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COX FOR U.S. SENATE COMMITTEE v. FEDERAL ELECTION COMM.

January 21, 2004.

COX FOR U.S. SENATE COMMITTEE, INC, and JOHN H. COX, Plaintiffs,
v.
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 granted.

  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 Page 2 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 Page 3 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 the Committee.

  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 Page 4 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 outlined in Page 5 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 Motion

  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 Page 6 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 Page 7 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 their violations.

  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 Page 8 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 recommendation.

  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' ...


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