The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 5, 1999 Decided October 29, 1999
No. 99-7002
Public Office Corporation, et al.,
Appellants
v.
Clinton for President Committee, et al.,
Appellees
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Appeal from the United States District Court
for the District of Columbia
(No. 95cv01264)
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Michael E. Geltner argued the cause and filed the briefs
for appellants.
John C. Keeney, Jr., argued the cause for appellees. With
him on the brief was Kelleen McGinnis Scott.
Before: Edwards, Chief Judge, Wald and Williams,
Circuit Judges.
Opinion for the Court filed by Circuit Judge Wald.
Wald, Circuit Judge: Appellants, the Public Office Corpo-
ration ("POC") and its directors, provided computer systems
services to appellees, the Clinton for President Committee
and its auxiliaries ("Committee"). As part of a routine audit
mandated by federal election campaign law, auditors for the
Federal Election Commission ("FEC" or "the Commission")
issued an interim report in which they identified possible
discrepancies in the Committee's accounts. In response to
this audit report, the Committee attributed these disparities
in part to the actions of an unnamed computer vendor.
Alleging that the Committee had made libelous statements
about them in its response to the report, appellants filed suit.
Appellees moved to dismiss the libel suit under 2 U.S.C.
s 437d(c), which provides statutory immunity against civil
liability for disclosing information "at the request of the
Commission." 2 U.S.C. s 437d(c). This is an appeal from
the district court's order dismissing the suit. Appellants
argue that the allegedly libelous statements made by the
Committee were not immune because they were not made "at
the request of the Commission." Id. We hold in conformity
with the district court that the Commission's audit report did
constitute a request for information. Thus, the Committee's
statements in response to that report were immunized under
s 437d(c).
I. Background
Appellants, POC and its directors, William and Patricia
Anderson, provided data processing services and assistance in
complying with federal election laws to political campaigns.
Appellees, the Clinton for President Committee and the Clin-
ton/Gore '92 General Election Compliance Fund, retained
POC to provide computer systems support during the pri-
mary and general election campaigns. As is customary under
federal election campaign law, the FEC conducted an audit of
the Committee's accounts; in their report the auditors found
discrepancies. In response to an interim report issued by the
FEC's auditors, the Committee attributed some of these
disparities to errors made by one of its vendors. Alleging
that their professional reputation had been damaged by three
statements, POC and its directors sued to recover damages
for libel against the Committee and its attorney.1 This
appeal arises from an order issued by the district court
granting the appellees' motion to dismiss appellants' libel suit
under 2 U.S.C. s 437d(c), which provides statutory immunity
against civil liability for disclosing information "at the request
of the Commission." 2 U.S.C. s 437d(c).
The Committee received federal election campaign funds
under the Presidential Primary Matching Payment Account
Act ("PPMPAA"), 26 U.S.C. s 9031 et seq. As a condition of
receiving such funds, a campaign committee is required to
"agree to an audit and examination by the Commission." 26
U.S.C. s 9033(a)(3). The PPMPAA and implementing regu-
lations set out a mandatory procedural framework for con-
ducting an audit. See 2 U.S.C. s 9038(a); 11 C.F.R. s 9038.1.
The auditing process involves four steps.2 First, the Commit-
tee must submit documentation to the FEC's auditors to be
utilized in conducting the audit. Second, the audit staff
releases an interim audit report detailing its preliminary
findings and recommendations. See 11 C.F.R. s 9038.1(c)(1).
These recommendations may include tentative repayment
amounts, if the Committee is found to have received federal
funds in excess of actual eligibility. Third, the Committee
"will have an opportunity to submit, in writing ... legal and
factual materials disputing or commenting on the contents of
the interim report." 11 C.F.R. s 9038.1(c)(2). Fourth, after
consideration of the Committee's responses, the Commission
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1 The Clinton/Gore '92 General Election Compliance Fund was
formed by the Committee to ensure compliance with legal and
accounting functions for the 1992 Clinton/Gore election campaign.
For all purposes relevant to this case, the General Election Compli-
ance Fund operated in conjunction with the Committee. Similarly,
Carolyn ("Lyn") Utrecht was an attorney employed by the Commit-
tee with responsibility for FEC audit matters. Thus, the term
"Committee" when used in this opinion is inclusive of the General
Election Compliance Fund and Utrecht.
2 This description of the auditing process is based on the 1994
version of section 9038.1. In 1995, section 9038.1 was revised to
replace the interim audit report with an exit conference memoran-
dum. All parties agree, however, that the 1994 version is applicable
to the instant case.
publicly releases its final audit report, which may differ from
its interim audit report. The Commission may publish a
committee's responses in its own final report.
