[Federal Register: January 31, 2006 (Volume 71, Number 20)]
[Rules and Regulations]
[Page 4975-4980]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31ja06-1]
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Rules and Regulations
Federal Register
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[[Page 4975]]
FEDERAL ELECTION COMMISSION
11 CFR Parts 109 and 300
[Notice 2006-1]
Definitions of ``Agent'' for BCRA Regulations on Non-Federal
Funds or Soft Money and Coordinated and Independent Expenditures
AGENCY: Federal Election Commission.
ACTION: Revised Explanation and Justification.
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SUMMARY: The Federal Election Commission is publishing a revised
Explanation and Justification for its definitions of ``agent'' in its
regulations on coordinated and independent expenditures, and non-
Federal funds, which are commonly referred to as ``soft money.'' The
regulations, which are being retained, implement the Bipartisan
Campaign Reform Act of 2002 by defining ``agent'' as ``any person who
has actual authority, either express or implied'' to perform certain
actions. These definitions do not include persons acting only with
apparent authority. These revisions to the Explanation and
Justification are in response to the decision of the U.S. District
Court for the District of Columbia in Shays v. FEC. Further information
is provided in the supplementary information that follows.
DATES: Effective date is January 31, 2006.
FOR FURTHER INFORMATION CONTACT: Mr. Brad C. Deutsch, Assistant General
Counsel, or Mr. Ron B. Katwan, Attorney, 999 E Street, NW., Washington,
DC 20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: The Bipartisan Campaign Reform Act of 2002,
Pub. L. 107-155, 116 Stat. 81 (2002) (``BCRA'') amended the Federal
Election Campaign Act of 1971, as amended, 2 U.S.C. 431 et seq. (the
``Act''). In 2002, the Commission promulgated regulations in order to
implement BCRA's new limitations on party, candidate, and officeholder
solicitation and use of non-Federal funds. Final Rules and Explanation
and Justification for Prohibited and Excessive Contributions: Non-
Federal Funds or Soft Money, 67 FR 49064 (July 29, 2002) (``Soft Money
Final Rules''). The Commission also approved final rules implementing
BCRA's provisions regarding payments by political committees and other
persons for communications that are coordinated with a candidate, a
candidate's authorized committee, or a political party committee, as
well as other expenditures that are made either in coordination with,
or independently from, candidates and political party committees. Final
Rules and Explanation and Justification for Coordinated and Independent
Expenditures, 68 FR 421 (Jan. 3, 2003) (``Coordination Final Rules'').
Many of BCRA's provisions and the regulations implementing BCRA
apply not only to principals, such as candidates, political party
committees, or other entities, but also to their agents. See 67 FR at
49081-82; 68 FR at 421-22. Before BCRA was enacted, the Commission's
regulations at former 11 CFR 109.1(b)(5) (2001) defined ``agent'' only
for purposes of establishing whether an expenditure made by an
individual was made independent of a candidate or political party. The
definition was limited to ``any person who has actual oral or written
authority, either express or implied, to make or to authorize the
making of expenditures, or [* * *] any person who has been placed in a
position within the campaign organization where it would reasonably
appear that in the ordinary course of campaign-related activities he or
she may authorize expenditures.'' The definition of ``agent'' at former
section 109.1(b)(5) did not apply to any fundraising activities.
When implementing BCRA in 2002, the Commission did not seek comment
on whether it should retain the pre-BCRA definition of ``agent.''
Rather, the Commission sought comment on whether a principal should be
held liable if an agent has actual, as opposed to apparent, authority
to engage in the alleged actions at issue, and whether a principal
should be held liable only if an agent has express, rather than
implied, authority to act. See Notice of Proposed Rulemaking on
Prohibited and Excessive Contributions; Non-Federal Funds or Soft
Money, 67 FR 35654, 35658 (May 20, 2002). The Commission also sought
comment on whether the term ``agent'' should be left undefined in the
Commission's rules and interpreted instead based on common law
principles of agency. Id.
The final rules adopted by the Commission in 2002 contained two
identical definitions of ``agent'' for the regulations on coordinated
and independent expenditures (11 CFR 109.3) and the soft money
regulations (11 CFR 300.2(b)). Both rules defined ``agent'' as ``any
person who has actual authority, either express or implied,'' to
perform certain actions. The Commission decided to exclude from the
BCRA rules defining ``agent'' those persons acting only with apparent
authority. The 2002 BCRA rules sought to limit a principal's liability
for the actions of an agent to situations where the principal had
engaged in specific conduct to create an agent's authority. The
Commission was concerned that by including apparent authority in the
definitions of ``agent'' it would expose principals to liability based
solely on the actions of a rogue or misguided volunteer and ``place the
definition of `agent' in the hands of a third party.'' See Soft Money
Final Rules, 67 FR at 49083; Coordination Final Rules, 68 FR at 424-
425. Accordingly, the Commission's BCRA definitions did not include the
second part of the pre-BCRA definition, which had covered only limited
aspects of apparent authority, specifically, apparent authority based
on ``a position within the campaign organization.''
