's initial.finding and
Plaintiffs' response, the Office of Administrative Review issued its
recommendation to Defendant on March 27, 2003. After determining that a
$5,000.00 contribution (one of the three contributions originally at
issue) from a political action committee was not made during the 48-Hour
Reporting Period, the Office of Administrative Review recommended
reducing the amount of the civil money penalty from $22,750.00 to $22,
150.00. In arriving at that sum, the Schedule was applied. However, the
Office of Administrative Review rejected the remainder of Plaintiffs'
arguments, finding that (1) Warren had previously filed reports for
contributions received during the 48-Hour Reporting Period in a prior
congressional race and was, therefore, aware that candidate loans must
also be reported, (2) a fire in the apartment of a campaign staff member
other than Warren did not constitute an extraordinary circumstance within
the meaning of 11 C.F.R. § 111.35(b), (3) Cox was both the candidate
and the Committee's Treasurer which made him personally responsible for
reporting his own loans, (4) Cox's public statement that he would
contribute money to his own campaign did not override his duty to report
the March 5, 2002 and March 12, 2002 loans during the 48-Hour Reporting
Period, and (5) reporting the contributions in the post-election April
2002 Quarterly Report was not a substitute for reporting the
contributions within forty-eight hours of receipt of the same.
Plaintiffs were notified of the Office of Administrative Review's
recommendation on March 31, 2003. On April 10, 2003, Plaintiffs responded
to the recommendation with a number
of new arguments, including constitutional challenges to the
Schedule. After receiving Plaintiffs' April 10, 2003 response, the Office
of Administrative Review made a final recommendation on April 14, 2003
that a civil money penalty of $22,150.00 should be assessed. A copy of
Plaintiffs' April 10, 2003 response was attached to the final
On April 29, 2003, Defendant adopted the Office of Administrative
Review's recommendation, made a final determination that Plaintiffs
violated 2 U.S.C. § 434(a)(6)(A), and assessed a civil money penalty
of $22,150.00. Defendant notified Plaintiffs of its final determination
and the $22,150.00 civil penalty on April 30, 2003. Plaintiffs
subsequently filed their complaint on May 30, 2003.
Legal Issues and Analysis
The parties' cross-motions for summary judgment essentially present
four disputed legal issues. In the interest of judicial economy, the
Court will address all of the parties' arguments related to each issue at
the same time.
I. Defendant's Decision to Assess a Civil Money Penalty in the
Amount of $22,150.00 was in Accordance with Law and Not
Arbitrary, Capricious, Irrational, or an Abuse of Discretion.
Both parties concede that the standard of judicial review applicable to
Defendant's administrative decision is provided by the Administrative
Procedure Act.*fn3 As stated therein, this Court will review Defendant's
decision "to determine whether the decision was `arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance
with law.'" Smith v. Office of Civilian Health & Med. Program of
the Uniformed Servs., 97 F.3d 950, 954 (7th Cir. 1996) (citations
omitted); Pozzie v. United States Dep't of Hous. & Urban
Dev., 48 F.3d 1026, 1029 (7th Cir. 1995). This determination
requires the Court to "`consider whether the decision was based on a
consideration of the relevant factors and whether there has been a clear
error of judgment.'" Smith, 97 F.3d at 955 (citation omitted);
Pozzie, 48 F.3d at 1029.
However, courts are cautioned that they "must guard against
substituting [their] own judgment for that of the agency."
Smith, 97 F.3d at 955 (citations omitted); see also Federal
Election Comm'n v. Democratic Senatorial Campaign Comm.,
454 U.S. 27, 37 (1981) ("[T]he Commission is precisely the type of agency
to which deference should presumptively be afforded."). Indeed, the
"`arbitrary or capricious' standard of review is a deferential one
which presumes that agency actions are valid as long as the decision is
supported by a `rational basis.'" Pozzie, 48 F.3d at 1029 (citations
omitted); see also Federal Election Comm `n v. Nat'l Rifle Ass'n of Am.,
254 F.3d 173, 182 (D.C. Cir. 2001) ("We review the Commission's
interpretation of its own regulations pursuant to `an exceedingly
deferential standard.'") (citation omitted). Here, Plaintiffs bear the
burden of proving that Defendant's administrative decision lacks such
support. Sierra Club v. Marita, 46 F.3d 606, 619 (7th Cir.
A. The Record Indicates that Defendant's Assessment of a Civil
Money Penalty was Not Arbitrary, Capricious, Irrational, or an Abuse of
Discretion and was in Accordance with Law.
The factual record before this Court establishes that Defendant
considered Plaintiffs' mitigating factors, including the apartment fire
and confusion surrounding the wire transfer, before reaching its
decision. Because all of the relevant factors were considered, Plaintiffs
must make the
very difficult showing that Defendant's decision lacked any
rational basis and, therefore, constituted a clear error of judgment.
