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COLORADO COURT OF APPEALS 2 East 14th Avenue Denver, CO 80203 District Court, City and County of Denver Honorable

J. Eric Elliff, Judge Case No. 2012 CV 2133 (consolidated with 2012 CV 2153) Defendant/Appellant/Cross-Appellee: SCOTT GESSLER, in his official capacity as Secretary of State for the State of Colorado, v. Plaintiffs/Appellees/Cross-Appellants: COLORADO ETHICS WATCH and COLORADO COMMON CAUSE and Plaintiffs/Appellees: DAVID PALADINO; MICHAEL CERBO; PRO-CHOICE COLORADO PAC; PPRM BALLOT ISSUE COMMITTEE; and CITIZENS FOR INTEGRITY, INC. JOHN W. SUTHERS, Attorney General LEEANN MORRILL, First Assistant Attorney General FREDERICK R. YARGER, Assistant Solicitor General, Reg. No. 39479* MATTHEW D. GROVE, Assistant Attorney General, Reg. No. 34269* 1300 Broadway, 10th Floor Denver, Colorado 80203 Telephone: (720) 508-6551 E-Mail: fred.yarger@state.co.us; matt.grove@state.co.us *Counsel of Record

COURT USE ONLY Case No. 12 CA 1712

Opening Brief of Appellant / Cross-Appellee Colorado Secretary of State

Certificate of Compliance This brief complies with the requirements of C.A.R. 28 and C.A.R. 32, including all formatting requirements. Specifically, I certify the following: The brief complies with C.A.R. 28(g) because It contains 9,144 words. o It does not exceed 30 pages. o The brief does not comply with CAR 28(g) because it exceeds the word and/or page limit. A motion to accept the over length brief has been filed contemporaneously with the brief. The brief complies with C.A.R. 28(k) because, For the party raising the issue: It contains under a separate heading (1) a concise statement of the applicable standard of appellate review with citation to authority; and (2) a citation to the precise location in the record (R. __, p. __), not to an entire document, where the issue was raised and ruled on. For the party responding to the issue: It contains, under a separate heading, a statement of whether such party agrees with the opponents statements concerning the standard of review and preservation for appeal, and if not, why not. /s/ Frederick R. Yarger Frederick R. Yarger

TABLE OF CONTENTS PAGE Introduction ................................................................................................ 1 Issues on Appeal ......................................................................................... 2 Statement of the Case and Facts ............................................................... 3 A. The Secretarys rulemaking effort. ..................................................3 B. Plaintiffs lawsuit...............................................................................6 C. The decision below.............................................................................7 D. The Secretarys request for a stay and the parties appeals. .........9 Summary of Argument ............................................................................... 9 Argument .................................................................................................. 11 I. Standard of Review. ........................................................................ 11 A. In enacting administrative rules, the Secretary must follow the law, including binding judicial interpretations of the law.....................................................................................................13 B. The Court must defer to the Secretarys Rules, asking only whether the Rules are based on a permissible interpretation of the law. ................................................................19 II. The five rules at issue in this appeal are all within the Secretarys authority and discretion to promulgate. ..................... 23 A. As the district court observed, the major purpose test of Rule 1.18.2 is undeniably required by Colorado case law.........23 1. The Supreme Courts major purpose test refines the scope of political committee regulation. ................................ 24 2. Rule 1.18.2 acknowledges the major purpose test and explains how it applies........................................................... 25 3. The district court improperly held that the Secretarys rules must ignore the existence of the major purpose test. ......................................................................................... 26 i

TABLE OF CONTENTS PAGE B. Rule 1.12 clarifies the definition of issue committee based on criteria the General Assembly specified...................................29 1. Rule 1.12 fills a gap left by the General Assembly. .............. 31 2. The Secretarys decision to use a 30% threshold is reasonable in light of governing law. .................................... 34 3. The district courts flawed analysis of Rule 1.12 must be overturned. ........................................................................ 36 C. Rules 7.2 and 1.10 use existing law to clarify the definition of political organization. ...............................................................41 1. Rule 7.2s major purpose requirement is based on 26 U.S.C. 527. ........................................................................... 42 2. Rule 1.10 uses longstanding case law to clarify the meaning of influencing or attempting to influence. .......... 44 D. Rule 18.1.8(a) implements the Secretarys authority to waive penalties for failure to file major contributor reports. ......48 Conclusion ................................................................................................. 52

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TABLE OF AUTHORITIES PAGE CASES Alliance for Colo.s Families v. Gilbert, 172 P.3d 964 (Colo. App. 2007) ............................................................................................... passim Buckley v. Valeo, 424 U.S. 1 (1976) ................................................. passim Cerbo v. Protect Colorado Jobs, Inc., 240 P.3d 495, 502 (Colo. App. 2010) ............................................................................... 31, 33, 36, 37, 38 Holliday v. Regl Transp. Dist., 43 P.3d 676 (Colo. App. 2001) .............. 16 Citizens for Free Enter. v. Dept of Revenue, 649 P.2d 1054 (Colo. 1982) ........................................................................................... 20, 23, 39 Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010)................................................................................................ 16, 39 Colo. Citizens for Ethics in Govt v. Comm. for the Am. Dream, 187 P.3d 1207 (Colo. App. 2008) ............................................... 12, 23, 50 Colo. Common Cause v. Gessler, 2012 COA 147 (2012) ................ 18, 22 Colo. Ethics Watch v. Senate Majority Fund, 269 P.3d 1248 (Colo. 2012) ........................................................................................... 27, 29, 47 Colo. Ground Water Commn v. Eagle Peak Farms, 919 P.2d 212 (Colo. 1996) ............................................................................................ 12 Colo. Right to Life Comm. v. Coffman, 498 F.3d 1137 (10th Cir. 2007) ............................................................................................... passim Fed. Election Comm'n v. Massachusetts Citizens for Life, 479 U.S. 238 (1986)....................................................................... 16, 17, 24, 26, 35 Fed. Election Commn v. Wis. Right to Life, Inc., 551 U.S. 449 (2007)................................................................................................ 34, 36 Hyatt v. Heckler, 807 F.2d 376 (4th Cir. 1986) ....................................... 15 Independence Institute v. Coffman, 209 P.3d 1130 (Colo. App. 2008) ............................................................................................... passim iii

TABLE OF AUTHORITIES PAGE Ithaca Coll. v. Natl Labor Relations Bd., 623 F.2d 224 (2d Cir. 1980) ....................................................................................................... 15 Janssen v. Indus. Claim Appeals Office, 40 P.3d 1 (Colo. App. 2001) ................................................................................................. 22, 39 Lopez v. Heckler, 572 F. Supp. 26 (1983), affd, 725 F.2d 1489 (9th Cir. 1984) vacated on other grounds, 469 U.S. 1082 (1984) ................ 15 Minn. Citizens Concerned for Life, Inc. v. Swanson, 692 F.3d 864 (8th Cir. 2012) ............................................................................ 19, 24, 43 N.C. Right to Life, Inc. v. Leake, 525 F.3d 274 (4th Cir. 2008) .............. 13 Natl Org. for Marriage v. McKee, 649 F.3d 34 (1st Cir. 2011) .............. 46 NLRB v. Ashkenazy Prop. Mgmt. Corp., 817 F.2d 74 (9th Cir. 1987) ....................................................................................................... 15 People v. Lowrie, 761 P.2d 778 (Colo. 1988)............................................ 20 Sampson v. Buescher, 625 F.3d 1247 (10th Cir. 2010) ..................... 22, 34 Sanger v. Dennis, 148 P.3d 404 (Colo. App. 2006) .................................. 21 Swanson v. Town of Mountain View, 577 F.3d 1196 (10th Cir. 2009) ....................................................................................................... 15 Vaughan v. McMinn, 945 P.2d 404 (Colo. 1997) ..................................... 45 Vt. Right to Life Comm., Inc. v. Sorrell, 875 F. Supp. 2d 376 (D. Vt. 2012) ................................................................................................. 47 Wine & Spirits Wholesalers v. Colo. Dept of Revenue, 919 P.2d 984 (Colo. App. 1996)........................................................... 19, 22, 30, 39

CONSTITUTIONS Colo. Const., Art. XXVIII.................................................................... 27, 28 Colo. Const., Art. XXVIII, 2(10)(a)(I) .............................................. 17, 29 Colo. Const., Art. XXVIII, 2(12)(a) .................................................. 23, 27 iv

TABLE OF AUTHORITIES PAGE Colo. Const., Art. XXVIII, 3(5) .............................................................. 24 Colo. Const., Art. XXVIII, 3(9) .............................................................. 24 Colo. Const., Art. XXVIII, 3(10) ............................................................ 24 Colo. Const., Art. XXVIII, 3(12) ............................................................ 24 Colo. Const., Art. XXVIII, 9(1)(b) .................................................... 11, 16 Colo. Const., Art. XXVIII, 10 ............................................................. 3, 48 Colo. Const., Art. XXVIII, 10(2)(c) .................................................. 48, 50

STATUTES 1-45-103(12), C.R.S. (2012) .................................................................... 33 1-45-103(12)(b), C.R.S. (2012) ............................................. 26, 30, 31, 38 1-45-103(12)(c), C.R.S. (2012) .......................................................... 30, 33 1-45-103(14.5), C.R.S. (2012) ................................................................. 41 1-45-108(1), C.R.S. (2012) ...................................................................... 29 1-45-108(1)(a), C.R.S. (2012) ................................................................. 24 1-45-108(2.5), C.R.S. (2012) ................................................................... 48 1-45-111.5(1), C.R.S. (2012) ................................................................... 11 1-45-111.5(1.5)(c), C.R.S. (2012) ...................................................... 48, 51 26 U.S.C. 527.......................................................................................... 43 26 U.S.C. 527(e)(1) ................................................................................. 42 26 U.S.C. 527(e)(2) ................................................................................. 42

OTHER AUTHORITIES Am. Heritage Coll. Dictionary 1106 (4th ed. 2002) ................................. 42 v

Introduction In an effort to clarify the increasingly confusing field of campaign finance law, the Secretary of State promulgated rules in early 2012 that answered specific questions not directly addressed by Colorados Constitution or the campaign finance statutes. Some of the rules adopted controlling legal standards announced in federal and state court decisions. Plaintiffs challenged those rules (as well as a rule implementing the Secretarys authority to waive campaign finance penalties for good cause), arguing that the Secretary cannot enact campaign finance rules based on case law. The new rules, however, did not deviate from past practice. Several of the Secretarys predecessors had previously enacted rules in direct response to federal and state court case law. Rules like these diminish the need for ordinary citizens to research and read hundreds of pages of judicial opinions (in addition to dense pages of constitutional provisions and statutes) before engaging in protected First Amendment activity. 1

Despite this precedent, and although none of the Secretarys rules contravene statutory or constitutional provisions, the district court struck down five of the Secretarys new rules. The district court respected the Secretarys pragmatism in attempting to harmonize Colorado campaign finance laws with judicial decisions. But the court believed the Secretary lacked the authority to do so. The district courts reasoning is flawed. Nothing prevents public officials from heeding the judiciary in enacting administrative rules. In fact, public officials are required to adhere to case law. If upheld, the courts order will require Colorado agencies to ignore binding judicial decisions in promulgating their rules. This will serve only to confuse areas of law that administrative rules are meant to clarify, and it will mean that the public cannot trust the regulations they are obligated to understand and follow. Issues on Appeal 1. Can an administrative agency promulgate rules based on controlling and authoritative case law? 2

2.

If constitutional or statutory provisions fail to directly answer specific regulatory questions, can a public official use case law to arrive at reasonable interpretations of those provisions?

3.

