Federal Election Commission Main Page
FEDERAL ELECTION COMMISSION
Washington, DC 20463
September 18, 2006
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 2006-22
Andrius R. Kontrimas, Esquire
Jenkens & Gilchrist
1401 McKinney
Suite 2600
Houston, Texas 77010-4034
Dear Mr. Kontrimas:
We are responding to your advisory opinion request on behalf
of Wallace for Congress ("the Wallace Committee") concerning the
application of the Federal Election Campaign Act of 1971, as
amended (the "Act"), and Commission regulations to an
incorporated law firm's preparation of an amicus curiae brief on
behalf of the Wallace Committee, free of charge, in a court case
addressing the ballot eligibility of the Republican nominee in
Mr. Wallace's congressional district. Specifically, you ask
whether the value of the legal services provided free of charge
by your law firm would be an in-kind contribution to the Wallace
Committee.
The Commission concludes that the law firm's provision of
free legal services would be a prohibited corporate contribution
to the Wallace Committee.
Background
The facts presented in this advisory opinion are based on
your letter received on July 21, 2006, and public records,
including the Wallace Committee's 2006 July Quarterly Report
filed with the Commission and the Wallace Committee's website.
The Wallace Committee is the principal campaign committee of
David G. Wallace, who was seeking election to the House of
Representatives from the 22nd congressional district of Texas.
You are the Wallace Committee's treasurer. You are also a
shareholder in the incorporated law firm retained by the Wallace
Committee to draft the amicus brief, Jenkens & Gilchrist (the
"Firm").
1. The court case
On March 7, 2006, the incumbent Representative, Tom DeLay,
won the Republican primary for the House seat for the 22nd
congressional district. On April 3, 2006, after declaring his
intention to move to Virginia, Representative Delay announced
that he would retire from the House, effective in early June, and
would not seek re-election. After receiving a letter from
Representative DeLay asserting his ineligibility to remain on the
ballot because of his move to Virginia, the Chair of the
Republican Party of Texas declared in writing, on June 7, that
Representative DeLay was no longer eligible to be the party's
nominee. When a nominee is no longer eligible to be the nominee,
Texas law allows the Republican executive committee for the
affected congressional district to select a replacement candidate
for the general election ballot.
In anticipation of the withdrawal of Mr. DeLay's name from
the ballot, Mr. Wallace filed his Statement of Candidacy with the
Commission on April 17, 2006. The Wallace Committee filed its
Statement of Organization on April 24, 2006.
On June 8, 2006, the Texas Democratic Party filed a lawsuit
in State court, contesting the declaration of Mr. DeLay's
ineligibility on constitutional grounds. See Texas Democratic
Party v. Benkiser, No. D-1-GN-06-002089 (Dist. Ct. Travis County,
Texas, June 8, 2006). After removal of the case to Federal
court, the U.S. District Court for the Western District of Texas
held the declaration of ineligibility to be invalid, and
permanently enjoined the Republican Party of Texas from
certifying to the Texas Secretary of State any candidate other
than Mr. DeLay to appear as the Republican candidate on the
general election ballot. See Texas Democratic Party v. Benkiser,
__ F. Supp. __, 2006 WL 1851295 (W.D. Tex. July 6, 2006). The
U.S. Court of Appeals for the Fifth Circuit upheld the District
Court decision and the injunction. See Texas Democratic Party v.
Benkiser, __ F.3d __, 2006 WL 2170160 (5th Cir. August 3, 2006).1
On August 9, 2006, Mr. Wallace announced that he intended to
qualify, under Texas law, as a "write-in candidate" for the House
seat in the 2006 general election.2 On August 21, 2006, Mr.
Wallace announced that he no longer intended to pursue a write-in
candidacy and withdrew from the House race.3
If the Court of Appeals' injunction had been stayed and the
declaration of Mr. DeLay's ineligibility had been given effect,
the Republican Party executive committee for the 22nd
congressional district, composed of precinct chairs, would have
met to select a replacement House candidate for the November
ballot. Mr. Wallace was a contender for the nomination.
2. The Firm's services
On July 11, 2006, the Firm entered into a legal
representation agreement with the Wallace Committee. The Firm
agreed to submit an amicus curiae brief to the Fifth Circuit
Court of Appeals supporting reversal of the District Court
judgment on constitutional grounds. The agreement specified that
the Firm would seek an advisory opinion from the Commission as to
whether the preparation of the brief without charge would be a
contribution from the Firm to the Wallace Committee. If the
Commission determined that it would be a contribution, the
Wallace Committee would pay the Firm "a normal fee" for such
services. The Wallace Committee agreed, in any event, to pay all
routine expenses, such as photocopies and postage. You and the
other Firm employees who provided the services will be
compensated as usual by the Firm for your work. The Wallace
Committee's amicus brief was filed on July 21, 2006.4
Question Presented
Would the Firm's preparation, free of charge, of an amicus
brief on behalf of the Wallace Committee be a contribution to the
Committee, where the brief sought reversal of a Federal court
judgment that declared the current nominee of the candidate's
party eligible for the ballot and thereby precluded Mr. Wallace's
eligibility for the party's nomination?5
Legal Analysis and Conclusions
Yes, the Firm's preparation of an amicus brief free of
charge for the Wallace Committee would be a contribution to the
Wallace Committee and, because the Firm is a corporation, would
be impermissible.
