FILED: NEW YORK COUNTY CLERK 03/13/2014

NYSCEF DOC. NO. 39

INDEX NO. 161554/2013 RECEIVED NYSCEF: 03/13/2014

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 16 ---------------------------------------------------------------------- x STRATEGIC ADVANTAGE INTERNATIONAL : and DANIEL ODESCALCHI, : : Petitioners, : : - against : : COMMISSION TO INVESTIGATE PUBLIC : CORRUPTION, : : Respondent. : : ---------------------------------------------------------------------- x

Index No. 161554/2013

Honorable Alice Schlesinger Oral Argument Requested

MEMORANDUM OF LAW IN FURTHER SUPPORT OF PETITION TO QUASH SUBPOENAS AND FOR A PROTECTIVE ORDER AND IN OPPOSITION TO RESPONDENT’S MOTION TO COMPEL

Joanna C. Hendon Christopher W. Dysard Richard M. Benjamin Benjamin Silverman SPEARS & IMES LLP 51 Madison Avenue New York, NY 10010 (212) 213-6996 Attorneys for Petitioners

   

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .......................................................................................................... ii PRELIMINARY STATEMENT .....................................................................................................1 RELEVANT FACTUAL BACKGROUND AND LEGAL FRAMEWORK .................................4 A. B. C. Common Sense Has Complied with Federal Law ...................................................6 Common Sense Complied with New York’s Lobbying Laws.................................8 Common Sense Complied with New York’s Election Laws ...................................9

ARGUMENT .................................................................................................................................10 I. II. THE COMMISSION WAS NOT AUTHORIZED TO ISSUE THE SUBPOENAS ...........................................................................................................10 THE INFORMATION SOUGHT IS NOT RELEVANT TO THE MORELAND COMMISSION’S TASK ...................................................................................................15 A. The Commission Cannot Explain How the Subpoenaed Information Is Relevant to its Mandate ........................................................................................15 i. ii. B. III. The Commission Cannot Explain How the Names It Seeks Are Relevant to its Mandate.............................................................................................15 The Commission No Longer Has Need for the Names it Seeks ................17

The Commission Cannot Demonstrate Relevance Through Ad Hominem Attacks and Innuendo ............................................................................................20

THE FIRST AMENDMENT PROTECTS FROM DISCLOSURE THE NAMES SOUGHT BY THE SUBPOENA ......................................................................................22 A. B. The Information Requested by the Commission Implicates Significant First Amendment Concerns ...................................................................................23 No Compelling State Interest Warrants Disclosure ...............................................28

IV.

THE COMMISSION’S SUBPOENAS ARE PREEMPTED BY THE INTERNAL REVENUE CODE ........................................................................................30

CONCLUSION ..............................................................................................................................33

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TABLE OF AUTHORITIES Cases A’Hearn v. Comm’n on Unlawful Practice of Law in N.Y. County Lawyers’ Ass’n, 23 N.Y.2d 916 (1969) ..............................................................................................................10 Arizona v. United States, 132 S. Ct. 2492 (2012) .............................................................................................................30 Bailey v. Me. Comm’n on Gov’t Ethics and Election Practices, 900 F. Supp. 2d 75 (D. Me. 2012) ...........................................................................................27 Biscone v. JetBlue Airways Corp., 957 N.Y.S.2d 361 (2d Dep’t 2012) ..........................................................................................31 Buckley v. Valeo, 424 U.S. 1 (1976) .................................................................................................................9, 29 Citizens United v. FEC, 558 U.S. 310 (2010) ...............................................................................................15, 16, 21, 24 Ctr. For Individual Freedom v. Madigan, 697 F.3d 464 (7th Cir. 2012) ...................................................................................................29 DeGregory v. Attorney Gen. of State of N.H., 383 U.S. 825 (1966) .................................................................................................................28 Ex Parte Lowe, 887 S.W.2d 1 (Tex. 1981)........................................................................................................29 FEC v. Larouche Campaign, 817 F.2d 233 (2d Cir. 1987)...................................................................................15, 20, 22, 23 Gibson v. Fla. Legislative Investigation Comm., 372 U.S. 539 (1963) .................................................................................................................28 Ginett v. Computer Task Group, Inc., 962 F.2d 1085 (2d Cir. 1992)...................................................................................................12 Golden v. Clark, 76 N.Y.2d 618 (1990) ..............................................................................................................23 Hillman v. Maretta, 133 S. Ct. 1493 (2013) .............................................................................................................30

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Human Life of Wash. Inc. v. Brumsickle, 624 F.3d 990 (9th Cir. 2010) ...................................................................................................29 In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liability Litig., 725 F.3d 65 (2d Cir. 2013).......................................................................................................30 John Doe No. 1 v. Reed, 561 U.S. 186 (2010) .................................................................................................................27 Klepper v. Christian Coal., Inc., 259 A.D.2d 926 (3d Dep’t 1999) ...............................................................................................9 Kolbe v. Tibbetts, 22 N.Y.3d 344 (2003) ..............................................................................................................12 Liberty Mut. Ins. Co. v. Donegan, 2014 WL 401708 (2d Cir. Feb. 4, 2014)..................................................................................30 Madeira v. Affordable Hous. Found., Inc., 469 F.3d 219 (2d Cir. 2006).....................................................................................................31 Matter of Abbruzzese v. N.Y. Temp. State Comm’n on Lobbying, 43 A.D.3d 518 (3d Dep’t 2007) ...............................................................................................10 Matter of Di Brizzi (Proskauer), 303 N.Y. 206 (1951) ................................................................................................................13 Matter of Gen. Elec. Capital Corp. v. N.Y. State Div. of Tax Appeals Trib., 2 N.Y.3d 249 (2004) ................................................................................................................12 Matter of Nicholson v. State Comm’n on Judicial Conduct, 68 A.D.2d 851 (1st Dep’t 1979) ..............................................................................................10 Matter of Nicholson v. State Comm’n on Judicial Conduct, 50 N.Y.2d 597 (1980) ..............................................................................................................27 Matter of Office of Attorney Gen. of State of N.Y., 709 N.Y.S.2d 1 (1st Dep’t 2000) .............................................................................................15 Matter of Parkhouse v. Stringer, 12 N.Y.3d 660 (2009) ..............................................................................................................15 McConnell v. FEC, 540 U.S. 93 (2003) ...................................................................................................................29

