[Federal Register: February 2, 2005 (Volume 70, Number 21)]
[Proposed Rules]
[Page 5382-5385]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02fe05-13]
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FEDERAL ELECTION COMMISSION
11 CFR Parts 109 and 300
[Notice 2005-3]
Definition of ``Agent'' for BCRA Regulations on Non-Federal Funds
or Soft Money and Coordinated and Independent Expenditures
AGENCY: Federal Election Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Election Commission requests comments on the
proposed revision of the definition of ``agent'' for its regulations on
coordinated and independent expenditures, and non-Federal funds, which
are commonly referred to as ``soft money.'' Current Commission
regulations define agent as ``any person who has actual authority,
either express or implied'' to perform certain actions. This definition
does not include persons acting only with apparent authority. The
Commission's regulations defining agent were challenged in Shays v.
FEC. The District Court held that the Commission's definitions of agent
did not necessarily run contrary to Congress's intent and were based on
a permissible construction of the statute. However, the court also held
that the Commission had not provided adequate explanation of its
decision to exclude from the definition of agent persons acting only
with apparent authority and therefore had not satisfied the reasoned
analysis requirement of the Administrative Procedures Act. The court
remanded the regulations to the Commission for further action
consistent with the court's opinion. Accordingly, in order to comply
with the court's decision, the Commission now revisits the definition
of agent by issuing this Notice of Proposed Rulemaking. No final
decision has been made by the Commission on the issues presented in
this rulemaking. Further information is provided in the supplementary
information that follows.
DATES: Comments must be received on or before March 4, 2005. If the
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Commission receives sufficient requests to testify, it may hold a
hearing on these proposed rules. Commenters wishing to testify at the
hearing must so indicate in their written or electronic comments.
ADDRESSES: All comments should be addressed to Mr. Brad C. Deutsch,
Assistant General Counsel, and must be submitted in either electronic
or written form. Commenters are strongly encouraged to submit comments
electronically to ensure timely receipt and consideration. Electronic
mail comments should be sent to agentnprm@fec.gov and may also be
submitted through the Federal eRegulations Portal at http://www.regulations.gov.
All electronic comments must include the full
name, electronic mail address, and postal service address of the
commenter. Electronic comments that do not contain the full name,
electronic mail address, and postal service address of the commenter
will not be considered. If the electronic comments include an
attachment, the attachment must be in the Adobe Acrobat (.pdf) or
Microsoft Word (.doc) format. Faxed comments should be sent to (202)
219-3923, with printed copy follow-up. Written comments and printed
copies of faxed comments should be sent to the Federal Election
Commission, 999 E Street, NW., Washington, DC 20463. The Commission
will post public comments on its Web site. If the Commission decides
that a hearing is necessary, the hearing will be held in the
Commission's ninth floor meeting room, 999 E Street, NW., Washington,
DC.
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 (March 27, 2002) (``BCRA''), contained
extensive and detailed amendments to the Federal Election Campaign Act
of 1971, as amended, 2 U.S.C. 431 et seq. (the ``Act''). On July 29,
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 Regulations on Prohibited and Excessive
Contributions; Non-Federal Funds or Soft Money, 67 FR 49064 (July 29,
2002) (``Soft Money E&J''). On January 3, 2003, the Commission
promulgated regulations 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 and regarding expenditures by
political party committees that are made either in coordination with,
or independently from, candidates. Final Rules and Explanation and
Justification for Regulations on Coordinated and Independent
Expenditures, 68 FR 421 (Jan. 3, 2003) (``Coordination E&J'').
Many of the regulations promulgated in these two rulemakings apply
not only to principals, such as a candidate or party committee, but
also to their agents. 67 FR at 49081-82; 68 FR at 421-22. Accordingly,
in each rulemaking the Commission adopted a definition of the term
``agent.'' 67 FR at 49081-83; 68 FR at 423-25. The two identical
definitions provide that an agent is ``any person who has actual
authority, either express or implied'' to perform certain actions. See
11 CFR 109.3 and 300.2(b). The definitions do not include persons
acting only with apparent authority.
