DISTRICT COURT, CITY AND COUNTY OF DENVER, COLORADO Court Address: 1437 Bannock Street Denver, Colorado 80202
Plaintiffs: COLORADO ETHICS WATCH and COLORADO COMMON CAUSE v. Defendant: SCOTT GESSLER, in his capacity as Secretary of State of Colorado And Plaintiffs: DAVID PALADINO; MICHAEL COURT USE ONLY CERBO; PRO-CHOICE COLORADO PAC; PPRM BALLOT ISSUE COMMITTEE; and Case Numbers: 2012CV2133 CITIZENS FOR INTEGRITY, INC. and 2012CV2153 v. Defendant: SCOTT GESSLER, as Secretary of Courtroom: 280 State for the State of Colorado Attorneys for Plaintiffs in 2012CV2133: Luis Toro, #22093 Margaret Perl, #43106 1630 Welton Street, Suite 415 Denver, Colorado 80202 Telephone: (303) 626-2100 Fax: (303) 626-2101 E-mail: firstname.lastname@example.org email@example.com Attorneys for Colorado Ethics Watch Jennifer H. Hunt, # 29964 Hill & Robbins, P.C. 1441 18th Street, Suite 100 Denver, CO 80202-1256 Telephone: (303) 296-8100 Fax: (303) 296-2388 E-mail: firstname.lastname@example.org Attorneys for Colorado Common Cause JOINT REPLY BRIEF OF COLORADO ETHICS WATCH AND COLORADO COMMON CAUSE
INTRODUCTION At its core, this is a case about separation of powers. The General Assembly, or the people exercising their inherent legislative power, make the laws. The executive branch, here the Secretary of State, enforces the laws.1 Finally, it is for the courts to “say what the law is.” Marbury v. Madison, 5 U.S. 137, 177 (1803). Despite claiming that the challenged Rules simply “fill a gap” or “harmonize” existing laws and judicial rulings, the Secretary has used this administrative rulemaking to act as a court deciding what federal and state case precedent means and as a legislature rewriting Colorado law to match his interpretations – even where those interpretations conflict directly with provisions enacted by voters or the General Assembly. It is this Court’s role to set aside these unlawful actions and invalidate the challenged Rules as exceeding the Secretary’s authority. With regard to the specific rules at issue in this case, the Secretary’s Answer Brief reveals a basic misunderstanding of the difference between campaign finance laws that limit speech by restricting the source or amounts of money that may be spent on political speech, and mere disclosure laws, which do not raise the same First Amendment concerns. The new Rules improperly import the concepts of “express advocacy” and its “functional equivalent” and “major purpose,” which were developed to ensure that contribution or spending restrictions do not violate the First Amendment, into these areas where disclosure and disclaimers are required, but no spending is limited and no speech is prohibited. The U.S. Supreme Court made clear, in the 8-1 portion of its opinion in Citizens United v. F.E.C., 130 S. Ct. 876 (2010), that the First Amendment does not require such drastic action in the context of disclosure and disclaimer laws.
As pertaining to campaign finance laws in Colorado, these laws are in part privately enforced by citizens and groups such as Colorado Common Cause (“CCC”) and Colorado Ethics Watch (“Ethics Watch”). See Colo. Const. art. XXVIII, § 9(2).