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NAACP v. Alabama, 357 U.S. 449 (1958) ...........................................................................................................23, 28 Nat’l Org. for Marriage v. McKee, 666 F. Supp. 2d 193 (D. Me. 2009) ...........................................................................................4 N.Y. State Comm’n on Gov’t Integrity v. Congel, 156 A.D.2d 274 (1st Dep’t 1989) ...................................................................................... 19-20 N.Y. State Nat’l Org. for Women v. Terry, 886 F.2d 1339 (2d Cir. 1989)...................................................................................................23 Pacific-Union Club v. Superior Court, 232 Cal. App. 3d 60 (Cal. Ct. App. 1991) ...............................................................................29 Perry v. Schwarzenegger, 591 F.3d 1147 (9th Cir. 2010) .................................................................................................23 Pollard v. Roberts, 283 F. Supp. 248 (E.D. Ark. 1968), aff’d, 393 U.S. 14 (1968)....................................24, 26, 28 Rowell v. Gould, Inc., 124 A.D.2d 995 (4th Dep’t 1986) ............................................................................................13 Savola v. Webster, 644 F.2d 743 (8th Cir. 1981) ...................................................................................................29 Scheja v. Sosa, 4 A.D.3d 410 (2d Dep’t 2004) .................................................................................................12 SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir. 2010) ........................................................................................... 29-30 Talley v. California, 362 U.S. 60 (1960) ...................................................................................................................23 United States v. Church of World Peace, 775 F.2d 265 (10th Cir. 1985) .................................................................................................27 Woodward v. State of N.Y., 805 N.Y.S.2d 670 (3d Dep’t 2005) ..........................................................................................32 United States Constitution & Federal Statutes U.S. Const. art. VI, cl. 2 .................................................................................................................30

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26 C.F.R. § 1.501(c)(4)-1.................................................................................................................4 18 U.S.C. § 1905 ..............................................................................................................................5 26 U.S.C. § 501(c)(4).......................................................................................................................4 26 U.S.C. § 6103 ..........................................................................................................16, 20, 31, 32 26 U.S.C. § 6104(b) .............................................................................................5, 6, 16, 20, 31, 32 26 U.S.C. § 6104(c)(3)...............................................................................................................5, 31 26 U.S.C. § 6104(d)(3) ..................................................................................5, 6, 16, 20, 21, 31, 32 New York State Constitution & Statutes N.Y. Con. art. I...............................................................................................................................23 Civil Rights Law § 73 ....................................................................................................................14 Election Law § 14-100 ...............................................................................................................9, 30 Election Law § 14-101 .....................................................................................................................9 Election Law § 14-102 .....................................................................................................................9 Executive Law § 6 ...............................................................................................................1, 10, 11 Executive Law § 63(8) .............................................................................................1, 10, 11, 13, 14 Legislative Law § 1-e(a)(1) .............................................................................................................8 Legislative Law § 1-j .......................................................................................................................8 New York Public Integrity Reform Act of 2011, 2011 Sess. Law News of N.Y. Ch. 299 (S. 5679)......................................................................8 Federal Regulations Rev. Rul. 2004-6, 2004-1 C.B. 328 .................................................................................................4 State Regulations Executive Order (Gov. Mario Cuomo) No. 88.1 ...........................................................................12 Executive Order (Gov. Andrew Cuomo) No. 76 ...........................................................................13 v

Executive Order (Gov. Andrew Cuomo) No. 106 ...........................................................1, 2, 10, 11 N.Y. Comp. Codes R. & Regs. Tit. 13, § 91.6...............................................................................18

Other Authorities Associated Press, John Kerry Grills Belgium Ambassador Nominee Over Swift Boat Donation, FoxNews.com (Feb. 28, 2007), available at http://www.foxnews.com/story/2007/02/28/johnkerry-grills-belgium-ambassador-nominee-over-swift-boat-donation/ .........................................24 Institute for Justice, Brief of Amici Curiae, Citizens United v. FEC, 558 U.S. 310 (2010) (No. 08-205) ...........................................................................................................................................24 List of Moreland Commissioners, available at http://publiccorruption.moreland.ny.gov/commissioners ..........................................14 David McCormack, Whole Foods Threatened with Boycott by Liberal Customers After CEO Compares Obamacare to ‘Fascism,’ U.K. Daily Mail (Jan. 17, 2013), available at http://dailymail.co.uk/news/article-2264307/Whole-Foods-threatened-boycott-liberal-customersCEO-compares-Obamacare-fascism.html .....................................................................................25 New York State Office of the Attorney General, A.G. Schneiderman Adopts New Disclosure Requirements for Nonprofits that Engage in Electioneering (June 5, 2013), available at http://www.ag.ny.gov/press-release/ag-schneiderman-adopts-new-disclosure-requirementsnonprofits-engage-electioneering/ .................................................................................................18 Lydia Saad, Heavily Democratic States Are Concentrated in the East, Gallup Politics (Aug. 3, 2012), available at http://www.gallup.com/poll/156437/heavily-democratic-states-concentratedeast.aspx .........................................................................................................................................24 Kim Severson, Chick-fil-A Thrust Back Into Spotlight on Gay Rights, N.Y. Times (July 25, 2012), available at http://www.nytimes.com/2012/07/26/us/gay-rights-uproar-over-chick-fil-awidens.html ....................................................................................................................................24 Jimmy Vielkind, Senate GOP is paying Super PAC founder, Capital Confidential (Oct. 22, 2012), available at http://blog.timesunion.com/capitol/archives/160954/senate-gop-is-payingsuper-pac-director/ ...................................................................................................................16, 17 Joe Weisenthal, Liberals Threaten Whole Foods Boycott Over CEO’s Healthcare Stance, Business Insider (Aug. 15, 2009), available at http://www.businessinsider.com/liberals-threatenwhole-foods-boycott-over-ceos-healthcare-stance-2009-8............................................................25

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Petitioners Daniel Odescalchi and Strategic Advantage International (“SAI”) respectfully submit this memorandum of law in further support of their Petition to Quash and for a Protective Order, and in opposition to Respondent’s Motion to Compel. PRELIMINARY STATEMENT Conceding the overbreadth of its subpoenas (“the Subpoenas”), Respondent has narrowed its request to cover the names of those who funded Common Sense, a former client of Petitioners, and the names of those who directed its activities. The Court should grant the Petition to Quash and deny Respondent’s Motion to Compel on four separate grounds. First, the Subpoenas are not authorized by New York law. Second, the information sought by Respondent is irrelevant to its mandate. Third, the Subpoenas seek information protected by the First Amendment. Fourth, and finally, the Subpoenas are preempted by federal law. The Subpoenas should be quashed because they are unauthorized. The investigative authority of the Commission to Investigate Public Corruption (the “Commission”) derives from a single source, Executive Order 106, which grants the Commission the power to issue subpoenas under Sections 6 and 63(8) of the Executive Law, “provided, however, that . . . the CoChairpersons shall unanimously approve such procedures and rules as they believe necessary to govern the exercise of the powers and authority given or granted to the Commissioners . . . including rules designed to provide transparency while protecting the integrity of the investigation and rights to privacy.” Executive Order (Gov. Andrew Cuomo) No. 106, § V (“Exec. Order No. 106”) (emphasis added). The Commission concedes it has not complied with this condition precedent, but argues it need not do so. However, the Commission cites no persuasive authority for a position that in any event is foreclosed by the plain language of the order and First Department precedent.