See Smith, 97 F.3d at 955; Pozzie, 48 F.3d at 1029;
Sierra Club, 46 F.3d at 619. However, Plaintiffs point to no
facts and offer no authority that would suggest that such an error was
Plaintiffs concede that (1) they failed to report the March 5, 2002 and
March 12, 2002 loans during the 48-Hour Reporting Period in violation of
2 U.S.C. § 434(a)(6)(A) and (2) their defenses are not recognized by
the applicable regulation, 11 C.F.R. § 111.35(b)(1) permits
Plaintiffs to challenge the civil money penalty assessed against them
only on the basis of
(i) [t]he existence of factual errors; and/or (ii)
[t]he improper calculation of the civil money
penalty; and/or (iii) [t]he existence of
extraordinary circumstances that were beyond the
control of [Plaintiffs] and that were for a
duration of at least 48 hours and that prevented
[Plaintiffs] from filing the report in a timely
manner. . . .
11 C.F.R. § 111.35(b)(1). The regulation adds that "[e]xamples of
circumstances that will not be considered extraordinary include, but are
not limited to, the following: (i) [n]egligence; . . . (iii) [i]llness,
inexperience, or unavailability of staff, including the treasurer; . . .
and (v) [o]ther similar circumstances." 11 C.F.R. § 111.35(b)(4).
This Court agrees with the parties that Plaintiffs' mitigating factors do
not qualify as "extraordinary circumstances." Plaintiffs also concede
that Defendant did not deviate from the Schedule or disregard any fact
that would mandate a downward departure from the fine prescribed by
11 C.F.R.' § 111.44. See 2 U.S.C. § 437g(a)(4)(C);
11 C.F.R. § 111.44.
Despite these concessions, Plaintiffs steadfastly maintain that a
strict application of the Schedule is unreasonable in light of, inter
alia, (1) the fact that Plaintiffs' violations were inadvertent, (2)
Plaintiffs' history of compliance, with the FECA disclosure requirements,
severity of the resulting fine, and (4) the factual circumstances
surrounding each violation. However, each of these arguments was
considered by Defendant during the underlying administrative proceedings.
Hence, Plaintiffs, in effect, are asking this Court to exercise its own
judgment and rehear Plaintiffs' administrative appeal. This is precisely
the type of second-guessing that this Court must avoid. See
Democratic Senatorial Campaign Comm., 454 U.S. at 37;
Smith, 97 F.3d at 955. Since the record is clear that the
relevant factors were considered and the applicable regulations were
strictly applied to Plaintiffs' violations, the Court concludes that the
decision to assess a civil fine of $22,150.00 is supported by a rational
basis and does not indicate a clear error of judgment. In light of that
conclusion, further analysis is neither required, nor permitted.
B. Plaintiffs' Policy Arguments Do Not Establish that
Defendant's Assessment of a Civil Money Penalty was Arbitrary,
Capricious, Irrational, or an Abuse of Discretion or Out of Accordance
Plaintiffs' policy arguments are unpersuasive. Initially, Plaintiffs'
argue that no harm resulted from their failure to timely report the March
5, 2002 and March 12, 2002 loans because Cox had publicly stated on
several occasions that he had pledged one million dollars of his own
funds to his campaign. However, campaign promises do not adequately
safeguard the important governmental interests that contribution
disclosure requirements protect. The United States Supreme Court has
stated that disclosure and reporting requirements further at least three
"substantial governmental interests:"
(1) "[D]isclosure provides the electorate with
information `as to where political campaign money
comes from and how it is spent by the candidate'
in order to aid the voters in evaluating those who
seek federal office[;]"
(2) "[D]isclosure requirements deter actual
corruption and avoid the appearance of corruption
by exposing large contributions and
expenditures to the light of publicity. . . . A
public armed with information about a candidate's
most generous supporters is better able to detect
any post-election special favors that may be given
in return[;] and
(3) "[R]ecordkeeping, reporting and disclosure
requirements are an essential means of gathering
the data necessary to detect violations of the
contribution limitations. . . ."
Buckley v. Valeo, 424 U.S. 1
, 66-68 (1976) (citations
omitted). Because Plaintiffs failed to report the March 5, 2002 and March
12, 2002 loans during the 48-Hour Reporting Period (and prior to the
primary election), Plaintiffs undermined "substantial governmental
interests" that the disclosure requirements protect. See also Federal
Election Comm'n v. Toledano, 317 F.3d 939
, 953 (9th Cir. 2003)
("Public harm can be presumed `from the magnitude or seriousness of the
violation' of the FECA.") (citation omitted); Federal Election Comm'n
v. Furgatch, 869 F.2d 1256
, 1259 (9th Cir. 1989) ("The importance of
the FECA's reporting and disclosure provisions, and the difficulty of
proving that violations of them actually deprived the public of
information, justify a rule allowing a district court to presume harm to
the public from the magnitude or seriousness of the violation of these
provisions.") (citations omitted). Plaintiffs' self-serving campaign
promises do nothing to change that fact. Indeed, campaign promises
concerning future contributions provide no guarantee that (1) the pledged
contributions will actually be made, (2) the pledged contributions will
ultimately be derived from the stated funding sources, or (3) the public
will be able to accurately ascertain prior to an election which
candidates are incurring sizable obligations that may be discharged with
the generosity of unidentified parties after the election.