More fundamentally, it simply is not the role of the Secretary of State to rewrite campaign finance laws based on his own interpretation of case law regarding the First Amendment, which is not administered or enforced by the Colorado Department of State. It is for the legislature to amend statutes and the people of Colorado to amend the Constitution. If the Secretary believes existing laws should be amended, he should make his case to the legislature or the voters.2 ARGUMENT A. The Court Reviews the Secretary’s Legal Determinations De Novo. The Secretary’s argument on the standard of review exemplifies his effort to encroach on the fundamental role of the judiciary to determine the law. In arguing that the Court may not “substitute its own judgment for that of the Secretary’s” [sic], Answer Brief at p. 8, the Secretary ignores both the fundamental administrative law principle that legislative power may not be delegated to an agency and the long-established standard that courts review questions of law de novo. See People v. Lowrie, 761 P.2d 778, 781 (Colo. 1988) (“nondelegation doctrine, which has its source in the constitutional separation of powers, prohibits the General Assembly from delegating its legislative power to some other agency or person”); Colo. Office of Consumer Counsel v. Colo. Public Utils. Comm’n, 2012 CO 33, ¶ 9 (Colo. 2012) (“We review de novo questions of law, but defer to the [agency’s] determination of factual issues”). A legislative body may delegate rulemaking authority to an administrative agency, provided that “constraints are sufficient to insure that administrative action will be rational and
The Secretary has chosen not to challenge CCC and Ethics Watch’s standing in this matter. Answer Br. at 9. In addition, CCC and Ethics Watch agree with the Secretary that the challenge to Rule 14.4 regarding political parties in home rule jurisdictions is moot due to the Secretary’s recent rulemaking proceedings. Answer Br. at 14; Joint Opening Br. at 2 n.1. However, CCC and Ethics Watch do not agree that the issue and recall committee threshold rules are not properly before this court because of the related pending appeal in Colorado Common Cause v. Gessler Case No. 2011CA2405, as discussed more fully below.
consistent in the first instance and that subsequent judicial review of that action is available and will be effective.” Cottrell v. City and County of Denver, 636 P.2d 703, 709 (Colo. 1981). Delegation typically occurs where administrative expertise is necessary to adapt laws of general applicability to numerous specific situations, for example, when an administrator is needed to apply liquor laws to “countless situations and environments.” People v. Lowrie, 761 P.2d 778, 782 (Colo. 1988). Where an agency has expertise in a certain subject matter, in the exercise of de novo review the Court “may accord deference to an agency’s construction of its statute.” Bd. of County Commr’s of San Miguel County v. Public Utils. Comm’n, 157 P.3d 1083, 1092 (Colo. 2007) (emphasis added); see also North Colo. Medical Ctr. v. Committee on Anticompetitive Conduct, 914 P.2d 902 (Colo. 1996) (“The interpretation of a statute by the agency charged with enforcement of that statute is generally entitled to deference”) (emphasis added).3 Deference to a state administrative agency, however, cannot possibly extend to an agency’s interpretation of First Amendment case law. The Secretary of State has authority to enact rules to “administer and enforce” Colorado’s campaign finance law, not the federal Constitution. See Colo. Const. art. XXVIII § 9(1)(b); C.R.S. § 1-45-111.5(1). While there is no question that the Secretary is required to abide by the First Amendment, this does not mean he has authority to determine the Amendment’s application to the laws he is charged to administer.
The cases from other jurisdictions cited by the Secretary (Answer Brief at 8) either shed no light on the question or actually support the proposition that an agency receives no deference when interpreting case law. Russo v. Bd. Of Trustees, 17 A.3d 801, 809 (N.J. 2011) (“Like all matters of law, we apply de novo review to an agency's interpretation of a statute or case law”); Blackburn v. Reich, 79 F.3d 1375, 1377 n.3 (4th Cir. 1996) (“Because the Secretary based his decision in the instant case on judicial precedent rather than his own interpretation of the statute, we owe no more deference than we would any lower court's analysis of the law”) (quotation omitted); Montana v. U.S. Envt’l Prot. Agency, 941 F. Supp. 945, 956 (D. Mont. 1996) (“The parties are in agreement that this court must subject EPA's interpretation of case law to de novo review”). The Secretary notes that Clearing House Assoc., L.L.C. v. Cuomo, 510 F.3d 105 (2d Cir. 2007), was reversed in part by the United States Supreme Court, but fails to advise the Court that among the issues upon which the Second Circuit was reversed was its ruling deferring to a regulation based on an agency’s interpretation of case law. Cuomo v. Clearing House Ass'n, L.L.C., 557 U.S. 519, ___,129 S. Ct. 2710, 2715 (2009) (citing 12 C.F.R. 7.4000 (2009)). Moreover, case law interpreted by the agency in Clearing House Ass’n addressed a statute the agency was charged with administering. 510 F.3d at 119. Finally, Schwalier v. Panetta, No. 11-cv-126m 2012 U.S. Dist. LEXIS 33809 (D.D.C. Mar. 14, 2012) does not deal with an agency interpretation of case law at all.