Nor can the Commission demonstrate the relevance of the information sought to any legitimate goal. The Commission’s mandate is to investigate “weaknesses in existing laws, regulations and procedures relating to the regulation of lobbying . . . and make recommendations to reform any weaknesses uncovered in existing State laws, regulations and procedures.” Exec. Order No. 106. Common Sense is a not-for-profit social welfare organization under Section 501(c)(4) of the Internal Revenue Code established for the purpose of issue advocacy, including engaging in lobbying activities. Federal law requires such organizations to make detailed public disclosures about their management, operations, and activities, but it expressly provides that donor names and addresses be kept confidential. The Commission plainly has fulfilled its mission with respect to examining 501(c)(4) organizations, such as Common Sense. In December 2013, the Commission issued a tome-like “Preliminary Report” (“Moreland Report” or “Report’) in which it boasted to having uncovered “more than enough information to warrant sounding the alarm for immediate legislative action to help stem the tide of corruption in the [State of] New York.” Affirmation of Joanna Hendon, dated December 16, 2013 (“Hendon Aff.”) Exh. A at 3. On the subject of 501(c)(4) organizations, the Commission stated that its investigation “reveals the growing problem of groups spending large sums of money in our elections without reporting their activities or disclosing their donors.” Id. at 39. The Report singles out Common Sense as such a group and makes detailed recommendations for legislative action, including that any entity spending $1,000 or more in an election in New York report the name and address of every donor who has contributed $1,000 or more to the entity, unless that donor earmarks its donations for “nonelection-related activities.” Id. at 39-40, 54-58.

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Furthermore, a sitting member of the Commission (the Attorney General) has already caused New York State’s Charities Bureau to adopt rules designed to address the same 501(c)(4) “loophole” the Commission claims to be investigating, without obtaining (or even requesting) any information from Common Sense – a fact that only underscores that the Commission has no legitimate need or use for the names of private citizens it now seeks. The Commission offers no serious response to this attack, devoting nearly one-third of its brief, instead, to its own views of “dark money” organizations and unsubstantiated allegations and innuendo of misconduct by Common Sense. The truth is that Common Sense has complied with all applicable laws and has not been accused of wrongdoing by anyone. The Subpoenas should be quashed for the independent reason that they seek to abridge the First Amendment rights of Petitioners, their clients, and donors to those clients who rely on the protections of federal law, for the sake of what, at bottom, is a fishing expedition. The Commission concedes that to survive this Petition it must show that its desire to know the names of Common Sense’s donors and personnel is “substantially related” to a “compelling government interest.” Unable to demonstrate even basic relevance under the forgiving standard of review appropriate where no First Amendment right is implicated, the Commission, as a matter of law, fails to meet its burden. Finally, the Commission’s efforts to peer into the 501(c)(4) structure and discover the names of Common Sense’s donors is preempted by the Internal Revenue Code, pursuant to which such information is collected, maintained, and protected from disclosure. Second Circuit law is clear that, where the “repugnance or conflict” between federal and state law is such that the two cannot be reconciled or consistently stand together, federal law controls. For this reason, as well, the Court should grant the Petition to Quash and deny Respondent’s Motion to Compel.

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RELEVANT FACTUAL BACKGROUND AND LEGAL FRAMEWORK Common Sense is a not-for-profit organization established in 2010 under Section 501(c)(4) of the Internal Revenue Code for the purpose of educating the public about conservative causes and engaging in lobbying activities that support its mission.1 Section 501(c)(4) of the Internal Revenue Code and corresponding Department of Treasury regulations require such organizations to be operated primarily for social welfare. 26 U.S.C. § 501(c)(4); 26 C.F.R. § 1.501(c)(4)-1(a)(2). Activities to influence legislation – including “issue advocacy” – have been deemed appropriate social welfare functions. See 26 C.F.R. § 1.501(c)(4)-1; Nat’l Org. for Marriage v. McKee, 666 F. Supp. 2d 193, 199-200 (D. Me. 2009). In fact, the Internal Revenue Service (“IRS”) publishes detailed guidance on how it distinguishes between “issue advocacy,” which under applicable rules is consistent with operating primarily for social welfare, and “campaign intervention,” which is not. See Rev. Rul. 2004-6, 2004-1 C.B. 328 (describing permissible communications in furtherance of a not-forprofit organization’s “public policy advocacy [that] involve[s] discussion of the positions of public officials who are also candidates for public office”).2 Consistent with this guidance, in 2010, Common Sense exercised its First Amendment right to engage in the policy advocacy process in New York by lobbying constituents to contact incumbent officeholders George Latimer, Joseph Addabbo, and Ted O’Brien and ask them to support legislation or policies related to ethics in government, pension reform, and lower taxes. As required by law, Common Sense makes public filings that describe in considerable detail its management and lobbying activities. Common Sense has disclosed the names,
                                                             1 Available at Supplemental Affirmation of Joanna C. Hendon, dated March 13, 2014 (“Supp. Hendon Aff.”) Exhs. A, B.
2

Available at http://www.irs.gov/pub/irs-irbs/irb04-04.pdf.

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addresses, and telephone numbers of its directors, lobbyists, and legal counsel, and the names and compensation paid to its five highest-paid contractors. Affirmation of Janos Marton, dated Feb. 6, 2014 (“Marton Aff.”) Exhs. C at 7-8, E at 1; Supp. Hendon Aff. Exh. A at 1. Common Sense has likewise disclosed its revenues, expenses, total donations, and the names of the organizations to which it has granted money and the purposes of those grants. Marton Aff. Exh. C at 1, 10, 20. A 501(c)(4) organization is required to file with the IRS a schedule that discloses the identity of persons who contributed $5,000 or more to the organization. This donor schedule, however, is confidential by federal statute and not subject to public disclosure by the IRS. 26 U.S.C. §§ 6104(b), 6104(d)(3) (prohibiting “the disclosure of the name or address of any contributor to the organization”). Indeed, it is a crime for federal officials to make an unauthorized disclosure of this donor information. See 18 U.S.C. § 1905. Neither federal nor New York law required Common Sense to disclose the identity of any donor in 2010 and 2011, and Common Sense did not do so. As discussed in greater detail below, in 2012, Common Sense publicly disclosed the name of its then-sole donor, because newly enacted provisions of New York law required it to do so.3 Petitioners are Daniel Odescalchi, a political consultant, and his firm, SAI. Mr. Odescalchi runs SAI from the apartment he lives in on West 79th Street in Manhattan. Supplemental Affidavit of Daniel Odescalchi, dated March 13, 2014 (“Supp. Odescalchi Aff.”), ¶ 1. In 2010, Common Sense retained Petitioners to develop its website and to help prepare
                                                             3 Unambiguous federal law limits the circumstances in which state officials may obtain the information Respondent seeks. 26 U.S.C. § 6104(c)(3). In relevant part, the Internal Revenue Code provides that “an appropriate state officer” may review such information “only to the extent necessary in[] the administration of State laws regulating the solicitation or administration of the charitable funds or charitable assets of such organizations.” Id. No such circumstances are present here.