Corporations are prohibited from making any "contribution or
expenditure." 2 U.S.C. 441b(a); 11 CFR 114.2(b). The Act
defines the term "contribution" in two ways. First, the Act
defines "contribution" to include "any gift, subscription, loan,
advance, or deposit of money or anything of value made by any
person for the purpose of influencing any election for Federal
office." 2 U.S.C. 431(8)(A)(i). Second, the Act defines
"contribution" to include the "payment by any person of
compensation for the personal services of another person which
are rendered to a political committee without charge for any
purpose." 2 U.S.C. 431(8)(A)(ii) (emphasis added); see also 2
U.S.C. 441b(b)(2). The situation presented here implicates the
second definition.
Similarly, Commission regulations provide that, with some
exceptions, the "payment by any person of compensation for the
personal services of another person if those services are
rendered without charge to a political committee for any purpose"
is a contribution to the political committee. 11 CFR 100.54
(emphasis added); see also 11 CFR 114.2(b)(1). The Firm's
provision of free legal services to the Wallace Committee would
not come within the exception to the definition of "contribution"
for legal services provided solely to ensure compliance with the
Act or the presidential campaign funding provisions of Title 26.
See
2 U.S.C. 431(8)(B)(viii)(II); 11 CFR 100.86 and 114.1(a)(2)(vii).
Nor would they come within the exception for services provided
without compensation by an individual volunteer on behalf of a
candidate or political committee. See 2 U.S.C. 431(8)(B)(i); 11
CFR 100.74.
You contend that Mr. Wallace was not a candidate but merely
a potential candidate when the Firm rendered its legal services
to the Wallace Committee, because no district committee selection
process had yet been scheduled. Under the Act and Commission
regulations, a "candidate" is "an individual who seeks nomination
for election, or election, to Federal office." 2 U.S.C. 431(2);
11 CFR 100.3(a). An individual becomes a candidate for Federal
office when that individual, or a person acting on the
candidate's behalf and with his or her consent, "has received
contributions aggregating in excess of $5,000 or made
expenditures aggregating in excess of $5,000." 11 CFR
100.3(a)(1) and (2); see 2 U.S.C. 431(2)(A) and (B). According
to its 2006 July Quarterly Report, the Wallace Committee raised
over $200,000 in contributions before July 1 and spent over
$45,000, including $20,000 for a "radio buy." Moreover, as of
August 1, 2006, its website, davidwallaceforcongress.com, made
clear that Mr. Wallace considered himself a candidate for
election to the House in 2006. For example, the website (i)
asked readers to contact precinct chairs in support of his
nomination; (ii) attacked the Democratic general election
candidate in a number of articles; (iii) posted a committee radio
ad expressly advocating Mr. Wallace's election and the Democratic
candidate's defeat; and (iv) noted that, prior to July 1, Mr.
Wallace received commitments for $800,000 in contributions, over
and above the amounts already received.6 Thus, Mr. Wallace was a
Federal candidate at the time the Firm rendered its services, and
the Wallace Committee, as Mr. Wallace's principal campaign
committee, was a political committee. See 11 CFR 100.5(d) ("An
individual's principal campaign committee . . . becomes a
political committee[] when that individual becomes a candidate
pursuant to 11 CFR 100.3").
Because the definition of "contribution" under 2 U.S.C.
431(8)(A)(ii) and 11 CFR 100.54 applies to services provided to a
political committee "for any purpose" (other than services
specifically excepted by the Act and regulations), the Firm's
compensation to you and other Firm employees for the preparation
of the amicus brief free of charge to the Wallace Committee would
be a "contribution." Accordingly, the Firm's payment of
compensation to you and other Firm personnel for such services
would be an impermissible corporate contribution to the Wallace
Committee, unless the Wallace Committee pays the usual and normal
charge for such services in a timely manner. See 11 CFR
100.52(d) and 116.3(b).
