Opinion
No. 01-CV-6444 (CJS)
July 23, 2002
Anthony J. Colucci, III. Esq., Colucci Gallaher, P.C., Buffalo, NY, and
Kimberly N. Brown, Esq., Kirk L. Jowers, Esq., Caplin Drysdale, Washington, DC, for Plaintiff
Kevin A. Deeley, Esq., for Defendant
DECISION AND ORDER
INTRODUCTION
This is an action pursuant to the Federal Election Campaign Act of 1971, as amended, 2 U.S.C. § 431 et seq., and the Administrative Procedure Act, 5 U.S.C. § 551 et seq., in which plaintiff seeks review of a final determination by the defendant Federal Election Commission, which found that plaintiff violated 2 U.S.C. § 434(a) by failing to timely file a required report, and which assessed a civil money penalty of $9,000.00, pursuant to 11 C.F.R. § 111.43. Plaintiff maintains that, although it filed the report late, defendant should have reduced the fine to $3,850.00, because defendant made certain misleading statements about the filing deadline. Now before the Court are the parties' cross-motions for summary judgment. For the reasons that follow, plaintiff's motion is denied, defendant's motion is granted, and this action is dismissed.
BACKGROUND
Unless otherwise noted, the following facts are undisputed. Plaintiff Friends for Houghton is the candidate committee for the Honorable Amory Houghton, Jr., United States Representative for the 31st District of New York. Defendant Federal Election Commission is responsible for the administration and civil enforcement of the Federal Election Campaign Act ("FECA"). On September 12, 2000, the State of New York held its U.S. Congressional Primary election. Pursuant to Section 434(a)(2)(A)(i) of FECA, all congressional candidates, including Congressman Houghton, were required to file a 12-Day Pre-Election Report on or before August 31, 2000. Plaintiff did not comply with the August 31, 2000 deadline. On September 1, 2000, defendant sent a written notice to plaintiff, indicating that plaintiff "may have" failed to file the required report, and further stating that the Commission had sent an earlier notice regarding the deadline. Plaintiff's treasurer and former campaign manager, Brandon Gardner, indicates that he "do[es] not recall having received" an earlier notice, while defendant, through the sworn declaration of Lisa J. Stolaruk, Chief of defendant's Compliance Branch, indicates that such a notice was sent on or about August 7th. In any event, the September 1, 2000 notice advised plaintiff that it would be allowed four business days from the date of the notice to file the report, and stated that the failure to file the report could result in "publication, audit, or legal enforcement action." The letter further advised plaintiff to call Michael H. Young, at the Commission's Reports Analysis Division, if it had any questions. Gardner received the September 1, 2000 notice at plaintiff's offices on September 7, 2000. Gardner then telephoned Michael H. Young, the contact individual listed on the letter, in order to confirm the date of the 4-business-day deadline. Young told Gardner that to comply with the 4-business-day deadline contained in the September 1st notice, plaintiff needed to file the report by September 8, 2000. During Gardner and Young's telephone conversation, Young also checked with a Leah Palmer, an analyst in the Commission's Compliance Branch, who confirmed for him that September 8th was the 4-business-day "cutoff date" referred to in the Commission's September 1st letter. Defendant adds, however, that Young also told Gardner to file the report as quickly as possible.
September 4, 2000, a Monday, was the Labor Day holiday.
Since Gardner and Young's telephone conversation took place on September 7, 2000, in order to meet the September 8th deadline described in the letter, plaintiff either had to file the report that day, or file it the following day. Gardner indicates that he asked Young whether he should file the report electronically that very day, or whether it would be acceptable to send the report by overnight delivery, and that Young told him that overnight delivery, with receipt on September 8th, would be acceptable. Defendant denies that Young advised Gardner to send the report by overnight delivery rather than electronic filing. Defendant also indicates that electronic filing was not an option in any event, since Gardner told Young that plaintiff did not possess the necessary password to file electronically. Gardner sent the report by overnight delivery, and it was received by the Commission on September 8th at 12:45 p.m. As a result of meeting the 4-business-day deadline, defendant did not publish the fact that plaintiff had not timely filed the report prior to the September 12th election.