Rather, he is bound by the entirety of the United States Constitution, which places in the judicial branch the authority to “say what the law is.” Marbury, 5 U.S. at 177. Here, because the Secretary has no institutional expertise in construing or applying the First Amendment, the Court owes no deference whatsoever to the Secretary’s interpretation of the First Amendment or case law regarding that amendment. See Bd. of County Comm'rs of San Miguel County, 157 P.3d at 1089. It is the Court’s role to invalidate any rule enacted by the Secretary that would add, modify, or contradict laws established by the General Assembly or the People. Sanger v. Dennis, 148 P.3d 404, 413 (Colo. App. 2006). B. The New Rules Narrow the Scope of Disclosure-Only Provisions Without Authority and Directly Contrary to Voter and Legislative Intent The new Rules shrink the disclosure of political spending in two areas where Colorado voters and the General Assembly have determined the public information interest is great: political advertising known as “electioneering communications,” and spending in Colorado candidate elections by third-party groups known as “political organizations.” In both cases, the new Rules impermissibly narrow the range of activity that is reported or that must be counted to trigger registration of groups by limiting the definitions to the hyper-technical category of “express advocacy” or its “functional equivalent.” However, both these provisions merely require registration and disclosure of spending and contributions – they do not impose contribution limitations or prohibit any spending. When regulations require only disclosure, campaign finance jurisprudence has consistently treated such provisions with a lower level of scrutiny and declined to apply the limits of “express advocacy.” Longstanding U.S. Supreme Court precedent has held that disclosure laws pose far less risk of infringement on free speech than do contribution or spending restrictions. See Citizens United, 130 S. Ct. 876 at 915 (discussing the application of this principle in cases from Buckley 5
v. Valeo, 424 U.S. 1 (1976) to the present); NM Youth Organized v. Herrera, 611 F.3d 669, 676 (10th Cir. 2010) (distinguishing scrutiny applied to disclosure regulations). The “express advocacy” standard was created by the Court in Buckley to address vagueness problems within the federal definition of “expenditure” which triggered contribution and spending limitations. See Buckley, 424 U.S. at 44. In the 8-1 portion of the Citizens United majority opinion, however, the Supreme Court made clear that no “express advocacy” limitation is constitutionally required when a law requires only disclosure of election-related spending or a disclaimer identifying the speaker: As a final point, Citizens United claims that, in any event, the disclosure requirements in § 201 must be confined to speech that is the functional equivalent of express advocacy. The principal opinion in WRTL limited 2 U.S.C. § 441b's restrictions on independent expenditures to express advocacy and its functional equivalent. 551 U.S., at 469-476, 127 S. Ct. 2652, 168 L. Ed. 2d 329 (opinion of Roberts, C. J.). Citizens United seeks to import a similar distinction into BCRA's disclosure requirements. We reject this contention. Id. at 915 (emphasis added). Post-Citizens United decisions make this point clear. See National Organization for Marriage v. McKee, 649 F.3d 34, 54-55 (1st Cir. 2011) (finding express advocacy standard “has no place” in the review of state disclosure-oriented laws); Real Truth About Abortion, Inc. v. F.E.C., 681 F.3d 544 at *10-11 (4th Cir. 2012) (disclosure subject to lower scrutiny); Human Life of Washington, Inc. v. Brumsickle, 624 F.3d 990, 1016-17 (9th Cir. 2010) (same). The Secretary’s attempt to import an “express advocacy” or its “functional equivalent” limitation to Colorado’s disclosure laws should be struck down as contrary to law and beyond the scope of Secretary’s authority.