Second, Plaintiffs cite to Smith v. Metro. Sch. Dist. Perry
T'ship, 128 F.3d 1014 (7th Cir. 1997) in arguing that Defendant
inappropriately applied a strict liability standard when assessing
the civil money penalty.*fn4 Plaintiffs' argument is not
well-taken. Smith discussed strict liability in the context of
Title IX and Spending Clause legislation and provides no guidance as to
whether a strict liability standard may be applied in the context of the
FECA. Id. at 1016-18, 1029-31. Moreover, Plaintiffs fail to
explain how Smith is applicable to the instant action, or supply
any additional authority for their position. Lacking a compelling reason
to find that imposition of a strict liability standard constituted a
clear lack of judgment, this Court will defer to Defendant's
interpretation of its regulations. See Democratic Senatorial Campaign
Comm., 454 U.S. at 37; Nat'I Rifle Ass'n, 254 F.3d at 182;
Smith, 97 F.3d at 955; Pozzie, 48 F.3d at 1029
Deference is also appropriate, here, because
2 U.S.C. § 437g(a)(4)(C)(i)(II) permits Defendant to "take into
account . . . such other factors as [Defendant] considers appropriate"
when formulating a schedule of penalties.
2 U.S.C. § 437g(a)(4)(C)(i)(II). Indeed, Defendant has been given great
latitude with respect to the Schedule.
Next, Plaintiffs argue that 11 C.F.R. § 111.35(b)(1) & (b)(4)
employ an arbitrary and subjective standard from which to impose civil
penalties for violations of the 48-Hour Reporting Period. For the
following reasons, the Court disagrees. First, Plaintiffs cite no
authority to support their position. This absence of authority is
magnified, here, because 2 U.S.C. § 437g(a)(4)(C)(i)(II) permits
Defendant to establish a schedule of penalties for violations of
2 U.S.C. § 434(a) "which takes into account the amount of the violation
involved, the existence of previous violations by the person, and such
other factors" that Defendant "considers appropriate."
2 U.S.C. § 437g(a)(4)(C)(i)(II). The Schedule is quite consistent with
2 U.S.C. § 437g(a)(4)(C)(i)(II), a fact that
suggests the Schedule is far from arbitrary or subjective. Second,
Plaintiffs' argument that Defendant applied a strict liability standard
when evaluating Plaintiffs' violations of 2 U.S.C. § 434(a) belies
its position that 11 C.F.R. § 111.35(b)(1) & (b)(4) are wholly
subjective in nature. Third, the record offers no evidence that
Plaintiffs! failure to timely report the March 5, 2002 and March 12, 2002
loans was in any way caused by Plaintiffs' inability to determine in
advance whether their mitigating circumstances would act to excuse their
Finally, this Court declines to adopt Plaintiffs' bald assertion that
assessment of the $22,150.00 civil money penalty created "no incentive"
for Plaintiffs to subsequently report the March 5, 2002 and March 12,
2002 loans in their April 2002 Quarterly Report. As an initial matter,
the reporting requirements in effect during the 48-Hour Reporting Period
are "in addition to all other reporting requirements. . . ."
2 U.S.C. § 434(a)(6)(E). Therefore, a party's duty to timely report
contributions in its Quarterly Report exists regardless of whether those
same contributions were timely reported during the 48-Hour Reporting
Period. Furthermore, this Court will not advocate excusing or reducing
the penalties for violations of 2 U.S.C. § 434(a)(6)(A) simply
because a party has chosen to lawfully comply with other disclosure
II. The Schedule Does Not Impose a Form of Criminal Punishment.
Plaintiffs argue that the sanctions imposed by the Schedule are "so
severe that [they] transform the sanction[s] into . . . criminal
penalt[ies]." Plaintiffs continue that this transformation renders the
Schedule unconstitutional because the penalties set forth therein
"constitute criminal punishment without the safeguards afforded an
accused under the Fifth and Sixth Amendments." The Court declines to
adopt Plaintiffs' position.
In order to determine whether the penalties imposed by the Schedule are
criminal in nature, the Court must first "determine whether the
legislature `in establishing the penalizing mechanism, indicated either
expressly or impliedly a preference for one label or the other.'"
