False advertising law as a weapon against scam PACs

With political action committees (PACs) playing an ever-greater role in elections, campaigns have experienced an unanticipated side effect: the rise of “scam PACs.”  Scam PACs solicit grassroots contributions to support a particular candidate, but only spend a small fraction—if any—of money so raised in support of the invoked candidate.  For scam PACs, fundraising is the end in itself, and the political candidate invoked in the PAC’s solicitations is merely a means to the PAC’s commercial end. In essence, parasitical scam PACs are ticks on the political campaign animal. 

The model of the scam PAC is simple: the PAC registers with the Federal Election Commission (FEC), rents a post office box, sets up a website, and acquires lists of ideologically receptive donors.  The PAC then targets small donors with passionate solicitations in support of its chosen candidate, claiming that contributions made to the PAC will further that candidate.  In truth, much of the money raised lines the pockets of the PAC’s operators through sham overhead costs and “consulting” fees. Sometimes the PAC operators will churn the money raised to build larger donor lists, which the PAC operators will then sell or rent for their own commercial purposes.  The PAC makes minimal—if any—contributions to, or independent expenditures in support of, the candidates that the PAC’s solicitations promise to support.        

{mosads}Combating scam PACs has proven a challenge, as the FEC has indicated that it has no jurisdiction to police a PAC’s false or misleading fundraising solicitations. What has been overlooked until recently, however, is that the federal Lanham Act provides a weapon for candidates to combat scam PACs that siphon away their support. 

The Lanham Act is most often used to combat false advertising in commercial speech, and has rarely been invoked in the context of political fundraising.  But there is no reason the Lanham Act cannot apply to fundraising solicitations by scam PACs, as it provides a private right of action to any person who is injured by another’s false or misleading statement in commercial advertising regarding his own or another’s goods, services, or commercial activities.  A PAC that misleads contributors about its support for a candidate to induce contributions commits false advertising for its own commercial purposes—and to the detriment of the candidate competing with the PAC for contributions—just as much as a product manufacturer that uses misleading advertising to increase its own product sales to the detriment of its competitors.     

The first known Lanham Act challenge to scam PAC activities—Ken Cuccinelli For Governor, Inc. v. Conservative Strikeforce PAC, was filed in September 2014 in federal court in Alexandria, Virginia and settled earlier this year.  The Cuccinelli campaign alleged that Conservative Strikeforce was a scam PAC that had solicited contributions through representations that the money would be donated to Cuccinelli’s campaign or used to pay for independent expenditures (for example, the “largest GOTV campaign in Virginia’s history”) on his behalf.  In reality, only a tiny fraction of the money raised by Conservative Strikeforce using Cuccinelli’s name was donated to the Cuccinelli campaign, and none was used to fund any of the promised independent expenditures—even though after the campaign, Conservative Strikeforce shamelessly boasted to its duped donors that it had spent “tens of thousands of dollars” in independent expenditures in support of the Cuccinelli campaign.

The Cuccinelli case settled before the court had an opportunity to rule on the merits.  Nonetheless, the settlement—which was publicly filed—demonstrates the effectiveness of using the Lanham Act to combat scam PAC activities.  In addition to agreeing to make a payment of $85,000 and transferring ownership of its email and direct mail donor lists to the Cuccinelli campaign, Conservative Strikeforce agreed that in the future it would cease use of any supported candidate’s name and/or image in its solicitations upon receipt of a written request from that candidate.  Thus, the settlement protects not only Cuccinelli (to the extent he runs for office in the future), but any other candidate who objects to having Conservative Strikeforce solicit funds invoking his or her name.  The value of this preemptive remedy for future targets of Conservative Strikeforce’s fundraising cannot be overstated: Given that a false advertising claim is not ripe until after an election ends (when it can be determined whether the scam PAC followed through on its promised support), this settlement agreement—enforceable as an order of the court—provides the only way to obtain preliminary injunctive relief against at least one alleged scam PAC.

It remains to be seen whether any court will approve the Lanham Act to combat scam PAC behavior.  However, given the FEC’s inability to address the issue, the Lanham Act is the most promising tool for policing scam PACs.  In addition, the benefits for a candidate targeted by a scam PAC in bringing such a claim are clear: the Lanham Act permits a successful plaintiff to recover up to three times the defendant’s profits, along with attorney’s fees and costs in bringing the lawsuit where the behavior of the defendant is exceptionally willful and in bad faith.

Bukrinsky and Baker are attorneys at McDermott Will & Emery LLP in Washington, and advised Ken Cuccinelli in connection with his Lanham Act claim against Conservative StrikeForce PAC.