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electronic communications for distribution to New York residents and media outlets in connection with issues and policies under consideration in the New York Senate. Id. ¶ 3. Petitioners did no work for Common Sense in 2012 and possess no information about the organization’s source of funding in that year. Id. ¶¶ 3-4. A. Common Sense Has Complied with Federal Law On May 10, 2010, Common Sense applied for tax-exempt status under Section 501(c)(4) of the Internal Revenue Code. Supp. Hendon Aff. Exh. A. On July 26, 2010, the IRS granted Common Sense’s application. Id. Exh. B. In the application, Common Sense disclosed that it intended to devote 50 percent of its time to activity designed “to influence legislation through grassroots advocacy advocating core conservative principles,” including by maintaining “an active website and blog, media advertising, grassroots coalition building, and public relations activity.” Id. Exh. A at 2. The same records disclose Kevin Wright and Christopher J. LaCivita – both located in Virginia – as the organization’s directors, and counsel at the law firm presently known as Holtzman Vogel Josefiak PLLC, which specializes in election law, lobbying, government ethics, and tax-exempt organizations, with offices in Virginia and Washington, D.C., as its “contact person.” Id., at 1. Common Sense’s application for tax-exempt status is publicly available. Supp. Hendon Aff. ¶¶ 3, 9 & Ex. A. In 2010 and 2011, Common Sense filed federal tax returns (“Form 990s”), which are also publicly available. Marton Aff. Exhs. C, D. Those records clearly identify Mr. LaCivita and Mr. Wright as directors of the organization, together with the names and annual compensation paid to Common Sense’s highest-paid independent contractors. Marton Aff. Exhs. C, D, both at 7-8. Consistent with Internal Revenue Code Sections 6104(b) and 6104(d)(3), the publicly available versions of these Form 990s do not disclose the name of any donor to Common Sense. Common

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Sense’s Form 990s for 2010 and 2011 describe its “mission or most significant activities” in plain terms: “to further the common good and general welfare of the citizens of the United States . . . by advocating smaller government and responsible tax and budget policies,” including by “engag[ing] in issue advocacy direct mail to individuals about budget policies in close proximity to an election.” Marton Aff. Exhs. C, D, both at 2, 15. A vast amount of information about Mr. LaCivita and Mr. Wright is publicly available. For example, Mr. LaCivita has his own Wikipedia entry, which describes his childhood in Richmond, Virginia, his service in the Gulf War (for which he was awarded a Purple Heart), and a career spanning more than 20 years dedicated to conservative causes (including the Swift Boat Veterans for Truth) and to supporting Republican candidates for national and statewide office. See Supp. Hendon Aff. Ex. C. He is president of the consulting firm Advancing Strategies, LLC in Midlothian, Virginia, where Common Sense is located. Id. Mr. Wright’s consulting firm, Old Dominion Research Group, is disclosed as a recipient of funds by Common Sense in each of its Form 990s and has its own website, which contains a detailed profile of Mr. Wright. Id. That website states that “[a]fter Democrats captured control of the U.S. House and Senate during the 2006 mid-term elections, Kevin Wright founded Old Dominion Research Group. Prior to founding [that firm], Kevin Wright spent the previous six years with the National Republican Senatorial Committee,” where he focused on “campaign finance issues” and research in the service of helping Republican Senatorial candidates regain the majority in the 2002 midterm election. Id. Having begun his career in politics working in Vice President Dan Quayle’s leadership committee, Campaign America, Mr. Wright later worked on Vice President Quayle’s 1999 presidential campaign. Id.

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B. Common Sense Complied with New York’s Lobbying Laws Under New York law, a lobbyist who has spent, received, or incurred over $5,000 in a calendar year, or has been retained and expects to spend, receive, or incur over $5,000 in a calendar year for lobbying must register with the state. Legislative Law § 1-e(a)(1). Clients of lobbyists are not required to register themselves, but if a client anticipates spending or incurring more than $5,000 in compensation and expenses for lobbying, it must file semi-annual reports summarizing its lobbyists, compensation, and reimbursed expenses paid to lobbyists, lobbying activities, lobbying expenses, certain sources of funding, and reportable business relationships with public officials. Legislative Law § 1-j. On August 15, 2011, Governor Andrew Cuomo signed into law the Public Integrity Reform Act of 2011, which expanded the types of lobbying regulated by New York law. 2011 Sess. Law News of N.Y. Ch. 399 (S. 5679). Beginning in 2012, New York law required Common Sense, as a client expending more than $5,000 per year on lobbying activities, to file semi-annual reports with the Joint Commission on Public Ethics (“JCOPE”), disclosing, among other things, the identity of its paid lobbyist, amounts paid to the lobbyist, the nature of the lobbying activities (and anticipated activities) in New York for the year, and certain sources of funding for the client’s lobbying activity. Legislative Law § 1-j(a). Beginning in 2012, the law required Advancing Strategies, LLC, as Common Sense’s paid lobbyist, to make such filings as well.4 Common Sense’s July/December 2012 JCOPE filing – which, like its Form 990s, are publicly available – disclose Mr. LaCivita as the president of Common Sense and Advancing Strategies, LLC (which is Mr. LaCivita’s firm) as its paid lobbyist. Marton Aff. Exh. E
                                                             4 Thus, Common Sense did not, as Respondent asserts, take “the position that it was a lobbying entity” in New York. Opposition Brief (“Opp. Br.”) at 11. The Commission misconstrues New York’s lobbying law and the filings on which it purports to rely.

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(Common Sense July/December NY State Client Semi-Annual Report), at § 3,11. As required, Common Sense also disclosed to JCOPE that, in 2012, it had a single source of funding, The Center for Common Sense LLC, located in Fort Lauderdale, Florida. Id. § 5. C. Common Sense Complied with New York’s Election Laws New York’s campaign finance and election laws subject “political committees” to certain registration and reporting requirements. See generally Election Law §§ 14-100, 14-101, 14-102. “Political Committees” do not include organizations engaged in “issue advocacy,” which is “protected by the First Amendment and includes communications that discuss an organization’s views on issues endorsed by a political candidate or party without expressly advocating the election of that candidate or party.” Klepper v. Christian Coal., Inc., 259 A.D.2d 926, 927 (3d Dep’t 1999) (citing Buckley v. Valeo, 424 U.S. 1, 41-44 (1976)). New York has long followed the Supreme Court’s decision in Buckley v. Valeo, which defines “express advocacy” as “communications containing express words of advocacy of election or defeat, such as ‘vote for,’ ‘elect,’ ‘support,’ ‘cast your ballot for,’ ‘Smith for Congress,’ ‘vote against,’ ‘defeat,’ ‘reject.’” Buckley, 424 U.S. at 44 n.52.5 Common Sense is not a political committee under New York law. Neither the Commission nor the New York Board of Elections (nor any other authority) has suggested otherwise. Common Sense’s mailings and political advertisements contain no express advocacy and constitute issue advocacy under applicable laws. Under existing New York law, an organization may freely distribute what the Commission improperly terms “attack ads,” so long
                                                             5 New York’s Board of Elections expressly adopted the definition of “express advocacy” set forth in Buckley v. Valeo. See, e.g., Memorandum of Law in Opposition to Plaintiff’s Motion for a Preliminary Injunction by the New York State Board of Elections, Nat’l Org. for Marriage, Inc. v. Walsh, No. 10-CV751, Dkt. No. 34 at 9–10 (W.D.N.Y. Oct. 13, 2010) (“A corporation aiding or promoting a political principle, or taking part in a candidate’s election or defeat, constitutes a ‘political committee’ only if it engages in the ‘express advocacy’ described by Buckley – not if it engages solely in ‘issue advocacy’ and refrains from supporting or opposing a candidate for public office.”). Supp. Hendon Aff. Exh. F.