Can the Secretary, who is constitutionally empowered under Article XXVIII, Section 10 to set aside campaign finance penalties for good cause, enact rules to explain specific circumstances in which fines will be waived? Statement of the Case and Facts A. The Secretarys rulemaking effort.

Seeking to improve [the] organization and readability of existing campaign finance rules, to clarify existing laws, and to achieve the uniform and proper administration and enforcement of Colorado campaign and political finance laws, the Secretary initiated a rulemaking proceeding on November 15, 2011. (Admin. R. Vol. 1, Tab 1

at 1.)1 As part of the rulemaking effort, the Secretary held a hearing on December 15, 2011 (see Tr.) and solicited extensive written comments (see R. Vol. 2). Many of the Plaintiffs in this case, and some of their counsel, participated in those proceedings. (See R. Vol. 2, Tabs 2, 20, 32, 35, 41, and 42.) The record included testimony from several members of the public who described the difficulty of determining when their advocacy groups might trigger Colorados campaign finance regulations. One commenter noted, I myself have spent many hours reading about the rules, and yet I feel totally incapable of obeying them. . . . For a small-scale project, a political activist easily could spend far more hours navigating the assorted campaign finance rules than the activist actually spends

Admin. R. Vol. 1 refers to the eight documents in the official rulemaking record. Admin. R. Vol. 2 refers to written comments submitted by the public as part of the rulemaking hearing in December 2011. Tr. refers to pages of the transcript of the rulemaking hearing. E-File R. refers to documents compiled in the compact disk e-filed by the district court clerk (for these citations, page numbers refer to PDF pages 1508). 4

speaking out. (Admin. R. Vol. 2, Tab 4 at 1.) Another commenter noted that [C]itizens, especially those who work for underfunded organizations or toward unpopular ends[,] must often seek legal advice before engaging in political activity in Colorado. The complexity of state regulations, and the fact they often do not reflect established constitutional law, makes it difficult for a layperson to obtain accurate guidance in the area of campaign finance. (Admin. R. Vol. 2, Tab 14 at 1.) Supporters of the Secretarys rulemaking effort favored bright-line rules in the place of general or intent-based guidelines and a one-stop location for private citizens (that is, those without representation) to learn what is required of them under Colorado law. (Admin. R. Vol. 2, Tab 14 at 1.) They supported the Secretarys effort to adopt rules to explain the legal requirements imposed by various court decisions. Other commenters believed the Secretary lacked authority for some of the revised rules. With respect to Rule 1.12, which includes a 30% spending threshold to trigger a groups classification as an issue committee, one group argued that [t]he Colorado Constitution is silent 5

on this matter, as are the statutes dealing with campaign finance. (Admin. R. Vol. 2, Tab 2 at 1.) As for the major purpose requirement for political committees, which Rule 1.18.2 codifies, some commenters stated that the Colorado Constitution does not impose a major purpose test. (Admin. R. Vol. 2, Tab. 41 at 3.) These comments, however, did not cite decisions by the Colorado Courts, the Tenth Circuit Court of Appeals, or the United States Supreme Court. After considering the full rulemaking record, the Secretary issued a Notice of Temporary and Permanent Adoption setting forth the revised rules, as well as a comprehensive Statement of Basis, Purpose, and Specific Statutory Authority, which explained the reason for each new rule or revision and included references to governing law. (Admin. R. Vol. 1, Tab 1 at 8.) Because some of the rules were promulgated to incorporate judicial interpretations of existing law, the Statement of Basis, Purpose, and Specific Statutory Authority included case citations. B. Plaintiffs lawsuit.

On April 6, 2012, two groups of plaintiffs filed complaints challenging some of the Secretarys new rules under the Administrative 6

Procedure Act. For convenience, this brief refers to all plaintiffs together as Plaintiffs. The Secretary answered the complaints on May 4, 2012. (E-File R. at 17786.) Soon afterward, the Court set a briefing schedule and reserved a half-day hearing for oral argument. (E-File R. at 500.) Although the allegations in Plaintiffs complaints appeared to challenge eleven of the Secretarys rules, Plaintiffs briefs sought a court ruling on only eight: Rules 1.7, 1.10, 1.12, 1.18.2, 7.2, 18.1.8, 4.1, and 15.6. Plaintiffs asserted that the Secretary had exceeded his authority in passing the rules because in their view, [d]eterminations of the impact, if any, of past federal court cases on Colorado law are properly within the power of the judicial branch. (E-File R. at 200.) According to Plaintiffs, the Secretary is required to ignore case law in drafting campaign finance regulations. C. The decision below.

After considering the briefs, the administrative record, and the parties arguments at the hearing, the district court issued a decision on 7

August 10, 2012. (E-File R. at 420 (attached to this brief as Addendum B).) The courts order upheld one of the Secretarys rules (Rule 1.7), invalidated five of them (Rules 1.10, 1.12, 1.18.2, 7.2, and 18.1.8),2 and dismissed as unripe Plaintiffs challenges to the two remaining rules (Rules 4.1 and 15.6). The court, like Plaintiffs, believed that the Secretary cannot codify legal standards announced in court decisions, even when they are undeniably required by federal and state jurisprudence. (Adden. B at 7.) At the same time, the court upheld Rule 1.7 because it is based on case law. According to the court, Rule 1.7 adds no substantive additional terms and imposes no additional restrictions except those found in decisions by the United States Supreme Court and Colorado Court of Appeals. (Adden. B at 5.) The court did not explain why Rule 1.7s explicit reliance on case law was appropriate, while the Secretarys other rules, also based on case law, automatically exceeded his administrative authority. The text of these six rules is set forth in Addendum A to this brief. For the complete campaign finance rules, see 8 CCR 1505-6.
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D.

The Secretarys request for a stay and the parties appeals.

Because the 2012 elections were only months away, the Secretary sought a stay in the district court and simultaneously filed a notice of appeal. (E-File R. at 397.) The Secretary also requested that this Court enter a temporary stay while the district court considered a permanent one. When these requests were denied (see E-File R. at 452, 486), the Secretary announced publicly that he would not enforce rules 1.10, 1.12.3, 1.18.2, 7.2.1, and 18.1.8 unless or until the Colorado appellate courts reverse the District Courts decision. Plaintiffs later filed a joint notice of cross-appeal, seeking to overturn the district courts decision as to Rule 1.7. (See E-File R. at 491.) The Secretary will respond to Plaintiffs arguments about Rule 1.7 in an answer-reply brief. Summary of Argument The district court believed that an administrative agency exceeds its authority by codifying unambiguous requirements of judicial precedent into concise rules. But no tenet of Colorado case law 9

precludes an agency from doing so. Indeed, careful rulemakers will stay abreast of relevant court decisions, ensuring a full understanding of the area of law they administer. By harmonizing administrative regulations with case law, rulemakers enhance the clarity and legal accuracy of their rules. Four of the rules at issue hereRules 1.18.2, 1.12, 7.2, and 1.10 embody longstanding requirements of case law. In doing so, these rules explain how the law applies in practice; answering specific questions that Colorados Constitution and campaign finance statutes fail to directly answer. The district court should have deferred to the Secretarys discretion to enact these rules, asking only whether his interpretation of the law was permissible. It must be permissible for an administrative agency to rely on the judiciary for interpretations of the law. The rules are therefore valid. The final rule at issue here, Rule 18.1.8, implements the Secretarys constitutional authority to waive campaign finance penalties for good cause. But rather than deferring to the Secretary, the court engaged in an analysis of whether, in its view, the rule reflected 10

sound policy. This inquiry exceeded the courts role. Moreover, the courts decision to invalidate the rule was based on a mistaken and incomplete understanding of the record and the regulatory framework. When reviewed in the proper setting, Rule 18.1.8 was a routine exercise of the Secretarys rulemaking power. Argument I. Standard of Review. Both the Colorado Constitution and the campaign finance statutes expressly delegate rulemaking authority to the Secretary. Colo. Const. art. XXVIII, 9(1)(b) (The secretary of state shall . . . [p]romulgate such rules . . . as may be necessary to administer and enforce any provision of this article . . . .); C.R.S. 1-45-111.5(1) (The secretary of state shall promulgate such rules . . . as may be necessary to enforce and administer any provision of this article.). Thus, in adjudicating Plaintiffs challenge to the Secretarys rules, the Court must presume the rules are valid. Plaintiffs bear a heavy burden in rebutting this presumption: they must establish [the] invalidity of [each] rule by demonstrating that the [Secretary] violated constitutional or statutory 11

law, exceeded [his] authority, or lacked a basis in the record for the rule. Colo. Ground Water Commn v. Eagle Peak Farms, 919 P.2d 212, 217 (Colo. 1996). And they must prove the invalidity of each rule beyond a reasonable doubt. Colo. Citizens for Ethics in Govt v. Comm. for the Am. Dream, 187 P.3d 1207, 1217 (Colo. App. 2008). The district court cited these general standards but made two errors related to the standard of review. First, the court assumed that an administrative agency automatically exceed[s] [its] delegated authority when it bases a rule on judicial precedent. (See Adden. B at 8.) Second, although it purported to defer to the precise content of the Secretarys rules, the court opined on whether, in the courts view, the rules work[e]d . . . mischief or were income neutral. (Adden. B at 6.) These errors were critical. This Court should make clear that administrative agencies are empowered to incorporate binding case law into their rules, as the Secretarys predecessors have repeatedly done. If, as the district court assumed, regulators must close their eyes to judicial precedent, a large number of administrative rules in Colorado will be inaccurate and potentially misleading. 12

The Court should also reaffirm that administrative agencies with delegated rulemaking authority are the appropriate entities to determine whether a particular rule is wise or will work mischief. Courts must maintain their limited role of asking only whether a challenged rule is permissible under governing standards, maintaining the vital rulemaking discretion that allows administrative agencies to hone their rules to ensure they work well in practice under evolving conditions. A. In enacting administrative rules, the Secretary must follow the law, including binding judicial interpretations of the law.

Campaign finance law has become a maze of rules, sub-rules, and cross-references, all of which an individual or organization must navigate to do nothing more than project a basic political message. N.C. Right to Life, Inc. v. Leake, 525 F.3d 274, 296 (4th Cir. 2008). Colorado law is no exception. As one commenter observed during the rulemaking proceeding, Before an activist can even begin to speak out for or against any ballot measure or candidate with the intention of spending even small amounts of 13

resources, the activist must learn the rules (broadly defined). The assorted Constitutional provisions, statutes, bureaucratic rules, and surrounding court cases constitute many scores of pages of dense legalese. Even learning whether certain forms of speech fall under these rules requires substantial effort . . . . (Admin. R. Vol. 2 Tab 4.) To fully understand when they will trigger the laws of campaign finance, regulated entities cannot rely solely on the language of Colorados constitutional and statutory provisions. Judicial precedent informs the meaning of these laws and, more importantly, the way in which the laws may be constitutionally applied. For example, both this Court and the Tenth Circuit have held that an organization cannot be regulated as a political committee under Colorado law, and therefore cannot be subject to reporting and disclosure requirements, unless the organization meets the major purpose test announced in Buckley v. Valeo, 424 U.S. 1 (1976). See Alliance for Colo.s Families v. Gilbert, 172 P.3d 964 (Colo. App. 2007); Colo. Right to Life Comm. v. Coffman, 498 F.3d 1137 (10th Cir. 2007). The district court itself acknowledged the impact of cases like these on Colorados scheme of campaign finance 14

regulation, observing that the Supreme Courts First Amendment jurisprudence undeniably applies in Colorado. (Adden. B at 7.) The Secretary must abide by this jurisprudence. [G]overnmental agencies, like all individuals and other entities, are obliged to follow and apply the law as interpreted by the courts. Lopez v. Heckler, 572 F. Supp. 26, 29 (1983), affd, 725 F.2d 1489, 1497, 1503 (9th Cir. 1984) vacated on other grounds, 469 U.S. 1082 (1984); see also Hyatt v. Heckler, 807 F.2d 376, 379 (4th Cir. 1986); Ithaca Coll. v. Natl Labor Relations Bd., 623 F.2d 224, 228 (2d Cir. 1980). Public officials are not free to ignore case law within their jurisdiction. See NLRB v. Ashkenazy Prop. Mgmt. Corp., 817 F.2d 74, 75 (9th Cir. 1987); see also Swanson v. Town of Mountain View, 577 F.3d 1196, 1200 (10th Cir. 2009). If, for example, the Secretary attempted to regulate, as political committees, a class of organizations that do not meet the major purpose requirement of Buckley, this Court would prevent him from doing so. See Alliance for Colo.s Families, 172 P.3d at 97273 (vacating penalties imposed on an organization because the administrative law judge failed to determine whether the organization met the major purpose test). 15