In Advisory Opinion 1980-4 (Carter/Mondale Presidential
Committee), on which you rely in your request, the Commission
applied a previous version of 11 CFR 100.54 (11 CFR 100.4(a)(5)
(1977)). Although the relevant definition of "contribution" in
the Act (2 U.S.C. 431(8)(A)(ii)) was amended in early 1980 to
include compensation paid by one person for personal services of
another that are rendered to a political committee without charge
"for any purpose," see Pub. L. No. 96-187, Title I, 101, Jan.
8, 1980, 93 Stat. 1339, the Commission had not yet amended its
regulations to reflect the amended statute.7 Accordingly, in
Advisory Opinion 1980-4, the Commission stated that "Commission
regulations indicate that contributions in the form of
compensation occur when the compensated services consist of
`political activity,' i.e., services engaged in for the purpose
of influencing an election to Federal office." The Commission
concluded that a contribution did not result in Advisory Opinion
1980-4 because the compensation paid for legal services that
enabled the political committee in question to present a defense
to a complaint alleging violations outside the purview of the
Act, as distinguished from permitting compensated personnel to
engage in the political committee's political activities.
The Commission's conclusion here, by contrast, rests on the
implementation of the Act as reflected in current Commission
regulations, which specify that a contribution results from the
"payment by any person of compensation for the personal services
of another person if those services are rendered without charge
to a political committee for any purpose." 11 CFR 100.54
(emphasis added). The Commission need not and does not address
whether the legal services described by the requestor are for the
purpose of influencing the election of any person to Federal
office. Due to material differences between the previous and
current understanding of the Act and between the versions of
Commission regulations, the Commission determines that Advisory
Opinion 1980-4 does not apply here.
This response constitutes an advisory opinion concerning the
application of the Act and Commission regulations to the specific
transaction or activity set forth in your request. See
2 U.S.C. 437f. The Commission emphasizes that, if there is a
change in any of the facts or assumptions presented, and such
facts or assumptions are material to a conclusion presented in
this advisory opinion, then the requestor may not rely on that
conclusion as support for its proposed activity.
Sincerely,
(signed)
Michael E. Toner
Chairman
Enclosure (Advisory Opinion 1980-4)
_______________________________
1 On August 7, 2006, Justice Antonin Scalia of the U.S. Supreme
Court denied a request for a stay of the injunction, and the
Republican Party of Texas reportedly considers its legal options
to be "exhausted." Bob Dunn, Scalia Denies GOP's Last Stab At
Dropping DeLay From Ballot, FortBendNow, August 7, 2006,
available at http://www.fortbendnow.com/news/1627/scalia-denies-
gops-last-stab-at-having-delay-declared-ineligible-for-ballot
(last visited August 21, 2006).
2 See Kristen Mack, Sugar Land Mayor To Be Write-in For DeLay's
Seat, Houston Chronicle, August 10, 2006, available at
http://www.chron.com/disp/story.mpl/nb/fortbend/news/4105411.html
(last visited August 21, 2006).
3 See Eric Hanson and Ruth Rendon, Sugar Land Mayor Quits
District 22 Race, Houston Chronicle, August 22, 2006, available
at
http://www.chron.com/disp/story.mpl/headline/metro/4132280.html
(last visited August 22, 2006).
4 Under the Firm's normal billing procedures, bills for work
performed in July are processed in August and sent in September,
with payment expected within 30 days of the client's receipt of
the bill. Hence, the request pertains to future activity by the
Wallace Committee. See 11 CFR 112.1(b).
5 Your advisory opinion request included a second question,
concerning the possible establishment of a legal expense fund to
pay for the Firm's services. You withdrew this question from
Commission consideration on August 23, 2006, and explained that
the Wallace Committee would prefer to pay for the legal services
out of its available cash on hand, rather than have Mr. Wallace
establish a legal expense fund.
6 Mr. Wallace's use of a radio ad to publicize his campaign and
his statements referring to himself as a candidate indicate that
he was well beyond "testing the waters" for a candidacy when the
amicus brief was prepared and filed with the court.
Nevertheless, even if he were treated as a "potential candidate,"
in the same position as an individual testing the waters, funds
received and spent for such purposes are subject to the
limitations and prohibitions of the Act, and are contributions
and expenditures subject to the Act's reporting requirements if
the individual subsequently becomes a candidate. See 11 CFR
100.72 and 100.131.
7 Advisory Opinion 1980-4 was issued on February 1, 1980. The
amended regulation, which is also the current regulation, became
effective on April 1, 1980, and appeared at 11 CFR 100.7(a)(3).
See 45 Fed. Reg. 21211 (Apr. 1, 1980). The Commission re-
numbered the regulation as 11 CFR 100.54 after enactment of the
Bipartisan Campaign Reform Act of 2002, Pub. L. No. 107-155, 116
Stat. 81 (2002). See 67 Fed. Reg. 50582, 50586-7 (Aug. 5, 2002).