In 2004, the Commission's post-BCRA definitions of ``agent'' were
reviewed by the U.S. District Court for the District of Columbia in
Shays v. FEC, 337 F. Supp. 2d 28 (D.D.C. 2004) (``Shays''), aff'd, 414
F.3d 76 (D.C. Cir. 2005) (pet. for reh'g en banc denied Oct. 21, 2005)
(No. 04-5352). The District Court held that the Commission's decision
not to include apparent authority within the definitions of ``agent''
was an acceptable and permissible construction of the term under the
Act. Shays at 84. The court found that Congress had not directly spoken
to the question at issue, satisfying the first step of Chevron
[[Page 4976]]
review.\1\ Id. at 71, 84. The court determined that ``the Commission's
construction of the term `agent' is faithful to the literal terms of
the statute.'' Id. at 71-72, 81-86 (finding that both definitions
``survive[] Chevron review''). Specifically, the District Court
concluded, ``the term `agent' is subject to different interpretations
and the FEC's interpretation of the term complies with an acceptable
interpretation of the statute.'' Id. at 84. The court emphasized that
the Shays plaintiffs ``provide[d] no basis for the conclusion that the
term `agent' has developed a `settled meaning under * * * the common
law,' or that the meaning includes those acting with apparent
authority.'' Id. at 83. The District Court noted, ``Black's Law
Dictionary provides that the term in its normal parlance does not
include those acting with apparent authority.'' Id. (emphasis
added).\2\ Accordingly, the court ``conclude[d] that the term `agent'
does not have a settled common law meaning that includes those acting
with apparent authority.'' Id.
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\1\ The first step of the Chevron analysis, which courts use to
review an agency's regulations, asks whether Congress has directly
spoken to the precise questions at issue. The second step considers
whether the agency's resolution of an issue not addressed in the
statute is based on a permissible construction of the statute. See
Shays at 51-52 (citing Chevron, U.S.A., Inc. v. Natural Res. Def.
Council, 467 U.S. 837, 842-43 (1984)).
\2\ The court also noted that individuals with apparent
authority ``are therefore not technically `agents' with regard to
the activity at issue; it is only by their actions and those of
their `principal' that they are deemed to act as agents for purposes
of establishing liability.'' Id. at 84, citing Restatement (Second)
of Agency 8, cmt. a.
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While upholding the Commission's definition under Chevron, the
District Court found that the Commission's Explanation and
Justification for the definitions of `agent' at 11 CFR 109.3 and
300.2(b) did not satisfy the reasoned analysis requirement of the
Administrative Procedure Act (``APA'') on three grounds. See Shays at
72, 88; see also 5 U.S.C. 553. First, the court found that the
Commission had not adequately explained why it departed from its pre-
BCRA definition of `agent,' by not including the portion of the
definition that covered certain applications of apparent authority.
Shays at 87. Second, the court found that the Commission had not
addressed the impact that its construction of the term ``agent'' might
have on preventing circumvention of the Act's limitations and
prohibitions and on preventing the appearance of corruption, two
policies that Congress sought to advance in passing BCRA. Id. at 72,
87. Third, the court found that the Commission's main concern in
excluding apparent authority from the definitions--namely, to prevent a
candidate or political party committee from being held liable for the
actions of a rogue or misguided volunteer who purports to act on behalf
of the candidate or committee--was ``not supported by the law of agency
* * *.'' Id. at 87.
The court remanded the definitions to the Commission for further
action consistent with its opinion. Id. at 130. The Commission did not
appeal this portion of the District Court decision.
In response to the Shays decision, the Commission issued a Notice
of Proposed Rulemaking, which was published in the Federal Register on
February 2, 2005. Notice of Proposed Rulemaking on the Definitions of
``Agent'' for BCRA Regulations on Non-Federal Funds or Soft Money and
Coordinated and Independent Expenditures, 70 FR 5382 (Feb. 2, 2005)
(``NPRM''). The NPRM sought comment on several alternatives, which were
(1) whether to continue to exclude apparent authority from its
definitions of ``agent'' at 11 CFR 109.3 and 300.2(b); (2) whether to
add apparent authority to these definitions; (3) whether to return to
the pre-BCRA definition; and (4) whether to adopt a different
definition of ``agent'' covering certain applications of apparent
authority while excluding others. The comment period closed on March 4,
2005. The Commission received six written comments from eleven
commenters on the proposed rules. Additionally, the Commission received
a letter from the Internal Revenue Service indicating, ``the proposed
rules do not pose a conflict with the Internal Revenue Code or the
regulations thereunder.'' The Commission held a hearing on this
rulemaking on May 17, 2005. Four commenters testified at the hearing.