LaCrosse v. Commodity Futures Trading Comm'n, 137 F.3d 925, 930
(7th Cir. 1998) (citation and internal quotation marks omitted). "It is
widely-recognized that the fact that Congress makes a statute enforceable
by an administrative agency `is prima facie evidence that Congress
intended to provide for a civil sanction.'" Turner v. Glickman,
207 F.3d 419, 429 (7th Cir. 2000) (citations omitted). Such evidence
exists here since 2 U.S.C. § 434(a)(6)(A) is enforced by Defendant.
Moreover, the penalties prescribed by the Schedule were expressly
classified as civil. See 2 U.S.C. § 437g(a)(4)(C)(i)(II)
("civil money penalty in an amount determined under a schedule
of penalties which is established . . . by [Defendant]") (emphasis
added). Both of these facts lead to the conclusion that the Schedule
should be construed as civil. However, it would be premature for the
Court to end its analysis here.
"Even if the legislature intended to create a civil penalty, the
penalty may still be `criminal'" in nature or application.
LaCrosse, 137 F.3d at 930. Therefore, the Court must also
"determine `whether the statutory scheme was so punitive either in
purpose or effect' . . . to convert the intended civil penalty into a
criminal one." Id. (citation and internal quotation marks
omitted). When making this determination, seven factors must be
[w]hether the sanction involves an affirmative
disability or restraint, whether it has
historically been regarded as punishment, whether
it comes into play only on a finding of
scienter, whether its operation will
promote the traditional aims of punishment
retribution and deterrence, whether the behavior
to which it applies is already a crime, whether an
alternative purpose to which it may rationally be
connected is assignable for it, and whether it
appears excessive in relation to the alternative
Id. (citation omitted). Additionally, courts are cautioned
that "these factors should be applied to the statute on its face, and
`only the clearest proof' will suffice to override legislative intent and
transform what has been denominated a civil remedy into a criminal
penalty." Id. (citation and internal quotation marks omitted).
With respect to 11 C.F.R. § 111.44, Plaintiffs fail to provide such
clear proof. Initially, it should noted that Plaintiffs make almost no
attempt to show how application of the aforementioned factors establishes
that the Schedule imposes criminal penalties. Instead, Plaintiffs choose
to summarily state that "[n]one of the seven . . . is dispositive in this
analysis." Contrary to Plaintiffs' cursory statement, this Court finds
the Schedule's penalties to be civil in construction, nature, and
A. No Significant Affirmative Disability or Restraint is
This factor is of minimal importance because the civil fine in this
case places no significant affirmative disability or restraint on
Plaintiffs. Although Plaintiffs' violations of
2 U.S.C. § 434(a)(6)(A) could potentially lead to increased future fines if
Plaintiffs engage in recidivist behavior (see
11 C.F.R. § 111.44(a)(2)), the only disability or restraint that could
possibly be imposed is a higher fine, not any restriction on Plaintiffs'
B. Civil Fines are Not Historically Regarded as Punishment
Neither party argues that civil fines have been historically regarded
as punishment. See also LaCrosse, 137 F.3d at 931 ("neither
money penalties nor debarment have historically been viewed as
punishment'") (citation omitted).
C. Finding of Scienter is Not Required
No finding of scienter is required under
2 U.S.C. § 434(a)(6)(A), 2 U.S.C. § 437g(a)(4)(C), or 11 C.F.R. § 111.44.
See 2 U.S.C. § 434(a)(6)(A); 2 U.S.C. § 437g(a)(4)(C);
11 C.F.R. § 111.44.
D. No Promotion of Traditional Aims of Punishment Such That
Sanction is Penal in Nature
Although the Schedule may have a deterrence effect, Plaintiffs fail to
establish that this effect renders the schedule penal in nature. See
Hudson v. United States, 522 U.S. 93, 105 (1997) ("[W]e recognize
that the imposition of . . . money penalties . . . will deter others from
emulating petitioners' conduct, a traditional goal of criminal
punishment. But the mere presence of this purpose is insufficient to
render a sanction criminal, as deterrence `may serve civil as well as
criminal goals.'") (citations omitted).
E. Behavior is Not Already a Crime
The fact that 2 U.S.C. § 437g(d) provides separate, criminal
penalties for knowing and willful violations of 2 U.S.C. § 434(a)
suggests that the Schedule is directed to civil behavior for which a
finding of scienter is not required. Compare
2 U.S.C. § 437g(a)(4)(C) with 2 U.S.C. § 437g(d); see also
Sequoia Books, Inc. v. Ingemunson, 901 F.2d 630, 640 n.10 (7th Cir.
1990) ("the existence of `two separate and distinct provisions imposing
sanctions' for the same offense, one of which is `obviously a criminal
one', may suggest that the other sanction is civil") (citation omitted).
