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Law Tue Apr 21 2015

Will Donor's Lawsuit Send Schock Waves?

The novel federal lawsuit filed April 15 against former Congressman Aaron Schock and up to 100 "John Does," seeking return of political contributions, is one of the strongest signals yet of Americans' disgust with the perversion and conversion of our own political system, and in particular Congress, into a beast we barely recognize let alone control. In part, the new lawsuit simply piles more chaos onto the train wreckage of the Aaron Schock Express, catalyzed by the relatively trivial "Downton Abbey" redecoration kerfuffle and now in the hands of a grand jury. The suit underscores that overdone office decor was only footnote to a pattern of hinky dealings by Schock. It also tests the immunity that politics has enjoyed from the courts, if not the wider court of public opinion. This latter part of the story may not be so easily dismissed, though the lawsuit may meet that fate.

Howard Foster of Chicago gave $500 to Schock. His lawsuit is superficially about a donor's disappointment that a politician wasn't what he claimed. Foster's court papers and lawyers' PR say that Foster "gave money to the rising young Republican Congressman because he believed Mr. Schock was ethical [but] the opposite was true." Much reaction has been a shrug, "And your point would be?"

Some commentators noted that contributions are called "donations," closer to an engagement ring "gift" than to an enforceable contract. One could quibble with the analogy - courts sometimes do order rings returned, saying an engagement has an implicit mutual promise - but point made. If you bring a 6-pack to a party, you don't get it back if the party turns out less than the invite promised.

Legally speaking, the suit is unusual. It's a "class action," where the plaintiff sues not just on his or her own behalf, but as claimed proxy for untold others alleged to have been similarly injured by the defendant. Class actions make sense where the large number of victims makes separate individual suits impractical and likely to result in injustice (because of inconsistency, or because claims collectively significant are, alone, too small to be worth filing). Think defective consumer products, pollution spills, and sneaky mortgage lending practices. To get to trial, plaintiffs first must show that the suit passes this test, and also that their claims are typical of the mass of unnamed victims they champion. Foster claims a class of all of Schock's contributors. See the Complaint at ΒΆΒΆ44-48.

"Many" is plausible; "all" a tough sell. People give campaign contributions for complex reasons. Only some donations are personality-driven; many donors, maybe most, simply want the recipient to win and, once elected, to do what he or she talked about: actions rather than characteristics. If Schock supporters wanted a Republican who would vote and speak conservatively, they got what they "paid" for. Most would no doubt rather have a sinner that voted against Obamacare than a saint who supported it. So the class claim that all Schock donors gave only to install some icon of "integrity" seems a reach, albeit fixable by amending the pleading.

Unusual aspect #2 is the use of the Racketeer Influenced and Corrupt Organizations Act, or "RICO." This federal law was tooled to enable prosecuting organized crime in hard-to-pin-down "rackets," where a facially legit "front," such as a mob-controlled union or restaurant, shields or does laundry for a shadier operation. The broadly worded law is also used, not without controversy, in other situations where an "enterprise" enables the commission of an underlying crime. RICO can also be brought as a private civil action, allowing triple damages and attorney's fees to victims. To invoke RICO, Foster claims that the whole Schock political operation was a fraud, mass-marketing what Foster's lawyers call a "false image." The suit says that the misrepresentation was key to the fundraising.

Lots of things aren't what they seem on the surface; that's no crime in itself. RICO requires that the racket enable a separate, underlying crime. Foster alleges that Schock and his cronies schemed "to deceive people into given [sic] money." But fundraising, also, is not a crime. Unlike, say, a phony charity, Schock's campaigns and elections did exist, and fundraising paid for real ads and staff and helped secure actual wins. The allegations only address a fraction of the millions Schock raised for the four PACs identified (but, curiously, not named as defendants). No doubt most of the funds spent were on exactly what contributors expected, not Schock's self-enrichment. If anything, the facts suggest that Schock was diverting House funds, and side deals, to stroke large donors, not committing crimes to deceive small contributors.