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as those communications do not expressly advocate the election or defeat of a particular candidate. (The terms “attack” and “attack ad” have no legal significance under New York law.) Such actions could implicate New York’s lobbying laws, but Respondent does not dispute that Common Sense has complied with these laws. ARGUMENT As discussed below, the Subpoenas must be quashed because they were not properly authorized, they are not relevant to the Commission’s task, they violate the First Amendment, and any authority pursuant to which the Commission could promulgate such subpoenas is preempted by the federal Internal Revenue Code. I. The Commission Was Not Authorized to Issue the Subpoenas Legal authority is required for a commission to issue a subpoena. See Matter of Abbruzzese v. N.Y. Temp. State Comm’n on Lobbying, 43 A.D.3d 518, 519 (3d Dep’t 2007); see generally A’Hearn v. Comm. on Unlawful Practice of Law of N.Y. County Lawyers’ Ass’n, 23 N.Y.2d 916, 918 (1969) (“There must be authority, relevancy, and some basis for inquisitorial action.”). Here, the relevant legal authority is Executive Order 106, which grants the Commission the subpoena powers afforded by Sections 6 and 63(8) of the Executive Law only if two specific prerequisites are met. Exec. Order No. 106, § V. The Commission has yet to fulfill the second prerequisite: approval of “procedures and rules” necessary to govern the exercise of its investigative powers. Id. Accordingly, the Subpoenas are invalid and should be quashed. See, e.g., Matter of Nicholson v. State Comm’n on Judicial Conduct, 68 A.D.2d 851, 852 (1st Dep’t 1979) (quashing subpoena items where “conditions prerequisite to the commission’s investigation, which authorize and limit the scope of any inquiry attendant upon such investigation, have not been met”). Respondent’s arguments to the contrary are meritless.

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First, Respondent asserts that Sections 6 and 63(8) of the Executive Law do not require the adoption of particular procedures and rules prior to the issuance of a subpoena. Opp. Br. at 18. However, those statutes are not the source of the Commission’s subpoena power; the Executive Order is. And the Executive Order’s extension of subpoena power to the Commission is conditional. In pertinent part, the Executive Order states: I hereby give and grant to the Commissioners all the powers and authority that may be given or granted to persons appointed under authority of Section Six and Subdivision Eight of Section Sixty-Three of the Executive Law, including the powers to subpoena and enforce the attendance of individual witnesses, both public and private, to administer oaths and examine witnesses under oath, and to require the production of any books or papers deemed relevant or material; provided, however, that (1) the Co-Chairpersons shall unanimously approve any subpoena prior to its issuance; and (2) the Co-Chairpersons shall unanimously approve such procedures and rules as they believe necessary to govern the exercise of the powers and authority given or granted to the Commissioners pursuant to such Section Six and Subdivision Eight of Section Sixty-Three, including rules designed to provide transparency while protecting the integrity of the investigation and rights to privacy. Exec. Order No. 106, § V (emphasis added). Accordingly, unless and until the two numbered prerequisites are met, the Commission lacks subpoena power, and the content of Sections 6 and 63(8) of the Executive Law is irrelevant.6 Second, Respondent argues that the Executive Order does not require the Commission to adopt certain procedures and rules but merely “authorizes” it to do so. Opp. Br. at 18. That interpretation does violence to the plain meaning of key language in the Executive Order. The Executive Order grants the Commission subpoena power “provided . . . that” two specific actions are taken. Exec. Order No. 106, § V. The phrase “provided that” signals conditions precedent,
                                                             6 Therefore, Respondent’s assertions elsewhere in its brief that the Commission’s subpoena authority “derives from two distinct and complementary statutes,” Opp. Br. at 1, and is “statutorily defined,” id. at 18, are only half-right. The Commission’s subpoena authority derives from the Executive Order, which extends to the Commission certain powers that are defined by the statutes cited by Respondent – but only conditionally.

11
 

i.e., actions that the Commission must take before it is authorized to issue subpoenas. See generally Ginett v. Computer Task Group, Inc., 962 F.2d 1085, 1100 (2d Cir. 1992). Furthermore, the Executive Order states that the Commission “shall” approve certain procedures and rules, a word that unambiguously “evinces the mandatory nature of the obligation.” Kolbe v. Tibbetts, 22 N.Y.3d 344, 353 (2003). Respondent asserts, without any further explanation, that the “context of the entire Executive Order” supports its reading, Opp. Br. at 18, but precisely the opposite is true. The Executive Order spans less than three pages and consists of nine short sections. Only one of those sections, Section V, grants subpoena power to the Commission, and that section uses the express, mandatory language quoted above. Nothing in the rest of the Executive Order suggests that Section V does not mean what it says. The Executive Order’s words are clear and should be given effect. See, e.g., Scheja v. Sosa, 4 A.D.3d 410, 411 (2d Dep’t 2004) (applying the “plain meaning of [former New York Governor George Pataki’s] Executive Order,” rather than an “extraordinary interpretation” offered by a litigant). Indeed, historical context demonstrates that the mandatory language of the Executive Order is intentional. In 1987, then-Governor Mario Cuomo appointed a Moreland Commission on public integrity. His executive order granted the commission all powers and authorities available under Section 6 of the Executive Law, on the following condition: provided, however, that (1) the issuance of subpoenas shall require the prior approval of the chairman and at least three other commissioners, and (2) the commissioners may adopt such procedures as they believe necessary governing the exercise of the powers and authorities given or granted to the commissioners pursuant to section 6. Exec. Order (Gov. Mario Cuomo) No. 88.1 (emphasis added), Supp. Hendon Aff. Exh. D. Using the permissive word “may,” see generally Matter of Gen. Elec. Capital Corp. v. N.Y. State Div. of Tax Appeals Trib., 2 N.Y.3d 249, 255 n.1 (2004), that order did not require the commission to