For purposes of this document, the terms ``comments'' and ``commenter''
apply to both written comments and oral testimony at the public
hearing.\3\
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\3\ The written comments and a transcript of the hearing are
available at http://www.fec.gov/law/law_rulemakings.shtml under
Definition of Agent for BCRA Regulations on Coordinated and
Independent Expenditures and Non-Federal Funds or Soft Money.
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The commenters were divided between those who favored adding
apparent authority to the definitions of ``agent'' and those who
supported retention of the 2002 rule. The Commission has decided, after
carefully weighing the relevant factors, including its extensive
experience in investigating and prosecuting statutory violations, to
retain the current definitions in 11 CFR 109.3 and 300.2(b) and to
provide this revised Explanation and Justification for the decision to
exclude apparent authority from these definitions. The Commission has
decided that its current definitions of ``agent'': (1) As required by
BCRA, cover individuals engaged in a broad range of activities
specifically related to BCRA-regulated conduct, thereby dramatically
increasing the number of individuals and type of conduct subject to the
Act, especially when compared to the Commission's pre-BCRA definition
of agent; (2) cover the wide range of activities prohibited by BCRA and
the Act, thereby providing incentives for compliance, while protecting
core political activity permitted by BCRA and affirmed by the U.S.
Supreme Court in McConnell \4\ that, under an apparent authority
standard, could otherwise be restricted or subject to Commission
investigation; and (3) are best suited for the political context, which
is materially different from other contexts in which apparent authority
is applicable.
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\4\ See McConnell v. FEC, 504 U.S. 93, 159-61 (2003).
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Explanation and Justification
11 CFR 109.3 and 300.2(b)--Definitions
According to the common law definition of actual authority, as
codified in the Restatement (Second) of Agency (1958)
(``Restatement''), an agent's actual authority is created by
manifestations of consent (express or implied) made by the principal to
the agent.\5\ Restatement 7. Apparent authority, by contrast, is the
result of manifestations the principal makes to a third party about a
person's authority to act on the principal's behalf. Restatement 8.
Apparent authority is created where the principal's words or conduct
``reasonably interpreted, causes the third person to believe that the
principal consents to have the act done on his behalf by the person
purporting to act for him.'' Overnite Transp. Co. v. NLRB, 140 F.3d
259, 266 (D.C. Cir. 1998) (quoting Restatement 27). Moreover, to have
apparent authority ``the third person must not only believe that the
individual acts on behalf of the principal but, in addition, `either
the principal must intend to cause the third party to believe that the
agent is authorized to act for him, or he should realize that his
conduct is likely to create such belief.' '' Id. (quoting Restatement
27, cmt. a) (emphasis added).
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\5\ See Kolstad v. American Dental Ass'n, 527 U.S. 526, 542
(1999) (``The common law as codified in the Restatement (Second) of
Agency (1957), provides a useful starting point for defining [the]
general common law [of agency].'')
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[[Page 4977]]
Finally, apparent authority may be created not only by
manifestations the principal makes directly to a third party, but, in
addition, ``as in the case of [actual] authority, apparent authority
can be created by appointing a person to a position, such as that of
manager or treasurer, which carries with it generally recognized
duties; to those who know of the appointment there is apparent
authority to do the things ordinarily entrusted to one occupying such a
position, regardless of unknown limitations which are imposed upon the
particular agent.'' Restatement 27, cmt. a.
The Supreme Court has emphasized that not every aspect of agency
law needs to be incorporated into a Federal statute when it is not
necessary to effectuate the statute's underlying purpose. See, e.g.,
Faragher v. City of Boca Raton, 524 U.S. 775, 803 n.3 (1998) (The
``obligation here is not to make a pronouncement of agency law in
general or to transplant [the Restatement (Second) of Agency into a
Federal Statute, but] is to adapt agency concepts to the [Statute's]
practical objectives.''). In construing the term ``agent,'' the
Commission believes that the current definitions of ``agent,'' which
are based on actual authority, either express or implied, best
effectuate the intent and purposes of BCRA and the Act.
