Florida FARA Case Leaves Troubling Precedent

On May 7, 2019, a federal District Court in the Southern District of Florida ruled that an American company, RM Broadcasting, must register as a foreign agent under the Foreign Agents Registration Act (“FARA”) for its agreement to broadcast radio programming from Rossiya Segodnya (meaning “Russia Today”), a Russian state-owned news agency.  Although the decision has received some attention because it is the latest victory in the Department of Justice’s efforts to force Russian state-owned media organizations and their agents to register under FARA, it has much broader implications.  The FARA legal analysis underpinning the Court’s decision has significant shortcomings, reflecting RM Broadcasting’s failure to assert and brief perhaps its strongest legal defenses.

RM Broadcasting buys and sells radio airtime, including from WZHF 1390 AM in Washington, D.C.  In late 2017, RM entered into a services agreement to provide for the broadcasting and transmission of Rossiya Segodnya’s radio programs over WZHF.  Notably, RM agreed to sell essentially the entire broadcast schedule on WZHF, except for hourly station identifications, and to transmit Rossiya Segodnya’s programming in whole and unaltered.  In June 2018, the FARA Unit informed RM that the government concluded the company was required to register under FARA.  RM disagreed and brought an action for a declaratory judgment that it was not required to register.

RM raised a number of arguments that the Court found inapplicable or unpersuasive.  For example, RM argued that its services agreement did not give rise to an agency relationship under common law principal-agent theories.  Unfortunately, there is very clear precedent that FARA’s “agent of a foreign principal” is a statutory test that is wholly distinct from common law agency.  RM also argued that it was not broadcasting radio programs because the FCC licensee – from which RM bought airtime – did the actual broadcasting.  FARA, however, covers actions of an agent taken “directly or indirectly,” and the agreement required RM to provide broadcasting services to Rossiya Segodnya, which it did.

From a FARA perspective, RM failed to raise directly perhaps its strongest argument: the commercial exemptions to FARA.  Although RM made arguments that alluded to the commercial exemptions, such as stating that it simply buys and sells radio airtime in “an arms-length commercial business transaction,” it raised these issues in the context of its alleged agency relationship with Rossiya Segodnya, rather than as an exemption to registration.  RM never specifically cited and explained the commercial exemptions to FARA, their history and purpose, or the reasons that the exemptions could preclude registration.  The Department of Justice, which had no incentive to help RM strengthen its case, also failed to address the commercial exemptions in its briefs.  As a result, the Court’s opinion did not address these critically important issues.

FARA legal analysis requires consideration of three aspects of the law.  First, whether there is a relationship between a purported agent in the United States and a foreign principal outside the United States.  Second, whether the activities of the agent are within four categories of activities covered by the statute.  Finally, third, whether the activities are covered by an exemption that eliminates the registration requirement.  It is essential to consider all three components.  Additionally, because the triggering language of FARA is particularly broad, it is critical to consider the exemptions.

Unfortunately, because neither RM nor the government addressed the commercial exemptions to FARA, neither did the Court.  The Court’s analysis in the May 7 decision covers only whether RM has a relationship with Rossiya Segodnya and whether its activities are covered by one of the four statutory triggering activities that implicate FARA.  On these points, the Court concluded that the services agreement made RM an agent of a foreign principal, and concluded that RM’s activities were within the literal scope of the statutory term “publicity agent” under FARA.  But the Court’s analysis stopped there and did not consider whether the activities were exempt under a commercial exemption.

There are two commercial exemptions to FARA.  First, the statutory commercial exemption provides that private commercial transactions “in furtherance of the bona fide trade or commerce” of the foreign entity are exempt from FARA.  Trade or commerce, in turn, is defined to include the purchase or sale of “services . . . of any kind.”  This exemption applies to the “publicity agent” trigger, but it generally does not apply to political activities, such as those intended to influence the U.S. government or public on a matter of policy.  Second, the regulatory commercial exemption, which does apply to political activities, exempts activities that are “directly in furtherance of the bona fide commercial . . . operations of the foreign corporation.”

There seems very little doubt that Rossiya Segodnya’s purchase of RM’s airtime falls squarely within the scope of purchasing “services . . . of any kind,” and Rossiya Segodnya’s decision to purchase airtime and extend its broadcast reach seems, at least in part, to serve the company’s commercial operations.  To be sure, there are limitations on the commercial exemptions that may have been relevant in this case, including limitations when the commercial activities are directed by a foreign government or “directly promote” a foreign government’s political interests.  These issues, however, were entirely unexamined by the Court, and the Department was not required to show that Russian state interests or control were behind Rossiya Segodnya’s commercial activities.

As a result, the Court’s decision stands as a troubling precedent because it held, without qualification, that entering into a contract to sell services that fell within the FARA triggers required registration.  The FARA triggers are exceedingly broad and, particularly when applied without the accompanying exemptions, could require registration for a very wide range of activities.  The Court itself seems to have recognized these implications, noting that it “must apply the statutory language as written; it is not for the Court to rewrite the statute.”

The “publicity agent” trigger at issue in the RM case covers anyone who engages in the “publication [of] matter of any kind,” including books, periodicals, newspapers, broadcasts, movies, and more.  Without the commercial exemptions, this trigger could incorrectly appear to require registration for a wide variety of commercial activities that are completely outside the scope of the statute.  Everyday examples include a local movie theater contracting to show a foreign film, a publishing house contracting with a foreign author to publish the author’s novel, and a Madison Avenue advertising agency creating an ad campaign for a foreign car manufacturer.  Congress never intended for those activities to be captured by FARA, and that is made clear in the commercial exemptions and various other aspects of the legislative and regulatory history of the law.  The Florida Court’s FARA analysis unfortunately, and incorrectly, suggests otherwise.

As the Department of Justice pursues its new enforcement strategy for FARA, which Assistant Attorney General John Demers announced at a recent American Bar Association meeting, the specific scope and application of the statute will become even more important.  It might be easy to suggest that the Department would not pursue registration against the movie theater, publishing house, or advertising agency described above.  But there was also a time when the Department did not pursue registration of U.S. radio broadcasters doing business with foreign, state-owned media organizations.  Businesses contemplating commercial transactions with foreign companies should not have to rely on prosecutorial discretion when determining whether a given transaction would make a company an agent of a foreign principal under FARA.

RM, which did not receive support in the District Court from any interveners or amici, has publicly indicated that it does not have the resources to pursue an appeal.  That’s regrettable.  There is little case law on FARA, and the RM decision is a flawed and problematic addition to the very limited precedents.

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