In this case, the interim audit report discussed several
alleged discrepancies in the Committee's accounts, including
excessive redesignations. Contributions made to a primary
campaign may, in certain limited circumstances, be trans-
ferred to the general election campaign by written redesig-
nation. See 11 C.F.R. ss 103.3, 110.1, 110.2, and 9003.3. The
audit staff found that in many instances, the "redesignations
pursued by the Committee were not permissible." Joint
Appendix ("J.A.") at 250.
Moreover, according to the report, the excessive redesig-
nation effort caused the Committee to receive matching funds
in excess of entitlement. By redesignating funds from the
primary election campaign to the general election campaign,
it appeared that the Committee did not have sufficient private
funds in its primary campaign to meet its financial obli-
gations. J.A. at 248-50. Therefore, the primary campaign
remained eligible for matching funds. However, the Commis-
sion staff contended that most of the funds were improperly
redesignated and should have been considered available to
the primary campaign to discharge its financial obligations.
Thus, it concluded that "the Candidate had received matching
funds in excess of his entitlement." J.A. at 249. Given this
finding, the report recommended that "the Committee pro-
vide evidence to demonstrate that it did not receive matching
funds in excess of entitlement." J.A. at 251.
The issue in this case is whether three statements about
POC that the Committee made in its response to the interim
audit report fall within the statutory grant of immunity for
information given "at the request of the Commission." 2
U.S.C. s 437d(c). The first alleged defamatory statement
involves the Committee's response to the report's finding that
the Committee had received excessive public funds, primarily
due to the volume of improper redesignations. Since the
propriety of this finding depended on whether the Committee
had improperly conducted redesignations, the Committee
sought to explain its redesignation efforts. Agreeing that
many redesignations were "superfluous," J.A. at 101, the
Committee referred to an unnamed vendor whose "contract
... included an incentive for the vendor to treat contributions
as though additional documentation or affidavit was neces-
sary." J.A. at 100. This statement was later published by
the FEC in its final audit report. Contending that this
statement was libelous, POC asserted that the clear implica-
tion was that it had conducted improper redesignations to
augment its profits. POC further argued that although the
vendor was not named, it could easily be identified since a
vendor list was published with the final report.
In the second and third "defamatory" statements, appel-
lants also alleged that the Committee essentially tried to shift
blame for its accounting discrepancies to POC. The second
statement concerned the Committee's assertion that discrep-
ancies in its account balances were "essentially due to errors
by one of the Committee's computer vendors who failed to
reconcile her records." J.A. at 63. POC asserted that while
she was not named, the "her" was an obvious reference to its
director, Patricia Anderson, who performed these functions
and was widely known to have done so. In the third state-
ment, the Committee explained recordkeeping errors by stat-
ing that "[d]uring this period, the Committee experienced
significant difficulties with the vendor preparing the Primary
Committee's reports." Id.
In response to the lawsuit, appellees filed a motion arguing
that 2 U.S.C. s 437d(c), the provision that provides statutory
immunity for information disclosed at the FEC's request,
mandated dismissal. The district court granted the defen-
dant's motion to dismiss, finding that the statements made by
the Committee to the FEC were in fact "privileged against
civil liability under s 437d(c)." Memorandum Opinion at 13
(reprinted in J.A. at 18). The court determined that
s 437d(c) set forth a "two-fold test" for immunity: "the
statements must be (1) at the request (2) of the Commission."
Memorandum Opinion at 7 (reprinted in J.A. at 12). The
court determined that the report "contain[ed] unequivocal
requests for information." Memorandum Opinion at 9 (re-
printed in J.A. at 14). The court also held that the second
prong of s 437d(c) was satisfied, rejecting the argument that
the audit staff was a separate entity from the Commission.
However, the court declined to accept appellees' ambitious
contention that all audit submissions necessarily constitute
responses to Commission requests that fall within s 437d(c)'s
scope.
On appeal, appellants assert that the statements do not
meet s 437d(c)'s bifurcated test. Noting that s 437d(c)'s
grant of immunity is contingent on the issuance of a "re-
quest," appellants first contend that the statements in the
Commission's interim report were not "requests." Appellants
also assert that because the report was not issued by the
Commission, but by its audit staff, which is an entity distinct
from the Commission, the statements fail to meet the second
prong of s 437d(c)'s test.
II. Discussion
The viability of appellants' libel suit turns on whether the
allegedly defamatory statements fall within the immunity
provision's scope. See 2 U.S.C. s 437d(c). Recalling the
Supreme Court's holding that "in any case of statutory con-
struction, our analysis begins with the language of the stat-
ute," we turn to the text of s 437d(c). Hughes Aircraft Co. v.