1. Electioneering Communications Definition (Rule 1.7) The Secretary’s further modification of the “electioneering communications” definition in Rule 1.7 is a prime example of his effort to apply judicial precedent to Colorado law and use regulations to implement how he thinks the law should be under the guise of “clarify[ing] an existing definition.” Answer Br. at 16. The Rule not only exceeds the Secretary’s rulemaking authority, but also imposes arbitrary and capricious limitations on the public disclosure mandated by Colorado voters. The plain language of the “electioneering communication” definition in both federal and Colorado law reaches broadly to regulate any communication in the 30/60-day window before a primary or general election that merely “unambiguously refers to any candidate.” Colo. Const. art. XXVIII, § 2(12)(a); 2 U.S.C. § 434(f)(3)(A). In 2007, the reach of these provisions was temporarily narrowed to communications that meet the stated provision and contain “the functional equivalent of express advocacy” because those provisions were tied to a corporate and labor union speech ban and therefore had to be read narrowly. F.E.C. v. Wisconsin Right to Life, 551 U.S. 449, 481 (2007) (WRTL). However, this judicial filter limiting the scope of the electioneering communication provision was disregarded as inadequate protection of speech when Citizens United opted instead to strike down the spending prohibitions entirely. Citizens United, 130 S. Ct. at 913. As noted above, however, the Court explicitly rejected application of the “functional equivalent” limitations on the remaining disclosure provisions. Id. at 915-16. The impact of this 8-1 decision is clear: once the electioneering communications provision was limited to disclosure provisions (as confirmed in Colorado’s provision by In Re Interrogatories Propounded by Governor Ritter, Jr. Concerning the Effect of Citizens United v. Federal Election Comm’n, 558
U.S.___ (2010) on Certain Provisions of Article XXVIII of The Constitution of the State of Colorado, 227 P.3d 892 (Colo. 2010)), the “functional equivalent” standard is no longer applicable. See, e.g., See National Organization for Marriage, 649 F.3d at 54 (stating functional equivalent line of cases “came to a definitive end with Citizens United”); Real Truth About Abortion, 681 F.3d at *19 (noting “mandatory disclosure requirements are permissible when applied to ads that merely mention a candidate” after Citizens United); Human Life of Washington, 624 F.3d at 1016 (stating Citizens United refused to apply functional equivalent standard to disclosure); Vermont Right to Life v. Sorrell, 2012 U.S. Dist. Lexis 86175, *121-22 (D. Vt. 2012) (stating Citizens United rejected the argument that electioneering communications disclosure provisions could only cover express advocacy or its functional equivalent). Thus, the Secretary’s argument that Rule 1.7 simply clarifies prior Rule 9.4 without any additional modification misses the point. Rule 9.4 did truly reflect the state of the law when enacted in 2007 – a narrower construction of the electioneering communications definition required in order for the funding prohibitions to be constitutional – but that is not the law in 2012.4 Just as the Secretary admits that the initial interpretation of the electioneering communications provision in Harwood v. Senate Majority Fund, 141 P.3d 962 (Colo. App. 2006), was no longer applicable after the WRTL rejection of an intent-and-effect test,5 the prior narrowing constructions of the definition carried over from prior Rule 9.4 are no longer appropriate after Citizens United and In Re Interrogatories removed the funding prohibitions that could chill speech. Rule 1.7 does reduce the amount of spending to be disclosed under Article
Similarly, the assertion that ALJs did “routinely apply” the narrower test in electioneering disputes while that was the controlling judicial interpretation does not mean that the provisions should not be applied now in its broader form after Citizens United. Answer Br. at 21. 5 Answer Br. at 18.
XXVIII as there is no constitutional reason not to apply the plain language definition of “electioneering communication” in Colo. Const. art. XXVIII, § 2(12)(a). Finally, if the Secretary’s goal is to implement clear rules that are easy for unsophisticated participants in the political system to understand, the bright-line triggers of Article XXVIII’s electioneering communications provision (what date the communication runs, where and how it is distributed, and any reference to a candidate) meet that goal infinitely better than Rule 1.7’s multi-part test with three-part exception. See Citizens United, 130 S.Ct. at 895896 (stating that the complexity of the FEC’s “functional equivalent” regulation functions as the equivalent of the prior restraint on speech). Rule 1.7 is arbitrary and capricious and beyond the Secretary’s authority. 2. Political Organization Definition (Rules 7.2 and 1.10) The Secretary’s arguments completely ignore the essence of Plaintiffs’ challenge to the new political organization rule: the new Rules collapse the distinction between “political committees” and “political organizations” under Colorado law. Joint Opening Br. at 25. Once new Rules 7.2 and 1.10 add in major purpose and express advocacy requirements to the latter, both categories now only extend to entities whose major purpose is making express advocacy expenditures in Colorado candidate elections. Yet, the two categories must have distinct and separate coverage because “political committees” are subject to contribution limitations under Article XXVIII and “political organizations” are merely disclosure-only entities. This illogical and absurd result of the Secretary’s actions justify invalidating both Rules 7.2 and 1.10. See Frazier v. People, 90 P.3d 807, 812 (Colo. 2004). In addition, the new Rules disregard the General Assembly’s specific choice of words in the political organization legislation and substitute the Secretary’s policy preferences in a way
