# Petition — Federal Election Commission v. American Federation of Labor & Congress of Industrial Organizations

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1980
- **Citation:** 449 U.S. 982

## Text

Supreme Court, J. 3.
C FILE D

80 “368 SEP8 1980

MICHAEL RODAK, JR., CLERK

Yu the Supreme Court of the United States

OCTOBER TERM, 1980

FEDERAL ELECTION COMMISSION, Petitioner,
Vv.

AMERICAN FEDERATION OF LABOR AND CONGRESS
OF INDUSTRIAL ORGANIZATIONS, Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
DISTRICT OF COLUMBIA CIRCUIT

CHARLES N. STEELE
General Counsel

KATHLEEN IMIG PERKINS
Assistant General Counsel

JEFFREY H. BOWMAN
Attorney

Attorneys for

FEDERAL ELECTION COMMISSION,
MAX L. FRIEDERSDORF,

JOHN W. McGARRy,

JOAN D. AIKENS,

THOMAS E. HARRIS,

FRANK P. REICHE,

ROBERT O. TIERNAN,

EDMUND L. HENSHAW, JR.,

J. STANLEY KIMMITT

13825 k Street, N.W.
Washington, D.C. 20463
(202) 523-4060

SEPTEMBER 8, 1980
ASE PSEC ESSE SSP sas SSPE

I
QUESTION PRESENTED

Whether the decision of the United States Court of
Appeals for the District of Columbia Circuit, estab-
lishing a standard for “knowing and willful” violations
of the Federal Election Campaign Act (“FECA”) was
clearly erroneous where the standard adopted has
been rejected by seven other circuits, is inconsistent
with applicable decisions of this Court and with a prior
decision of the District of Columbia Circuit, and is not
supported by FECA’s legislative history.

II
TABLE OF CONTENTS

Sg re re err rer rey
gS nt Pe Crary Se ey Peery mire peer
nel APRs Pr enn ee erg ee
eee rere errr reer
SE Mr SOU I oo see's cr dne cea va open vgn
Reasons Why The Writ Should Be Granted .......

I. THE DECISION OF THE COURT OF
APPEALS IS IN CONFLICT WITH DE-
CISIONS OF THE UNITED STATES
COURTS OF APPEALS FOR’ THE
FIRST, FOURTH, FIFTH, SIXTH,
EIGHTH, NINTH AND TENTH CIR-
| ee a Aree ae Se ee ne

Il. THE DECISION OF THE COURT OF
APPEALS CONFLICTS WITH APPLI-
CABLE DECISIONS OF THIS COURT ..

Ill. THE INTENT OF CONGRESS IN EN-
ACTING 2 U.S.C. § 487g(a)(7) IS FRUS-
TRATED BY THE HOLDING OF THE
ee i gg Pee ee

Tay ERSTE A ete rte Fae A ene EO Dn
TABLE OF AUTHORITIES

Cases

Babcock and Wilcox v. OSHRC, 622 F.2d 1160
oe eae kpotned

Cedar Construction Co. v. OSHRC, 587 F.2d
cc cue whid db bas bake ens

Coleman v. Jiffy June Farms, 458 F.2d 1139
(5th Cir. 1971), cert. denied, 409 U.S. 948
Re a MINS ore ar eae She ae ae?

Empire-Detroit Steel Division v. OSHRC, 579
oe 8 Le a a ee

II]

Cases—Continued: Page

Fin and Feather Sport Shop, Inc. v. Bureau of
Alcohol, Tobacco and Firearms, 481 F.

Sune. GOOD. Mem. TRIG) .c.cccccccceevecss 7
Georgia Electric Company v. Marshall, 595
pe A ee ere ee Pe 6

Intercounty Construction Co. v. OSHRC, 522
F.2d 777 (4th Cir. 1975), cert. denied, 423
Se Eo os n.0 59 Sn ra ¥b oho cae eeaee de 6

Frank Trey, Jr. v. Occupational Safety and
Health Review Cow:mission, 519 F.2d 1200
(38d Cir. 1974), aff'd en bane on other
grounds, 519 F.2d 1215 (8d Cir. 1976) aff'd
on other grounds, sub. nom. Atlas Roofing
Co. v. Occupational Safety and Health Re-
view Commission, 430 U.S. 442 (1977).... 5, 6, 10

Jones v. Unknown Agents of the Federal Elec-
tion Commission, Fed. Elec. Camp. Fin.
Guide (CCH) 4 9092 (D.C. Cir. Aug. 23,

Bc eae eck cea Rak eis ae eke 9
Lewis v. Blumenthal, 590 F.2d 268 (8th Cir.

MN Loe et aa he wud ce Ro ee de beens ia 7
F.X. Messina Construction Co. v. OSHRC,

ee bee ee | erro 7
National Steel and Shipbuilding v. OSHRC,

GOT F068 S11 (th Cir. IBTB) nn ccc cccvvsnes 6
Kent Nowlin Construction Co. v. OSHRC, 593

PP Fy ee oe | ee ere 7

Prino v. Simon, 606 F.2d 449 (4th Cir. 1979) . 7

Shyda vy. Director, Bureau of Alcohol, Tobacco
and Firearms, 448 F. Supp. 409 (M.D. Pa.

