Earlier this year, the U.S. Court of Appeals for the Eighth Circuit upheld the Minnesota Attorney General’s authority to investigate potential consumer violations by a federal political action committee (PAC), finding that Minnesota law was not preempted by the Federal Election Campaign Act (FECA). WinRed v. Ellison, No. 22-1238 (8th Cir. Feb. 7, 2023).
WinRed is a PAC that assists candidates with funding in federal elections by helping them set up a webpage where donors contribute. WinRed collects and distributes the earmarked contributions. As a federal PAC, WinRed must comply with FECA, which requires certain disclosures and certain disclaimers on its communications. WinRed has complied with these federal requirements.
Consumers complained to state attorneys general (as well as to WinRed itself and the Federal Election Commission) that WinRed had “steered supporters into unwitting donations” with pre-checked recurring-donation checkboxes and had made it difficult to determine how to opt out of the recurring donations. The attorneys general of Connecticut, Maryland, Minnesota, and New York began an investigation of WinRed. WinRed declined to produce information requested by the attorneys general on the grounds that its actions were solely governed by FECA. The states issued civil investigative demands (CIDs) to WinRed, seeking information about pre-checked recurring-donation boxes, the webpages that contained them, and any disclosures or disclaimers from the webpages. The Minnesota CID stated that the attorney general “had reasonable grounds to believe that WinRed violated” Minnesota consumer protection statutes. WinRed filed suit in Minnesota, seeking to enjoin the states from investigating “activities with respect to contributions” and “bring[ing] a deceptive-practice action against it for those activities.” The district court dismissed the suit against Connecticut, Maryland, and New York for lack of jurisdiction and dismissed the suit against Minnesota on the grounds that Minnesota’s consumer protection law is not preempted by FECA. WinRed appealed.
The Eighth Circuit affirmed the district court’s dismissal of WinRed’s claims. WinRed argued that even though preemption typically involves state enforcement actions, rather than investigations, it is protected by federal law from potential enforcement actions, and that state law prohibits investigations where no enforcement action could be brought. Although Minnesota law authorizes the attorney general to investigate whenever he has “reasonable ground to believe that any person has violated, or is about to violate, [Minnesota’s consumer-protection] laws,” because FECA preempts Minnesota’s consumer protection laws, the attorney general can have no reasonable grounds to believe in a violation of those laws.
The Eighth Circuit first determined which law the attorney general was seeking to enforce, and disagreed with WinRed that he was seeking to impose additional or different disclaimer requirements from those included in FECA on WinRed. Although the CID sought information about disclaimers used by WinRed, the Eighth Circuit concluded “Clear and conspicuous disclaimers about auto-recurring donations might have legitimated otherwise-illegal solicitation tactics. But that would be because disclaimers prevent the “confusion” and “misunderstanding” that Minnesota prohibits.” Thus, just because the CID sought information about disclaimers, that did not mean that the law required them.
The court next turned to the question of whether Minnesota’s consumer protection laws were explicitly preempted by FECA. The regulations enacted under FECA list six specific areas in which state law is not preempted, including “4) Prohibition of false registration, voting fraud, theft of ballots, and similar offenses.” The court found that this provision has been interpreted broadly and would not preempt Minnesota consumer protection laws. Although WinRed proposed preemption whenever state law regulates a federal PAC’s “engage[ment] in federal fundraising related activity,” the court found this was not supported by the text. The Eighth Circuit stated,
WinRed’s “fundraising-related” standard is also too broad. A PAC’s “engag[ing] in federal fundraising-related activity” cannot remove it from all state regulation. That position would permit “requesting” donations at gunpoint—so long as the money went to a federal election—because FECA does not prohibit assault.
The court also rejected WinRed’s claim of implied preemption. Because the court had already determined that the Minnesota statutes at issue did not compel any particular disclaimers, compliance with both federal and state regulations is neither a “physical impossibility,” nor “an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” The FEC has held that recurring donations are not violations of FECA, so the Minnesota statutes are no barrier to Congressional objectives. The court concluded by noting that if the attorney general’s CID was a “fishing expedition” as claimed by WinRed, it could challenge the CID in state court.