that decreases the amount of disclosure to Colorado voters regarding spending directly affecting elections in their state. CCC and Ethics Watch agree with the Secretary that the Court must defer to the legislature’s choice of words which were deliberately selected with knowledge of definitive judicial interpretations of those words. Answer Br. at 36-37 (citing Vaughan v. McMinn, 945 P.2d 404, 409 (Colo. 1997)). However, the General Assembly deliberately chose to avoid using words that were arguably given technical meaning from Buckley in order to address a loophole in existing law, where groups that were spending money in Colorado to influence candidate elections but did not meet the threshold for political committees were immune from disclosure of any sort. See Comment of Sen. Morgan Carroll, Administrative Record, Tab 5.12 (stating new Rules changes “run 180 degrees opposite of the legislative intent” of legislation creating § 527 disclosures). The first choice the General Assembly made was to require disclosures from a broader class of § 527 organizations that were not at that time required to report in Colorado. Thus, the statute reaches any “political organization as defined in section 527(e)(1) of the [IRS code] that is engaged in influencing or attempting to influence the selection, nomination, election or appointment of any individual to any state or local public office in the state.” C.R.S. § 1-45103(14.5). It is clear from this language that the General Assembly intended to reach any § 527 organization that was engaged in any way in influencing Colorado elections, as the phrase does not read “ political organization that has the major purpose of influencing…”. With full knowledge of Buckley, the General Assembly chose the phrase “is engaged in” instead, and the Secretary cannot overrule that choice by adding “major purpose” into Rule 7.2.
The Secretary argues that the General Assembly did in fact include a major purpose test by requiring the organization fit the definition of § 527(e)(1). However, a more complete look at the exact language of that section illustrates otherwise: (e) Other definitions. For purposes of this section--
(1) Political organization. The term "political organization" means a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function. (2) Exempt function. The term "exempt function" means the function of influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or VicePresidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed.
26 U.S.C. § 527 (e)(1)-(2) (emphasis added). As the emphasized provisions make clear, a § 527 organization must have a primary purpose of influencing elections or appointments of officials at the state or federal level or both. The General Assembly limited the reach of the political organization disclosure requirements only to § 527 organizations operating or “engaged” in Colorado state or local candidate races. However, the new Rules narrow the reach of political organizations disclosure further – to only § 527 organizations whose “major purpose” is influencing Colorado state and local elections. This is not an implementation and clarification of what it means to be a § 527 organization. A simple example illustrates how the new Rules limit the range of groups reporting as political organizations in direct contrast to legislative intent. A national organization headquartered in California registers with the IRS as an § 527 organization stating that its primary purpose is to support candidates at the federal, state and local level that support strong 11
environmental laws. In 2012, the group decides to spend $500,000 in Colorado to support a Colorado state legislative candidate in addition to a number of other races at the federal and state level across the country. The total election year spending for all these races is $50 million. Applying the statutory language to this example, this is a § 527 organization that is “engaged in” influencing a Colorado state candidate race and, therefore, would be deemed a “political organization” and required to disclosure contributions and spending in Colorado. See C.R.S. § 145-108.5. However, applying new Rules 7.2 and 1.10, the group would not meet the definition despite its tax status because it does not have a “major purpose” of influencing Colorado elections. This is exactly the type of previously undisclosed spending that the General Assembly intended to cover with the political organization statute. Section 527 status means that an organization has a primary purpose of influencing elections in general, across the country, at all levels of government.6 This is not the same as saying it is a group that has a major purpose of influencing specifically Colorado elections. Therefore, Rules 7.2 and 1.10 modify the statutory language and are invalid as contrary to law. In addition, despite the Secretary’s belief that “the plain meaning of the terms ‘primary’ and ‘major’ are identical” (Answer Br. at 34), there has been much debate in the past decade as to that point and whether the technical terms of “major purpose” and “primarily for the purpose of” in campaign finance and tax law are equivalent. See, e.g. Notice of Proposed Rulemaking on Political Committee Status, 69 Fed. Reg. 11736, 11744 (March 11, 2004) (discussing issues raised in section titled “Major Purpose or Primary Purpose?”); Shays, et al. v. FEC, 511 F. Supp. 2d 19, 30-31 (D.D.C. 2007) (upholding the FEC decision not to issue a major purpose rule based on § 527 status). The Court need not resolve that question in this case, however, because the
Actually, the statute is broader as it covers organizations focused on nominations and appointments of officials as well. 26 U.S.C. § 527 (e)(2). Thus, an organization that is primarily involved in judicial nominations or executive appointments with only minimal activity in electoral politics could be registered as a § 527 organization.