On October 18, 2000, defendant sent plaintiff a letter, indicating that plaintiff had violated 2 U.S.C. § 434(a) by failing to file the report on or before August 31st, and that, because the report was not filed at least 4 days before the election, i.e., on or before September 7th pursuant to 11 C.F.R. § 111.43, plaintiff was being classified as a "non-filer" for purposes of computing a monetary penalty, and was being assessed a monetary penalty of $9,000.00. In that regard, 11 C.F.R. § 111.43 distinguishes between "late-filed reports," defined as reports filed after the 12-day deadline, but at least 4 days prior to the election, and "non-filed" reports, defined as those reports filed less than 4 days prior to the election. 11 C.F.R. § 111.43 sets forth higher fines for "non-filers" than it does for "late-filers." Since plaintiff did not file its report until September 8th, it was classified as a "non-filer," and assessed a penalty of $9,000.00, whereas, if it had filed the report on September 7th, it would have been classified as a "late-filer," and assessed a penalty of only $3,850.00.
Plaintiff indicates that, upon receiving defendant's October 18th letter, Gardner called Young, who remembered having spoken with Gardner on September 7th, and that Young stated that he did not understand why the defendant commission had issued the October 18th letter, although defendant disputes this. Young further told Gardner that since the matter was then in the administrative fines process, Gardner should address any questions to Leah Palmer, the analyst in defendant's compliance Branch with whom Smith had spoken on September 7th.
On November 27, 2000, plaintiff filed a challenge to defendant's October 18th findings with defendants Office of Administrative Review, specifically, challenging both the finding that plaintiff was a non-filer, and the finding as to the amount of the civil penalty. As the basis for its appeal, plaintiff essentially indicated that, since it had relied on the 4-business-day rule contained in defendant's September 1St letter, as well as on Young's oral representation that filing on September 8th would satisfy the 4-business-day rule, that plaintiff should not be penalized as a "non-filer," but instead, should be treated as a "late-filer."
Defendant's Office of General Counsel reviewed the issues which plaintiff raised. On May 7, 2001, the Office of Administrative Review, relying upon the advice of the General Counsel, issued a five-page recommendation, recommending that the defendant commission make a final determination adopting its earlier findings. The recommendation indicated that the 4-business-day rule notice letter really serves two functions, both of them related to 2 U.S.C. § 437g(b). First, Section 437g(b) requires that the defendant give notice to any person before taking any action against the person for failing to file a report required to be filed by Section 434(a)(2)(A)(i). Second, Section 437g(b) requires the defendant to publish the person's name prior to the election, if he or she fails to file the report "within 4 business days after the date of notification." The recommendation indicates that, "[w]hile the law allows committees four additional business days to file the report before the Commission publishes the names of the committees, it does not provide for a grace period when calculating the per day penalty under Administrative Fines." The recommendation further notes that, pursuant to 11 C.F.R. § 111.43(e)(2), "election sensitive reports," such as plaintiffs, "are considered to be filed late if they are filed after their due dates but prior to four (4) days before the primary election. . . . These reports are considered to be not filed if they are not filed prior to four (4) days before the primary election . . . ." The recommendation further concludes that, using the schedule of fines for reports classified as "not filed," plaintiff was properly fined $9,000.00. In concluding, the recommendation states:
The four business day period . . . provides an opportunity for the respondents to either file the report or provide evidence that it was timely filed by certified or registered mail, thus avoiding publication by the Commission as non-filers. The four business day period does not provide for an "extension' when calculating the per day penalty under the administrative fines regulations. The schedules of penalties at 11 C.F.R. § 111.43 clearly state that the civil money penalty is calculated from the date on which the reports are due.
Commission records indicate that the committee did not have an electronic filing password on September 7 [2000] and that as of May 4 [2001] the committee has not applied for an electronic filing password. Even if they had had the software necessary to file electronically and had received an electronic filing password on September 7, the Reviewing Officer is not in a position to guess if they could have accomplished [filing] on September 7. It is still the responsibility of the [committee's] Treasurer under the Act to file complete and accurate reports in a timely manner.
Respondent's challenge presented no evidence that a factual error was made, that the civil money penalty was miscalculated . . . or that extraordinary circumstances existed which prevented them from filing the 12 Day PrePrimary Report . . . in a timely manner.
(Reviewing Officer Recommendation, pp. AR0092-93).