Because the Secretary has a mandatory duty to [p]romulgate such rules . . . as may be necessary to administer and enforce the campaign finance laws, Colo. Const. art. XXVIII, 9(1)(b), he must ensure that his rules comport with judicial precedent. Cf. Holliday v. Regl Transp. Dist., 43 P.3d 676, 681 (Colo. App. 2001) (permitting a challenge to the RTDs policies because, in light of federal constitutional jurisprudence they may have amounted to an impermissible intrusion upon First Amendment protections). The Secretarys predecessors held this view. They used rulemaking to ensure compliance with judicial precedent, even when their rules contravened the plain language of Colorados constitution and statutes. Former Rule 4.13, for example, exempted certain entities from Colorados ban on corporate electioneering communications before Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010), established that all corporations have a right to engage in protected speech. Rule 4.13 was based upon another Supreme Court case, Federal Election Commission v. Massachusetts Citizens for Life, 479 U.S. 238 (1986), which held that Some [small nonprofit] corporations . . . should 16

not have to bear burdens on independent spending solely because of their incorporated status. Id. at 263. This contradicted the Colorado Constitutions absolute ban on corporate electioneering, but the rule was necessary to comport with the First Amendment. See Colo. Right to Life, 498 F.3d at 1140 (noting that the Secretary passed former Rule 4.13 to follow[] the United States Supreme Courts teachings in MCFL). The Secretarys predecessors have even used rulemaking to change the meaning of a specific word in the Colorado Constitution. In defining the term issue committee, Article XXVIII 2(10)(a)(I) uses the disjunctive or to explain how the definitional criteria (a dollar limit and a major purpose test) apply. One of the Secretarys predecessors, however, interpreted this provision in the conjunctive, replacing or with the word and, see Rule 1.12.2 (former Rule 1.7(b)), because the First Amendment compels this linguistic change. See Colo. Right to Life, 498 F.3d at 1154 ([T]he $200 trigger, standing alone, cannot serve as a proxy for the major purpose test . . . .). As a result, an organization is an issue committee only if it (1) has spent or 17

collected more than $200 to support or oppose a ballot question and (2) has a major purpose of ballot-issue advocacy. See Colo. Common Cause v. Gessler, 2012 COA 147 4 n.2 (2012) (Although the Amendment uses the disjunctive or, the Secretarys rules interpret it to require both conditions before a group is considered an issue committee.). Unlike these examples, none of the rules Plaintiffs have challenged here actually contravenes any specific constitutional or statutory provision. Nonetheless, the district court believed the Secretary is required to ignore case law in promulgating campaign finance rules. According to the district court, even when binding judicial precedent requires a certain interpretation of the law, the Secretary must wait for the legislature or the citizens to act before he can acknowledge case law through rulemaking. (Adden. B at 7.) This approach would require the public to wade through pages of case law to understand whether their speech will be regulated. And it would require the Secretary to shun formal pronouncements in favor of informal promises that he will not violate the First Amendment. 18

Those who seek to engage in protected political speech, however, are entitled to more than informal assurance[s]. Minn. Citizens Concerned for Life, Inc. v. Swanson, 692 F.3d 864, 87374 & n.8 (8th Cir. 2012). They are entitled to clear guidance. The Secretary must have the discretion to acknowledge through rulemaking what the case law unambiguously requires. B. The Court must defer to the Secretarys Rules, asking only whether the Rules are based on a permissible interpretation of the law.

The district court cited the proper standard for reviewing the substance of an administrative rule: if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agencys answer is based on a permissible construction of the statute . . . . [A] court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency. (Adden. B at 3 (quoting Wine & Spirits Wholesalers v. Colo. Dept of Revenue, 919 P.2d 984, 897 (Colo. App. 1996) (emphasis added)).) Yet the court failed to defer to the Secretarys interpretation of the law, and it ignored his policy judgment that bright19

line rules are more effective for triggering disclosure and reporting requirements than are potentially ambiguous intent-based standards. (Adden. B at 6.) Judicial deference to agency rulemaking precludes secondguessing the wisdom of a rule or whether, in the courts view, a different rule might be more effective or more desirable. See Citizens for Free Enter. v. Dept of Revenue, 649 P.2d 1054, 1063 (Colo. 1982). Agencies must have flexibility to adapt the law to changing circumstancesit will often be impracticable for the General Assembly to fix rigid standards to guide agency action. People v. Lowrie, 761 P.2d 778, 781 (Colo. 1988). This is especially true in a regulatory area like campaign finance, where the [t]he law . . . is in a state of flux as the courts attempt to balance the desire of Congress and the states to enact legislation that will reduce the potential for corruption . . . against contributors First and Fourteenth Amendments guarantees of freedom of speech and association. Alliance for Colo.s Families, 172 P.3d at 969.

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Agency discretion is not unlimited, however. In Sanger v. Dennis, this Court stated that an administrative rule cannot add, [] modify, and [] conflict with the [governing] constitutional provision. 148 P.3d 404, 413 (Colo. App. 2006). In Sanger, the Secretary passed a rule that violated the United States Supreme Courts First Amendment jurisprudence by imposing barriers to collective speech and consequently restrict[ing] the overall quantum of speech available to the election process. Id. at 414 (internal quotation marks omitted). Here, in contrast, the Secretary is seeking to use rulemaking to make Colorado law consistent with the First Amendment. In doing so, he has not added new legal requirements that conflict with existing ones. Id. at 413. Sanger, while relevant to this case, presented a different situation. This Court recently applied Sanger to invalidate a campaign finance rule that directly modified a specific constitutional provision. Case law from the Tenth Circuit had held that the $200 threshold for triggering issue committee status is far too low, and the Secretary consequently increased the threshold to $5,000, ensuring that the 21

financial burden of state regulation would not approach[] or exceed[] the value of [a groups] financial contributions to their political effort. Sampson v. Buescher, 625 F.3d 1247, 1261 (10th Cir. 2010). This Court held that the Secretarys rule exceed[ed] the holding of the governing case law. Colo. Common Cause, 2012 COA 147 24. Colorado Common Cause, like Sanger, is inapposite to the rules challenged in this case.3 Here, the question is more nuanced. The rules at issue do not contradict specific constitutional or statutory provisions. They simply seek to answer precise questions that the constitution and campaign finance statutes do not directly address[]. Wine & Spirits Wholesalers, 919 P.2d at 897. The Court must therefore ask only whether the rules reflect permissible interpretations of governing law. Janssen v. Indus. Claim Appeals Office, 40 P.3d 1, 4 (Colo. App. 2001).

The Secretary disagrees with the holding of Colorado Common Cause and has filed a petition for writ of certiorari to seek review of that decision. That decision, however, is irrelevant to the issues presented here.
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II.

The five rules at issue in this appeal are all within the Secretarys authority and discretion to promulgate. Plaintiffs bear the burden of establishing that each of the

Secretarys rules is invalid beyond a reasonable doubt. Colo. Citizens for Ethics in Govt v. v. Comm. For the Am. Dream, 187 P.3d 1207, 1217 (Colo. App. 2008). The Court must separately ask whether each rule reflects a permissible construction of the law. See, e.g., Citizens For Free Enter. v. Colo. Dept of Revenue, 649 P.2d 1054, 106970 (Colo. 1982) (reviewing two rules separately; upholding one rule and invalidating the other). When viewed with proper deference and in light of the full legal landscapewhich includes relevant constitutional and statutory provisions as well as judicial precedenteach rule at issue in this case was well within the Secretarys authority. A. As the district court observed, the major purpose test of Rule 1.18.2 is undeniably required by Colorado case law.

In Colorado, an organization that meets the definition of political committee in Article XXVIII, Section 2(12)(a) of the Colorado Constitution must satisfy various reporting and disclosure 23

requirements. See C.R.S. 1-45-108(1)(a); Colo. Const., art. XXVIII, 3(5), (9), (10), and (12). Rule 1.18.2 clarifies when an entity is subject to these regulations. It does so by codifying the major purpose test, a longstanding fixture of First Amendment jurisprudence. 1. The Supreme Courts major purpose test refines the scope of political committee regulation.

Years ago, decades before Colorados current regime of campaign finance regulation was put in place, the United States Supreme Court held that an entity may be regulated as a political committee only if it meets an important constitutional requirement: its major purpose must be to support or oppose the nomination or election of political candidates. Buckley, 424 U.S. at 79; see also Fed. Election Commn v. Mass. Citizens for Life, Inc., 479 U.S. 238, 252 n.6 (1986). The test ensures that the regulation of political committees is not impermissibly broad. Minn. Citizens Concerned for Life, 692 F.3d at 872 (quoting Buckley, 424 U.S. at 7980). Two courts have held that the major purpose test applies to political committees in Colorado. In Colorado Right to Life Committee, 24

the Tenth Circuit held that Colorado cannot regulate as a political committee an entity that fails the major purpose test. 498 F.3d at 1153. The same year, this Court echoed that holding, recognizing that the test is required by Buckley although it does not appear in the text of the Colorado Constitution. Alliance for Colorados Families, 172 P.3d at 972. The Court overturned the ruling of an administrative law judge who had imposed retroactive penalties on an advocacy group without considering the major purpose test. The Court remanded the case with explicit instructions for the ALJ to apply the test; the group could be subject to regulation as a political committee only if its major purpose was supporting or opposing a political candidate. Id. 2. Rule 1.18.2 acknowledges the major purpose test and explains how it applies.

Rule 1.18.2 formally acknowledges that Buckleys major purpose test is a required element of Colorados definition of political committee. The rule should be uncontroversial. Below, Plaintiffs conceded that [a]s a matter of constitutional law, a political committee must have the major purpose to support or oppose candidates. (E-File 25

R. at 303 (emphasis added) (quoting Buckley, 424 U.S. at 79).) And the district court observed that Alliance for Colorados Families and Colorado Right to Life undeniably required application of the Buckley test. (Adden. B at 7.) The rule also explains precisely how the test applies, using two criteria drawn from case law: (1) the objectives of the entity set forth in its organizing documents and (2) whether [a]nnual expenditures made to support or oppose [a] nomination or election . . . are a majority of the organizations total spending. As the Tenth Circuit recognizes, the Supreme Court endorses this very same two-pronged approach. Colo. Right to Life Comm., 498 F.3d at 1152 (citing Mass. Citizens for Life, Inc., 479 U.S. at 252 n.6, 262). So does the General Assembly: it used similar criteria to define the a major purpose requirement for issue committees. See C.R.S. 1-45-103(12)(b). 3. The district court improperly held that the Secretarys rules must ignore the existence of the major purpose test.