Py Pre rere rrr ee per re yee 7
Todd Shipyards Corp. v. Secretary of Labor,

586 F.2d 683 (9th Cir. 1978) .............5. 7
United States v. Bishop, 412 U.S. 346 (1978) .. 8

United States v. Consolidation Coal Co., 504
eB fs ee | ree )

IV

Cases—Continued: Page
United States v. Dye Construction Co., 510
ee ee a | ee eo re 7
United States v. Illinois Central Railroad Co..,
oe ER rrr ee 8
United States v. Park, 421 U.S. 658 (1975) ... 8
United States v. Pomponio, 429 U.S. 10 (1976) . 8
Western Waterproofing Co. v. Marshall, 576
ye gf Ls ee errr rr yr rT 7
Statutes and Regulations
SES ie BN Gc ha ck ede vewscccaenne 3
ot ee 2,12
DP NE oon ce ctpencsseesinwes 5, 9
Fr re 2
PIE, Sess ycees tap ecuenns 2,3
Pe oso vinse sss Gs 08 2, 3, 9, 10
DCT AV ees bene tan hak dere ewan 3
Legislative History
ee Come. Moe. 15,190 (IGT)... oc cee civcces 5, 11

H.R. Rep. No. 94-917, 94th Cong., 2d Sess.
Derry ag ac pate as hala psd GN a a 11

In the Suprene Court of the Hnited States

OCTOBER TERM, 1980

FEDERAL ELECTION COMMISSION, Petitioner,

Uv.
AMERICAN FEDERATION OF LABOR AND CONGRESS
OF INDUSTRIAL ORGANIZATIONS, Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
DISTRICT OF COLUMBIA CIRCUIT

Petitioner Federal Election Commission (‘‘the
Commission”) respectfully prays that a writ of cer-
tiorari issue to review the judgment rendered in this
case by the United States Court of Appeals for the
District of Columbia Circuit.

OPINIONS BELOW

On Ap: 1 1, 1980, the United States Court of Ap-
peals for the District of Columbia Circuit reversed an
order of the United States District Court for the Dis-
trict of Columbia imposing a $10,000 civil penalty
against respondent. The order of the district court and
the opinion of the court of appeals are included in the

]

yA

—

Commission Appendix at la, 3a (“Comm. App. at
Pies 3

The Commission’s petition for rehearing and petition
for rehearing en banc were denied by the court of ap-
peals on May 27, 1980, and July 9, 1980, respectively.
The court’s order denying the petition for rehearing
appears at Comm. App. at 14a and the denial of the
petition for rehearing en banc at Comm. App. at lda.

JURISDICTION

The jurisdiction of this Court is invoked under 28
U.S.C. § 1254(1) (1980).

STATUTES INVOLVED

2 U.S.C. § 437g(a)(5)(C)! provides in pertinent part:

In any civil action instituted by the Commission
... the court may grant a permanent or tempor-
ary injunction, restraining order, or other order,
including a civil penalty which does not exceed the
greater of $5,000 or an amount equal to the
amount of any contribution or expenditure in-
volved in such violation, upon a proper showing
that the person involved has engaged or is about
to engage in a violation of this Act or of chapter 95
or chapter 96 of the Internal Revenue Code of
1954.

1In an attempt to minimize confusion over citations to FECA
herein, citations will be to the FECA prior to the 1979 Amend-
ments, 2 U.S.C. § 487g(a)(5)(C) (authority for a district court to
impose a civil penalty for a violation of FECA), 2 U.S.C.
§ 437g(a)(7) (authority for a district court to impose a civil pen-
alty for a “knowing and willful” violation of FECA). The 1979
Amendments renumbered these provisions so that proper cita-
tion is now 2 U.S.C. § 437g(a)(6)(B), and 2 U.S.C.
§ 437g(a)(6)(C) respectively.

3

2 U.S.C. § 487g(a)(7) provides in pertinent part:

In any civil action for relief instituted by the
Commission ... if the court determines that the
Commission has established through clear and
convineing proof that the person involved in such
action has committed a knowing and willful viola-
tion of this Act... the court may impose a civil
penalty of not more than the greater of (A)
$10,000; or (B) an amount equal to 200 percent of
the contribution or expenditure involved in such
violatio:.?

STATEMENT OF THE CASE

On December 16, 1977, the Commission filed a com-
plaint in the United States District Court for the Dis-
trict of Columbia charging that the AFL-CIO had vio-
lated 2 U.S.C. § 441b by transferring monies (totalling
$750,000 at various times over a period of seven years)
from the AFL-CIO general treasury to the AFL-CIO
Committee on Political Education Political Contribu-
tions Committee (“COPE-PCC”’). See 2 U.S.C.
§ 437g(a)(5)(B) (1976).

The district court found that the transfers violated 2
U.S.C. § 441b and prohibited future transfers from the
general treasury to COPE-PCC. However the court
denied the Commission’s request that AFL-CIO be
barred from re-transferring the balance of $312,000
from the general treasury to the COPE-PCC, impos-
ing instead a civil penalty in the amount of $10,000.

2Section 437g(a)(7) was amended by the Federal Election
Campaign Act Amendments of 1979 to exclude the requirement
of “clear and convincing proof.” See 2 U.S.C. § 487g(a)(6)(C)
(1980).

4

Respondents appealed only that portion of the dis-
trict court’s order which imposed the $10,000 penalty
to the United States Court of Appeals for the District
of Columbia Circuit. On April 1, 1980, the court of ap-
peals reversed the imposition of the penalty on the
ground that:

the facts of this case do not support a finding that
the violations were “knowing and willful” as re-
quired by 2 U.S.C. § 487g(a)(7), the provision
upon which the district court based the imposition
of the c’vil penalty.
Slip op. at 8; Comm. App. at 12a. Petitions for re-
hearing and rehearing ev banc were denied by the
court of appeals.

REASONS WHY THE WRIT SHOULD BE GRANTED

I. THE DECISION OF THE COURT OF AP-
PEALS IS IN CONFLICT WITH DECI-
SIONS OF THE UNITED STATES COURTS
OF APPEALS FOR THE FIRST, FOURTH,
FIFTH, SIXTH, EIGHTH, NINTH AND
TENTH CIRCUITS.

The standard established by the court of appeals in
this case for proving “knowing and willful” violations
of FECA conflicts with the knowing and willful stand-
ard applied by courts of appeals in seven other cir-
cuits.* Finding that “the facts of this case do not sup-
port ... that the violations were ‘knowing and will-
ful,’” slip opinion at 9, the court of appeals held that a
violation of FECA is willful only if there is evidence of

3See also discussion of Babcock and Wilcox Co. v. OSHRC,
622 F.2d 1160 (8rd Cir. 1980), infra at 10.

5

‘defiance’ or ‘knowing, conscious, and deliberate
flaunting’ of the Act.” Slip opinion at 6.