12
 

adopt procedures as a condition of its subpoena power. The permissive word “may” was also used more recently, in 2012, by the current Governor in his executive order addressing the subpoena powers of a Moreland Commission created to investigate New York utilities’ response to Hurricane Sandy. Exec. Order (Gov. Andrew Cuomo) No. 76, Supp. Hendon Aff. Exh. E. If the same language were used by the Governor in the Executive Order at issue here, then Respondent would be correct that it does not function as a limitation on the Commission’s subpoena power. But the Governor instead chose to make the requirement mandatory, using “shall” rather than “may.” Thus, the Commission’s failure to adopt procedural safeguards means that it lacks the authority to issue subpoenas. Cf. Rowell v. Gould, Inc., 124 A.D.2d 995, 996 (4th Dep’t 1986) (by changing the word “may” to “shall” in a statute, the legislature “expressed its intention” to make the action at issue mandatory). Third, Respondent argues that an executive order may not limit the Attorney General’s subpoena authority under Section 63(8) of the Executive Law. See Opp. Br. at 18-19. This is a non sequitur, as the Attorney General’s general subpoena authority is not at issue. The Subpoenas were issued by the Commission, not the Attorney General. Affirmation of Joanna C. Hendon, dated December 16, 2013 (“Hendon Aff.”), Exh. A (Subpoenas issued “by the Commission to Investigate Public Corruption, established by Governor Andrew M. Cuomo, on July 2, 2013”). Further, the Executive Order does not limit the general subpoena authority of the Attorney General in any way.7 Rather, the Executive Order conditionally extends the subpoena authority afforded to the Attorney General by statute to the Commission – which includes,
                                                             7 Thus, Matter of Di Brizzi (Proskauer), 303 N.Y. 206, 213 (1951), (cited at Opp. Br. at 19), is inapposite. There, the Court noted that, when an executive order requested that an Attorney General appoint an investigatory commission with certain members, and the Attorney General obliged, the executive order did not infringe upon the Attorney General’s discretion. Id. at 213. Here, the prerequisites in the Executive Order have no bearing whatsoever on the Attorney General’s activities.

13
 

among others, law school deans and professors and numerous attorneys in private practice who, outside the context of specific litigation, would have no subpoena authority at all absent the Executive Order.8 Just one paragraph later in its brief, Respondent razes its own argument by acknowledging that the Executive Order “requires that each subpoena be unanimously approved by all of the Co-Chairpersons.” Opp. Br. at 19 (emphasis added). Such a requirement is not mentioned in Section 63(8) and therefore does not restrict the Attorney General, but, as Respondent concedes, it nevertheless limits the Commission’s subpoena authority. The same is true of the Executive Order’s requirement that the Commission adopt procedural safeguards for witnesses. Fourth, and finally, while denying any obligation to adopt rules governing the exercise of the Commission’s powers, Respondent argues that adequate protections for witnesses are already in place. Respondent points to rules relating to privacy found in Section 63(8) of the Executive Law and a “Code of fair procedure for investigating agencies” created by Section 73 of the Civil Rights Law. Id. However, the existence of certain pre-existing statutory protections does not absolve the Commission of its duty to satisfy the conditions precedent in the Executive Order. Respondent does not assert that the Co-Commissioners unanimously approved any procedures and rules (even pre-existing ones), nor is there any record of their doing so. Accordingly, the statutory provisions cited by Respondent are irrelevant.9

                                                             8 The list of Commissioners is available at http://publiccorruption.moreland.ny.gov/commissioners. Respondent also points to the protection to witnesses resulting from the fact that “the Executive Order requires that each subpoena be unanimously approved by all of the Co-Chairpersons.” Opp. Br. at 19 (emphasis added). However, that is only the first prerequisite under the Executive Order. Furthermore, Respondent’s acknowledgment that unanimous approval by all Co-Chairpersons is “require[d]” by the Executive Order, id., is a devastating concession. By the plain terms of the Executive Order, the two numbered conditions precedent are on equal footing, and the second is “required” no less than the first.
9

14
 

The Executive Order’s grant of subpoena power to the Commission is reasonably conditioned on the Commission’s adoption of basic safeguards for witnesses. The Commission has failed to adhere to that requirement. As a result, the Commission did not have the legal authority to issue the Subpoenas, and they should be quashed. II. The Information Sought Is Not Relevant to the Moreland Commission’s Task A. The Commission Cannot Explain How the Subpoenaed Information Is Relevant to its Mandate A subpoena must be quashed when it seeks material that is irrelevant to a legitimate subject of inquiry, Matter of Office of Attorney Gen. of State of N.Y., 709 N.Y.S.2d 1, 12-13 (1st Dep’t 2000), and subpoenas encroaching upon core First Amendment Rights must be supported by a “strong and probative basis for investigation,” Matter of Parkhouse v. Stringer, 12 N.Y.3d 660, 666 (2009). Indeed, where, as here, the requested documents implicate the First Amendment, the Commission “must make some showing of need for the material sought beyond its mere relevance to a proper investigation.” FEC v. Larouche Campaign, 817 F.2d 233, 234-35 (2d Cir. 1987). Respondent has utterly failed to make the required showing. i. The Commission Cannot Explain How the Names It Seeks Are Relevant to its Mandate

The Commission asserts that the names of those who funded Common Sense and directed its activities are “directly relevant to assessing the adequacy of current lobbying regulations,” and, further, that the Commission “cannot make specific recommendations to address the weaknesses in New York’s disclosure laws unless it fully understands how dark money groups such as Common Sense have been able to avoid disclosures that are crucial to ‘enabl[ing] the electorate to make informed decisions and give proper weight to different speakers and messages.’” Opp. Br. at 16 (quoting Citizens United v. FEC, 558 U.S. 310, 371 (2010)). These

15
 

assertions are meritless. There is no mystery to how or why 501(c)(4) social welfare organizations “have been able to avoid” disclosing the names and addresses of their donors. Settled federal law provides that groups organized for social welfare purposes may keep the names of their donors private. See 26 U.S.C. §§ 6103(a), 6104(b), 6104(d)(3). Further, the Commission is wrong to suggest that Citizens United endorsed requiring 501(c)(4) organizations to disclose such information. That issue was not before the Court. In Citizens United, the Court upheld the Federal Election Campaign Act’s existing disclosure requirements; it did not purport to order, or even suggest, that any legislature or regulatory body should adopt more or different disclosure requirements. Citizens United, 558 U.S. at 371. The Commission argues that “serious questions” have arisen about “whether existing provisions of New York law effectively prevent coordination between outside anonymous donors and in-State campaign committees,” Opp. Br. at 15, and cites a press story that “Chris LaCivita and Kevin Wright [Common Sense’s publicly disclosed directors] have ties to Senate Republicans” and that, in 2011, the New York Republican Campaign Committee (“SRCC”) hired Mr. Wright’s firm, Old Dominion Research Group. Opp. Br. at 12 n.13 (citing Jimmy Vielkind, Senate GOP is paying Super PAC founder, Capital Confidential, Oct. 22, 201210). The fact that Mr. LaCivita and Mr. Wright, both well-known political consultants, have “ties” to Senate Republicans and, through their consulting firms, performed work for them, is evidence of just that. With respect to unsubstantiated allegations of “coordination,” the Commission acknowledges that Mr. Wright and a spokesperson for the SRCC have both denied them on the record. Opp. Br. at 11-12, (citing Jimmy Vielkind, Senate GOP is paying Super PAC founder, Capital Confidential, Oct. 22, 2012 (“The Times reached Wright, who said there was ‘no
                                                             10 Available at http://blog.timesunion.com/capitol/archives/160954/senate-gop-is-paying-super-pacdirector/.