The district court, while acknowledging the validity of the major purpose test, struck down Rule 1.18.2 for two reasons. First, the court 26

believed that the major purpose test is contrary to the political committee definition in [Article] XXVIII and would add a new, strict limitation to the definition. (Adden. B at 7.) Second, the court believed that the major purpose test is contrary to the intent of Art. XXVIII 2(12)(a) as passed by the citizens of Colorado. (Adden. B at 7.) This reasoning, however, violates recent guidance from the Colorado Supreme Court. In Colorado Ethics Watch v. Senate Majority Fund, the Colorado Supreme Court interpreted another term in the Colorado Constitution: express advocacy, which is used to define the activities of political committees. 269 P.3d 1248 (Colo. 2012). The plaintiff in Colorado Ethics Watchwho is also a plaintiff hereargued that express advocacy should be interpreted to encompass a broad range of political speech, thereby expanding the definition of the term political committee and exposing more advocacy groups in Colorado to campaign finance regulation. The Colorado Supreme Court disagreed with this approach, relying explicitly on Buckley for guidance in how to construe the Colorado Constitution. The Court noted that the plaintiffs 27

interpretation would require us to ignore the settled definition of express advocacy that existed at the time that Amendment 27 [the Campaign Finance Amendment] was adopted by the voters. Id. at 1256. According to the Court, when Colorado voters used term[s] of art in Amendment 27, they incorporated the decades of campaign finance jurisprudence that has attempted to balance the public concerns related to the impact of independent financing in elections and the constitutional concerns outlined in Buckley. Id. Under this reasoning, Rule 1.18.2 simply codifies a legal requirement that Colorado voters adopted when they enacted Amendment 27. The rule does not, as the district court assumed, contradict the language or intent of the Colorado Constitution. Nothing in the language of Article XXVIII suggests an intent to preclude the major purpose test, and two courts have explicitly recognized that to comport with Buckley, the term political committee must include a major purpose requirement. Colo. Right to Life, 498 F.3d at 1153; Alliance for Colo.s Families, 172 P.3d at 972. Courts must presume that the electorate was aware of the legal significance of the 28

terminology they chose to use in Colorados campaign finance laws. Colorado Ethics Watch, 269 P.3d 1256. This includes the decades-old major purpose test. Plaintiffs themselves have not attempted to argue that the major purpose test is invalid or should not apply within the state; they simply seek to prevent the Secretary from formally acknowledging it. This serves no purpose other than to increase the chance that citizens might fail to realize that the protections of the test might apply to them. Rule 18.1.2 must be upheld. B. Rule 1.12 clarifies the definition of issue committee based on criteria the General Assembly specified.

Entities that advocate for or against ballot measures in Coloradoissue committeesare regulated much like political committees. See C.R.S. 1-45-108(1). The Colorado Constitution defines issue committees as groups that take in or spend at least $200 on ballot issue advocacy and have a major purpose of supporting or opposing any ballot issue or ballot question. Colo. Const., art. XXVIII, 2(10)(a)(I).

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But the a major purpose requirement has been challenged as unconstitutionally vague and overbroad, Independence Institute v. Coffman, 209 P.3d 1130, 113640 (Colo. App. 2008), and the General Assembly enacted a multi-factor test to confine its application in light of this case law. Under the statute, whether an entity has a major purpose of advocating ballot issues is informed by (1) specifically identified objectives in . . . organizational documents or (2) a demonstrated pattern of conduct, which in turn is informed by the entitys (a) annual expenditures in support of or opposition to a ballot issue or ballot question or (b) [p]roduction or funding, or both, of written or broadcast communications. C.R.S. 1-45-103(12)(b); see also id. 1-45-103(12)(c) (citing Independence Institute). This statutory methodology, however, does not directly answer a specific question relevant to the a major purpose requirement. Wine & Spirits Wholesalers, 919 P.2d at 897. It fails to explain how an entity must weigh its expenditures and production or funding . . . of written 30

or broadcast communications. To clarify how this definition operates in practice, the Secretary enacted Rule 1.12. Under the rule, if either prong of the statutory methodology expenditures or production or funding . . . of written or broadcast communicationsexceeds 30% of an entitys total budget, the entity has a major purpose of supporting or opposing any ballot issue or ballot question. The rule was meant to take the guesswork out of applying 1-45-103(12)(b). It create[s] a bright line test for issue committees an easily-measurable 30% thresholdmaking it easier for any person or group of persons to understand when campaign finance law applies. (Admin. R. Vol. 1, Tab 1 at 2.) 1. Rule 1.12 fills a gap left by the General Assembly.

Absent the guidance provided by Rule 1.12, the a major purpose requirement has proven difficult to apply in practice. In Cerbo v. Protect Colorado Jobs, Inc., for example, this Court overturned the decision of an administrative law judge who had erred in her analysis of the test. 240 P.3d 495, 502 (Colo. App. 2010). 31

Although the ALJ articulated the proper factors, she placed undue weight on one of them, gave too much weight to another, and failed to give weight to other facts relevant to the inquiry. Id. The Court conducted its own fact-specific analysis, considering the interrelationships of [the entitys] officers and agents, the amount of time spent promoting the ballot issue, and the portion of funds the entity expended promoting th[e] ballot issue. Id. at 50204. Based on this revised analysis, the Court concluded that the entity was, in fact, an issue committee and was potentially subject to sanctions for nondisclosure of its expressive activity. Id. at 504. In another case, this Court considered a collateral First Amendment challenge to a decision of the same ALJ. This time, however, the Court upheld the ALJs ruling. The Court noted that the ALJ properly conducted a fact-specific inquiry into the organizations original purpose, its organizational structure, the various issues with which it had been involved, and the amount of money it spent on advocacy in proportion to its annual budget. Independence Institute,

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209 P.3d at 1139. This multi-factor inquiry, the Court held, was not unconstitutionally vague. But while they are not unconstitutionally vague, these multifactor inquirieswhich rely purely on hindsight and do not explain how each factor appliesfail to provide adequate guidance to the public before litigation ensues. Those who wish to know whether their speech will be subject to the disclosure requirements issue committees are obligated to follow must resort to a best guess. And this best guess, no matter how well-intentioned, might be overturned in litigation. An ALJ (or this Court) could hold that the advocacy group placed undue weight on one factor or gave too little weight to another. Cerbo, 240 P.3d at 502. Moreover, the statutory methodology of 1-45-103(12) does not resolve the ambiguity. The statute explicitly states that it makes no substantive change to the definition of a major purpose and is intended only to reflect the holding of Independence Institute. See 145-103(12)(c). The statute merely reiterates the factors cited in the case law without explaining how to apply them. 33

Rule 1.12 fills the gap. It uses the statutory methodology to create an easy-to-apply standard, one that entail[s] minimal if any discovery and allows parties to resolve disputes quickly without chilling speech through the threat of burdensome litigation. Fed. Election Commn v. Wis. Right to Life, Inc., 551 U.S. 449, 469 (2007). The Rule minimizes the risk that a group seeking to engage in protected speech will guess wrong and be forced to spend the time, energy, and money required to defend against litigation. See Sampson, 625 F.3d at 1260. As one member of the public testified at the rulemaking hearing, I do like the idea that theres a clear rule here. There hasnt been a test at all. . . . And so . . . [if you decide to engage in ballot-issue advocacy,] youre running the risk that youre going to be dragged into court . . . . (Tr. at 114:413.) 2. The Secretarys decision to use a 30% threshold is reasonable in light of governing law.

As the Secretary explained at the rulemaking hearing, the 30% threshold of Rule 1.12 honors the difference between a major purpose and the major purpose. (Tr. at 122:89 (emphasis added).) Unlike issue 34

committees, political committees must have the major purpose of supporting or opposing a candidate. Buckley, 424 U.S. at 79. The Supreme Court and the Tenth Circuit have interpreted this to mean that a political committee must spend the majority, or the preponderance, of its budget on political advocacy. Colo. Right to Life Comm., 498 F.3d at 1152 (citing Mass. Citizens for Life, Inc., 479 U.S. at 252 n.6, 262). Issue committees, meanwhile, must meet the a major purpose test. The 30% threshold of Rule 1.12 recognizes the distinction. It uses a lower benchmark than the 50% threshold for political committees while ensuring that a meaningful portion of an issue committees budget is spent on ballot-issue advocacy. The percentage-based approach is also rooted in case law. Colorado court decisions addressing the a major purpose requirement focus on the proportion of spending, not an absolute amount. For example, in 2010 this Court held that an organization has a major purpose of supporting a ballot issue if such support constitutes a considerable or principal portion of the organizations total activities. 35

Cerbo, 240 P.3d at 501 (internal quotation marks omitted) (emphasis added). The Court found this requirement to be satisfied where an entity spen[t] three-fourths of all of the funds it has ever expended promoting that ballot issue. Id. at 504. The United States Supreme Court forbids amorphous campaign finance regulations. WRTL II, 551 U.S. at 469. Rule 1.12 avoids this problem. Instead of using an open-ended rough-and-tumble of factors, which invit[es] complex argument in a trial court and a virtually inevitable appeal, id. (internal quotation marks omitted), Rule 1.12 uses a bright-line threshold. As demonstrated by cases applying the a major purpose requirementcases that depend on fact-specific, multi-prong inquiries, see Cerbo, 240 P.3d at 50304; Independence Institute, 209 P.3d at 1139Rule 1.12 is necessary to avoid the burdensome litigation that the First Amendment forbids. 3. The district courts flawed analysis of Rule 1.12 must be overturned.

In striking down Rule 1.12, the district court made three errors.

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First, the court implied that unless a statute is unconstitutionally vague, it leaves no room for rulemaking. The court observed that two cases . . . held that the term major purpose . . . [is] not ambiguous. (Adden. B at 6.) By implication, then, the Secretary was precluded from enacting Rule 1.12 to clarify the not ambiguous phrase a major purpose. Neither of the cases the district court cited, however, suggests that the phrase a major purpose is so unambiguous that it cannot be clarified. The first case, Independence Institute, analyzed only whether the phrase is unconstitutionally vague or overbroad. 209 P.3d at 1136. In denying the plaintiffs constitutional challenge, the Court identified three factual considerations advocacy groups could consider in applying the a major purpose test. Id. at 1139. Using these factual considerationsand not merely the bare phrase a major purposea group could make an informed decision before undertaking ballot advocacy. Id. The second case, Cerbo, also involved a vagueness and overbreadth challenge to a major purpose. 40 P.3d at 500. And 37

although Cerbo perceive[d] no ambiguity in the phrase it explicitly relied on the three nonexclusive factors from Independence Institute to guide its application of the phrasefactors the Court had used to ensure the phrase could be constitutionally applied. Id. at 501. Cerbos reliance on these factors illustrates that even though the phrase a major purpose is not so ambiguous that it is unconstitutional, it must be clarified to be applied in practice. Both cases illustrate that the phrase is amenable to rulemaking. The district courts second error was to assume that an administrative agency cannot enact regulations to clarify how a statute should be applied in practice. The court noted that the legislature . . . codif[ied] the holding of Cerbo and Independence Institute in 1-45103(12)(b) without the use of Rule 1.12s 30% requirement. (See Adden. B at 6.) In the district courts view, the statutes silence was dispositive. This reasoning misapplied the standard of review. Because 1-45103(12)(b) is silent . . . with respect to the specific issue of how to apply the statutory factors, the only question the district court should 38

have asked is whether the agencys answer is based on a permissible construction of the statute. Wine & Spirits Wholesalers, 919 P.2d at 897 (emphasis added). Indeed, if administrative regulations were valid only if they parroted existing statutory provisions, there would be no need for rulemaking. Finally, the court improperly relied on its own policy judgments to evaluate the rule. The court believed the rule works further mischief in that it appears not to be income neutral. (Adden. B at 6.) This secondguessing the wisdom of Rule 1.12 exceeded the bounds of judicial review. See Citizens for Free Enter., 649 P.2d at 1063. The district court was not empowered to substitute its judgment for that of [the Secretary]; it could only determine whether the rule is reasonable. Janssen, 40 P.3d at 4. In any event, the district courts evaluation of the wisdom of Rule 1.12 was misinformed. The rule is, in fact, income neutral. The 30% threshold applies regardless of a speakers wealth or income. This complies with First Amendment jurisprudence, which forbids regulating political speech . . . based on a speakers wealth. Citizens United, 130 39

S. Ct. at 904. The United States Supreme Court has rejected the premise that the Government has an interest in equalizing the relative ability of individuals and groups to influence the outcome of elections. Id. (quoting Buckley v. Valeo, 424 U.S. 1, 48 (1976)). To regulate based on the impermissible criterion of wealth would allow suppression of political speech based on the speakers identity, something the First Amendment generally forbidsespecially in the context of political speech. Id. Contrary to the district courts appraisal, Rule 1.12s 30% threshold provides a clear guideline while staying wealth-neutral (and therefore identity-neutral), as the First Amendment requires. Moreover, the 30% threshold actually promotes the interests of organizations with modest resources. One public commenter noted that [t]he grassroots activist, with limited time and funds, suffers the most from having complicated, time-consuming regulations and draconian penalties over his or her head. (Admin. R. Vol. 2, Tab 26 at 1.) The 30% rule allows grassroots organizations to easily determine, without having to pay for hours of attorney time, when they will trigger the reporting and disclosure obligations of Colorados campaign finance laws. 40

C.