Jacobson, -- U.S. --, 119 S.Ct. 755, 760 (1999) (internal
quotation marks omitted).
That text is straightforward. Section 437d(c) provides that
"n[o] person shall be subject to civil liability to any person
(other than the Commission or the United States) for disclos-
ing information at the request of the [Federal Election]
Commission." 2 U.S.C. s 437d(c). Thus, the contested state-
ments must be made in response to a request by the Commis-
sion.
A. "At the Request" Of
We first determine whether the statements in this case
were made "at the request" of the FEC and in that pursuit,
we begin with a careful reading of the FEC's interim audit
report. If we find there are such requests we will decide
whether the Committee's statements were responsive to
them. The first disputed statement is as follows:
The auditors focused here on whether these contribu-
tions were properly redesignated to the Compliance
Fund, but, in fact, in order to have been considered
primary contributions in the first instance, the regula-
tions required that they be designated in writing for the
primary. Very few of them were so designated. The
Committee's vendor who processed these contributions
treated them as "redesignations" even though they were
not. That vendor's contract had been negotiated early in
the campaign by the Committee's original counsel and
included an incentive for the vendor to treat contribu-
tions as though additional documentation or affidavit was
necessary. Under the contract, the vendor received an
additional amount per contribution for which additional
documentation or an affidavit was obtained. The Com-
mittee staff did not see these contributions until well
after the election, but relied solely on the vendor's exper-
tise to handle the contributions appropriately.
J.A. at 100 (emphasis in original).
That statement directly responds to that portion of the
interim report in which the audit staff contended that the
Committee was conducting impermissible redesignations. In
a section entitled "Receipt of Matching Funds in Excess of
Entitlement," the interim audit report finds that the Commit-
tee received funds in excess of its actual eligibility, primarily
due to the volume of improper redesignations. J.A. at 247-
51.3 In its conclusion to that section, the audit staff issued
the following recommendation:
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3 The auditors found that:
[d]uring the period when the redesignations were being sought
for the contributions deposited into the Suspense Account, the
Committee continued to request and receive matching fund
payments based on ... statements that apparently did not
recognize contributions deposited into the suspense ac-
count.... Therefore, as of September 2, 1992, the Candidate
had received matching funds in excess of his entitlement.
J.A. at 248-49.
The Audit staff recommends that within 30 calendar days
of service of this report, the Committee provide evidence
to demonstrate that it did not receive matching funds in
excess of entitlement. Absent such a demonstration, the
Audit staff will recommend ... that the Committee
repay $3,674,353 to the U.S. Treasury.
J.A. at 251 ("Recommendation Ten") (emphasis added).
Appellants' contention that this recommendation is not a
request is hardly credible. Surely a recommendation that the
committee "provide evidence" to demonstrate that it was not
violating the law is a genuine request for more information in
ordinary parlance and especially in the context of a govern-
ment audit.
Moreover, even if this language were not sufficiently clear,
the transmittal letter accompanying the audit report removes
all doubts that Recommendation Ten was in fact a "request."
Prominently featured in the letter accompanying the report is
the following instruction:
This report is to formally advise you of the findings and
recommendations of the Audit staff resulting from the
audit of the Clinton for President Committee. You are
requested to comply with the recommendations by May 4,
1994.
J.A. at 205 (emphasis added). Recommendation Ten, read in
conjunction with the transmittal letter, clearly confirms that
the report did in fact contain a specific request to which the
Committee was responding in its first disputed statement.4
Appellants accurately point out that the other two disputed
statements were responsive to sections of the report in which
the audit staff recommended that no further action be taken.
See J.A. at 211, 212. From that fact, appellants argue that
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4 Appellants also argue that even if Recommendation Ten does
constitute a request, the Committee's response is not material to
the request. We may easily dismiss this contention. To the extent
that the audit staff asserted that the excessive payments were due
to unnecessary redesignations, appellees quite reasonably chose to
address the necessity of such redesignations.
there is no need for any response and no reason to construe
the audit report as calling for one. The second statement in
which the Committee attributed misstatements in its account-
ing to errors by an unnamed computer vendor, was made in
response to a section of the report entitled "Misstatement of
Financial Activity." J.A. at 210-11. This section delineated
discrepancies in the Committee's accounts and charged the
Committee with failure to maintain supporting documentation
that might have explained away these discrepancies. While
this section of the audit report does not so clearly cry out for
a response as Recommendation Ten, it confirms a clear
implication of past wrongdoing by the Committee.