Foster's political "buyers' remorse" stab may earn amens from anyone who's felt burned by candidates they supported. In late January 2008, my wife and I made a contribution to John Edwards when we still thought he'd be a smart VP pick and he promised to take his strong health-care and climate change planks to the convention. Just a week later he folded his campaign. Two years later, America learned that Edwards had had a secret, very pregnant girlfriend at the time. Like Foster, had we known the facts, we would not have contributed, not from moral indignation but because he was a non-viable candidate for president or VP.

The idea of suing candidates who diverge from their campaign hype is fascinating yet scary. Candidates run as champions of the average citizen but then parcel out tax breaks to Wall Street. Candidates run on "peace" but give us drone strikes, massive defense spending, and war. Candidates running on "change" oust incumbents and then continue their predecessor's policies. Have all their contributors been "defrauded" so as to warrant suit?

Typically courts consider campaign materials close to pure protected speech, and keep hands off, reflecting a view that First Amendment remedies for political sins lie in the electoral sphere, not in the judiciary. The Washington Supreme Court has struck down laws banning misleading campaign ads, saying "The notion that the government, rather than the people, may be the final arbiter of truth in political debate is fundamentally at odds with the First Amendment." In the 2012 U.S. Supreme Court case U.S. v. Alvarez, dealing with an elected official's misrepresentation of his military record, four justices observed the general unconstitutionality of government attempting to police speech based on content. It's hard to imagine the courts wanting to become referees of whether a candidate's personal behavior sufficiently met the claims of ads and brochures.

In the appellate court opinion in Alvarez, in an amazing concurring opinion starting at page 3756, Judge Alex Kozinski wrote, "If all untruthful speech is unprotected, as the dissenters claim, we could all be made into criminals, depending on which lies those making the laws find offensive. And we would have to censor our speech to avoid the risk of prosecution for saying something that turns out to be false."

Schock apparently told donors that their contribution was an "investment." The suit says no one would have invested "had they known he was engaged in illicit financial schemes." But it's a stretch to say that campaign solicitations contained "material omissions" because they did not mention inflated mileage reimbursement vouchers. To hold that a candidate who campaigns saying X must proactively offer all evidence to the contrary would amount to compulsory political speech. A court, rather than order that, is more likely to say that a contribution only pays to serve the political goals of the recipient, and is neither an enforceable promise as to how it will be spent, nor what that candidate, if elected, will do, nor that political advertising is the truth, the whole truth, and nothing but the truth.

So, despite the emotional tug for a refund to contributors, and the schadenfreude of seeing Schock stripped not only of his shirt but also of his smarm, the suit has problems in the fraud and RICO departments. More promising may be the "unjust enrichment" claim that letting the defendants keep the money is just unfair. But if that is all that survives, a federal court will kick the case back to Illinois state courts.

Still, for Schock to put all his chips on "Hey, it was just politics" edges him closer to the Blagojevich "everybody does it" defense - which didn't turn out well for Blago. Schock also has to consider the time and expense, and additional risk, of the Foster lawsuit. Unlike the somewhat cat-and-mouse that is a criminal prosecution, a civil suit allows extended discovery, meaning that Foster's lawyers, if the case survives initial motions, could go after larger game their lawsuit hasn't yet alleged, such as the perhaps-oddest part of the Schock drama, the flow of money and business to others. Finally, having to litigate his own "integrity" puts Schock in a no-win situation.

Regardless of legal disposition, the case symbolizes on yet another front that, for many, resigned acceptance of politics-as-they-are is over, and that the fed-up may yet fight back. The prospect of a new cause of action, or a ruling that any ad that fact-checks reveal are bogus could lead to lawsuits, may produce some pressure on Schock, from peers and PACs, to make this suit go away. One of Foster's lawyers framed the suit as a "golden opportunity" for Schock to "repay those whom he let down." Don't be surprised at a large settlement that puts a lid, at least for the time being, on potential political shock waves from this novel case. But don't be surprised if it also gets more folks to thinking about what remedy there is for a system whose product has become so different than its promise.

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