Subsequently, in Shays v. FEC, 337 F.Supp.2d 28 (D.D.C. 2004),
appeal filed, No. 04-5352 (D.C. Cir. Sept. 28, 2004) (``Shays''), the
district court held that the Commission had not satisfied the reasoned
analysis requirement of the Administrative Procedures Act (``APA'')
because the Commission had not provided adequate explanation of its
decision to exclude from the definition of agent persons acting only
with apparent authority.\1\ The court based its conclusion that the
Explanations and Justifications for the Commission's definitions of
agent did not satisfy APA requirements on three grounds. First, the
court found that the Commission had not explained why its former
definition of agent, which pre-dated BCRA and which had included a
definition that covered certain aspects of apparent authority, should
be changed. 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 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 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 both definitions to the Commission for further
action consistent with its opinion. Id. at 130. Accordingly, in order
to comply with the court's decision in Shays, the Commission is now
issuing this Notice of Proposed Rulemaking (``NPRM'') on the definition
of agent. For reasons explained in more detail below, the Commission
proposes to revise its regulations to include persons acting with
apparent authority in its definitions of agent at 11 CFR 109.3 and
300.2(b). The Commission may nonetheless determine after the comment
period to retain the current definitions of agent, which exclude
apparent authority. Accordingly, this NPRM seeks comment both on
whether apparent authority should be added to the Commission's
definitions of agent and on whether there are reasons for continuing to
exclude apparent authority from the definitions.
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\1\ Although the court held that, with respect to the definition
of agent, the Soft Money E&J and the Coordination E&J both failed to
satisfy APA requirements, it found that the definitions of agent at
11 CFR 109.3 and 300.2(b) did not necessarily run contrary to
Congress's intent and were based on a permissible construction of
the statute. Id. at 71-72, 81-86 (finding that both definitions
``survive[ ] Chevron review''). The court concluded that ``the FEC's
definition of the term `agent' is, at least on its face, a
`permissible construction of the statute' '' and that ``the
Commission's construction of the term `agent' is faithful to the
literal terms of the statute.'' Id. at 84.
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Proposed 11 CFR 109.3 and 300.2(b)--Definitions
According to the common law definition of actual and apparent
authority as codified in the Restatement (Second) of Agency (1958)
(``Restatement''),\2\ an agent's actual authority is created by
manifestations of consent (express or implied) made by the principal to
the agent. Restatement, Sec. 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,
Sec. 8. It is important to emphasize that apparent authority is
created only where the principal's word or conduct ``reasonably
interpreted, causes the third party 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
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Restatement, Sec. 27). Moreover, to have apparent authority ``the
third party 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, Sec. 27, cmt. a) (emphasis
added). Finally, ``apparent authority can be created by appointing a
person to a position, such as that of manager or treasurer, that
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,
Sec. 27, cmt. a.
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\2\ 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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At the time the Commission decided to exclude apparent authority
from its definitions of agent, its primary goal was to ensure that a
principal would be able to control whether a would-be agent had
authority to act on the principal's behalf. Accordingly, the Commission
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. Particularly, the Commission was concerned
that by including apparent authority in the definition of agent it
would, first, expose principals to liability based solely on the
actions of a rogue or misguided volunteer and, second, ``place the
definition of `agent' in the hands of a third party''. See Soft Money
E&J, 67 FR at 49083; Coordination E&J, 68 FR at 425. The Commission
seeks comment on rationales for excluding apparent authority from the
definition of agent.
According to the Shays court, the scope of the common law concept
of apparent authority appears to exclude from the definition of agent
precisely the types of conduct that the Commission sought to exclude
when it decided to limit its definitions of agent to persons acting
with actual authority. Just as the Commission intended when it adopted
its current definitions of agent, the common law definition of agent,
including apparent authority, limits a principal's liability for a
would-be agent's actions to situations where the principal has taken
specific action to create authority, either actual or apparent, in a
person.
Given the Shays court's interpretation of the narrow scope of
apparent authority, the Commission now proposes to revise 11 CFR 109.3
and 300.2(b) by defining agent as any person acting with either actual
authority, express or implied, or apparent authority, but also seeks
comments on whether or not there remain reasons to exclude apparent
authority from the Commission's definitions of agent.