Rules 7.2 and 1.10 use existing law to clarify the definition of political organization.

In 2007, the General Assembly enacted legislation that imposed disclosure and reporting obligations on political organizations, groups organized as tax-exempt under Section 527 of the Internal Revenue Code. Under 1-45-103(14.5), a political organization is an entity that (1) meets the definition in section 527(e)(1) of the federal Internal Revenue Code of 1986, and (2) is engaged in influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any state or local public office. Rules 7.2 and 1.10 clarify the two elements of the definition of political organization. Contrary to the district courts view, the rules do not add new requirements to 1-45-103(14.5) or narrow the statutory definition. (See Adden. B at 9.) They use existing federal statutory requirements and longstanding case law to provide guidance to the public.

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1.

Rule 7.2s major purpose requirement is based on 26 U.S.C. 527.

Section 527 of the Internal Revenue Code imposes a primary purpose requirement on political organizations. Only if an entity is organized and operated primarily for the purpose of . . . influencing or attempting to influence an election can the entity be a political organization. 26 U.S.C. 527(e)(1)(2) (emphasis added). Rule 7.2, in requiring a political organization to have as its major purpose influencing or attempting to influence elections, codifies 527s primary purpose requirement. The rule recognizes that the terms primary and major are functionally identical. As an adjective, primary means [f]irst or highest in rank, quality, or importance. Am. Heritage Coll. Dictionary 1106 (4th ed. 2002). And major means [g]reater than others in importance or rank. Id. at 834. Given the words linguistic equivalence, it was within the Secretarys rulemaking discretion to use the more common word major, while codifying the primary purpose requirement of Section 527. 42

This requirement is not just a matter of federal statutory policy. It is also based on the First Amendment. In Buckley, the U.S. Supreme Court adopted a major purpose test to trigger reporting and disclosure requirements for advocacy groups, thereby ensuring that only campaign related organizations would be subject to comprehensive regulation. 424 U.S. at 79. The test ensures that government regulation does not discourage[] associations, particularly small associations with limited resources, from engaging in protected political speech. Minn. Citizens Concerned for Life, 692 F.3d at 874. The district court believed that the major purpose requirement narrow[s] the definition of political organization. (Adden. B at 9.) Rule 7.2, however, makes no additions to the law; it merely makes explicit one requirement of 26 U.S.C. 527, the federal statute on which Colorados definition of political organization is based. Through Rule 7.2, the Secretary sought to provide Colorado citizens with information about existing legal requirements relevant to the definition of political organization. Rather than being forced to flip back and forth between judicial precedent, federal and state statutes, and administrative 43

regulations, the public could consult a single resourcethe Secretarys rulesto understand how the definition works. As one commenter suggested, this creates a one-stop location for private citizens (that is, those without representation) to learn what is required of them under Colorado law. (Admin. R. Vol. 2, Tab 14 at 1.) 2. Rule 1.10 uses longstanding case law to clarify the meaning of influencing or attempting to influence.

The words influencing or attempting to influenceanother element of the statutory definition of political organizationhave acquired a specific meaning in the area of campaign finance law. Nearly forty years ago in Buckley, the United States Supreme Court analyzed a nearly identical phrase: for the purpose of . . . influencing. 424 U.S. at 7482. The phrase, used to trigger disclosure and reporting obligations, pose[d] constitutional problems because of its potential to include both issue discussion [which the First Amendment broadly protects] and advocacy of a political result [which may be regulated more stringently]. Id. at 77, 79.

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To remedy these constitutional problems, the Court adopted a narrowing construction, holding that the phrase must only reach activity that expressly advocate[s] the election or defeat of a clearly identified candidate. Id. at 80. Rule 1.10 makes explicit what the First Amendment has long required. The rule incorporates the express advocacy standard into the ambiguous phrase influencing or attempting to influence, using language from Buckley to avoid the phrases constitutional problems. The General Assembly is presumed to adopt the construction which prior judicial decisions have placed on particular language. Vaughan v. McMinn, 945 P.2d 404, 407 (Colo. 1997). Rule 1.10 is not, therefore, contrary to the clear terms of the statute and the intent of the legislature, as the district court believed. (Adden. B at 9.) The rule simply clarifies a term of art the General Assembly chose to adopt. Recent case law affirms that Rule 1.10s construction of the term influencing is constitutionally compelled. The First Circuit, for example, held that the term influencing presents vagueness problems. Natl Org. for Marriage v. McKee, 649 F.3d 34, 65 (1st Cir. 45

2011). In the courts view, the term could be read to include various types of speech, including advocacy for or against a candidates election; championing an issue for inclusion in a candidates platform; and encouraging all candidates to embrace public funding. Id. Without more context, the term is uncertain enough that a person of average intelligence would be forced to guess at its meaning and modes of application. Id. (internal quotation marks omitted). The defendants in that casestate public officials responsible for administering Maines campaign finance lawsacknowledged that influencing is insufficiently clear on its face to satisfy due process standards. Id. at 66. They therefore officially adopted a narrowing construction, as Rule 1.10 does, which interpreted influencing to mean communications and activities that expressly advocate for or against [a candidate] or that clearly identify a candidate by apparent and unambiguous reference and are susceptible of no reasonable interpretation other than to promote or oppose the candidate. Id. at 6667. This narrowed formulation, the court held, was considerably

46

more precise than the original. Id. at 67. And so limited, the term influencing was not so vague as to offend due process. Id. Another federal court adopted a similar limiting construction to ensure the phrase influencing an election was not unconstitutionally vague. Vt. Right to Life Comm., Inc. v. Sorrell, 875 F. Supp. 2d 376 (D. Vt. 2012). Indeed, the court held that it would have reached the same conclusion in interpreting otherwise expansive language like influencing. Id. The Colorado Supreme Court recently observed that Colorado campaign finance law must be construed to avoid the vagueness and over-breadth concerns from Buckley that are the bedrock of all campaign finance political speech jurisprudence. Colo. Ethics Watch, 269 P.3d at 1258. By codifying a longstanding interpretation of the term influencing that the General Assembly is presumed to have adopted, this is precisely what Rule 1.10 accomplishes.

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D.

Rule 18.1.8(a) implements the Secretarys authority to waive penalties for failure to file major contributor reports.

Major Contributor Reports are disclosures that must be filed by candidate committees, political committees, issue committees, and political parties within thirty days of an election. C.R.S. 1-45-108(2.5). In these reports, entities must list any contribution of one thousand dollars or more they received within the thirty-day time period. Id. The reports must be filed no later than twenty-four hours after receipt of said contribution. Id. Under C.R.S. 1-45-111.5(1.5)(c), an entity that fails to file any reportincluding a Major Contributor Reportis subject to a sanction of up to $50 per day for each day that [the report] . . . is not filed by the close of business on the day due. The Secretary may, upon receiving an appeal of a sanctions order, set aside or reduce the penalty [for failure to file a report] upon a showing of good cause. Colo. Const., art. XXVIII, 10(2)(c). To implement the appeal provisions of Article XXVIII, 10, the Secretary has created a system of uniform requests for waiver that a 48

person or entity may file with the Secretary (or an administrative law judge) after receiving a penalty for violation of the campaign finance laws. See Rule 18.1. The Secretarys request-for-waiver rules explicitly define the circumstances under which various penalties will be waived. In doing so, the rules create clarity and predictability for those seeking to engage in public debate but fearing that simple mistakes will lead to large, unpredictable penalties. As the record illustrates, these fears are legitimate. During rulemaking, one commenter noted, I have been a volunteer treasurer on a few campaigns and had the experience of making a mistake and costing my candidate nearly $1,000 in a race that raised in the neighborhood of $34,000. (Admin. R. Vol. 2, Tab 17 at 1.) The rookie mistake this commenter described was failing to file a Major Contributor Report. In the commenters view, the mistake was unintentional and did not harm my candidates opponent or the public. (Id.) She believes that those who should know better and [are] willful violators of campaign finance laws should be punished with fines. (Id.)

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But where fines only serve to punish those who try to act in good faith, they d[o] not benefit the public or the process. (Id.) Rule 18.1.8(a) addresses these concerns by defining when a failure to file a Major Contributor Report will be excused for good cause under Article XXVIII, 10(2)(c). Rule 18.1.8(a) states that [p]enalties assessed for failure to timely file a Major Contributor Report . . . stop accruing on the date that the contribution is first disclosed, either on the Major Contributor Report or the regularly-scheduled Report of Contributions and Expenditures . . . . Penalties will not accrue beyond the date of the general election. This rule recognizes that, once a regularly-scheduled report is filed, or when an election is over, any harm flowing from a failure to file a Major Contributor Report is diminished. A previous Secretary enacted a similar rule, former Rule 9.5.1, which excused political committees from filing separate electioneering reports so long as any expenditure for electioneering communications [was] disclosed in a regularly filed disclosure report. See Colo. Citizens for Ethics in Govt, 187 P.3d at 1213. In CCEG, this Court observed that 50

a $1,000 penalty would not have accrued had Rule 9.5.1 been promulgated before the offending conduct occurred. But because Rule 9.5.1 [had] only prospective application, the Court was required to analyze whether the $1000 penalty . . . was erroneous. Id. Despite the constitutional underpinnings of Rule 18.1.8and despite this Courts recognition in CCEG that a similar rule is valid and enforceablethe district court believed that Rule 18.1.8 substantially denudes the statutory penalty and would improperly allow bad actors to intentionally refuse to file a Major Contributor Report knowing that the fine amount will be fixed on Election Day. But this scenario was possible before the enactment of Rule 18.1.8(a): If a sophisticated entity desired to hide its major contributions, it could do so if it were willing to accrue penalties under Section 1-45-111.5(1.5)(c) until it filed a Major Contributor Report the day after the election. Of course, to do so, the entity would also have to delay filing a regularly-scheduled report, and would therefore incur additional penalties, just as it would under Rule 18.1.8(a).

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Rule 18.1.8(a) therefore does not excuse bad behavior any more than Section 1-45-111.5(1.5)(c) does; the Rule merely clarifies when penalties will be set aside for good cause, protecting entities that inadvertently fail to file a Major Contributor Report. This clarification of the constitutional good cause standard is within the Secretarys rulemaking authority and should be upheld. Conclusion The Secretary respectfully requests that the Court reverse the district courts order as to Rules 1.18.2, 1.12, 7.2, 1.10, and 18.1.8(a) and conclude that each of these rules is valid and enforceable.