Secretary’s major purpose requirement goes much farther than implementing the statute requiring disclosure by any § 527 organization engaged in Colorado elections. The other half of the Secretary’s changes to the political organization rules is the requirement in new Rule 1.10 that such groups make “express advocacy” expenditures. As discussed above, the political organization statute is a disclosure-only provision and the express advocacy standard is inapplicable. A concrete example of where the Rule decreases disclosure as cited in CCC and Ethics Watch’s opening brief can be found in the organizations at issue in Colorado Ethics Watch v. Senate Majority Fund, 269 P.3d 1248 (Colo. 2012). In that case, two organizations were spending in Colorado candidate races, but solely making communications that the Court held did not rise to the level of express advocacy. Yet, “SMF and CLF concede that they were ‘political organizations’ as defined in section 1-45-103(14.5)” and the Court and plaintiffs agreed. Id. at 1251, 1258 n.8. Under the new Rules, SMF and CLF would be able to de-register and stop reporting as political organizations because they do not engage in “express advocacy.” This leads to the second choice that the General Assembly deliberately made: that the political organization definition would not be subject to the express advocacy standard. The Secretary argues that by using the word “influencing” the General Assembly imported the Buckley standard into the statute. Answer Br. at 35-36. Yet “influencing” is not the technical term interpreted by Buckley – it was the technical terms “political committee” and “expenditure” that Buckley was interpreting and narrowing for First Amendment compliance. See Buckley, 424 U.S. at 78-79; National Organization for Marriage, 649 F.3d at 64-66 (refusing to apply Buckley narrowing to the term “influencing” when the term is paired with other words in state statute). These are the terms that the General Assembly carefully avoided and do not appear in the
political organization statute. Instead the statute defines its own term of “spending” in C.R.S. § 1-45-103(16.5). Again, these choices by the General Assembly make sense because legislative intent was to create an additional category of disclosure-only regulation for groups that were currently not required to report as “political committees” – a status that all parties agree requires “express advocacy expenditures.” The Secretary cannot substitute his policy preference for the General Assembly’s and limit disclosure through Rules 7.2 and 1.10. C. The New Rules Explicitly Add to or Change Statutory and Constitutional Requirements Where No “Gap” Exists The Secretary also exceeds his authority by using regulations to add and change the provisions regarding “political committees,” “issue committees,” and “major contributor” reports. In all three instances the new Rules limit the scope for a net decrease in disclosure and enforcement of the campaign finance rules. 1. Political Committee Definition (Rule 1.18) The Secretary agrees that Rule 1.18 “incorporates” a major purpose test into the Colorado constitutional definition of “political committee” that does not exist in the text of Article XXVIII. Answer Br. at 30. Even if that judicial interpretation exists, the Secretary lacks the power to change the explicit definition under the separation of powers and his limited delegated authority to “administer and enforce” campaign finance law in Colorado. Indeed, the Secretary seeks to do something even the courts have said they lack the power to do – amend the constitutional definition. See Colorado Right to Life Committee, Inc. v. Coffman, 498 F.3d 1137, 1154-55 (10th Cir. 2007) (“we cannot re-write state laws to conform with constitutional requirements where doing so would be inconsistent with legislative, or here, the state citizenry's intent”). Thus, Rule 1.18 exceeds the Secretary’s authority and is invalid.