The Commission's current definitions of ``agent': (1) As required
by BCRA, cover individuals engaged in a broad range of activities
specifically related to BCRA-regulated conduct, thereby dramatically
increasing the number of individuals and types of conduct subject to
the Act, especially when compared to the Commission's pre-BCRA
definition of agent; (2) cover the wide range of activities prohibited
by BCRA and the Act, thereby providing incentives for compliance, while
protecting core political activity permitted by BCRA and affirmed by
the U.S. Supreme Court in McConnell that, under an apparent authority
standard, could otherwise be restricted or subject to Commission
investigation; and (3) are best suited for the political context, which
is materially different from other contexts in which apparent authority
is applicable.
1. As required by BCRA, the Commission's definitions of ``agent''
cover individuals engaged in a broad range of activities specifically
related to BCRA-regulated conduct, thereby dramatically increasing the
number of individuals and types of conduct subject to the Act,
especially when compared to the Commission's pre-BCRA definition of
agent.
In implementing BCRA, the Commission adopted regulations that
defined ``agent'' based on a broad range of activities specifically
related to BCRA-regulated conduct, thereby dramatically increasing the
number of individuals who met the definitions of an ``agent'' of a
candidate, political party committee, or other political committee. The
Commission's pre-BCRA independent expenditure rules limited the
definitions of ``agent'' to ``any person who has actual oral or written
authority, either express or implied, to make or to authorize the
making of expenditures, or [* * *] any person who has been placed in a
position within the campaign organization where it would reasonably
appear that in the ordinary course of campaign-related activities he or
she may authorize expenditures.'' 11 CFR 109.1(b)(5)(2001).
Campaign committees typically authorize very few people to make
expenditures, and typically limit those powers to employees under the
campaign's direct control. The number of positions within a campaign
organization where it would reasonably appear that a person could make
expenditures is similarly limited. Therefore, the Commission's pre-BCRA
definition of ``agent'' captured only a small number of individuals
within a campaign organization. Moreover, by defining agency based on
authority to make expenditures, the Commission's pre-BCRA definition
did not restrict individuals involved in the solicitation and receipt
of funds specifically prohibited by BCRA.
In enacting BCRA, Congress extended the scope of agency for
purposes of the Act to include persons with the authority to solicit
and receive funds, thereby increasing significantly the number of
persons subject to the Act. Accordingly, the Commission's soft money
regulations define ``agents'' as individuals with actual authority to
solicit or receive funds. See, e.g., 11 CFR 300.2(b)(1)(i) (``solicit,
direct or receive funds'') and 300.2 (b)(3) (``solicit, receive,
direct, transfer, or spend funds''). In contrast to the pre-BCRA rule,
the current definition applies to the solicitation of funds generally,
and is not limited to activities based on statutorily defined terms,
such as expenditures or contributions. The number of individuals
involved in fundraising for a campaign can reach hundreds and, in the
case of presidential campaigns and national party committees,
potentially thousands of individuals, most of whom are volunteers.
Therefore, the number of individuals subject to the Commission's
current definition of ``agent'' in the soft money regulations is far
greater than the number of individuals who were subject to the pre-BCRA
regulation, while the type of activity restricted is specifically
related to BCRA-regulated conduct.
The Commission's current definition of ``agent'' in its
coordination regulations defines agents as individuals with actual
authority to request, make, or be materially involved with the
production of certain types of communications. 11 CFR 109.3. In
contrast to the pre-BCRA rule, this definition applies to a wide range
of activities related to the creation and distribution of political
communications, and is not limited to activities based on statutorily
defined terms, such as expenditures or contributions. For example, the
rule captures individuals who, on behalf of a Federal candidate, have
actual authority, ``to provide material information to assist another
person in the creation, production, or distribution of any
communication.'' 11 CFR 109.3(b)(5). Therefore, the rule not only
captures a much larger set of individuals than the pre-BCRA rule, but
also captures the proper type of activity prohibited by the
coordination regulations, i.e., activities related to the production
and distribution of communications.
After examining the Commission's pre- and post-BCRA enforcement
record, the Commission has determined that the decision to limit agency
to those with actual authority, express or implied, has not had a
material impact on its ability to prosecute cases in the three years
the rule has been in place. In the Commission's experience in
administering and enforcing the Act since promulgating the current
rules in 2002, excluding apparent authority from the definitions of
``agent'' has not facilitated circumvention of the Act nor led to
actual or apparent corruption. Commenters both favoring and opposing
the regulations in their current form agreed that there is no evidence
that the operation of the current definitions of ``agent'' in the 2003-
2004 election cycle in any way undermined the success of BCRA cited by
its Congressional sponsors. When asked at the hearing whether the lack
of apparent authority had led to circumvention of the Act, a
representative of a major reform organization testified, ``I don't know
of any specific situation.'' The Commission concurs with this
conclusion.