Shortly before the Office of Administrative Review issued its recommendation, defendant's Reports Analysis Division drafted a new "non-filer notice," which was the notice sent to plaintiff on September 1, 2000. Whereas the "old" notice indicated, "[y]ou will be allowed four (4) business days from the date of this notice to file this report," and further stated, "[t]he failure to file this report may result in publication, audit, or legal enforcement action," the new notice informs candidates that they "will be allowed four (4) business days from the date of [the] notice to file [the] report to a void publication and that the failure to timely file [the] report may result in publication, civil money penalties, an audit or legal enforcement action." (emphasis added).
On May 17, 2001, plaintiff filed a response to the Office of Administrative Review's recommendation, raising essentially two points. Plaintiff first challenged defendant's position that compliance with the 4-business-day rule merely protects a committee from publication, but does not shield them from other enforcement action. Plaintiff stated that defendant's interpretation
would lead to the absurd conclusion that responding satisfactorily to a . . . notice within four business days of the notice date would ostensibly protect a committee from having its name published as a non-filer but would provide no immunity rom an FEC enforcement action, whose basis and details would be publicly disclosed at its conclusion. Under such a reading, the safe harbor from publication [obtained by complying with the 4-business-day rule] would become illusory.
(AR00145). Plaintiff further stated, referring to the September 7th telephone conversation between Gardner and Young, that "[t]o now penalize Friends for Houghton for relying upon the advice of the FEC contact official would be grossly inequitable."
On August 9, 2001, the defendant commission made its unanimous final determination, adopting the Office of Administrative Review's recommendation, finding that plaintiff was a non-filer, and that the appropriate civil penalty was $9,000.00. On October 11, 2001, defendant published on its website the list of committees fined for violating the filing requirements, including plaintiff, which was listed as a "non-filer." The published notice contained the following statement:
Late filers are those committees filing reports after the due date, but within 30 days of the due date and/or filing election sensitive reports after due date, but prior to four days before election. Non-filers are committees that have either not filed a report or filed a report after the parameters outlined above.
(emphasis added).
ANALYSIS
This action is an appeal from a final determination of the defendant Federal Election Commission, pursuant to 2 U.S.C. § 437g(a)(4)(C)(iii). The defendant's determination may not be set aside unless the Court finds that it was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706. "The task of the reviewing court under this standard is to determine whether the agency has considered the pertinent evidence, examined the relevant factors, and articulated a satisfactory explanation for its action including whether there is a "rational connection between the facts found and the choice made." J. Andrew Lange, Inc. v. Federal Aviation Admin., 208 F.3d 389, 391 (2d Cir. 2000) ( citing Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962)).
It is undisputed that the Federal Election Campaign Act of 1971 ("FECA"), as amended, requires political committees to file periodic reports detailing the committees' receipts and expenditures. Specifically, for purposes of this action, 2 U.S.C. § 434(a)(2)(A)(1) required plaintiff to file a pre-election report "no later than the 12th day before (or posted by registered or certified mail no later than the 15th day before)" the September 12, 2000 primary election, which filing date was August 31, 2000. Defendant, as the agency of the United States government with exclusive jurisdiction over the ad ministration, interpretation and civil enforcement of FECA, is authorized to assess civil money penalties against committees which violate the reporting requirements of Section 434(a), in amounts to be determined by a schedule of penalties set forth in the agency's regulations. 2 U.S.C. § 437g(a)(4)(C); 11 C.F.R. § 111.43. Defendant is also authorized, but not required, to publish the names of committees which fail to file reports as required. 2 U.S.C. § 438(a)(7). However, section 437g(b) provides that,