In adopting this standard, the court relied on the
third cireuit’s ruling in Frank Trey, Jr., Inc. v. Occu-
pational Safety and Health Review Commission, 519
F.2d 1200, 1207 (8d Cir. 1974), aff'd en bane on other
grounds, 519 F.2d 1215 (8d Cir. 1975), aff'd on other
grounds, sub nom. Atlas Roofing Co. v. Occupational
Safety and Health Review Commission, 430 U.S. 442
(1977), that:

|wjillfulness connotes defiance or such reckless
disregard of consequences to be equivalent to a
knowing, conscious, and deliberate flaunting of
the Act. Willful means more than merely volun-
tary action or omission—it involves an element of
obstinate refusal to comply.

Id. at 1207. “To hold otherwise,” the court noted,
“would fail to distinguish between a ‘serious’ offense
and a ‘willful’ one and would ‘disrupt the gradations of
penalties’ established by Congress in [FECA].” Slip
opinion at 6 quoting Frank Irey, Jr., Inc. v. OSHRC,
supra at 1207.4 Such reliance on Jrey, however, stands

4FECA provides penalties for violations of the Act, and more
severe penalties for “knowing and willful” violations, but does
not include a separate category for “serious” violations. Thus,
the court’s rationale that “willful” must be defined restrictively
lest it overlap with the definition of a “serious violation” is not
well taken. Slip opinion at 6. In addition, under 2 U.S.C.
§ 437g¢(a)(5)(D) (1976) the Commission may refer alleged
“knowing and willful” violations to the Department of Justice.
Since Congress provided for both civil and criminal prosecution
of “knowing and willful” violations of FECA, it must have in-
tended a lesser standard of proof for successful civil enforce-
ment. 122 Cong. Rec. 12,199 (May 3, 1976) (Remarks of Rep.
Hays) (FECA’s civil sanctions apply to all violations “except for

6

squarely at odds with the decisions of the courts of ap-
peals in seven other circuits® which have rejected the
Trey standard. See e.g., Iutercounty Construction Co.
v. OSHRC, 522 F.2d 777, 779-80 (4th Cir. 1975), cert.
denied, 423 U.S. 1072 (1976), (fourth circuit refused to
require that knowing and willful violations of OSHA
include a deliberate intent to defy the Act); National
Steel and Shipbuilding Co. v. OSHRC, 607 F.2d 3811,
314 (9th Cir. 1979) (“We believe that the majority
rule—which does not require a bad motive for
willfulness—better serves the congressional objectives
in enacting OSHA and better reflects the statute.”);
Georgia Electric Company v. Marshall, 595 F.2d 309,
319 (5th Cir. 1979) (“[Wle define a willful violation as
one involving voluntary action, done either with an in-
tentional disregard of, or plain indifference to, the re-
quirements of the statute.”); Empire-Detroit Steel Di-
vision Vv. OSHRC, 579 F.2d 378, 385 (6th Cir. 1978)
(“We agree with the. . . opinions of the First, Fourth,
and Tenth Circuits that a showing of evil or malicious

substantial violations committed with a specific wrongful in-
tent”).

5 Moreover, the language used in /rey was dicta. The case in-
volved a foreman’s good faith mistake regarding soil composition
of a trench in which employees were working. If his mistaken
assumption had been correct, the trench would not have re-
quired shoring against collapse. 519 F.2d at 1206-1207. The
third circuit was not considering a case of intentional disobedi-
ence to a known standard. Additionally, in /rey itself, the court
did not hold that the violation was not willful as a matter of law;
it remanded the case to OSHRC for reconsideration.

intent is not necessary to establish willfulness. .. .”)
Western Waterproofing Co. v. Marshall, 576 F.2d 139,
142-43 (8th Cir. 1978) (court rejected application of Jrey
standard); United States v. Dye Construction Co., 510
F.2d 78, 81 (10th Cir. 1975) (act is willful “if done know-
ingly and purposefully by an employer who, having a
free will or choice, either intentionally disregards the
standard or is plainly indifferent to its requirement.”);
F.X. Messina Construction Co. v. OSHRC, 505 F.2d
701, 702 (1st Cir. 1974) (“A conscious, intentional, delib-
erate, voluntary decision, . .. properly is described as
willful.”). See also Prino v. Simon, 606 F.2d 449 (4th
Cir. 1979); Kent Nowlin Construction Co. v. OSHRC,
593 F.2d 368, (10th Cir. 1979); and Todd Shipyards
Corp. v. Secretary of Labor, 586 F.2d 6838 (9th Cir.
1978).

In addition, courts have not required a showing of
“bad purpose” or “evil motive” for willful violations of
other statutes imposing civil penalties. See Coleman
v. Jiffy June Farms, 458 F.2d 1189, 1142 (5th Cir.
1971), cert. denied, 409 U.S. 948 (1972) (“wilful” viola-
tion [of the Fair Labor Standards Act] occurs where
the employer knows, or has reason to know, that his
conduct is governed by the Act.); Lewin v. Blumen-
thal, 590 F.2d 268 (8th Cir. 1979) (plain indifference to
recordkeeping requirements sufficient to establish a
willful violation). See also Fin and Feather Sport
Shop, Inc. v. Bureau of Alcohol, Tobacco and Fire-
arms, 481 F. Supp. 800, 804 (D. Neb. 1979); Shyda v.
Director, Bureau of Alcohol, Tobacco and Firearms,
448 F.. Supp. 409, 411 (M.D. Pa. 1977).

8

II. THE DECISION OF THE COURT OF AP-
PEALS CONFLICTS WITH APPLICABLE
DECISIONS OF THIS COURT.

The court of appeals’ construction of willfulness, as
required to demonstrate a knowing and willful viola-
tion of FECA, does not comport with the usual mean-
ing of “knowing and willful” or “willful” found in reg-
ulatory statutes that impose civil penalties. This Court
has held that it is generally adequate to show inten-
tional disregard of or indifference to the regulatory re-
quirement, and that it is not necessary to establish evil
intent in order to prove a knowing and willful violation
of a civil statute. United States v. Park, 421 U.S. 658,
670-71 (1975); United States v. Bishop, 412 U.S. 346,
361 (1973); and United States v. Illinois Central
Railroad Co., 303 U.S. 239, 243 (1938).