In upholding the Commission's definitions of ``agent'' under
Chevron, the District Court observed, ``it is not readily apparent that
the regulation on its face creates the potential for gross abuse'' and
``in the end simply finds
[[Page 4978]]
Plaintiffs'' concerns [that the definitions would allow circumvention
of the Act] to be too amorphous and speculative at this stage to
mandate the reversal of the Commission's regulation.'' Shays at 85-86.
The record evidence developed and reviewed in this rulemaking and the
Commission's prosecutorial experience support the District Court's
conclusion.
Nevertheless, if the Commission should encounter evidence of actual
or apparent corruption or of circumvention of the Act in the future,
the Commission has the authority to revisit the regulation and take
action as appropriate, including an approach targeted to the specific
problems that are actually found to occur.
2. Actual authority, either express or implied, is a broad concept
that covers the wide range of activities prohibited by BCRA and the
Act, thereby providing appropriate incentives for compliance, while
protecting core political activity permitted by BCRA and affirmed by
the U.S. Supreme Court in McConnell that, under an apparent authority
standard, could otherwise be restricted or subject to Commission
investigation.
Based on a careful review of the relevant factors, the Commission
has found that inclusion of apparent authority in the Commission's
definitions of ``agent'' is not necessary to implement BCRA or the Act,
and that actual authority is sufficient to prevent circumvention and
the appearance of corruption. In arguing for an apparent authority
standard, some commenters erroneously stated that the Commission's
current definitions of ``agent'' were too narrow because they failed to
capture various hypotheticals involving allegedly prohibited activity.
These hypotheticals included: (a) Actions by individuals with certain
titles or positions within a campaign organization or party committee;
(b) actions by individuals where the candidate privately instructed the
individual to avoid raising non-Federal funds; (c) actions by
individuals acting under indirect signals from a candidate; and (d)
actions by individuals who willfully kept a candidate, political party
committee, or other political committee ignorant of their prohibited
activity. As discussed further below, actual authority, either express
or implied, sufficiently addresses this hypothetical behavior.
Moreover, a principal's private instructions or indirect signals to
agents, or a principal's attempts to keep himself ignorant of an
agent's activities, do not implicate apparent authority, which involves
manifestations by a principal to a third person rather than to the
agent.
While the Commission's actual authority standard is sufficiently
broad to address this activity, it also protects core political
activity permitted by BCRA and affirmed by the U.S. Supreme Court in
McConnell that, under an apparent authority standard, could otherwise
be restricted or subject to Commission investigation. Therefore, the
Commission's current definitions of ``agent'' best effectuate the
intent and purpose of BCRA and the Act, and create the appropriate
incentives for candidates, party committees, and other political
committees to ensure that their employees and volunteers are familiar
with, and comply with, BCRA's soft money and coordination provisions.
a. Actions of individuals with certain titles or positions.
Apparent authority is not necessary to capture impermissible activity
by persons holding certain titles or positions within a campaign
organization, political party committee, or other political committee.
A title or position is most frequently part of the grant of actual
authority, either express or implied, to act on behalf of a principal.
The scope of the authority created will depend on the title given and
the understanding of the agent and the principal. For example, an
individual with the title of fundraising chair of a campaign has actual
authority to raise funds on behalf of that campaign. See Restatement
27, cmt a. Fundraising is within the scope of a fundraising chair's
actual authority. Later actions by a principal, reasonably understood
by the agent, can expand the scope of authority under either express or
implied actual authority. Thus, even if the definitions of ``agent''
are limited to persons acting with actual authority, a person may be an
agent as a result of actual authority based on his or her position or
title within a campaign organization, political party committee, or
other political committee.
b. Actions by individuals where the candidate privately instructed
the individual to avoid raising non-Federal funds. The Commission's
current definitions of ``agent'' are sufficiently broad to capture
actions by individuals where the candidate authorizes an individual to
solicit Federal funds on his or her behalf, but privately instructs the
individual to avoid raising non-Federal funds. One commenter's scenario
proposed, ``a Federal candidate publicly named a fundraising chairman
who thus was vested with the apparent authority of the candidate, but
where the candidate privately instructed the agent to avoid raising
non-Federal funds. Suppose further that the fundraiser nonetheless
solicits soft money.'' Contrary to the commenter's assertion, the
fundraising chairman in this scenario could be an agent for the purpose
of soliciting funds under the Commission's current regulations.\6\
Because raising funds is within the fundraising chair's scope of actual
authority, soft money solicitations on behalf of the candidate are
prohibited. As an agent of a federal officeholder the fundraiser would
be liable for any such violation. In addition, the candidate/principal
may also be liable for any impermissible solicitations by the agent,
despite specific instructions not to do so. See U.S. v. Investment
Enterprises, Inc., 10 F.3d 263, 266 (5th Cir. 1993) (determining that
it is a settled matter of agency law that liability exists ``for
unlawful acts of [] agents, provided that the conduct is within the
scope of the agent's authority''); see also Restatement 216 (``A master
or other principal may be liable to another whose interests have been
invaded by the tortious conduct of a servant or other agent, although
the principal does not personally violate a duty to such other or
authorize the conduct of the agent causing the invasion.'');
Restatement 219(1) (``A master is subject to liability for the torts of
his servant committed while acting in the scope of their
employment.'').