By including persons acting with apparent authority in the
definition of agent, the proposed revision would ensure that when a
candidate or party committee conveys through words or actions that
another person has authority to act on that candidate's or committee's
behalf, then the actions of that person are imputed to the candidate or
party committee for purposes of determining liability under the
Commission's soft money and coordination provisions. The Commission
solicits comments on whether persons acting with apparent authority
should be included in the definitions of agent at 11 CFR 109.3 and
300.2(b). Is the proposed revision required by BCRA? Would the proposed
revision reduce the opportunities for circumvention of the Act and the
appearance of corruption? Furthermore, would including apparent
authority in the definition of agent affect the exercise of political
activity, and if so, how? Would including apparent authority in the
definition of agent make it more difficult for a campaign or party
organization to predict potential liability?
The Commission also seeks comment on whether it should specify the
appropriate conclusions to be drawn from a principal's silence. Should
a principal be held liable for the actions of another person based
solely on the principal's failure to disavow that person's actions, or
must there be some other facts present to indicate knowledge and/or
complicity? Should the Commission's rules provide that the failure of a
person to disavow the actions of another person shall not, without
more, create apparent authority for purposes of the Act?
Alternatively, the Commission solicits comment on whether, instead
of including apparent authority, it would be more consistent with the
purposes of BCRA to continue to exclude persons acting only with
apparent authority from the definitions of agent. The Supreme Court has
noted that not every nuance of the law of agency need be incorporated
into Federal statutes where full incorporation is not necessary to
effect the statute's underlying purpose. See, e.g., Farragher v. City
of Boca Raton, 527 U.S. 775, 802 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.'')
However, would excluding apparent authority from the definitions of
agent create opportunities for circumvention of the Act or permit
activity that would give the appearance of corruption?
In the Soft Money E&J, the Commission reasoned that the exclusion
of apparent authority from the definition of agent was appropriate
because apparent authority was primarily designed to ``protect innocent
third parties who had suffered monetary damages as a result of
reasonably relying on representations by individuals who purported to
have, but did not actually have, authority to act on behalf of
principals. Unlike other statutes, such as consumer protection or anti-
fraud legislation, BCRA does not affect individuals who have been
defrauded or have suffered economic loss due to detrimental reliance on
unauthorized representations.'' 67 FR at 49082. The Commission solicits
comments on whether there are reasons supporting this rationale for
excluding apparent authority from the definition of agent.
Specifically, do the legislative purposes of BCRA of preventing
circumvention of the Act and the appearance of corruption differ from
those of other statutes, such as anti-fraud, consumer protection, or
antitrust, in ways that support excluding apparent authority from the
definition of agent?
Particularly, the Commission notes the following differences
between ordinary commercial settings, which are the settings in which
the concept of apparent authority has been applied, and political
settings, in which the Commission's regulations operate: (1)
Ordinarily, in commercial settings people have no incentive to promote
a product with which they are not associated; (2) in commercial
settings, those who have not suffered harm generally have no incentive
or standing to file complaints, whereas in political settings opposing
candidates may be motivated to impede their rivals' campaigns by filing
complaints; (3) in commercial settings, businesses usually have
incentives to dissuade people from purporting to act on their behalf,
whereas in political settings a candidate's or party's goal is often to
motivate others to act on their behalf; and finally (4) in political
settings, constitutional rights are at stake that are not often at
stake in commercial settings. Do these differences between commercial
and political settings provide grounds for excluding apparent authority
from the Commission's definitions of agent? Are there additional
reasons for excluding
[[Page 5385]]
apparent authority from the definition of agent?