In United States v. Pomponio, 429 U.S. 10 (1976)
this Court held that willfulness, even in a criminal
case, means only “an intentional violation of a known
legal duty” and does not include any element of baa
purpose or evil motive. United States v. Pomponio,
supra at 12. The showing of willfulness in a civil case
has been held to an even lower standard. UL’ wited
States v. Illinois Central Railroad Co., supra. Any
other interpretation of “knowing and willful” as it
applies to violations of FECA would seriously impair
the Commission’s enforcement of the Act. If the court
of appeals were correct, the significant penalties re-
served by the Act for “knowing and willful” violations
would rarely if ever be imposed, since the Commission
would be forced to find evidence of “defiance” and
“flaunting” on the part of a respondent to a Commis-

9

sion action.® In addition, if the Commission is required
to meet this high standard before it can successfully
prosecute a civil action for a serious knowing and
willful violation of FECA, it cannot be determined
what standard would be required before the Commis-
sion could refer a matter to the Department of Justice
for criminal investigation and possible prosecution.
See note 4 supra; c.f. 2 U.S.C. § 487g(a)(7) with
§ 437g(a)(5)(D) (1976). Such a standard would require
the Commission to discover the motives and intent of
persons engaged in political activities—a requirement
which this Court should hesitate to compel. See e.g.,
Jones v. Unknown Agents of the Federal Election
Commission, Fed. Elec. Camp. Fin. Guide (CCH)
§ 9092, 50,706 (D.C. Cir. Aug. 23, 1979).

Additionally, the decision of the court in this case
misconstrues and misapplies the willfulness standard
as enunciated by the District of Columbia Circuit.
Cedar Construction Co. v. OSHRC, 587 F.2d 1303
(D.C. Cir. 1978). There, in an attempt to reconcile the
apparent differences among the circuits, the court con-
cluded that “intentional disregard of, or plain indiffer-
ence to, OSHA regulations could well be considered” a
willful violation. Jd. (emphasis added).

6 As the sixth circu’t has said:

We do not consider the phrases “bad purpose” and “an evil
motive” to be appropriate in this action. [The Federal Coal
Mine Health and Safety Act of 1969, 30 U.S.C.A. § 801 ef
seq.] is a Safety Act and it would be virtually impossible to
establish violations if this rule were followed.

United States v. Consolidation Coal Co., 504 F.2d 1330, 1385
(6th Cir. 1974), quoted in Empire-Detroit Steel Division v.
OSHRC, 579 F.2d at 385.

10
The third circuit, having recently reconsidered the

question, adopted the conclusion of the District of Co-
lumbia Circuit in Cedar Construction, supra. The
court, after noting that its opinion in Jrey “has not
been followed in some circuits,” observed:

...the Court of Appeals for the District of Co-

lumbia Circuit, an ever-available forum under the

statute, has concluded that there is little, if any,

difference between our approach and that taken

by the other courts. Jd. at 1805. We agree.
Babcock & Wilcox Co. v. OSHRC, 622 F.2d at 1167
(8d Cir. 1980). Thus, even the third circuit now inter-
prets its /rey standard as encompassing “plain indif-
ference,” not requiring a showing of “bad purpose.”

Yet, without mentioning Cedar Construction and
notwithstanding the “plain indifference” standard for
willfulness established therein, the court of appeals in
this case held that a “knowing and willful violation
must be something more.” Slip opinion at 5. This rul-
ing misconstrues and misapplies a prior ruling of the
District of Columbia Circuit which should not be per-
mitted to obtain in the absence of consideration by this
Court.

III. THE INTENT OF CONGRESS IN ENACT-
ING 2 U.S.C. § 437g(a)(7) IS FRUS-
TRATED BY THE HOLDING OF THE
COURT OF APPEALS.

FECA’s legislative history indicates that Congress
intended no higher standard for “knowing and willful”
than that applied by the courts, supra. The Chairman
of the House Administration Committee summarized 2
U.S.C. § 487¢(a)(7):

11

Perhaps the most important phrase used in the
enforcement section is “knowing and willful.” As
explained in House Report No. 94-917, that
phrase refers to actions taken with full knowledge
of all the facts and a recognition that the action is
prohibited by law.

122 Cong. Rec. 12,199 (May 3, 1976) (remarks of Rep.
Hays) In its report accompanying H.R. 12406, the
Committee on House Administration explained the
purpose of the section:

H.R. 12406 places its reliance on civil enforce-
ment, except as to substantial violations com-
mitted with a specific wrongful intent. The bill
distinguishes between violations of the law as to
which there is not a specific wrongful intent which
are subject to injunctive relief and civil penalties
of up to $5,000 or the amount in question,
whichever is greater, and violations as to which
the Commission has clear and convincing proof
that the acts were committed with a knowledge of
all the relevant facts and a recognition that the
action is prohibited by law, which are subject to
injunctive relief and a civil penalty of up to
$10,000 or twice the amount in question.

H.R. Rep. No. 94-917, 94th Cong., 2d Sess. 4 (1976)
(emphasis added). Thus it is clear that Congress in-
tended that knowing and willful FECA violations could
be found absent bad purpose or motive.

The adoption by the court in this case of a much
higher standard for “knowing and willful” violations
stands in direct conflict with congressional intent in
enacting FECA.’ To require the Commission to meet

7In any event, the district court’s imposition of a civil penalty
in the amount of $10,000 in this case was not based upon a find-

12
this higher standard in its actions would place a severe
restriction on the statutory authority of the FEC to
apply stronger sanctions in enforcing the law; a result
the Commission urges was not intended by Congress.

ing that the violation of the Act was “knowing and willful.”
Neither the district court’s order, nor the transcript of the
hearing in the district court, indicates that the court considered
the violation “knowing and willful.” The court’s imposition of a
civil penalty in the amount of $10,000 is well within the discre-
tionary range of civil penalties which 2 U.S.C. § 487g(a)(5)(C)
provides for a violation totalling over $800,000, Indeed, the fact
that “knowing and willful” was neither addressed as present in
the case nor briefed as an issue in the case is supported by re-
sponses and papers filed by all parties. See Comm. App. at 16a;
18a; 20a. See also Commission’s complaint filed in the United
States District Court for the District of Columbia; the Commis-
sion’s Motion for summary judgment; AFL-CIO’s brief to the
United States Court of Appeals for the District of Columbia
Circuit and the Commission’s brief to the court of appeals.