In addition, the major purpose test incorporated into Rule 1.18 is arbitrary and capricious because it narrows the scope of groups that could meet this test and be required to follow the disclosure and contribution limits for political committees. The Secretary claims that the criteria in the Rule are appropriate because they are taking directly from the case law interpreting the major purpose test. Answer Br. at 31-32. Not so. The Tenth Circuit suggested two considerations for evaluating major purpose: 1. “examination of the organization’s central purpose” or 2. “comparison of the organization’s independent spending with overall spending to determine whether the preponderance of expenditures are for express advocacy or contributions to candidates. Colorado Right to Life, 498 F.3d at 1152. Rule 1.18 narrows the scope of this test in two ways. First, the Rule limits the major purpose test to a comparison of the organization’s expenditures to total spending and completely ignores any calculation of the organization’s contributions to candidates (which are permissible under Colorado law). Surely making contributions to political candidates would be indicative of whether or not the group had a major purpose of influencing candidate elections. Second, the Rule only looks to what the organization states as to its purpose “in organizing documents.” Under this test, an organization may talk about candidates on websites and in solicitations and still not trigger the major purpose test so long as the corporate documents do not mention a purpose of supporting or opposing candidates. This is not consistent with the test as applied by the courts. See NM Youth Organized v. Herrera, 611 F.3d at 678 (examining actual activities of organizations to determine organization purpose). As the Colorado Court of Appeals stated when determining the purpose of an organization under the predecessor statute governing political committees:
While the stated purposes for the formation of the organization may be one criterion upon which to determine whether it is a "political committee," they are not conclusive. To so hold would permit regulable conduct to escape regulation merely because the stated purposes were misleading, ambiguous, fraudulent, or all three. In addition, such a holding would exalt form over substance and would almost entirely eviscerate the Act and make a mockery of a legitimate attempt at campaign finance reform. League of Women Voters of State v. Davidson, 23 P.3d 1266, 1275 (Colo. Ct. App. 2001). Thus, Rule 1.18’s articulation of a major purpose test for political committees is arbitrary, capricious and contrary to law. 2. Issue Committee Definition (Rule 1.12) The Secretary admits that the General Assembly has provided “a statutory methodology” for determining if an organization meets the Colorado constitutional major purpose test for issue committees. Answer Br. at 23. This admission should end the Court’s inquiry. Rule 1.12 adds a specific 30% threshold on committee spending which does not exist in the statute. The Secretary relies on Cerbo v. Protect Colorado Jobs, Inc., 240 P.3d 495, 501 (Colo. App. 2010) to argue that a “gap” exists for him to fill through regulation. Answer Br. at 25-26. The General Assembly, however, has already responded to Cerbo by enacting C.R.S. § 1-45103(12)(b). Once that provision became effective on January 1, 2011 any remaining “gap” was filled by the General Assembly. The Secretary does not have the authority to add to, modify or contradict that determination. Sanger, 148 P.3d at 413. Moreover, the Secretary has still not provided any justification for drawing the line at 30%. Certainly nothing in the record supports that threshold; it is the paradigm example of an arbitrary determination by an administrator and must be rejected for that additional reason.7
The Secretary’s “wealth-neutral” justification here is irrelevant. Similar to the political organization and electioneering communications provisions discussed above, the issue committee provisions are disclosure-only regulations that do not include any contribution or spending limitations or prohibitions. Thus, there is no danger of
3. Limitations on Major Contributor Report Fines (Rule 18.1.8) Colorado law requires entities to file a major contributor report “in addition” to any regularly-scheduled report and assesses an automatic penalty of $50 per day for each day the report is not filed between the 48-hour deadline and whenever that specific, separate report is filed. See C.R.S. § 1-45-108(2.5), § 1-45-111.5(c). Rule 18.1.8 instead implements the policy that “once a reporting deficiency is cured, continuing sanctions are unwarranted.” Answer Br. at 38. The specific, clear language of the statute requires a second report even if the underlying information is reported elsewhere and the Secretary has no authority to change that requirement. Moreover, the Secretary’s answer simply ignores the second half of Rule 18.1.8 that stops accrual of all penalties on the date of the general election even if no disclosure of the contribution is ever made. The Secretary’s own justification is not served if no major contributor report is filed, the contribution is not reported on any regularly-scheduled report, and yet no penalties can be assessed because the general election has passed. Common sense says this will encourage at least some candidates and groups to just “wait it out” and limit the exposure to civil penalties because of this cap. Finally, the power to “set aside or reduce” a civil penalty is not the same as the authority to stop a penalty from even accruing in the first place. Answer Br. at 38-39. If the Secretary wants to consider the ultimate disclosure of a large contribution on a regularly-scheduled report as one of the factors in whether or not to grant a specific committee’s waiver request from penalties assessed, that might be permissible. But that is not what Rule 18.1.8 does. Reporting the major contribution elsewhere is not listed as a factor to be considered under “good cause” in the chart governing waiver requests in Rule 18.1.2. Instead, this is a separate determination
“suppression of political speech based on the speaker’s identity” that would require this court to limit the disclosure sought by Colorado voters on the basis of protecting wealthy speakers.