F. Alternative Purpose is Assignable and Sanction is Not
Excessive in Relation to the Same
"[A]lternative purpose" refers, to "a purpose other than a punitive
purpose. . . ." LaCrosse, 137 F.3d at 932. Here,
2 U.S.C. § 434, (a)(6)(A), 2 U.S.C. § 437g(a)(4)(C), and 11 C.F.R. § 111.44
are directed to the protection of "substantial governmental interests"
related to the pre-election disclosure of campaign contributions. See
Buckley, 424 U.S. at 66-68. Thus, an alternative
purpose is clearly assignable.
Defendant was vested with the authority to formulate a schedule of
civil money penalties that would further this alternative purpose.
See 2 U.S.C. § 437g(a)(4)(C), A review of the Schedule
reveals that it incorporates the factors identified in
2 U.S.C. § 437g(a)(4)(C). Compare 2 U.S.C. § 437g(a)(4)(C)
with 11 C.F.R. § 111.44. Because Plaintiffs concede that (1)
they violated 2 U.S.C. § 434(a)(6)(A) and (2) Defendant strictly
applied the relevant statutes and regulations when assessing a civil
money penalty for those violations, the $22,150.00 penalty was not
excessive in light of the important alternative purpose identified above.
Plaintiffs attempt to get around this conclusion by arguing that the
sanctions imposed under 11 C.F.R. § 111.44 are unreasonable and
excessive because they are "based solely on the amount of the
contribution not reported or reported late. . . ." That is simply not
the case. The regulation takes into account not only the amount of the
contribution not timely reported, but also the existence of previous
violations. See 11 C.F.R. § 111.44(a)(2). These are
precisely the factors that Congress asked Defendant to consider when
formulating the Schedule. See
2 U.S.C. § 437g(a)(4)(C)(i)(II). Furthermore, it makes sense that timely,
pre-election disclosure of contributions becomes more important as the
amount of indebtedness or the size of the contribution increases. Indeed,
a candidate may be more beholden to a large contributor or more likely to
seek post-election contributions to satisfy significant, campaign-related
debt. On the other hand, Plaintiffs never explain why it is inappropriate
to formulate a schedule of penalties using these factors or why the
sanctions are excessive in light of the important governmental interests
protected by the Schedule.
Plaintiffs also argue that "the amount of the penalty is unrelated to
the conduct that the sanction is intended to deter." In support,
Plaintiffs boldly claim that the "penalty provisions are
really intended to severely punish violators, even on highly
technical grounds, not encourage compliance." This argument does not make
sense. If anything, strong sanctions would likely encourage compliance.
Furthermore, it is irrelevant that the March 5, 2002 and March 12, 2002
loans would not have been subject to civil penalties had they been made
prior to the 48-Hour Reporting Period. Plaintiffs were well-aware of the
heightened reporting requirements imposed during the 48-Hour Reporting
Period, and, more, importantly, have been unable to convince this Court
that these special requirements were not necessary to protect the
"substantial governmental interests" at issue in this case,
III. The Schedule Does Not Violate Substantive Due Process or the
Equal Protection Clause of the Fifth Amendment
A. Due Process
Plaintiffs argue that "imposition of a substantial fine for a
non-reporting violation, which [sic] based solely on the amount of the
contribution and when it was made, is a deprivation of property without
due process of law." Although this argument appears to concern procedural
due process rights, Plaintiffs indicate that they are challenging the
Schedule on substantive due process grounds. This Court does not find the
Schedule to be unconstitutional on the basis of either position.
1. Substantive Due Process.
As an initial matter, Plaintiffs do not claim that any fundamental
liberty interest is threatened by the Schedule. It is well-established
that "the Due Process Clause specially protects those fundamental rights
and liberties which are, objectively, deeply rooted in this Nation's
history and tradition, and implicit in the concept of ordered liberty,
such that neither liberty nor justice would exist if they were
sacrificed." Khan v. Gallitano, 180 F.3d 829, 833 (7th Cir.
omitted); see also Washington v. Glucksberg, 521 U.S. 702,
720 (1997) ("[I]n addition to the specific freedoms protected by the Bill
of Rights, the `liberty' specially protected by the Due Process Clause
includes the rights to marry, . . . to have children, . . . to direct the
education and upbringing of one's children, . . . to marital privacy,
. . . to use contraception, . . . to bodily integrity, . . . and to
abortion. . . .") (citations omitted). Accordingly, a court should be
"reluctant to expand the concept of substantive due process because
guideposts for responsible decision making in this unchartered area are
scarce and open-ended." Glucksberg, 521 U.S. at 720
(citation omitted). Because Plaintiffs do not expressly state that any
fundamental right or liberty is threatened by the Schedule, Plaintiffs
are not entitled to relief under the substantive due process, clause.