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Respectfully submitted on February 1, 2013. JOHN W. SUTHERS Attorney General /s/ Frederick R. Yarger LEEANN MORRILL First Assistant Attorney General Public Officials Unit State Services Section FREDERICK YARGER, 39479* Assistant Solicitor General MATTHEW GROVE, 34269* Assistant Attorney General Public Officials Unit State Services Section Attorneys for Secretary Gessler *Counsel of Record

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CERTIFICATE OF SERVICE This is to certify that I have served this OPENING BRIEF OF APPELLANT / CROSS-APPELLEE COLORADO SECRETARY OF STATE on all parties by LexisNexis File & Serve at Denver, Colorado, on February 1, 2013, addressed as follows: Mark Grueskin Heizer Paul Grueskin LLP 2401 15th Street, Suite 300 Denver, Colorado 80202 Luis Toro Margaret Perl 1630 Welton Street Denver, Colorado 80202 Jennifer H. Hunt Hill & Robbins, P.C. 1441 18th Street, Suite 100 Denver, Colorado 80202-1256

/s/ Frederick Yarger

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Paladino v. Gessler, 12 CA 1712 Addendum A to the Secretarys Opening Brief: Campaign Finance Rules at Issue in this Appeal

Rule 1.7 Electioneering communication is any communication that (1) meets the definition of electioneering communication in Article XXVIII, Section 2(7), and (2) is the functional equivalent of express advocacy. When determining whether a communication is the functional equivalent of express advocacy: 1.7.1 A communication is the functional equivalent of express advocacy only if it is subject to no reasonable interpretation other than an appeal to vote for or against a specific candidate. 1.7.2 In determining whether a communication is the functional equivalent of express advocacy, it shall be judged by its plain language, not by an intent and effect test, or other contextual factors. 1.7.3 A communication is not the functional equivalent of express advocacy if it: (a) Does not mention any election, candidacy, political party, opposing candidate, or voting by the general public, (b) Does not take a position on any candidate's or officeholder's character, qualifications, or fitness for office, and (c) Merely urges a candidate to take a position with respect to an issue or urges the public to adopt a position and contact a candidate with respect to an issue. [Federal Election Commission v. Wisconsin Right to Life, 551 U.S. 449 (2007)] Former Rule 9.4 (predecessor to Rule 1.7) Pursuant to the decisions of the Colorado Court of Appeals in the case of Harwood v. Senate Majority Fund, LLC, 141 P.3d 962 (2006), and of the United States Supreme Court in the case of FEC v. Wisconsin Right to Life, 127 S. Ct. 2652 (2007), a communication shall be deemed an electioneering communication only if it is susceptible to no reasonable interpretation other than as an appeal to vote for or against a specific candidate. In making this determination, (1) there can be no freeranging intent-and-effect test; (2) there generally should be no discovery or inquiry into contextual factors; (3) discussion of issues cannot be banned merely because the issues might be relevant to an election; (4) in a debatable case, the tie is resolved in favor of not deeming a matter to be an electioneering communication.

A-1

Rule 1.10 Influencing or attempting to influence, for purposes of political organizations as defined in section 1-45-103(14.5), C.R.S., means making expenditures for communications that expressly advocate the election or defeat of a clearly identified candidate or candidates. [Buckley v. Valeo, 424 U.S. 1 (1976)] Rule 1.12 Issue committee * * * 1.12.3 For purposes of determining whether an issue committee has a major purpose under Article XXVIII, Section 2(10)(a)(I) and section 1-45103(12)(b)(II)(A), C.R.S., a demonstrated pattern of conduct is established by: (a) Annual expenditures in support of or opposition to ballot issues or ballot questions that exceed 30% of the organizations total spending during the same period; or (b) Production or funding of written or broadcast communications in support of or opposition to a ballot issue or ballot question, where the production or funding comprises more than 30% of the organizations total spending during a calendar year. Rule 1.18 Political committee * * * 1.18.2 Political committee includes only a person or group of persons that support or oppose the nomination or election of one or more candidates as its major purpose. For purposes of this Rule, major purpose means: (a) The organization specifically identifies supporting or opposing the nomination of one or more candidates for state or local public office as a primary objective in its organizing documents; or (b) Annual expenditures made to support or oppose the nomination or election of one or more candidates for state or local public office are a majority of the organizations total spending during the same period. [Alliance for Colorados Families v. Gilbert, 172 P.3d 964, 970 (Colo. App. 2007)]

A-2

Rule 7.2 Political organizations. In the case of political organizations as defined in section 145-103(14.5), C.R.S.: 7.2.1 For purposes of section 1-45-108.5, C.R.S., an entity is considered a political organization only if: (a) Has as its major purpose influencing or attempting to influence elections as defined in Rule 1.10; and (b) Is exempt, or intends to seek exemption, from taxation by the Internal Revenue Service. [I.R.C. 527(i)(5)(B) (2010)] * * *

Rule 18.1.8 18.1 Requests for waiver or reduction of campaign finance penalties 18.1.1 A request for waiver or reduction of campaign finance penalties imposed under Article XXVIII, Section 10(2) must state the reason for the delinquency. The filer should provide an explanation that includes all relevant factors relating to the delinquency and any mitigating circumstances, including measures taken to avoid future delinquencies. Before the Secretary of State will consider a request, the report must be filed, and a request including the information required by this paragraph must be submitted * 18.1.8 Major Contributor Reports (a) Penalties assessed for failure to timely file a Major Contributor Report under section 1-45-108(2.5), C.R.S., stop accruing on the date that the contribution is first disclosed, either on the Major Contributor Report or the regularly-scheduled Report of Contributions and Expenditures. Penalties will not accrue beyond the date of the general election. [Section 1-45-108(2.5) C.R.S.] * * * * *

A-3

Paladino v. Gessler, 12 CA 1712 Addendum B to the Secretarys Opening Brief: The District Courts August 10, 2012 Order

DISTRICTCOURT,CITYANDCOUNTYOF DENVER,STATEOFCOLORADO 1437BannockStreet,Room256 Denver,Colorado80202 COLORADOETHICSWATCHCOLORADO COMMONCAUSEDAVIDPALADINO,etal., Plaintiffs, v. SCOTTGESSLER,asSecretaryofStatefortheState ofColorado, Defendant.

COURTUSEONLY CaseNo.:2012CV2133 (consolidatedwith2012CV2153) Courtroom:280

ORDER THISMATTERcomesbeforetheCourtonPlaintiffsconsolidatedComplaints challenginganumberofrulespromulgatedbytheDefendantinhiscapacityasColorados SecretaryofState(SecretaryorDefendant). I.Introduction In2002,thepeopleofthestateofColoradopassedAmendment27,declaring that...theinterestsofthepublicarebestservedbylimitingcampaign contributions,encouragingvoluntarycampaignspendinglimits,providingforfull andtimelydisclosureofcampaigncontributions,independentexpenditures,and fundingofelectioneeringcommunications,andstrongenforcementofcampaign financerequirements. Colo.Const.Art.XXVIII1. InNovember,2011,theSecretaryinstitutedarulemakingprocesstopromulgatenew rulestoadministerandenforceColoradoscampaignfinanceandelectionlaws.Thenewrules becamepermanentlyeffectiveonApril12,2012. Plaintiffsconsistofnumerouspublicinterestgroups,watchdogorganizations,and individuals,allofwhomhaveaninterestinthenewrules.Plaintiffsfiledtwoseparate

complaints,whichwereconsolidatedinthisaction,challengingthefollowingrulesimplemented bytheSecretarypursuanttotherulemakingprocess:1.71.101.121.184.14.26.16.27.2 14and18.1.8.Thepartiesagreethatinlightofsubsequentchangesimplementedbythe Secretary,thechallengestoRules6.16.2and14aremoot.Defendantdoesnotchallenge Plaintiffsstandingtobringthisaction. II.StandardofReview UndertheColoradoAdministrativeProcedureAct,C.R.S.244101, etseq.,a challengedagencyactionmustbeheldunlawfulifthereviewingcourtfinds: thattheagencyactionisarbitraryorcapricious,adenialofstatutoryright, contrarytoconstitutionalright,power,privilege,orimmunity,inexcessof statutoryjurisdiction,authority,purposes,orlimitations,notinaccordwiththe proceduresorprocedurallimitationsofthisarticleorasotherwiserequiredby law,anabuseorclearlyunwarrantedexerciseofdiscretion,baseduponfindings offactthatareclearlyerroneousonthewholerecord,unsupportedbysubstantial evidencewhentherecordisconsideredasawhole,orotherwisecontraryto law.... C.R.S.244106(7).Uponsuchafinding,thecourtmustsetasidetheagencyactionandshall restrainenforcementoftheorderorruleunderreview...andaffordsuchotherreliefasmaybe appropriate.Id. Anadoptedagencyruleispresumedtobevalid,andtheburdentoestablishitsinvalidity restsonthepartychallengingtherule. ColoradoGroundWaterCommnv.EaglePeakFarms , 919P.2d212,217(Colo.1996).Anagencyispresumedtohaveexpertiseinthesubstantive arenainwhichitoperates,andacourtmaygivecertaindeferencetotheagencythatadoptsarule pursuanttoitsauthorizingstatute. TivolinoTellerHousev.Fagan,926P.2d1208,1215(Colo. 1996). Theactuallevelofdeferencevariesbaseduponthecircumstancessurroundingthe enactedrule.Whererulesarebasedonjudgmentalorpredictivefacts,somedeferenceto administrativeexpertiseisappropriate. U.S.WestCommcns,Inc.v.ColoradoPublicUtil. Commn,978P.2d671,675(Colo.1999).Ifaruleseekstoaddressthepreciseissuethatthe legislatureorthepeopleactingpursuanttotheirreservedlegislativepowerasspecifiedin ArticleV,section1oftheColoradoConstitutionhasalreadyaddressed,thecourtswill construethestatuteaccordinglyandaffordnodeferencetotheagencysinterpretation. City ofBoulderv.ColoradoPublicUtil.Commn ,996P.2d1270,1277(Colo.2000)(citation omitted). Legalinterpretationsofarule,astatute,oraconstitutionalamendmentarereviewedona denovobasis.Cerbov.ProtectColo.Jobs,Inc.,240P.3d495,500(Colo.App.2010)(citations omitted).Whereanagencymisconstruesormisappliesthelawinexecutinginitsregulatory 2