16
 

connection whatsoever’ [between Common Sense and] the Senate GOP” and the SRCC’s spokesman retorted that “[a]s we’ve said previously, we don’t know anything about the work that [Common Sense is] doing”)). ii. The Commission No Longer Has Need for the Names it Seeks

Respondent argues that knowing the names of Common Sense’s donors and members will facilitate a “basic understanding of how groups like [Common Sense] actually operate in New York.” Opp. Br. at 17. But that claim is belied by the Commission’s 98-page, singlespaced Report published in December 2013; hearings in connection with the Attorney General’s recent investigation into exactly the same subject matter; and Respondent’s own brief, which evidences a fairly sophisticated “understanding of how [such] groups operate in New York.” The Commission’s Report is the product of an intense investigatory effort that spanned nearly six months. Br. at 8-10, 13-14 (citing Hendon Aff. Exh. A at 6). In a section entitled “Undisclosed Independent Expenditures in New York,” the Report focuses on Common Sense. Hendon Aff. Exh. A at 39-40. Crucially, the Report details exactly how that organization operates in New York, availing itself of the anonymity protections afforded by federal law while complying with all applicable state laws. Id. Based on its thorough investigation, the Commission concluded that: Creating an effective disclosure regime for independent expenditure activity requires three actions: (1) broadening the definition of electioneering activity that triggers the duty to disclose; (2) mandating the disclosure of the names and addresses of significant donors to organizations that engage in independent spending; and (3) providing effective public access to campaign finance reports. Id. at 55. In its Report, the Commission proposes specific legislation in each of the three enumerated areas. Id. at 56-58. The urgency with which the Commission offers its proposals – the Report “urges” the Governor and the legislature to “consider the reforms in this Report now”

17
 

because “deep and comprehensive reform cannot wait,” id. at 1 – as well as the clarity and comprehensiveness of those proposals, id. at 56-58, demonstrate the Commission’s command of the relevant material and its full satisfaction of its mandate to “[i]nvestigate weaknesses” and address[]” “weaknesses” in existing state campaign finance and election laws. Exec. Order 106 § II(b), (C). Recent reforms within New York’s Charities Bureau leave no room for doubt that the Commission has no legitimate need for the donor information it seeks. Nearly a year ago, on June 5, 2013, the Attorney General – who sits on the Commission – commenced an extensive inquiry into not-for-profit organizations operating within New York. See Marton Aff. Exh. F (testimony of Attorney General at 501(c)(4) Donor Disclosure Hearing (Jan. 15, 2013)) at 7. In the Attorney General’s words, that comprehensive investigation entailed “months of careful work by attorneys in my office . . . [and] leading reformers, good government advocates, scholars and legal practitioners.” Id. at 10-11. The probe also involved public hearings in New York City, Albany, and Buffalo, as well as the submission of over 6,000 comments from the public regarding related regulations proposed by the Attorney General pursuant to his power to oversee the state’s nonprofit organizations.11 As a result of that investigation, the Attorney General adopted new regulations, effective June 5, 2013, requiring nonprofit groups registered in New York to report how much they spend on federal, state, and local political campaigns.12 N.Y. Comp. Codes R. & Regs. tit. 13, § 91.6. The fact that a member of the Commission has already engaged in rule-making to impose additional disclosure obligations on 501(c)(4)
                                                             11 See Press Release, New York State Office of the Attorney General, A.G. Schneiderman Adopts New Disclosure Requirements for Nonprofits that Engage in Electioneering (June 5, 2013), available at http://www.ag.ny.gov/press-release/ag-schneiderman-adopts-new-disclosure-requirements-nonprofitsengage-electioneering [“June 5, 2013 AG Press Release”].
12

June 5, 2013 AG Press Release.

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organizations conclusively dispels the myth that the Commission suffers from an information deficit. Respondent contends that a further probe of Common Sense will help inform the Commission’s recommendations to the legislature. Opp. Br. at 17. However, it is clear that the Commission’s views on New York’s current regulation of 501(c) organizations have cemented. The Commission has already announced its conclusion that “[d]isclosure is critical to campaign finance law,” Hendon Aff. Exh. A at 54, and that “New York campaign finance disclosure laws . . . do a poor job of requiring independent expenditure committees . . . to report their activities,” id. at 55.13 The Commission’s view of the regulatory landscape drives its specific recommendations in its Report for strengthening New York’s disclosure laws. Id. at 54-58. Even if the Court were to enforce the Subpoenas and compel disclosure of the identities of those who are associated with Common Sense, the Commission would surely continue to advocate that laws be enacted to require disclosure of additional information by all 501(c)(4) organizations to the general public. There can be no doubt that the Commission has gathered sufficient facts to fulfill its mandate, certainly in relation to Common Sense and entities like it. The Moreland Report, the Attorney General’s hearings, and Respondent’s brief all demonstrate that the Commission knows exactly how Common Sense engages in issue advocacy in New York while maintaining the anonymity of its donors. As for the precise identities of Common Sense’s donors and associates,

                                                             13 This is also the view of the Attorney General, who stated after his own investigation: “More money is being spent on our elections, with less disclosure of where that money is coming from, than ever before. By shining a light on this dark corner of our political system, New York will serve as a model for other states, and for the federal government, to protect the integrity of nonprofits and our democracy.” June 5, 2013 AG Press Release.