See Khan, 180 F.3d at 834 ("[Plaintiff] must show not merely
that the defendants injured her in some legal sense but that they
deprived her of a liberty deeply rooted in our history and
Plaintiffs do, however, argue (without further explanation or citation
to authority) that application of the Schedule in this case resulted in a
"deprivation of property without due process of law." While it may be
true that "[a] substantive due process claim can be brought in the
context of property interests[,] . . . [o]ne prerequisite for a
cognizable claim . . . is an underlying constitutionally protected
property interest." Swartz v. Scruton, 964 F.2d 607, 609 (7th
Cir. 1992) (citations omitted); see also Thornton v. Barnes,
890 F.2d 1380, 1386 (7th Cir. 1989) ("Property interests, of course, are
not created by the Constitution.") (citation omitted). Additionally,
Plaintiffs `"must also show either a separate constitutional violation or
the inadequacy of state law remedies.'"*fn5 New Burnham Prairie
Homes, Inc. v. Vill. of Burnham, 910 F.2d 1474, 1481 (7th
Cir. 1990) (citations omitted). Here, Plaintiffs do not explain how the
money required to satisfy the civil penalty assessed by Defendant
constitutes or relates in any way to "an underlying constitutionally
protected property interest." Furthermore, Plaintiffs have not
established any separate constitutional violation or alleged the
inadequacy of state law remedies.
Finally, even if the Court were to assume that Plaintiffs' vague
"deprivation of property" claim constitutes the assertion of a
fundamental liberty interest, Plaintiffs' substantive due process claim
would still fail because Plaintiffs have not established that the
Schedule is not "narrowly tailored to serve a compelling state interest."
Glucksberg, 521 U.S. at 721 (citation omitted).
2 U.S.C. § 434(a)(6)(A) and 11 C.F.R. § 111.44 are narrowly tailored in that
they only require Plaintiffs to report contributions within forty-eight
hours of receipt of the same during the limited 48-Hour Reporting Period.
Although Plaintiffs were assessed a civil money penalty for failing to
comply with 2 U.S.C. § 434(a)(6)(A), their campaign activities and/or
ability to run for public office were in no way limited. Furthermore, the
disclosure requirements and accompanying Schedule, as previously noted,
serve to further "substantial governmental interests, " See also cf.
Buckley, 424 U.S. at 64-68 ("But we have acknowledged that there are
governmental interests sufficiently important to outweigh the possibility
of infringement [on the exercise of First Amendment rights], particularly
when the `free functioning of our national institutions' is
involved. . . . The governmental interests sought to be vindicated by
the disclosure requirements are of this magnitude.") (citation omitted).
Accordingly, the Court is loathe to declare the Schedule to
be unconstitutional on substantive due process grounds.
2. Procedural Due Process
The record does not indicate (nor do Plaintiffs argue) that Plaintiffs'
procedural due process rights were violated during the underlying
administrative proceedings. "A procedural due process claim requires two
principal inquiries: first, whether the plaintiff was deprived of a
protected property or liberty interest, and second, whether the plaintiff
was deprived of that interest without sufficient procedural protections."
Galdikas v. Fagan, 342 F.3d 684, 691 (7th Cir. 2003) (citation
omitted). Although it may be true that "property is `a legitimate claim
of entitlement'" for purposes of procedural due process (id. at
691-92 (citation omitted)), the record does not establish that
Defendant's administrative procedures failed to afford "sufficient
procedural protections" to Plaintiffs prior to imposition of the civil
money penalty. Indeed, both parties concede that (1) the applicable
statute and regulations were strictly applied, (2) Plaintiffs were
permitted to argue their mitigating factual circumstances, and (3)
Plaintiffs were allowed to appeal Defendant's September 18, 2002 initial
finding that Plaintiffs had violated 2 U.S.C. § 434(a)(6)(A).
Furthermore, Plaintiffs do not cite to any authority that suggests that
2 U.S.C. § 434(a)(6)(A), 2 U.S.C. § 437g(a)(4)(C), and/or
11 C.F.R. § 111.44 operate to violate procedural due process rights. The fact
that Plaintiffs are unhappy with the results of Defendant's
administrative proceedings is not a sufficient basis from which to
conclude that they were denied procedural due process.
B. Equal Protection
Plaintiffs argue that "the penalty provisions . . . treat committees
differently in a manner unrelated to [their] purpose. . . . Such a result
is irrational and violative of the Fifth Amendment's Equal Protection
Clause." At the heart of Plaintiffs' position lies the suggestion that "a
that repeatedly violates the . . . requirements over a brief period
of time by not reporting numerous contributions may receive a penalty
substantially less than a committee that makes a single mistake simply
because the latter failed to report one large contribution." These bald
allegations do not suffice to render 2 U.S.C. § 434(a)(6)(A),
2 U.S.C. § 437g(a)(4)(C), and/or 11 C.F.R. § 111.44
unconstitutional on equal protection grounds.