13
CONCLUSION

For the reasons stated above, a writ of certiorari
should issue to review the judgment and opinion of the
District of Columbia Circuit.

Respectfully submitted,

CHARLES N. STEELE
General Counsel

KATHLEEN IMIG PERKINS

Assistant General Counsel

JEFFREY H. BOWMAN .
Attorneys

Altorneys for

FEDERAL ELECTION COMMISSION,
MAX L, FRIEDERSDORF,
JOHN W. MCGARRY,

JOAN D. AIKENS,

THOMAS E, HARRIS,

FRANK P. REICHE,

ROBERT QO. TIERNAN,
EDMUND L. HENSHAW, JR.,
J. STANLEY KIMMITT

1325 K Street, N.W.
Washington, D.C. 20468
(202) 523-4060

SEPTEMBER 8&, 1980

Appendix

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

CIVIL ACTION 77-2147
FEDERAL ELECTION COMMISSION, PLAINTIFF,

v~.

AMERICAN FEDERATION OF LABOR AND CONGRESS OF
INDUSTRIAL ORGANIZATIONS (AF L-C10), DEFENDANT.

ORDER

This matter having come before the Court on Cross
Motions for Summary Judgment pursuant to Rule 56 of
the Federal Rules of Civil Procedure and the Court
having found that there are no genuine issues as to any
material facts and that the plaintiff, Federal Election
Commission, is entitled to judgment as a matter of
law, it is this 16th day of June, 1978, hereby

ORDERED that defendant’s Motion for Summary
Judgment is hereby DENIED, and it is

FURTHER ORDERED that plaintiff's Motion for
Summary Judgment is hereby GRANTED, and judg-
ment for plaintiff shall be entered as follows:

1. Defendant’s transfers of money from the AFL-
CIO COPE Education Fund to the AFL-CIO COPE
Political Contributions Committee, a separate segre-
gated fund, violated 2 U.S.C. § 441b.

la

2a

2. Defendant is hereinafter enjoined at any time in
the future from transferring any money from general
treasury funds or from the AFL-CIO COPE Education
Fund to the separated segregated fund of the AFL-
CIO COPE Political Contributions Committee except
as set forth in the single transfer ordered below.

3. Defendant shall pay a civil penalty in the amount
of $10,000 pursuant to 2 U.S.C. § 487g(a)(1)(7); and it

1S

FURTHER ORDERED that the AFL-CIO COPE
Education Fund shall transfer $312,000 to the AFL-
CIO COPE Political Contributions Committee forth-
with

/g/ GEORGE L. HART, JR.
United States District Judge

3a

In the Mnited States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 78-1937

AMERICAN FEDERATION OF LABOR AND CONGRESS OF
INDUSTRIAL ORGANIZATIONS (AFL-CIO),
APPELLANTS

v.

FEDERAL ELECTION COMMISSION, APPELLEES

Appeal from the United States District Court
for the District of Columbia

(D.C. Civil Aetion No. 77-2147)

Argued October 16, 1979
Decided April 1, 1980

Laurence Gold with whom J. Albert Wall was on
the brief, for Appellant.

Kathleen I. Perkins, Attorney, Federal Election
Commission with whom William C. Oldaker, General
Counsel, Charles N. Steele, Associate General Counsel
and Barbara Van Gelder, Attorney, Federal Election
Commission were on the brief, for appellees.

4a

Before: ROBB and WALD, Circuit Judges, and
NICHOLS*, Judge, United States Court of
Claims

Opinion for the Court filed by Judge NICHOLS.

NICHOLS, Judge: This is an appeal by the American
Federation of Labor and Council of Industrial Organi-
zations (AFL-CIO) from an unreported order of the
United States District Court for the District of Co-
lumbia issued on June 16, 1978. The AFL-CIO takes
exception only to that portion of the order which as-
sessed a civil penalty of $10,000 for violation of the
Federal Election Campaign Act of 1971, as amended,
2 U.S.C. § 431 et seg. (Act). The alleged violation in-
volved the transferring of funds between the Commit-
tee on Political Education-Political Contributions
Committee (COPE-PCC) and the COPE Education
Fund. The case was taken on a joint stipulation of
facts.

The COPE Education Fund is financed by AFL-CIO
general treasury monies derived from union dues and
assessments. It is used for non-partisan voter registra-
tion, get-out-the-vote drives and communications with
union members. COPE-PCC, on the other hand, is a
separate segregated fund within the meaning of 2
U.S.C. § 441b and is permitted to make direct contri-
butions to candidates for federal elective office. Its
monies may not be derived from any source but wholly
voluntary political contributions from AFL-CIO union
members. 2 U.S.C. § 441b allows corporations and
labor unions to have such “segregated” funds sup-

*Sitting by designation pursuant to 28 U.S.C. § 293(a).

5a

ported, in the case of unions, in no part by the re-
quired dues of members.

As had been a long-standing practice of the AFL-
CIO, between 1970 and 1977 several times COPE-PCC
transferred money to the COPE Education Fund for
use by that fund. It was explained that COPE-PCC
funds were idle and useless between elections. On de-
mand of COPE-PCC, funds would be transferred from
the Education Fund back to COPE-PCC for its use. At
no time did COPE-PCC owe money to the Education
Fund: the assistance was entirely one-way. These
transfers were designated as loans but were interest-
free. Complete records were kept, and, with one rela-
tively minor exception, the transactions were duly re-
ported to the Office of Federal Elections of the Gen-
eral Accounting Office (GAO) and later to Federal
Elections Commission (FEC or Commission) to which
jurisdiction was transferred. The FEC concedes that
there was no intentional wrongdoing.