For example, the audit report notes that although the
Committee claimed to have identified all disbursements in its
pre-audit inventory, further research by the auditors revealed
"significantly different" disbursements. J.A. at 210-11.
Moreover, the report states that although the Committee
later corrected these misstatements, it failed to maintain the
supporting documentation that would have allowed the audit
staff to "identify the reasons for the misstatements." J.A. at
211. The Committee could quite reasonably construe such a
suggestion of accounting discrepancies and shoddy record-
keeping as a request for explanatory information, in the
absence of which the auditors' tentative conclusion of wrong-
doing would remain on the record, even if no remedies were
sought. The Committee's issuance of an explanatory state-
ment in an effort to account for the discrepancies falls within
the scope of a "request."
The third statement in which the Committee referred to
difficulties with an unnamed vendor who prepared its reports,
was made in response to a section entitled "Itemization of
Receipts." J.A. at 211-12. Although this section of the audit
report was admittedly more neutral so far as any implication
of wrongdoing was concerned than the section just described,
it essentially highlighted the Committee's failure to itemize
its records. For example, the report noted that a significant
percentage of the contributions which required itemization
were not correctly itemized. J.A. at 211. Given the inevita-
bly tense atmosphere of an audit, especially one of a Commit-
tee which does ongoing business with the agency and whose
members can be expected to be repeat supplicants for federal
money, the auditee will understandably feel it imperative to
provide answers to questions raised by the audit report.
Additionally, it bears noting that the report was an interim
one. Even the recommendation for no further action would
not become final until the Commission acted upon it--hence
the felt need of the subject to provide any exculpatory
information.
Importantly, in this case, there can be little question that
the Committee's statements were relevant and responsive to
the Commission's concerns. There is then no need to even
consider appellees' contention that any information submitted
within the context of an audit is immunized irrespective of
whether it is germane to the Commission's report. The
district court reasonably rejected appellees' assertion of an
immunity so broad that it would include even gratuitous
information that was not responsive to the concerns in the
report.
In sum, we hold that the Commission's report did indeed
constitute a request for information in the three areas dis-
cussed and thus, the Committee's statements in response to
these requests are immunized under s 437d(c). Having
found that the statements meet s 437d(c)'s first request
prong, we discuss briefly whether these requests were issued
at the request "of the Commission."
B. "Of the Commission"
Appellants allege that even if the statements were respon-
sive to requests contained in the audit report, this report was
not issued by the Commission itself but by its audit staff,
which under the statute constitutes a distinct entity.5 Thus,
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5 Appellants assert that there is a clear distinction between the
Commission and its staff on the face of the statute. They emphasize
that the statutory provision establishing the FEC states that it
consists of "the Secretary of the Senate and the Clerk of the House
of Representatives or their designees, ex officio and without the
right to vote, and six members appointed by the President, by and
with the advice and consent of the Senate." 2 U.S.C. s 437c(a)(1).
On appellants' reading, any person who is not included within this
appellants assert that even if the report did contain requests,
the audit staff had no power to confer immunity under
s 437d(c), since any immunity-conferring requests must be
issued by the Commission itself. Appellants' strained distinc-
tion between the FEC and the staff working under its
direction simply does not cut the mustard. We agree with
the district court that "it was the Commission, acting pursu-
ant to its statutory authority, that conducted the interim
audit." Memorandum Opinion at 11 (reprinted in J.A. at 16).6
III. Conclusion
For the foregoing reasons, we hold that the Committee's
statements are immunized under s 437d(c). The decision of
the district court is
Affirmed.
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definition may not act on behalf of the Commission, so far as
s 437d(c) is concerned. The district court dismissed appellants'
argument noting that "this definition describes the membership of
the Committee and not its duties. By contrast the focus of this case
is the functions of the Commission." Memorandum Opinion at 10
(reprinted in J.A. at 15).
6 See, e.g., 2 U.S.C. s 438(b) ("The Commission may conduct
audits and field investigations ... [p]rior to conducting any audit
... the Commission shall perform an internal review of reports
filed by selected committees."); 26 U.S.C. s 9038(a) ("After each
matching payment period, the Commission shall conduct a thorough
examination and audit."); 26 U.S.C. s 9040(b) ("The Commission is
authorized ... to institute actions ... to seek recovery of any
amounts determined to be payable to the Secretary as a result of an
examination and audit made pursuant to section 9038."); 11 C.F.R.
s 9038.1 (c)(1) (1994) ("The Commission will issue an interim audit
report to the candidate and his or her authorized committee."); 11
C.F.R. s 9038.1(c)(3) ("The Commission will consider any written
legal and factual materials submitted by the candidate or his or her
authorized committee.") (emphasis added in all citations).