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Organizations Struggle With New Disclosure Rules for Members

I am general counsel of a trade association with hundreds of member businesses throughout the country. My question concerns the new law requiring us to disclose the identity of any member business that “actively participates” in planning our lobbying activities. We are struggling with this new obligation because the term “actively participates” is so vague that it seems virtually impossible to determine to whom it applies. I have heard that another trade association has filed suit to challenge the legal validity of the new law. How did the challenge come about? And, must our organization comply while it is pending?

[IMGCAP(1)]A: Before turning to your questions, it is worth reviewing the basic rules of lobbying disclosure to see where this particular requirement fits in. Broadly speaking, the Lobbying Disclosure Act requires lobbyists to file regular reports disclosing the identity of their clients and the interests that they represent. It also requires businesses with in-house lobbyists to file such reports. These requirements shine sunlight on businesses’ lobbying activities.

Businesses cannot avoid this sunlight merely by conducting their lobbying activities through another organization. Until last year, the LDA prevented this method of eluding disclosure by requiring all lobbying organizations to disclose the identity of any business that substantially funds their lobbying activities and “in whole or in major part, plans, supervises or controls” those activities.

Last fall, however, Congress determined that even with this requirement some businesses were still forming lobbying coalitions and eluding disclosure. Congress therefore broadened the disclosure obligation to require organizations to identify any member business that substantially funds their lobbying activities and “actively participates” in the planning, supervision or control of such activities. The stated purpose of this change was to close “a loophole that … allowed so-called ‘stealth coalitions,’ often with innocuous-sounding names, to operate without identifying the interests engaged in the lobbying activities.”

Whether Congress intended to target trade associations, the new law does raise tricky questions. The challenge now is to determine which, if any, of your member businesses qualify as “actively participating” in lobbying activities. This is particularly difficult not just because of the vagueness of “actively participates,” but also because of the somewhat vague definition of “lobbying activities,” which covers efforts in support of your “lobbying contacts” (another defined term), including “preparation or planning activities, research and other background work” intended for use in such contacts.

Associations that would prefer not to attempt the perplexing task of determining which members qualify as “actively participating” in “lobbying activities” have an alternative. An organization is excused from the disclosure requirement if it simply lists all of its members on the Internet.

Last November, three trade associations that apparently were not enthused with this option jointly sent a letter seeking guidance from the Secretary of the Senate and the Clerk of the House. The Senate Secretary and the House Clerk thereafter issued the requested guidance, which states that “actively participating” means “engaging directly” and provides examples. These include participating in decisions about selecting lobbyists and formulating lobbying priorities and strategies. Conversely, they said, a member does not “actively participate” when it merely plays a “passive role” in lobbying activities. Examples include “occasionally” responding to requests for information in support of lobbying activities or expressing an opinion regarding legislative goals through means generally “on par with” all other members.

At least one of the three associations that had sent the letter, the National Association of Manufacturers, was so dissatisfied with the guidance that it filed suit. The suit argues that the disclosure requirement impermissibly burdens the First Amendment rights of freedom of speech, assembly and petitioning the government to redress grievances. The argument that may have the best chance of success, however, is that the language is unconstitutionally vague.

The NAM argues not only that the term “actively participates” is vague but also that the term “lobbying activities” is. This latter argument faces a challenge because the term “lobbying activities” implicates so many other reporting requirements that have been in place since 1995. If the term is unconstitutionally vague, it is fair to ask how lobbying firms have managed to file reports for the past 12 years. Moreover, the fact that the term “lobbying activities” is so important to the LDA’s requirements means that, if the NAM’s challenge of that language were to prevail, the court’s decision would essentially gut the LDA and force Congress to start over.

One could argue that the very fact that the Senate and House provided such detailed guidance illustrates not that the language is clear, but rather just the opposite. Otherwise, why would such detailed guidance be necessary? Moreover, the guidance is of limited relevance to the language of the requirement itself given that the guidance explicitly states that it does not bind the very official responsible for enforcing the requirement: the U.S. Attorney for the District of Columbia.

All of this, while pertinent to how we got here and where the law might go next, still leaves your second question of whether you must comply in the meantime. Yes, you must. The fact that a court might strike down the new requirement is not a sufficient reason to ignore the law as it is currently written. And, the first report is due April 20. So, if you don’t want to post a list of all of your members, you should do whatever you can to determine which of your business members you must identify on your disclosure report. This could take a lot of work at substantial cost. However, the newly heightened civil and criminal penalties for noncompliance mean the cost of not doing the work could be even greater.

C. Simon Davidson is a partner with the law firm McGuireWoods LLP. Click here to submit questions. Readers should not treat his column as legal advice. Questions do not create an attorney-client relationship.

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