11 C.F.R. § 111.43 became effective on July 14, 2000, shortly before the events leading up to this action.
[b]efore taking any action under subsection (a) of this section against any person who has failed to file a report required under section 434(a)(2)(A)(iii) of this title . . . the Commission shall notify the person of such failure to file the required reports. If a satisfactory response is not received within 4 business days after the date of notification, the Commission shall pursuant to section 438(a)(7) of this title, publish before the election the name of the person and the report or reports such person has failed to file.2 U.S.C. § 437g(b) (emphasis added). The procedure for challenging the agency's determination, at the agency level, is set forth in 11 C.F.R. § 111.35, and lists three possible grounds for challenging the agency's determination: "(i)The existence of factual errors; and/or (ii) The improper calculation of the civil money penalty; and/or (iii) The existence of extraordinary circumstances that were beyond the control of the respondent and that were for a duration of at least 48 hours and that prevented the respondent from filing the report in a timely manner." 11 C.F.R. § 111.35(b)(1). Examples of circumstances that are not considered extraordinary are "negligence" and "other similar circumstances." 11 C.F.R. § 111.35(b)(4). If a violation of 2 U.S.C. § 434(a) has occurred, the Commission has only two options with regard to the monetary penalty. It may modify the penalty "only if the respondent is able to demonstrate that the amount of the proposed civil money penalty was calculated on an incorrect basis," or it may "waive the penalty because the respondent has convincingly demonstrated the existence of extraordinary circumstances that were beyond the respondent's control and that were for a duration of at least 48 hours." 11 C.F.R. § 111.37. If a respondent chooses to challenge the commission's determination by filing an action in federal district court, it may not raise arguments which it did not raise before the commission. 11 C.F.R. § 111.38 ("The respondent's failure to raise an argument in a timely fashion during the administrative process shall be deemed a waiver of the respondent's right to present such argument in a petition to the district court under 2 U.S.C. § 437g.").
Applying the foregoing principles to the instant case, the Court finds, on the undisputed facts, that plaintiff violated 2 U.S.C. § 434(a) by failing to file its pre-election report on or before August 31, 2000. Plaintiff has provided no explanation for this failure. It is also undisputed that the notice which defendant sent to plaintiff on September 1, 2000, was sent pursuant to § 437g(b). A Section 437g(b) notice serves two purposes. First, it gives a person notice that the commission is considering taking action against him, which notice is required before the commission can take "any action" against him. Additionally, it provides a 4-business-day window in which a person may file a report to avoid publication prior to an election. Section 437g(b) does not, however, attach any additional significance to the 4-business-day rule. More specifically, 437g(b) does not indicate that, by filing within 4-business-days, the late filing is excused, that the person avoids a monetary penalty, or that the commission may not publish the person's name after the election. Accordingly, there is nothing in the statute or regulations which would limit plaintiff's liability for monetary penalties simply because it filed its report within 4-business days of the notice. Moreover, based upon the undisputed filing date of September 8th it is clear that pursuant to 11 C.F.R. § 111.43, plaintiff would be properly classified as a "non-filer," for purposes of calculating the fine, absent extraordinary circumstances, since it did not file its report "prior to four (4) days before" the September 12th election.
Plaintiff contends that defendant's regulations are contradictory, since, with regard to pre-election publication, plaintiff is considered to have filed its report, but with regard to money penalties, it is considered a "non-filer." However, plaintiff indicates that "[t]his case challenges neither set of regulations." (Plaintiff's Memo in Opposition to Defendant's Summary Judgment Motion, p. 2). Nonetheless, the Court notes its disagreement with plaintiff's argument, made before the defendant, that the 4-business-day pre-election publication rule leads to an "absurd conclusion," or that its benefit to candidates is "illusory." Clearly, the benefit to the candidate in such a case it that he or she does not have his or her name published as a "non-filer" immediately prior to an election. This benefit is not undone merely because the candidate may have to eventually pay a fine, or, as happened in this case, have his or her name published a year later. Any other arguments directed at the regulations themselves are waived, since they were not raised at the administrative level.
Plaintiff further contends that the defendant acted arbitrarily and capriciously when it refused to exercise its discretion by taking into account "[i]ts own misfeasance." Specifically, plaintiff contends that defendant misled it, both in its written September 1st notice and in its oral representations, that September 8th was "the deadline," while failing to mention that "there was yet another, earlier deadline." Id. at p. 3. What is curious about plaintiff's argument is that, despite allegedly believing it had complied with "the deadline," it does not object to being labeled a "late-filer" or paying the appropriate fine for late filers. Logically, if plaintiff had actually believed and relied upon defendant's statements that September 8th was "the deadline," it would be before the Court objecting to the imposition of any fines for late filing. However, plaintiff does not object to being "labeled" as a late-filer, nor does it object to paying the lower fine. Accordingly, it is clear that neither the written or oral statements misled plaintiff into believing that it would escape a monetary penalty altogether if it filed by September 8th.
Plaintiff's argument may be characterized as being that, in logic and in fairness, a person who files a report should not be labeled a "non-filer." This argument is based on the assumption, no doubt true, that the average person would expect the term "not filed" to mean not filed. However, the average person's understanding is irrelevant in this case, since the term "not filed" is defined by 11 C.F.R. § 111.43 to mean something different, namely, to mean not filing "prior to four (4) days before" the election. Moreover, that definition was included in the notice published by defendant, which listed plaintiff as a non-filer.