Alternatively, rather than either excluding apparent authority
altogether from the definitions of agent at 11 CFR 109.3 and 300.2(b)
or simply adding the term ``apparent authority'' to these definitions,
should the Commission instead provide a more narrowly tailored
definition of agent? Before the Commission adopted the definition of
agent in the soft money regulations in 2002, the Commission's former
regulations contained a narrowly tailored definition of agent that
included certain aspects of apparent authority. Specifically, former 11
CFR 109.1(b)(5) defined agent as including ``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.'' Former 11 CFR
109.1(b)(5) appears to be narrower than the revision proposed in this
NPRM because it does not include cases where apparent authority exists
for persons other than those who hold a position ``where it would
reasonably appear that in the ordinary course of campaign-related
activities he or she may authorize expenditures.'' Under the proposed
revision of the definitions of agent, which would add the term
``apparent authority'' and rely on the Restatement for the definition
of the term, a principal potentially could invest a person with the
authority of an agent also by making statements to, or engaging in
conduct with respect to, a third party, regardless of the position the
putative agent occupies within the principal's organization. Should the
Commission re-adopt the definition of agent at former 11 CFR
109.1(b)(5)? Or would that definition be either too narrow or too broad
to effectuate the purposes of BCRA's soft money and independent and
coordinated expenditures provisions? Would former 11 CFR 109.1(b)(5) be
more or less effective than the proposed revision in preventing
circumvention of the Act and the appearance of corruption?
Alternatively, the Commission seeks comments on whether it should
adopt an entirely new approach towards apparent authority, different
from both the definition at former 11 CFR 109.1(b)(5) and the
Restatement. Commenters who propose such a new approach should explain
how their proposal would be more effective than both the revision
proposed in this NPRM and former 11 CFR 109.1(b)(5) in implementing the
purposes of BCRA's soft money and independent and coordinated
expenditures provisions, and how a wholly new approach would prevent
circumvention of the Act and the appearance of corruption.
Finally, although the Commission proposes to have consistent
definitions in both 11 CFR 109.3 and 300.2(b), the Commission also
solicits comments on whether effective implementation of BCRA's
purposes would be better served by defining agent in the soft money
context differently from agent in the coordination context and,
specifically, whether apparent authority should be included in one but
not in the other definition.
Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory
Flexibility Act)
The Commission certifies that the attached proposed rules, if
promulgated, would not have a significant economic impact on a
substantial number of small entities. The basis for this certification
is that the national, State, and local party committees of the two
major political parties, and other political committees are not small
entities under 5 U.S.C. 601 because they are not small businesses,
small organizations, or small governmental jurisdictions. Further,
individual citizens operating under these rules are not small entities.
To the extent that any political party committees or other political
committees may fall within the definition of ``small entities,'' their
number is not substantial.
List of Subjects
11 CFR Part 109
Elections, Reporting and recordkeeping requirements.
11 CFR Part 300
Campaign funds, Nonprofit organizations, Political candidates,
Political committees and parties, Reporting and recordkeeping
requirements.
For the reasons set out in the preamble, the Federal Election
Commission proposes to amend subchapters A and C of chapter I of title
11 of the Code of Federal Regulations as follows:
PART 109--COORDINATED AND INDEPENDENT EXPENDITURES (2 U.S.C.
431(17), 441a(a) AND (d), AND PUB. L. 107-55 SEC. 214(c))
1. The authority citation for part 109 would continue to read as
follows:
Authority: 2 U.S.C. 431(17), 434(c), 438(a)(8), 441a, 441d,;
Sec. 214(c) of Pub. L. 107-55, 116 Stat. 81.
2. Section 109.3 would be amended by revising the introductory text
of the section to read as follows:
Sec. 109.3 Definitions.
For the purposes of 11 CFR part 109 only, agent means any person
who has actual authority, either express or implied, or apparent
authority to engage in any of the following activities on behalf of the
specified persons:
* * * * *
PART 300--NON-FEDERAL FUNDS
3. The authority citation for part 300 would continue to read as
follows:
Authority: 2 U.S.C. 434(e), 438(a)(8), 441a(a), 441i, 453.
4. Section 300.2 would be amended by revising the introductory text
of paragraph (b) to read as follows:
Sec. 300.2 Definitions.
* * * * *
(b) Agent. For the purposes of part 300 of chapter I, agent means
any person who has actual authority, either express or implied, or
apparent authority to engage in any of the following activities on
behalf of the specified persons:
* * * * *
Dated: January 27, 2005.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 05-1892 Filed 2-1-05; 8:45 am]
BILLING CODE 6715-01-P