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\6\ The Commission notes that regardless of whether it includes
apparent authority in the definition of ``agent,'' for the candidate
to be liable in this scenario under existing Commission regulations
prohibiting soft money solicitations, the fundraising chair must be
``acting on behalf'' of the candidate when he or she makes the soft
money solicitation. See 11 CFR 300.10(c)(1) (``An officer or agent
acting on behalf of a national party committee or a national
congressional campaign committee;'') and 300.60(c) (``Agents acting
on behalf of a Federal candidate or individual holding Federal
office;'') (emphases added). As the Commission noted in the Soft
Money Final Rules, ``a principal can only be held liable for the
actions of an agent when the agent is acting on behalf of the
principal, and not when the agent is acting on behalf of other
organizations or individuals. Specifically, it is not enough that
there is some relationship or contact between the principal and
agent; rather, the agent must be acting on behalf of the principal
to create potential liability for the principal.'' Soft Money Final
Rules, 67 FR at 49083.
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c. Actions by individuals acting under indirect signals from a
candidate. The Commission's current definitions of ``agent'' are
sufficiently broad to capture actions by individuals acting under
indirect signals from a candidate. Commenters raised concerns that
candidates could withhold actual authority to violate the law, but
attempt to signal indirectly that the agent should ignore his or her
express instructions and solicit illegal soft money nevertheless.
Several commenters described this as the use of a ``wink and a nod''
that would authorize the agent to act illegally. Contrary to what these
commenters suggested, however, the
[[Page 4979]]
principal's indirect signals give the fundraiser actual authority to
raise money, and by implication, to do so illegally. See Restatement
26, cmt. c (``[authority to perform a particular act] may be inferred
from words or conduct which the principal has reason to know indicate
to the agent that he is to do the act for the benefit of the
principal''). Moreover, because apparent authority is based on
communications between the principal and a third party, if the
principal indirectly signaled to the agent that the agent should
violate the law, the principal's actions would not create apparent
authority. Apparent authority does not further the Commission's efforts
to prevent this type of misconduct.
d. Actions by individuals who willfully keep a candidate, political
party committee, or other political committee ignorant of their
prohibited activity. The Commission's current definitions of ``agent''
are also sufficiently broad to capture actions by individuals who
willfully keep a candidate, party committee, or other political
committee ignorant of their prohibited activity. In another scenario,
commenters maintained that ``so long as agents keep their principals
sufficiently ignorant of their particular practices * * * those
operating with apparent authority could exploit their positions to
continue soliciting and directing soft money contributions, continue
peddling access to their principals, and continue by virtue of their
apparent authority to perpetuate the appearance if not the reality of
corruption.''
Assuming that apparent authority in this scenario is based on a
position like that of fundraising chair, the agent would have actual
authority to raise funds and thus the candidate would be liable for the
agent's illegal soft money solicitations, if done on the candidate's
behalf, even if the solicitations were made without the candidate's
knowledge.\7\ Moreover, under actual authority, a principal cannot
avoid liability through attempts to keep himself ignorant of his or her
agent's actions. See Restatement 43 (``Acquiescence by the principal in
conduct of an agent whose previously conferred authorization reasonably
might include it, indicates that the conduct was authorized; if clearly
not included in the authorization, acquiescence in it indicates
affirmance.'')
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\7\ See note 6, above.
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Thus, for all the reasons discussed above, actual authority,
whether express or implied, is a broad concept that provides
candidates, political party committees, and other political committees
with the appropriate incentives to monitor the conduct of those whom
they hold out to the public as their agents.
e. Apparent authority based on direct manifestations a principal
makes to a third party is not necessary to implement the purposes of
BCRA and the Act because the Commission's soft money and coordination
regulations would, in many situations, reach the principal's own
conduct directly. In addition, apparent authority based on direct
manifestations a principal makes to a third party is not necessary to
implement the purposes of BCRA and the Act because the Commission's
soft money and coordination regulations would, in many situations,
reach the principal's own conduct directly. Where a Federal candidate
creates apparent authority to solicit soft money for a volunteer,
employee, or consultant by talking directly to a third party, in many
situations, the conversation between the candidate and the third party
will constitute a solicitation by the candidate in and of itself. For
example, assume a Federal candidate informs a contributor that an
illegal soft money contribution to Jane Doe's gun owners' rights
organization would greatly benefit the Federal candidate's campaign.