Plaintiffs have not established that the Schedule creates
classifications subject to equal protection analysis. It is
well-established that the "guarantee of equal protection under the Fifth
Amendment is not a source of substantive rights or liberties, but rather
a right to be free from invidious discrimination in statutory
classifications and other governmental activity." Harris v.
McRae, 448 U.S. 297, 322 (1980). However, Plaintiffs make no
suggestion that the disclosure requirements differ among campaign
committees. Nor could they. See 2 U.S.C. § 434(a)(6)(A).
Furthermore, Plaintiffs offer no evidence to suggest that campaign
committees are classified and/or treated differently upon application of
11 C.F.R. § 111.44. In fact, Plaintiffs never establish that campaign
committees can even be generally classified based on the type and size of
contributions they receive. This is especially problematic for Plaintiffs
because 11 C.F.R. § 111.44 is facially neutral. See
11 C.F.R. § 111.44. Instead, Plaintiffs argue that the operation of
11 C.F.R. § 111.44 allows for the possibility of disparate treatment
among campaign committees.
Even if this Court were to ignore that the existence of a
classification scheme has not been established, the Schedule would
survive equal protection analysis. First, Plaintiffs fail to show that
they have suffered invidious discrimination, or disparate treatment
through Defendant's assessment of a civil money penalty. Again,
Plaintiffs argue that "a committee that repeatedly violates the . . .
requirements over a brief period of time by not reporting numerous
receive a penalty substantially less than a committee that makes a
single mistake simply because the latter failed to report one large
contribution." However, that argument is flawed. Plaintiffs failed to
report two contributions totaling $219,507.47 and were assessed a civil
penalty of $22,150.00. However, if Plaintiffs had failed to report 219
contributions of $1,000.00 (the minimum contribution reported during the
48-Hour Reporting Period) totaling $219,000.00 they would have been
assessed a civil penalty of $43,800.00, a fine that is almost double the
one that Plaintiffs actually received. See
11 C.F.R. § 111.44. And that is without including any recidivism
penalty that may possibly apply.
Second, Plaintiffs' claim would fail even if they could somehow
establish invidious discrimination or disparate treatment because
Plaintiffs never show that such discrimination or treatment was
purposeful. See Harris, 448 U.S. at323 n.26 ("The equal
protection component of the Fifth Amendment prohibits only purposeful
discrimination . . ., and when a facially neutral federal statute is
challenged on equal protection grounds, it is incumbent upon the
challenger to prove that Congress `selected or reaffirmed a particular
course of action at least in part because of, not merely in spite of, its
adverse effects upon an identifiable group.'") (citations and internal
quotation marks omitted).
Finally, Plaintiffs fail to establish that the disclosure requirements
and accompanying Schedule are not "rationally related to a legitimate
governmental interest." Id. at 326. As previously noted, the
Schedule protects "substantial governmental interests." See
Buckley, 424 U.S. at 66-68. Moreover, it takes into account the
factors that Congress asked Defendant to consider, including the amount
of the contribution not timely reported and the existence of previous
violations. See 2 U.S.C. § 437g(a)(4)(C)(i)(II);
11 C.F.R. § 111.44. The Schedule acts to encourage candidates to be open
and forthcoming with respect to pre-election campaign
contributions. And again, it makes sense that timely, pre-election
disclosure becomes more important as the amount of indebtedness or
contribution size increases. Given that Plaintiffs present no persuasive
argument or authority to the contrary, the Court is left to conclude that
the Schedule would survive equal protection analysis.
IV. The Schedule Does Not Violate the Eighth Amendment's
Excessive Fines Clause.
The parties do not dispute that the Eighth Amendment's Excessive Fines
Clause applies to the Schedule. An invocation of the Excessive Fines
Clause requires this Court to apply a "`gross disproportionality' test to
determine whether a fine is `excessive. . . .'" Towers v. City of
Chicago, 173 F.3d 619, 624 (7th Cir. 1999) (citation omitted). That
test requires "that `[t]he amount of the forfeiture must bear some
relationship to the gravity of the offense that it is designed to
punish. . . .'" Id. (citation omitted). The Seventh Circuit has
cautioned, however, that when applying the test "the proportionality
determination must be made based on the facts of [the instant action]."
Id. at 625 (citation omitted).