Plaintiff admits that, "[t]he natural inference, then . . . was that Plaintiffs filing of the report within four business days of the Notice would have an effect on both publication and legal enforcement action including the imposition of a civil money penalty." (Memorandum of Law in Support of Plaintiff's Motion for Summary Judgment, p. 9).
Plaintiff objects to those portions of the September 1St notice which state that it will be allowed to file the report within 4 business days, and that "failure to file this report may result in publication, audit or legal enforcement action." If this notice is misleading, it is because it gives the impression that by filing within 4 business days, a candidate will avoid those penalties altogether. However, defendant does not claim to have been misled in that manner. Moreover, there is nothing in the notice which could lead anyone to believe that, by filing within 4 business days, they would be treated as a "late-filer" as opposed to a "nonfiler."
Plaintiff is essentially indicating that defendant's allegedly misleading statements were misleading only as to the type and extent of monetary penalty that could be imposed. However, neither defendant's September 15th notice nor Mr. Young made any express or implied statements in that regard. In reality, plaintiff's complaint is that Young did not explain to Gardner that filing the report on the 8th instead of the 7th would result in being classified a non-filer, with a resultant higher fine. However, there is no indication in the record that Young was even aware of the distinction, and even if he was, the Court does not believe he had a duty to explain it to Gardner. That is because it is clear that the sole purpose of Gardner's call to Young was merely to confirm his understanding that September 8th was the fourth business day from the date of the notice. Gardner did not specifically ask Young anything about monetary penalties. Based upon all of the foregoing, the Court finds that defendant did not make any misrepresentations to plaintiff. The Court also rejects plaintiff's contention that defendant failed to give proper consideration to its arguments. On the contrary, the Court finds that defendant did properly consider and analyze plaintiff's objections, although it ultimately rejected them. Thus, the Court rejects plaintiff's contention that defendant's final determination was arbitrary and capricious.
From the record, it appears very likely that on September 7th neither Mr. Gardner nor Mr. Young was aware of the distinction between a "late-filer" and a "non-filer," especially considering that the regulation had only become effective two months earlier.
Plaintiff also contends that the principle of equitable estoppel should apply. It is well settled that,
[t]he law requires more than a showing of detrimental reliance on material representations by a plaintiff looking to invoke equitable estoppel against a government or government agency. Because an estoppel against the government implicates the interest of the citizenry as a whole, such an estoppel must be supported by proof that the government's conduct was willful, wanton, or reckless. It follows that equitable estoppel against the government is foreclosed in all but the rarest of cases.Coney Island Resorts, Inc. v. Giuliani, 103 F. Supp.2d 645, 657 (E.D.N.Y. 2000) (citations and internal quotation marks omitted), aff'd 2001 WL 392053 (2d Cir. Apr. 18, 2001), cert. den. 122 S.Ct. 644 (2001). As noted above, however, the Court does not find that defendant made any misrepresentations to plaintiff, let alone that it engaged in willful, wanton, or reckless conduct. Nor has plaintiff proven detrimental reliance, since there is nothing in the record to indicate that plaintiff had the ability to file electronically on September 7, 2000. As to that, although plaintiff indicates that "a [filing] password can usually be obtained within a few yours of faxing a request" (Reply to Defendant's Opposition, p. 4, referring the Court to defendant's website), it is clear from defendant's website that special filing software is also required. Plaintiff has not shown that it had the necessary software to file electronically, nor has it indicated how long it would take to obtain that software. Accordingly, the Court finds that plaintiff has not established the elements necessary for equitable estoppel. Similarly, the Court rejects plaintiff's claim that the relief it seeks is justified on bare principles of "fundamental fairness," and finds that the cases it cites in connection therewith are inapposite to the facts of this case.
See http://www.fec.gov/elecfil/software.html. This website indicates that the filing software, and its 115-page user's manual, may be downloaded at no charge. However, one must apply online in order to obtain the software. Upon calling the defendant's offices to inquire how long it would take to actually receive the download, a court employee was routed through an automated answering system, and eventually received a recording directing him to leave a message.
CONCLUSION
For all of the foregoing reasons, plaintiff's motion for summary judgment is denied, defendant's motion for summary judgment is granted, and this action is dismissed.
SO ORDERED.