Regardless of whether Jane Doe has authority to act on behalf of the
Federal candidate, the Federal candidate would face liability based on
his or her own comments to the contributor. Not only is the principal's
statement likely captured by the Commission's current regulations, the
Commission is currently conducting a rulemaking to expand its
definition of ``solicit'' at 11 CFR 300.2(m), as it was understood by
the Shays court, and in light of the Court of Appeals decision in Shays
v. FEC. See Notice of Proposed Rulemaking on the Definitions of
``Solicit'' and ``Direct'', 70 FR 56599 (Sept. 28, 2005); see also
Shays v. FEC, 414 F.3d 76, 105-07 (D.C. Cir. 2005) (holding the
Commission's definitions of ``to solicit'' and ``to direct'' did not
survive the first step of Chevron review.). Under this approach,
liability for statements to third parties will rest directly on
candidates, rather than indirectly through purported agents.
f. Actual authority protects core political activity permitted by
BCRA and affirmed by the U.S. Supreme Court in McConnell that, under an
apparent authority standard, could otherwise be restricted or subject
to Commission investigation.
While the Commission's current regulations are sufficiently broad
to create appropriate incentives for candidates, party committees, and
other political committees to ensure that their employees and
volunteers are familiar with, and comply with, BCRA's soft money and
coordination provisions, the current regulations also preserve the
ability of individuals to solicit funds on behalf of multiple entities.
BCRA restricts the ability of Federal officeholders, candidates, and
national party committees to raise non-Federal funds. BCRA does not
prohibit individuals who are agents of the foregoing from also raising
non-Federal funds for other political parties or outside groups.\8\ As
the Supreme Court made clear in McConnell, even ``party officials may
also solicit soft money in their unofficial capacities.'' McConnell,
504 U.S. at 159-61. The Commission recognized in the Soft Money Final
Rules that ``individuals, such as State party chairmen and chairwomen,
who also serve as members of their national party committees, can,
consistent with BCRA, wear multiple hats, and can raise non-Federal
funds for their State party organizations without violating the
prohibition against non-Federal fundraising by national parties.'' Id.;
see also Restatement 13 (``merely acting in a manner that benefits
another is not necessarily acting on behalf of that person.'').\9\
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\8\ Federal candidates and officeholders may raise non-Federal
funds in limited circumstances. See 2 U.S.C. 441i(e)(1)(B), (2), and
(3).
\9\ In order to preserve an individual's ability to raise funds
for multiple organizations, the Commission's current regulations
specifically require an agent to be acting on behalf of a candidate
or party committee to be subject to BCRA's soft money prohibition.
See note 6, above.
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An apparent authority standard would potentially subject
individuals conducting permissible fundraising activities to Commission
complaints and investigations. Such a result would unduly burden
participation in permissible political activity. For example, assume
Candidate meets Contributor who mentions he is from Trenton, New
Jersey. Candidate mentions to Contributor that he knows a politically
prominent environmentalist named Tom who is also from Trenton.
Candidate praises Tom's involvement in an environmental group in New
Jersey and says, ``Say hello to Tom if you see him, and tell him to
give me a call. Tom is an old friend and one of the reasons I keep
getting elected.'' In fact, Tom has not spoken to the Candidate in over
a year, and knows him only though past efforts to lobby him on
tightening environmental laws. Contributor later meets Tom, who
solicits Contributor for
[[Page 4980]]
a soft money contribution to the environmental group.
If a complaint was filed with the Commission, the Commission could,
under an apparent authority standard, investigate whether Contributor
reasonably believed Tom was Candidate's agent, and if so, whether Tom
made the solicitation on behalf of Candidate. However, under an actual
authority standard, there is no actual authority between Tom and
Candidate, thereby ending the Commission's inquiry into his conduct and
preserving his ability to remain active in his environmental
organization.
In reaching this conclusion, the Commission is mindful that both
the Supreme Court in McConnell and the commenters agreed that citizen
participation in both Federal campaigns and with organizations that may
raise soft money is permissible under BCRA.
3. Liability premised on actual authority is best suited for the
political context, which is materially different from contexts where
apparent authority is applicable.
The Commission emphasizes that the decision to exclude apparent
authority from its definitions of ``agent'' is informed by the
difference between the political context in which the Commission's
definitions of ``agent'' operate, and the non-political contexts in
which apparent authority is normally applied.\10\
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\10\ This rulemaking does not impact the role of apparent
authority in the enforcement or interpretation of commercial
obligations between political committees and vendors. See, e.g.,
Karl Rove & Co. v. Thornburgh, 39 F.3d 1273 (5th Cir. 1994).