On November 7, 1974, the GAO issued a report of its
Office of Federal Elections on the results of an audit of
the AFL-CIO. The purpose of the audit was to review
AFL-CIO compliance with the Act. The report noted
that there had been a failure to report a transfer of
$1,500 from COPE-PCC to the COPE Education
Fund. The report went on to say that an amended re-
port had been filed to correct the discrepancy and that
no further action was recommended. Any reader
aware that the transfer referred to was one of several
would, we think, have concluded that if reported the
transfers were not objectionable.

6a

On August 28, 1977, the Federal Elections Commis-
sion, which had succeeded to the GAO’s authority,
notified the AFL-CIO that it was taking the position
that while § 441b of the Act permits transfers of funds
from COPE-PCC to the COPE Education Fund, no
transfers back into COPE-PCC were permissible.

Following an FEC reaffirmance of its position, there
was a period of attempted reconciliation as required by
section 437g(a)(5)(A) of the Act. During this period the
Commission rejected a proposed settlement which
would have allowed a single transfer of $312,000 from
the Education Fund to COPE-PCC for the purpose of
clearing the balance between the two funds; the Edu-
eation Fund holding at that time that sum of COPE-
PCC funds.

The FEC brought an enforcement action in the Dis-
trict Court seeking a prohibition against any future
transfers from the COPE Education Fund to the
COPE-PCC and the imposition of a civil penalty under
section 437g(a)(7) of the Act. During the hearing on
June 12, 1978, it was conceded by counsel for the
Commission that “* * * we are not attributing a direct
mal-feasance [sic] on the part of the AFL-CIO.” No
express provision violated by the transiers was
pointed out and the transcribed remarks of the District
Judge show he thought the wrong was principally to
the political contributors, not the regular dues payers,
and was in the nature of a breach of trust. We agree
with the District Judge that under the law no part of
the monies of a union’s segregated political fund should
be co-mingled with regular dues money, even tem-
porarily, but the statute is not specific as to what is to

7a

be segregated from what. The conclusion is a matter of
reading the statute in light of the common law rather
than direct statement, but it is not challenged here, as
it was below. The class the statute was written to pro-
tect clearly was the regular dues payers, not the
political contributors, and in view of the obviousness of
this, the error of the appellant, though an error, still is
understandable.

At the close of the hearing, the District Court stated
the terms of its order from the bench. The order was
filed in final written form on June 16, 1978. It declared
the transfers to be in violation of 2 U.S.C. § 441b and
prohibited future transfers from the general treasury
or the Education Fund to COPE-PCC with a single ex-
ception; a clearing of the $312,000 balance of COPE-
PCC monies back to COPE-PCC ‘from the Education
Fund was ordered. Finally, the District Court ordered
the imposition of a civil penalty of $10,000 against the
AFL-CIO. As previously noted, only the imposition of
the civil penalty is now at issue. We reverse.

While the transcript of the hearing reflects the civil
penalty was assessed pursuant to 2 U.S.C.
§ 437g(a)(7), the final order cited 2 U.S.C,
§ 487g(a)(1)(7) which would not accurately refer to any
section of the Act. We therefore take the citation in
the transcript as correct.

While we agree with appellee that the District Court
is vested with discretionary authority in the imposition
of civil penalties, the exercise of that discretion is
subject to appellate review. Such discretionary exer-
cises must be “guided by sound legal principles.” Al-

8a

ben arle Paper Co., v. Moody, 422 U.S. 405, 416
(1975).

We turn to the question of whether the imposition of
a $10,000 civil penalty under 2 U.S.C. § 437g(a)(7) is
supported by the facts of this case. Under that section
it must be found that there was “clear and convincing”
evidence that the violation was “knowing and willful.”
Where such a finding is made, a civil penalty of not
more than the greater $10,000 or 200 percent of the
amount of money involved in the violation may be im-
posed. In the context of this case and the statutory
framework, it is clear that a “knowing and willful”
violation must be something more than is present
here. As will appear, another section deals with penal-
ties for violations not specified to be willful. The dis-
tinction is a real one the trier of fact must contend
with, we think, if he means to find willfulness. The
order should have addressed the question, but we do
not dispose of the case on that ground as it was not
briefed.

In the case of Frank Trey, Jr., Inc. v. Occupational
Safety and Health Review Commission, 519 F.2d 1200
(1975),! the Third Circuit faced a similar issue where
the Occupational Safety and Health Act provided for
three levels of civil penalties for “non-serious,” “seri-
ous,” and “willful” violations. The penalty for a “non-
serious” violation was a discretionary fine of up to

‘'reh. en banc, 519 F.2d 1215, cert. granted, Atlas Roofing
Co. v. Occupational Safety and Health Review Commission, 96
S.Ct. 1458, 424 U.S. 964, 47 L.Ed.2d 731, aff'd, 97 S.Ct. 1261,
430 U.S. 422, 51 L.Ed.2d 464 (1977).

9a

$1,000. For a “serious” violation a mandatory fine of
up to $1,000 was provided. A “willfull’ or repeated
violation could bring a fine of up to $10,000. The hear-
ing officer had found a “willful” violation in the em-
ployer’s failure to adequately assess a certain safety
risk. On appeal from the Commission's affirmance of
the hearing officer’s decision, the court decided that
the hearing officer had found facts sufficient orly to
support a finding of a “serious” violation. Given the
statutory context, a “willful” violation must necessar-
ily connote “defiance or such reckless disregard of the
consequences as to be equivalent to a knowing, con-
scious, and deliberate flaunting of the Act.” To hold
otherwise would fail to distinguish between a “serious”
offense and a “willful” one and would “disrupt the gra-
dations of penalties” established by Congress. Frank
Trey Jr., Ine. at 1207.

In our case there is not only no finding but also no
evidence of such “defiance” or “knowing, conscious,
and deliberate flaunting” of the Act. In fact, every in-
(lication is that the AFL-CIO considered itself to be in
compliance with the Act. It learned nothing to the con-
trary from the GAO upon the occasion of the latter's
audit. The fact that the AFL-CIO was routinely re-
porting the inter-fund transfers to the very agency
charged with enforcement of the Act is persuasive evi-
dence of a lack of intent to violate the Act’s prohibi-
tions. The Commission would seem to have conceded
this point in stating at the District Court hearing that
“the Gommission must reiterate we are not attributing
a direct mal-feasance [sic] on the part of the AFL-
CIO.” Appendix at 68a.