Neither party has cited to any authority discussing the Schedule in the
context of the Excessive Fines Clause. Therefore, the Schedule was
evaluated in light of the factors outlined in Towers to
determine whether Plaintiffs have established that the civil money
penalty is grossly disproportionate to Plaintiffs' violations of
2 U.S.C. § 434(a)(6)(A) such that the fine is unconstitutionally excessive.
The following factors were considered by the Court: (1) the gravity of
Plaintiffs' violations, (2) Plaintiffs' level of culpability, (3) the
harm caused by Plaintiffs' violations, and (4) a comparison of the fine
to the gravity of Plaintiffs' violations. Id. at 625-26. After a
careful examination, the Court concludes that the Schedule is not grossly
disproportionate to the conduct
to which it applies. See also Newell Recycling Co. v. United
States Envtl. Prot. Agency, 231 F.3d 204, 210 (5th Cir. 2000) ("No
matter how excessive (in lay terms) an administrative fine may appear, if
the fine does not exceed the limits prescribed by the statute authorizing
it, the fine does not violate the Eighth Amendment.").
A. Gravity of Plaintiffs' Violations . . .
Plaintiffs' violations consist of two Incidents where Plaintiffs failed
to disclose campaign contributions received during the 48-Hour Reporting
Period. Although Plaintiffs subsequently reported the contributions in
their April 2002 Quarterly Report, this subsequent reporting occurred
after the primary election had already taken place. Therefore,
"substantial governmental interests" furthered by
2 U.S.C. § 434(a)(6)(A) were subverted because Plaintiffs' violations
deprived the public of important pre-election information. See
Buckley, 424 U.S. at 66-68.
B. Plaintiffs' Level of Culpability
While Plaintiffs' violations of the 48-Hour Reporting Period were
inadvertent, Plaintiffs were directly responsible for both violations.
And though the inadvertent nature of the violations somewhat lowers
Plaintiffs' level of culpability, negligence is specifically excluded as
an "extraordinary circumstance." 11 C.F.R. § 111.35(b)(4). Plaintiffs
were clearly aware of the reporting requirements set forth in
2 U.S.C. § 434(a)(6)(A), but nevertheless failed to comply with those
requirements. In light of the other factors to be considered by the
Court, Plaintiffs' inadvertence is an insufficient basis from which to
find that the fine imposed in this case was unconstitutionally excessive.
C. Harm Caused by Plaintiffs' Violations
Plaintiffs' subsequent reporting of the March 5, 2002 and March 12,
2002 loans in
their post-election April 2002 Quarterly Report did nothing to
alleviate the harm caused by their violations. See also
Toledano, 317 F.3d at 953; Furgatch, 869 F.2d at 1259.
Indeed, Plaintiffs' failure to report the loans during the 48-Hour
Reporting Period quite clearly subverted "substantial governmental
interests" furthered by 2 U.S.C. § 434(a)(6)(A). See
Buckley, 424 U.S. at 66-68. As discussed above, Plaintiffs' public
campaign promises are not a substitute for formal and timely reporting.
D. Comparison of Fine to Gravity of Plaintiffs' Violations
The Schedule is directly proportional to (1) the amount of the
unreported contribution and (2) the existence of prior violations. Once
again, it makes sense that timely, pre-election disclosure becomes more
important as the amount of indebtedness or contribution size increases.
Indeed, large contributions and/or significant indebtedness are of
heightened interest because of the increased influence that such
contributions or indebtedness may wield with a candidate. Moreover,
Plaintiffs fail to adequately explain why the formula for computing
sanctions employed by the Schedule is excessive in relation to the
"substantial governmental interests" furthered by the disclosure
requirements. See id. Instead, Plaintiffs simply complain that a
$22,150.00 fine is excessive given the factual circumstances surrounding
Because the fine assessed against Plaintiffs does not deviate from the
Schedule, Plaintiffs' unsupported complaints do not establish that the
fine is unconstitutionally excessive so as to justify the extraordinary
step of overruling the legislature in this instance. See United
States v. Bajakajian, 524 U.S. 321, 336 (1998) ("judgments about the
appropriate punishment for an offense belong in the first instance to the
legislature") (citations omitted). While $22,150.00 is not an
inconsequential sum, this Court has no reason to believe that Congress or
Defendant failed to give
serious thought to the Schedule used to sanction violations of the
48-Hour Reporting Period, In fact, Congress specified the very factors
that Defendant should consider when formulating the Schedule and the
Schedule incorporates those factors. Compare
2 U.S.C. § 437g(a)(4)(C)(i)(II) with 11 C.F.R. § 111.44. Since
Plaintiffs have not established that the sanctions embodied in the
Schedule are not necessary to further the relevant governmental
interests, this Court will refrain from rejecting the fine assessed
ORDERED: Plaintiffs' Motion for Summary Judgment  is
denied. Defendant's Motion for Summary Judgment  is granted. The
parties will bear their own attorneys' fees and costs.
Judgment will be entered in favor of Defendant on Plaintiffs' Petition
for Review of Defendant's Determination and Complaint for Declaratory and
Injunctive Relief . Judgment will be set forth on a separate document
and entered in the civil docket. Fed.R.Civ.P. 58, 79(a).