across the board – not in a specific waiver request – that fines will never be applied when a contribution is reported on a regularly-scheduled report or when the general election has passed. This limitation exceeds the Secretary’s authority. D. The Newly Enacted Issue Committee Thresholds (Rules 4.1 and 15.6) Exceed the Secretary’s Authority The Secretary argues that Plaintiffs’ challenge to Rules 4.1 and 15.6, changing the thresholds for regulation as an issue committee, is not ripe because of the pending appeal in the prior case addressing the same issue. This argument misses the point of Plaintiffs’ request to the Court. Plaintiffs do not ask this Court to preempt a decision from the Court of Appeals. Rather, Plaintiffs simply ask that this Court apply the law as it currently stands and determine that the new rules – like the rules challenged in the earlier case – exceed the Secretary’s authority. If the Court of Appeals rules otherwise, that ruling will certainly apply to any appeal of this case. But until the law changes, there is no reason that this Court cannot interpret current law and make any appropriate rulings. The Secretary cites no Colorado case law to support his remarkable contention that this Court cannot interpret and apply the current law to Plaintiffs’ claims. The Colorado cases he cites state the well-settled principle that an appellate court reviewing legal issues de novo stands in the same position as the trial court.8 See Skyland Metro. Dist. v. Mountain West Enterprise, LLC, 184 P.3d 106, 115 (Colo. App. 2007); Eason v. Bd. of County Comm’rs, 70 P.3d 600, 609 (Colo. App. 2003). They say nothing at all about whether a pending appeal on a similar issue strips a trial court of authority to make legal determinations. Moreover, the Maryland case relied upon by the Secretary involved a question of whether a trial court abused its discretion in dismissing a case where another identical case was pending before another court with concurrent
Answer Br. at 41.
jurisdiction. See Sprenger v. Pub. Serv. Comm’n of Md., 910 A.2d 544, 552 & n.6 (Md. App. 2006). It does not support the proposition that a trial court must abstain from interpreting existing law to wait for potential rulings from an appellate court. CONCLUSION The Court should enter judgment in favor of Plaintiffs and against the Secretary as requested in the Complaint in No. 2012CV2133, except as to Plaintiffs’ seventh claim for relief (regarding political party contribution limits and Rule 14.4), which should be dismissed as moot. DATED: July 17, 2012.
[Original Signature on File] _/s/ Luis Toro ______________ Luis Toro Margaret Perl Colorado Ethics Watch 1630 Welton Street, Suite 415 Denver, CO 80202 Attorneys for Colorado Ethics Watch
[Original Signature on File] ___/s/ Jennifer Hunt__________ Jennifer H. Hunt Hill & Robbins, P.C. 1441 18th Street, Suite 100 Denver, CO 80202-1256 Attorney for Colorado Common Cause
CERTIFICATE OF SERVICE The undersigned hereby certifies that on the 17th day of July, 2012, service of the foregoing JOINT REPLY BRIEF was made via LexisNexis File & Serve, addressed as follows: Maurice G. Knaizer Frederick R. Yarger State Services Department Office of the Attorney General 1525 Sherman Street, 7th Floor Denver, CO 80203 email@example.com Mark Grueskin Heizer Paul Grueskin LLP 2401 15th Street, Suite 300 Denver CO 80202 firstname.lastname@example.org signed original on file
_/s/ Luis Toro ______________