10a

In addition to a lack of evidence that the AFL-CIO
acted otherwise than in good faith, we can not say that
their belief in the legitimacy of the inter-fund transfers
was unreasonable. Neither the Act nor any court deci-
sion had addressed the immediate issue. Most telling is
ihe fact that the audit by the Office of Federal Elec-
tions of the GAO, two years after the decision in
Pipefitters Local No. 562 v. United States, 407 U.S.
385 (1972) had noted the transfers and did not indicate
disapproval in any way. It is clear that uncertainty as
to the meaning of the law can be considered in assess-
ing the element of willfulness in a violation of the law.
See James v. United States, 366 U.S. 213 (1961),
United States v. Garber, 607 F.2d 92 (5th Cir. 1979)
(41 U.S.L.W. 2425).

The Garber case was a criminal tax prosecution
where, as here, willfulness was, by express command
of the statute, an element of the offense. The holding
(en banc, with four dissents) was that it was reversible
error to exclude testimony by experts tending to show
that the rightness or wrongness of defendant’s re-
porting of the involved income was uncertain. The
court said that no one should be convicted on the basis
of an interpretation of law that is so written as to be of
uncertain meaning to the mind of the accused. We do
not have before us the question whether an uncer-
tainty of law can be shown by witnesses. We think it is
obvious that in construction of any penal statute of
which willfulness is an element, it is possible for the
meaning of the statute to be clear to the mind of a
trained judge, and still be less than clear enough to
support a finding of willful violation. This is certainly

lla
so where, as here, the question whether the conduct of
the AFL-CIO was unlawful, was hitherto untested by
any sort of tribunal, and there was no regulation or
even press release by the Commission, so far as cited
to us.

Contrary to the Commission’s assertions, we do not
regard the Supreme Court’s decision in Pipefitters as
providing specific notice that the inter-fund transfers
involved herein were prohibited by the Act. In that
case, the appeal of a conviction for campaign violations
under the law as it was before the Federal Election
Campaign Act of 1971, the central issue was whether
union control of political action committee (PAC) funds
was prohibited. The Supreme Court rejected the
prosecution’s contention that PAC’s must be inde-
pendent of control by union officials. By way of limit-
ing the scope of its holding, the Court stated that “a
fund must be separate from the sponsoring union only
in the sense that there must be strict segregation of its
monies from union dues and assessments.” Pipefitters
at 414. At 422 the Court states that “ ‘separate’ is
synonymous with ‘segregated.’” At 428-432 there is
extensive material on the meaning of “segregated,”
but it deals with whether the term bars union officials
paid by union dues, and using union financed offices,
from managing political funds. The holding is that it
does not. Some readers of Pipefitters might have ad-
vised caution in doing what was done here, but others
might have said that, if carefully accounted for, loans
by the political fund to the regular fund financed by
dues were not inconsistent with the funds being “sepa-
rate” and therefore not in conflict with the require-
ment of “segregation.” The truth is that the Court did

12a

not have before it the issue we must decide here, and
the issues it did decide are not here raised.

In all events the facts of this case do not support a
finding that the violations were “knowing and willful”
as required by 2 U.S.C. § 437g(a)(7), the provision
upon which the District Court based the imposition of
the civil penalty.

As noted above, the Act also provides for the impo-
sition of a civil penalty under section 437g(a)(5)(C).
That section provides for « lesser penalty upon a find-
ing of a violation of the Act and does not expressly
require that the violation be “knowing and willful.” We
do not reach the question of whether a penalty could
have been imposed in this case under that section. The
complaint did not seek a penalty thereunder, the par-
ties did not brief the issue, and the District Court did
not consider it.

As a matter of fact, the penalty was imposed with-
out any discussion at all; the entire oral argument be-
fore the District Judge dealing with the attempt of the
Commission to remove the $312,000 permanently from
the uses for which it had been donated. There was no
attempt at conciliation on the Commission’s part ex-
cept on the inadmissible premise that the breach of
trust it had discovered should not be corrected. We
believe the refund of $312,000 ordered by the court
was properly to be characterized as the correction of a
mistake. That is what we have here, a breach of law by
mistake, not by willful wrong.

Had the AFL-CIO been intransigent after learning
of the Commission’s position on the transfers, we
might have reached a different result. In fact, the

———

l3a
AFL-CIO was willing during the conciliation period to
acecde to the Commission’s position prospectively. It
was the Commission’s insistence on prohibiting the
clearing of the balance between the funds that stymied
the conciliation efforts.

Accordingly, the order of the District Court is mod-
ified by vacating the portion that assesses a penalty of
$10,000. The remainder of the order is not appealed
from and disposes of the case.

l4a
In the Wnited States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1979
Civil Action No. 77-2147
No. 78-1937

AMERICAN FEDERATION OF LABOR AND CONGRESS OF
INDUSTRIAL ORGANIZATIONS (AFL-CIO),
APPELLANTS

,

FEDERAL ELECTION COMMISSION, APPELLEES

BEFORE: RosB and WALD, Circuit Judges; and
NICHOLS“, Judge, United States Court
of Claims

ORDER

Upon consideration of appellee’s (federal) petition
for rehearing, it is

ORDERED, by the Court, that appellee’s aforesaid
petition for rehearing is denied.

Per Curiam
For THE COURT:

/s/) GEORGE A, FISHER
Clerk

* Sitting by designation pursuant to Title 28 U.S.C. § 293(a).