function,thecourtshavenocausetodefertotheagencysapproach. SeeSclavenitisv.Cherry HillsVillageBd.OfAdjustment&Appeals ,751P.2d661,664(Colo.App.1988).Anagency rulemaynotmodifyorcontraveneanexistingstatute,andanyrulethatisinconsistentwithor contrarytoastatuteisvoid.IndependenceInstitutev.Gessler,__F.Supp.3d__,2012WL 1439167at*8(D.Colo.April26,2012)(citing SuetrackUSAv.Indus.ClaimAppealsOffice , 902P.2d854(Colo.App.1995))(bracketsomitted).Likewise,whereanagencyofficial reinterpretsastatuteinawaythatiscontrarytothatofhispredecessor,thenewconstructionis owednodeference.CommonCausev.Meyer,758P.2d153,159(Colo.1988). Inpromulgatingrules,theSecretarycannotredefineatermalreadydefinedinthe Constitutionorstatutesorinsuchawaythatthedefinitionimposesadditionalrestrictionsona statuteorconstitutionalprovision. Sangerv.Dennis,148P.3d404,412(Colo.App.2006).Any rulemustbereasonableandconsistentwithpurposesofArticleXXVIII. Id.at41213.In summary: Whenacourtreviewsanagencysconstructionofthestatutewhichitadministers, itisconfrontedwithtwoquestions.First,always,isthequestionwhether[the legislature]hasdirectlyspokentotheprecisequestionatissue.Iftheintentof [thelegislature]isclear,thatistheendofthematterforthecourt,aswellasthe agency,mustgiveeffecttotheunambiguouslyexpressedintentof[the legislature].If,however,thecourtdetermines[thelegislature]hasnotdirectly addressedtheprecisequestionatissue,thecourtdoesnotsimplyimposeitsown constructiononthestatute,aswouldbenecessaryintheabsenceofan administrativeinterpretation.Rather,ifthestatuteissilentorambiguouswith respecttothespecificissue,thequestionforthecourtiswhethertheagencys answerisbasedonapermissibleconstructionofthestatute....If[the legislature]hasexplicitlyleftagapfortheagencytofill,thereisanexpress delegationofauthoritytotheagencytoelucidateaspecificprovisionofthe statutebyregulation.Suchlegislativeregulationsaregivencontrollingweight unlesstheyarearbitrary,capricious,ormanifestlycontrarytothestatute. Sometimesthelegislativedelegationtoanagencyonaparticularquestionis implicitratherthanexplicit.Insuchacase,acourtmaynotsubstituteitsown constructionofastatutoryprovisionforareasonableinterpretationmadebythe administratorofanagency. Wine&SpiritsWholesalersv.Colo.DeptofRevenue ,919P2d894,897(Colo.App.1996) (quotingChevron,U.S.A.,Inc.v.NaturalResourcesDefenseCouncil,Inc. ,467U.S.837,84243 (1984))(emphasisadded). III.Analysis A.Rule1.7,DefinitionofElectioneeringCommunications. ChallengedRule1.7providesasfollows: 3

Electioneeringcommunicationisanycommunicationthat(1)meetsthe definitionofelectioneeringcommunicationinArticleXXVIII,Section2(7),and (2)isthefunctionalequivalentofexpressadvocacy.Whendeterminingwhethera communicationisthefunctionalequivalentofexpressadvocacy: 1.7.1Acommunicationisthefunctionalequivalentofexpressadvocacyonlyif itissubjecttonoreasonableinterpretationotherthananappealtovoteforor againstaspecificcandidate. 1.7.2Indeterminingwhetheracommunicationisthefunctionalequivalentof expressadvocacy,itshallbejudgedbyitsplainlanguage,notbyanintent andeffecttest,orothercontextualfactors. 1.7.3Acommunicationisnotthefunctionalequivalentofexpressadvocacyif it: (a)Doesnotmentionanyelection,candidacy,politicalparty,opposing candidate,orvotingbythegeneralpublic, (b)Doesnottakeapositiononanycandidate'sorofficeholderscharacter, qualifications,orfitnessforoffice,and (c)Merelyurgesacandidatetotakeapositionwithrespecttoanissueor urgesthepublictoadoptapositionandcontactacandidatewithrespectto anissue. Plaintiffscomplainthatthisnewruleaddsafunctionalequivalencetestthat substantiallynarrowsthedefinitionofelectioneeringcommunicationcontainedinArticle XXVIII2(7),andthereforeimproperlyrestrictstheuniverseofthosewhomustmakethe requireddisclosures.Further,Plaintiffsarguethatthecasesuponwhichtheruleisbased (primarilyF.E.C.v.WisconsinRighttoLife ,551U.S.449(2007))wererenderedobsoleteby CitizensUnitedv.F.E.C.,558U.S.__,130S.Ct,876(2010).Inessence,Plaintiffsarguethat CitizensUnitedplacedfew,ifany,FirstAmendmentrestrictionsoncontributiondisclosure requirements,andthatthereforetheapplicationof WisconsinRighttoLifetodisclosure requirementsisunwarranted. However,newRule1.7issimilarinmostrespectstotheruleitreplaces,formerRule9.4. FormerRule9.4stated: PursuanttothedecisionsoftheColoradoCourtofAppealsinthecaseof Harwoodv.SenateMajorityFund,LLC ,141P.3d962(2006),andoftheUnited StatesSupremeCourtinthecaseof F.E.C.v.WisconsinRighttoLife ,127S.Ct. 2652(2007),acommunicationshallbedeemedanelectioneeringcommunication onlyifitissusceptibletonoreasonableinterpretationotherthanasanappealto votefororagainstaspecificcandidate.Inmakingthisdetermination,(1)there canbenofreerangingintentandeffecttest(2)theregenerallyshouldbeno

discoveryorinquiryintocontextualfactors(3)discussionofissuescannotbe bannedmerelybecausetheissuesmightberelevanttoanelection(4)ina debatablecase,thetieisresolvedinfavorofnotdeemingamattertobean electioneeringcommunication. Thenewruleaddsnosubstantiveadditionaltermsandimposesnoadditionalrestrictions overtheoldrule.Whileitmaybethat CitizensUnitedrendersbothnewandoldrulesobsolete, priorRule9.4wasineffectandunchallengeduntilitwassupersededbyRule1.7. PlaintiffsrelyonInreInterrogatoriesPropoundedbyGovernorRitter,Jr.,Concerning theEffectofCitizensUnitedv.FederalElectionCommn,558U.S.__(2010)onCertain ProvisionsofArticleXXVIIIofTheConstitutionoftheStateofColorado ,227P.3d892(2010) (Interrogatories).There,theColoradoSupremeCourtruledthat CitizensUnitedinvalidated ColoradoConstitutionArticleXXVIII3(4)and6(2)thesesectionsmadeitunlawfulfora corporationorlabororganizationtofundelectioneeringcommunications.Plaintiffspointout thatInterrogatoriesleftthedisclosurerequirementsofArticleXXVIIIundisturbed.But Plaintiffsreadtoomuchintothatdecision.TheColoradoSupremeCourtwasnotaskedabout thedisclosurerequirementsofArticleXXVIIIandthereforedidnotrenderadecisionabout corporateoruniondisclosures.Moreover,IagreewithDefendantthat ColoradoEthicsWatchv. SenateMajorityFund,269P.3d1248(Colo.2012)reaffirmsWisconsinRighttoLifes applicabilitytotheColoradoConstitutionsdefinitionofElectioneeringCommunication. E.g., ColoradoEthicsWatchv.SenateMajorityFund,269P.3dat125758and1258n.8. Here,itappearsthattheSecretarydidnotmodifyorcontraveneanexistingstatute. IndependenceInstitutev.Gessler,__F.Supp.3d__,2012WL1439167at*8(D.Colo.April 26,2012)Sangerv.Dennis,148P.3d404,412(Colo.App.2006).Further,thechallengedrule issimilartotheruleenactedbyDefendantspredecessor,anditthereforeisentitledtodeference. Ingramv.Cooper,698P.2d1314(Colo.1985).Accordingly,IconcludethattheSecretaryhas actedwithinhisauthorityunderC.R.S.244101inpromulgatingRule1.7. B.Rule1.12,ReportingThresholdforIssueCommittees Amongotherthings,Art.XXVIII2(10)(1)(I)definesanissuecommitteeasagroup thathasamajorpurposeofsupportingoropposinganyballotissueorballotquestion. ChallengedRule1.12.3relatestothephrasemajorpurpose,andstatesasfollows: Forpurposesofdeterminingwhetheranissuecommitteehasamajorpurpose underArticleXXVIII,Section2(10)(a)(I)andsection145103(12)(b)(II)(A), C.R.S.,ademonstratedpatternofconductisestablishedby: (a)Annualexpendituresinsupportoforoppositiontoballotissuesorballotquestions thatexceed30%oftheorganizationstotalspendingduringthesameperiodor

(b)Productionorfundingofwrittenorbroadcastcommunicationsinsupportofor oppositiontoaballotissueorballotquestion,wheretheproductionorfunding comprisesmorethan30%oftheorganizationstotalspendingduringacalendaryear. Plaintiffschallengethisrulearguingthattheadditionofarevenuepercentage requirement(30%)isarbitrary,andthatsuchalimitationisnotprovidedforinC.R.S.145 10312(b)(I)(III)whichalreadydefinesthetermmajorpurposewithoutresortingtoanannual revenuepercentageofanykind.TheDefendantrespondsthatheisprovidingaclear,brightline testthatbringscertaintytothosegroupswhichmayqualifyasissuecommittees. C.R.S.14510312(b)(I)(III)definesmajorpurpose.Plaintiffsarecorrectthatthe statutedoesnotincludeanannualincomepercentageinitsdefinition.Priortotheenactmentof thestatute,twocaseshadalreadyheldthatthetermmajorpurposeasusedinArticleXXVIII wasnotambiguous.Cerbov.ProtectColo.Jobs,Inc.,240P.3d495(Colo.App.2010) IndependenceInstitutev.Coffman,209P.3d1130(Colo.App.2008).Subsequenttothesecases, thelegislaturepassedastatuteessentiallycodifyingtheholdingofthesetwocases.C.R.S.1 45103(12)(b). Theadditional30%requirementaddsarestrictionnotfoundinthestatuteandnot supportedbytherecord.Therevenuerequirementworksfurthermischiefinthatitappearsnot tobeincomeneutral.Inotherwords,issuecommitteeswithverylittleincome,which presumablyspendmostofthatincomeonelectionrelatedmatters,willberequiredtoreport. Butlargecorporationsorwealthyindividualscouldspendsubstantialsumsofmoneyonissues andyetnothavetoreportbecausetheyarespendinglessthan30%oftheirrevenueonthese activities.Certainlythisiscontrarytotheintentoftheelectorate,whichhasexpressedan interestincompellingmoredisclosure,notless.Colo.Const.Art.XXVIII1. Regardlessoftheconsequencesofthe30percentrequirement,itsadditiontothemajor purposedefinitioninappropriatelymodifiesandcontravenesanexistingstatute,C.R.S.145 103(12)(b).IndependenceInstitutev.Gessler ,__F.Supp.3d__,2012WL1439167at*8(D. Colo.April26,2012).Moreovertherevenuetestclearlyisatoddswiththeexpressintentofthe legislature,whichhasenactedadefinitionwithoutuseofsuchatest.Forthesereasons,Rule 1.12.3isinvalidasitexceedstheSecretarysdelegatedauthorityunderC.R.S.244103(8)(a). Wine&SpiritsWholesalersv.Colo.DeptofRevenue ,919P.2d894,897(Colo.App.1996) Sangerv.Dennis,148P.3d404,412(Colo.App.2006). C.Rule1.18.2,ExpenditureThresholdforPoliticalCommittee ChallengedRule1.18.2definespoliticalcommitteeasfollows: Politicalcommitteeincludesonlyapersonorgroupofpersonsthatsupportor opposethenominationorelectionofoneormorecandidatesasitsmajorpurpose. ForpurposesofthisRule,majorpurposemeans:

(a)Theorganizationspecificallyidentifiessupportingoropposingthenominationof oneormorecandidatesforstateorlocalpublicofficeasaprimaryobjectiveinits organizingdocumentsor (b)Annualexpendituresmadetosupportoropposethenominationorelectionofone ormorecandidatesforstateorlocalpublicofficeareamajorityoftheorganizations totalspendingduringthesameperiod. Plaintiffsobjecttothisrulebecauseitaddsthefurtherlimitationthatamajorityofthe organizationstotalspendingbedirectedtowardssupportingoropposingcandidates.Plaintiffs pointoutthatthisdefinitionradicallynarrowsthedefinitionofpoliticalcommitteesetforthin Art.XXVIII2(12)(a).There,politicalcommitteeisdefinedasanygroupthatspendsor receivesmorethan$200tosupportoropposecandidates.Defendantarguesthattherules majorpurposetestisclearlyrequiredinlightof AllianceforColoradosFamiliesv.Gilbert , 172P.3d964(Colo.App.2007)andColoradoRighttoLifeComm.,Inc.v.Coffman ,498F.3d 1137,115455(10thCir.2007).Bothofthesecasesheldthat,asappliedtothepartiesinthose twocases,thepoliticalcommitteetestnowarticulatedinRule1.18.2wasrequiredby Buckley v.Valeo,424U.S.1(1976). BothAllianceforColoradosFamiliesv.Gilbert andColoradoRighttoLifeComm.,Inc. v.Coffmanundeniablyrequiredapplicationofthe Buckleytesttodeterminewhetherthe plaintiffsinthesecasesweresubjecttoregulationaspoliticalcommittees.Nevertheless,the Secretarysproposeddefinitionisclearlycontrarytothepoliticalcommitteedefinitionin AmendmentXXVIII.Courtscannotrewritestatelawstoconform[to]constitutional requirementswheredoingsowouldbeinconsistentwithlegislative,orhere,thestatecitizenrys intent....AllianceforColoradosFamiliesv.Gilbert ,172P.3d964,972(Colo.App.2007) (quotingColoradoRighttoLifeComm.,Inc.v.Coffman ,498F.3d1137,115455(10thCir. 2007)). BecausetheRule1.18.2slimitationiscontrarytotheintentofArt.XXVIII2(12)(a)as passedbythecitizensofColorado,theSecretarycannotreadthemajorpurposelimitationinto thedefinition.Doingsowouldresultintheadditionofanew,strict,limitationintoSection 2(12)(a).BothAllianceforColoradosFamiliesv.Gilbert andColoradoRighttoLifeComm., Inc.v.Coffmanholdthatsuchanarrowingisimpermissible(though,paradoxically,alsorequired topassconstitutionalmusterasappliedinthosecases).ButSection2(12)(a)hasneverbeen declaredfaciallyunconstitutional,sotherestillmaybecircumstanceswhereitcanapplyas written. Ultimately,itcomesdowntothis:CantheSecretaryaddamajorpurposelimitationto Section2(12)(a)tosavetheprovision,orisitamatterforathelegislatureorthecitizens, throughreferendum,tofixit?WhiletheSecretaryspragmatismistoberespected,removinga criticalelementof2(12)(a)byrulegoesbeyondtheSecretaryspowers. Sangerv.Dennis,148 P.3d404(Colo.App.2006)Wine&SpiritsWholesalersv.Colo.DeptofRevenue ,919P.2d 894,897(Colo.App.1996).Heassumesasolutionwithoutlegislativeorvoterinput,and

therebyexceedshisdelegatedauthority.C.R.S.244103(8)(a).Forthesereasons,Rule1.18.2 isinvalid. D.Rule1.10and7.2.1,Definitionofpoliticalorganization ChallengedRule7.2.1states: Politicalorganizations.Inthecaseofpoliticalorganizationsasdefinedinsection 145103(14.5),C.R.S.: 7.2.1Forpurposesofsection145108.5,C.R.S.,anentityisconsidereda politicalorganizationonlyif[it]: (a)Hasasitsmajorpurposeinfluencingorattemptingtoinfluenceelections asdefinedinRule1.10and (b)Isexempt,orintendstoseekexemption,fromtaxationbytheInternal RevenueService. (Punctuationintheoriginal.) ChallengedRule1.10states: Influencingorattemptingtoinfluence,forpurposesofpoliticalorganizationsas definedinsection145103(14.5),C.R.S.,meansmakingexpendituresfor communicationsthatexpresslyadvocatetheelectionordefeatofaclearly identifiedcandidateorcandidates. (Punctuationintheoriginal.) Plaintiffsmaintainthatthesetworulesimpermissiblynarrowthedefinitionofpolitical organizationwhichalreadyisdefinedinC.R.S.145103(14.5).Theresult,accordingto Plaintiffs,isthatthatpoliticalorganizationasdefinedbytheserulesbecomesindistinguishable frompoliticalcommitteewhichinturnresultsinaloopholethatallowsorganizationstoavoid reportingatall.TheSecretaryrespondsthatRule7.2.1merelyechoesthedefinitionofSection 527oftheInternalRevenueCode,andthatRule1.10issupportedbyfortyyearsofFirst AmendmentJurisprudence. C.R.S.145103(14.5)definespoliticalorganizationas apoliticalorganizationdefinedinsection527(e)(1)ofthefederalInternal RevenueCodeof1986,asamended,thatisengagedininfluencingorattempting toinfluencetheselection,nomination,electionorappointmentofanyindividual toanystateorlocalpublicofficeinthestateandthatisexempt,orintendstoseek anyexemption,fromtaxationpursuanttosection527oftheinternalrevenue code. 8

Tothis,theSecretarysruleaddsamajorpurposerequirementandfurthernarrowsthe phraseinfluenceorattemptingtoinfluencetoexpressadvocacy.Thus,underthechallenged rules,anentityisconsideredapoliticalorganizationonlyif[it]...hasasitsmajorpurpose influencingorattemptingtoinfluenceelectionsasdefinedinRule1.10.Rule1.10inturn definesinfluencingorattemptingtoinfluenceasmakingexpendituresforcommunications thatexpresslyadvocatetheelectionordefeatofaclearlyidentifiedcandidateorcandidates. Readincombination,asintended,thetworulesdefineapoliticalorganizationasanentity whichhasasitsmajorpurposemakingexpendituresforcommunicationsthatexpresslyadvocate theelectionordefeatofaclearlyidentifiedcandidateorcandidates. Thus,theSecretarysrulesimproperlynarrowthedefinitionofpoliticalorganization. Underthestatute,itisanorganizationthatisengagedininfluencingelectionsorappointments ofindividualstopublicoffice.UnderRule7.2.1,thisisnarrowedtoorganizationswithamajor purposeininfluencingelections.Rule1.10furthernarrowsthedefinitiontogroupswhich expresslyadvocatefororagainstcandidates.Thesenarrowingruleseffectivelyeliminate distinctionsbetweenpoliticalorganizationandpoliticalcommittee.Politicalcommittees, subjecttoaconstitutionalcontributionreportinglimitof$200,couldswitchtoapolitical organizationandavoidthisrestrictionunderthechallengedrules.Sucharesultiscontraryto thecleartermsofthestatuteandtheintentofthelegislature. SeeLetterfromStateSenator MorganCarrolltoSecretaryofStateScottGessler(Dec.14,2011)(RecordatTab5.11). RemovingorlimitingcriticalelementsofC.R.S.145103(14.5)byrulegoesbeyondthe Secretaryspowers.Sangerv.Dennis,148P.3d404(Colo.App.2006)Wine&Spirits Wholesalersv.Colo.DeptofRevenue ,919P.2d894,897(Colo.App.1996).Hethushas exceededhisdelegatedauthorityunderC.R.S.244103(8)(a).Forthesereasons,Rules1.10 and7.2areinvalid. E.18.1.8(a),MajorContributorReportingPenalties ChallengedRule1.18.1providesasfollows: 18.1Requestsforwaiverorreductionofcampaignfinancepenalties 18.1.1Arequestforwaiverorreductionofcampaignfinancepenalties imposedunderArticleXXVIII,Section10(2)muststatethereasonforthe delinquency.Thefilershouldprovideanexplanationthatincludesallrelevant factorsrelatingtothedelinquencyandanymitigatingcircumstances,including measurestakentoavoidfuturedelinquencies.BeforetheSecretaryofState willconsiderarequest,thereportmustbefiled,andarequestincludingthe informationrequiredbythisparagraphmustbesubmitted *** 18.1.8MajorContributorReports

(a)PenaltiesassessedforfailuretotimelyfileaMajorContributorReportunder section145108(2.5),C.R.S.,stopaccruingonthedatethatthecontributionis firstdisclosed,eitherontheMajorContributorReportortheregularlyscheduled ReportofContributionsandExpenditures.Penaltieswillnotaccruebeyondthe dateofthegeneralelection. Plaintiffschallengethisruleclaimingthatitsetsadefinitecutofffortheaccrualoffines forfailuretofilerequiredreports.Plaintiffsmaintainthatcertainwealthyorganizationssimply willdeclinetofileknowingthatthefineforfailingtodosowillbefixedonElectionDay. Defendantmaintainsthathesimplyissettingforthwhatconstitutesgoodcauseforfailingtofile areport. C.R.S.145108(2.5)specifieswhenamajordonorreportmustfiled.C.R.S.145 111.5(c)setsthepenaltyforfailingtodoso:fiftydollarsperdayforeachdaythatareport [requiredtobefiled]isnotfiled.Thereisnolimit,andnocutoffdate.Rule18.1.8abrogates thefiftydollarperdaypenaltyonceacontributorisidentifiedinanyreport,eithertheMajor ContributorReportortheregularlyscheduledReportofContributionandExpenditures.Butthe rulegoestoofarandcutsoffallpenaltiesasofthedateofthegeneralelection. Thissubstantiallydenudesthestatutorypenaltyandraisesthepossibilitythatthose subjecttothepenaltysimplywillnotreportknowingthatthefineamountwillbefixedon ElectionDay.TheSecretarydoesnotaddresstheeffectofthecutoffdateinhisbrief.Stopping accrualofthefineonElectionDayiscontrarytothestatedinterestsofstrongenforcementof campaignfinancerequirementsasstatedinArt.XVIII1.Furthermore,theruleremovesan enforcementelementfromC.R.S.145111.5(c)bysettinganultimatelimitonfinesforlackof reporting.Assuch,thisruleisbeyondtheSecretaryspowersunder Sangerv.Dennis,148P.3d 404(Colo.App.2006)Wine&SpiritsWholesalersv.Colo.DeptofRevenue ,919P.2d894, 897(Colo.App.1996).HethushasexceededhisdelegatedauthorityunderC.R.S.244 103(8)(a).Forthesereasons,Rule18.1.8isinvalid. F.Rules4.1and15.6 Rules4.1and15.6increasethereportinglimitsforissuecommitteesto$5,000.Both rulescontainadisclaimerindicatingthattheywillnotbeenforcedunless ColoradoCommon Causev.Gessler,No.2011CV4164(DenverDist.Ct.Nov.17,2011)isoverturnedbyahigher court.ColoradoCommonCauseheldthatthe$5,000limitinRule4.1spredecessor,Rule4.27, wasinvalid.TheSecretaryhasindicatedinRules4.1and15.6thattheywillnotbeenforcedin lightofthetrialcourtsrulinginColoradoCommonCause. Underthedoctrineofripeness,aclaimmustberealandimmediate.Withthis requirementinmind,wemustrefusetoconsideruncertainorcontingentfuture mattersthatsupposespeculativeinjurythatmayneveroccur.Wedetermine

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ripenessonthebasisofthesituationatthetimeofreview,notthesituation existingwhenthetrialcourtacted. DevelopmentalPathwaysv.Ritter ,178P.3d524,534(Colo.2008)(citationsandinternalquotes omitted).Here,theSecretaryhasexpresslystatedthatRules4.1and15.6willnotbeenforced pendingarulinginColoradoCommonCause.Becausethereisnorealandimmediatethreatof enforcement,IconcludethatPlaintiffsclaimswithrespecttothesetworulesarenotripefor decision. IV.Conclusion Forthereasonssetforthabove,Rule1.7isvalid.Rules1.101.121.187.2and18.1.8 areinvalid.Rules4.1and15.6arenotyetripefordetermination. ENTEREDthis10thdayofAugust,2012. BYTHECOURT:

J.EricElliff DistrictCourtJudge

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