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Electoral campaigns are materially different from many commercial
endeavors in that campaigns must depend on broad participation by
volunteers. Unlike commercial agents, political volunteers have an
affirmative interest in promoting and working toward the campaign's
goals based on personal and ideological, rather than economic,
incentives. Unlike commercial principals, campaigns welcome the
assistance and support of nearly any volunteer, regardless of their
expertise, availability, or exact reasons for supporting the campaign.
A commercial principal does not customarily rely on a large number of
mainly inexperienced volunteers to carry out its commercial purposes.
Moreover, a commercial principal typically does not have a large number
of people willing to work on its behalf for no economic benefit and
without the commercial principal's knowledge. See, e.g., AO 1999-17
(discussing campaign volunteers' independent Internet activities on
behalf of a presidential campaign).
As the Commission pointed out in the Soft Money Final Rules, in
most non-political contexts, the purpose of apparent authority is ``to
protect innocent third parties who have suffered monetary damages as a
result of reasonably relying on the representations of individuals who
purported to have, but did not actually have, authority to act on
behalf of [the] principals. Unlike other legislative areas, BCRA does
not affect individuals who have been defrauded or have suffered
economic loss due to their detrimental reliance on unauthorized
representations.'' 67 FR 49082. See, e.g., United States v. One Parcel
of Land, 965 F.2d 311, 318-19 (7th Cir. 1992) (`` `Apparent authority'
is a vehicle by which a principal is held vicariously liable to an
innocent third party for injury resulting from the misrepresentations
or misdeeds of the principal's agent who acted with apparent authority
from the principal.''); Fraioli v. Lemcke, 328 F. Supp. 2d 250, 278-79
(D.R.I. 2004) (``The doctrine of apparent authority exists to promote
business and protect a third party's reasonable reliance on an agency
relationship.''); Hammett v. VTN Corp., 1989 WL 149261 at *6 (E.D. La.
1989).
Instead, an overriding purpose of BCRA, and the purpose to which
the rules interpreting agency are drafted, is to prevent circumvention
of the Act and actual corruption or the appearance thereof. Applying
apparent authority concepts developed to remedy fraud and economic loss
to the electoral arena could restrict permissible electoral activity
where there is no corruption or the appearance thereof.
As the Supreme Court noted in Buckley v. Valeo, ``encouraging
citizen participation in political campaigns while continuing to guard
against the corrupting potential of large financial contributions to
candidates'' is an important goal of the Act. Buckley v. Valeo, 424
U.S. 1, 36 (1976). In the Commission's judgment, the potential of
apparent authority to restrict activity that would not circumvent the
statute or give the appearance of corruption outweighs any possible
benefits that may be derived from providing candidates and party
committees with additional incentives for monitoring their campaign
workers, especially given the fact that actual authority is a broad
concept that already creates appropriate incentives for such
monitoring.
Conclusion
This revised Explanation and Justification, thus, addresses the
three concerns articulated by the District Court in Shays. First, the
Commission determined that its current definitions of ``agent,'' by
focusing on authority to engage in a broad range of activities
specifically related to BCRA-regulated conduct rather than only on
expenditures, dramatically increases the number of individuals and
types of conduct subject to the Act, and therefore, properly implements
BCRA's prohibitions.
Second, the Commission has attempted to address the District
Court's concern regarding prevention of circumvention of the Act and
the appearance of corruption by explaining (1) that there is, at
present, no evidence of corruption or circumvention under the current
definitions of ``agent'' that dictates a change in Commission
regulations; (2) that even without inclusion of apparent authority, the
Commission's soft money and coordination regulations would reach
situations where the principal makes direct manifestations to a third
party regarding a person's authority to act on the principal's behalf;
and (3) that even without inclusion of apparent authority, reliance on
actual authority, express or implied, still reaches most situations
where agency is based on title or position.
Third, this revised Explanation and Justification addresses the
District Court's concern regarding a perceived misunderstanding of the
law of agency, by explaining that the Commission's decision now to
continue to exclude apparent authority from the definitions of
``agent'' is not based on an assumption, noted by the court, that
``rogue agents'' might potentially create liability for campaigns,
party committees, or other political committees solely through the
agents' own actions. Instead, the revised Explanation and Justification
recognizes that apparent authority does, in fact, require affirmative
conduct by a principal (whether through title or position or through
direct manifestations to a third party), and that there are persuasive
policy reasons for excluding apparent authority from the definitions of
``agent.''
Dated: January 24, 2006.
Michael E. Toner,
Chairman, Federal Election Commission.
[FR Doc. 06-853 Filed 1-30-06; 8:45 am]
BILLING CODE 6715-01-P