~~ f

l5a
In the Mnited States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1979
Civil Action No. 77-2147
No. 78-1937

AMERICAN FEDERATION OF LABOR AND CONGRESS OF
INDUSTRIAL ORGANIZATIONS (AFL-CIO),
APPELLANTS

ig

FEDERAL ELECTION COMMISSION, APPELLEES

BEFORE: WRIGHT, Chief Judge; MCGOWAN,
TAMM, ROBINSON, MACKINNON, ROBB,
WILKEY, WALD, MIKVA, and EDWARDS,
Circuit Judges

ORDER

The suggestion for rehearing ev banc filed by ap-
pellee (Federal Election Commission) having been
transmitted to the full Court and no judge in regular
active service having requested a vote with respect
thereto, it is

ORDERED, by the Court, ev banc, that appellee’s
aforesaid suggestion for rehearing ey bac is denied.

Per Curiam

FoR THE COURT:

/s/ GEORGE A, FISHER
Clerk

l6a

UNITED STATES COURT OF APPEALS
DISTRICT OF COLUMBIA CIRCUIT
WASHINGTON, D.C. 20001

October 3, 1978

Charles N. Steele, Esquire

Lester N. Scall, Esquire

Barbara Van Gelder

Federal Election Commission

1325 K St., N.W.

Washington, D.C. 20463

J. Albert Woll, Esquire

Laurence Gold, Esquire

815 16th St., N.W.

Washington, D.C. 20005

RE: No. 78-1987—Awmerican Federation of Labor
and Congress of Industrial Or-
ganizations v. Federal Election
Commission

Dear Counsel:

One objective of the Court’s civil appeals manage-
ment plan is to identify, early in the appellate process,
cases which should be remanded for further proceed-
ings. I am authorized to make inquiries of the parties,
although, of course, only the court can decide whether
a remand is in order.

The appeal is limited to the imposition of a civil pen-
alty. My concern is with the adequacy of the record for
appellate review of this judgment.

The district court’s order is not accompanied by a
memorandum with findings and conclusions. The sole

17a

conclusion in the order is that the transfers violated 2
U.S.C. § 441b. There is no explicit determination that,
as a predicate for a civil penalty, “the Commission has
established through clear and convincing proof that
the person involved in such civil action has committed
a knowing and willful violation of this Act ....” 2
U.S.C. § 437g(a)(7) (emphasis added). Further it is
not clear whether the papers moving for summary
judgment were intended to address the penalty ques-
tion, particularly, whether a “knowing and willful”
violation of the Act had occurred.

In light, of this, my inquiry is whether this appeal
should go forward on the present record or whether
there should be further consideration of the matter in
the district court. This might include further develop-
ment of the record or, at least, findings and conclu-
sions on the question of willfulness. I should stress
that the question has not been presented to this court,
and I am raising it initially with the parties.

If you decide there is a problem of going forward on
this record, then I suggest that an appropriate motion
be filed. In any event, I would appreciate being in-
formed how you propose to proceed.

Sincerely,

/s/ MICHAEL DAVIDSON
Chief Staff Counsel

18a

AMERICAN FEDERATION OF LABOR AND CONGRESS
OF INDUSTRIAL ORGANIZATIONS

815 SIXTEENTH STREET, N.W.
WASHINGTON, D.C. 20006
(202) 637-5000

October 19, 1978

Mr. Michael Davidson, Chief Staff Counsel

United States Court of Appeals for the
District of Columbia Circuit

United States Courthouse

Constitution Avenue & John Marshall Place

Washington, D.C. 20001

Re: American Federation of Labor and Congress of
Industrial Organizations v. Federal Election
Commission

Dear Mr. Davidson:

After careful consideration of the points made in
your letter to counsel in the above-noted case, I re-
main of the view that this matter is appropriate for
appellate review and should not be remanded for fur-
ther proceedings.

Unfortunately for defendants, the Federal Election
Campaign Act not only provides for certain civil penal-
ties when the Commission can establish through “clear
and convincing proof that the person involved in [a]
civil action has committed a knowing and willful viola-
tion” (2 U.S.C. Section 437g(a)(7)), but also for lesser
penalties for violations that are not knowing and will-
ful. See 2 U.S.C. Section 437g(a)(5)(B)&(C). This is
such a case and the papers moving for summary judg-
ment were intended to address the penalty question it
raises.

19a

As you point out, the District Court did not make
formal findings of fact and conclusions of law. Judge
Hart did however state from the bench the basis for
his decision before entering judgment. We are there-
fore ordering that portion of the transcript of the pro-
ceedings so that it may be included in the record ap-
pendix for the benefit of the Court of Appeals.

Very truly yours,

LAURENCE GOLD
Special Counsel

20a

FEDERAL ELECTION COMMISSION
1325 K STREET N.W.
WASHINGTON, D.C, 20463

November 6, 1978

Mr. Michael Davidson, Chief Staff Counsel

United States Court of Appeals for the
District of Columbia Circuit

United States Courthouse

Constitution Avenue & John Marshall Place

Washington, D.C. 20001

Re: American Federation of Labor and Congress of
Industrial Organizations v. Federal Election

Commission
Dear Mr. Davidson:

This is to acknowledge your letter of October 3,
1978. Initially, the Commission agrees with counsel for
the appellant that while the Court below did not enter
formal findings of facts and conclusions of law, the
Court did state from the bench the basis for its conclu-
sions,

Moreover, while counsel for the Commission does
not know what penalty questions appellant believes
this case raises, the fine imposed by the Court is
within the statutory limits set by 2 U.S.C.
§ 487g(a)(5)(B), (C) and (a)(7).

In short, it seems that there is an adequate record
to sustain the Court’s order of June 16, 1978. Both
parties agreed that there was no genuine dispute of
material fact. The facts before the lower Court estab-
lish the length and duration of the AFL-CIO’s practice
with regard to the matters at issue, i.e., that the

2la

transfers of money from the Education Fund to the
separate segregated fund was a “longstanding” prac-
tice and that the total amount of the violation extant
was $312,000.

If you have any further questions concerning this
matter, please contact, Barbara Van Gelder, (tele-
phone # 523-4060), the attorney assigned to this case.
Thank you for your interest in this matter.

Sincerely yours,

/s/ WILLIAM C, OLDAKER

General Counsel

ec: Laurence Gold

* US GOVERNMENT PRINTING OFFICE. 1980 327557 65

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_0387%3A1. Public record. Not legal advice.