19
 

Respondent has failed to show any need for that information; it would not advance the Commission’s inquiry in the least.14 B. The Commission Cannot Demonstrate Relevance Through Ad Hominem Attacks and Innuendo Unable to demonstrate relevance, the Commission offers an irrelevant polemic against “dark money,” highlighting the Commission’s bias against an out-of-state organization that has chosen to express opinions and support policies of which the Commission and the Governor disapprove. For example, the Commission complains that 501(c)(4) organizations “undermine core democratic values” and “prevent[] the effective enforcement of election laws and regulations that indisputably apply to their activities.” Opp. Br. at 6. But these arguments overlook that for more than 50 years, the Internal Revenue Code has permitted American social welfare groups to engage in lobbying activities and keep their donors’ names and home addresses confidential. See 26 U.S.C. §§ 6103(a), 6104(b), 6104(d)(3). The National Organization for Women, the American Israeli Public Affairs Committee, Planned Parenthood, the Sierra Club, the American Civil Liberties Union, J Street, the National Rifle Association, and the Human Rights Campaign are all 501(c)(4) entities that are authorized to engage in issue advocacy. The Moreland Commission, chaired by a Democratic Attorney General reporting to a Democratic Governor, seeks to slander Common Sense in an attempt to learn the names and
                                                             14 For this reason, among others, N.Y. State Commission on Government Integrity v. Congel, 156 A.D.2d 274 (1st Dep’t 1989) (cited at Opp. Br. at 17-18), is inapposite. In Congel, the court determined that the issuance of a Preliminary Report did not relieve parties from their obligation to respond to subpoenas when “[p]lainly, the material sought in the subpoenas . . . at issue was relevant to the Commission’s inquiry.” Id. at 278. Here, in contrast, absolutely no showing of relevance has been made, “plain” or otherwise. Additionally, Congel did not involve the heightened First Amendment relevance standard that applies here. Compare id. (framing the standard relevance question as “simply whether the material sought is in some measure relevant to the proper objectives of the investigative body”), with Larouche, 817 F.2d at 234-35 (holding that when an agency’s investigation “tread[s] in an area rife with first amendment associational concerns,” “the agency must make some showing of need for the material beyond its mere relevance to a proper investigation”).

20
 

home addresses of its donors. But such activity is not connected to any legitimate mission of the Commission, and it should not be condoned by this Court. The Commission’s reliance upon Citizens United for the proposition that the names of donors to 501(c)(4) organizations are entitled to less, rather than more constitutional protection, Opp. Br. at 5-6, is misplaced. Citizens United did not disturb the federal statutes and court decisions recognizing the right of 501(c)(4) organizations to keep the names of their donors confidential. Citizens United lifted spending prohibitions previously imposed on such organizations with respect to express advocacy communications. Citizens United, 558 U.S. at 354-56. Whatever reforms the Commission may seek in the wake of that decision, it has not and cannot show how knowing the names of donors to one out-of-state 501(c)(4) organization engaged in issue advocacy in New York will in any way advance that mission. There is no merit to the suggestion that Common Sense has improperly failed to disclose sufficient facts about itself. See, e.g., Opp. Br. at 8 (“there is little publicly available information about Common Sense or the sources of its funding.”). Common Sense has complied with all applicable laws and regulations and made available for public inspection expansive information about its objectives, contributions, expenditures, lobbying, advertising, and other activities. See, e.g., Supp. Hendon Aff. Exhs. A, B; Marton Aff. Exhs. C–E. The Commission offers no proof to the contrary, and, in fact, attaches to its own brief several such filings. See Marton Aff. Exhs. C– E. The identities, addresses, professional backgrounds, and political affiliations of Common Sense’s directors, lobbyists and consultants are a matter of public record available to anyone with an Internet search engine. See Marton Aff. Exhs. C–E; Supp. Hendon Aff. ¶ 9. All that Common Sense has not made publicly available is its donor’s names and addresses, privacy for which is specifically provided by Title 26, Section 6104 of the United States Code.

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III.

The First Amendment Protects from Disclosure the Names Sought by the Subpoena Even if the Commission could demonstrate how names and home addresses of Common

Sense’s contributors were relevant to its inquiry, which it cannot, the Subpoenas would still be barred by the First Amendment of the United States Constitution. Where, as here, an administrative subpoena seeks information that directly implicates associational and free speech rights, the party seeking disclosure must show “governmental interests sufficiently important to outweigh the possibility of infringement” of First Amendment interests. Larouche, 817 F.2d at 235. Respondent has not, and cannot, make such a showing. In Larouche, the Federal Election Commission (“FEC”) issued an administrative subpoena to the Lyndon LaRouche presidential campaign seeking the names of campaign employees who had solicited donations, together with the names of the voters whom the campaign claimed had made contributions, as part of an inquiry into whether the campaign had falsified its records to obtain matching funds from the government. Id. at 234. The campaign refused to disclose the names of its employees and moved to quash the subpoena. Id. The trial court denied the motion, applying the standard of review ordinarily used to assess the enforceability of an administrative subpoena, namely, whether the subpoena “is for a proper purpose, the information sought is relevant to that purpose, and the statutory procedures are observed.” Id. Acknowledging that “different considerations come into play when a case . . . implicates first amendment concerns,” the trial court nonetheless denied the motion, finding the employees’ names relevant to the FEC’s inquiry. Id. The Court of Appeals reversed, holding that, where a subpoena “tread[s] in an area rife with first amendment associational concerns,” the subpoenaing agency must demonstrate “more than mere relevance.” Id. The Court quashed that portion of the subpoena directed to the campaign, because “the FEC . . . failed to demonstrate 22
 

that there are governmental interests sufficiently important to outweigh the possibility of infringement” of First Amendment rights. Id. at 235.15 A. The Information Requested by the Commission Implicates Significant First Amendment Concerns The Supreme Court has long held that the privacy of an advocacy organization’s members is protected by the First Amendment and that the Fourteenth Amendment extends such protection against state governments. NAACP v. Alabama, 357 U.S. 449, 460-62 (1958) (“[S]tate action which may have the effect of curtailing the freedom to associate is subject to the closest scrutiny” as “[i]t is hardly a novel perception that compelled disclosure of affiliation with groups engaged in advocacy may constitute [an] effective restraint on freedom of association[.]”). For the same reasons, “[t]he freedom of association of political parties is deeply embedded in the constitutional law of our State.” Golden v. Clark, 76 N.Y.2d 618, 634 n.5 (1990) (citing N.Y. Con. art. I, §§ 8, 9). The Supreme Court has extended the protection announced in NAACP v. Alabama to a case in which the plaintiff alleged no imminent injury or damages. Talley v. California, 362 U.S. 60, 63-65 (1960); accord Larouche, 817 F.2d at 234.16 Respondent argues that Petitioners, their former client, and its donors do not deserve any protection, because they are not “members of any harassed or vulnerable minority.” Opp. Br. at
                                                             15 Other cases have applied a burden-shifting framework pursuant to which the party asserting a First Amendment privilege must meet the “light” burden of making out a prima facie showing that disclosure would violate First Amendment rights. New York State Nat’l Org. for Women v. Terry, 886 F.2d 1339, 1354-55 (2d Cir. 1989); Perry v. Schwarzenegger, 591 F.3d 1147, 1160 (9th Cir. 2010). Petitioners meet this burden, having tendered sworn testimony of Mr. Odescalchi, a professional in his field, who attests that production of the information sought by the Commission would impair the operations of his and his clients’ businesses, and discourage him and his clients from engaging in continued political speech, including issue advocacy. See Affidavit of Daniel Odescalchi, dated December 11, 2013, ¶¶ 5-6, 10-14.
16

In Talley, the Supreme Court opined that “[a]nonymous pamphlets, leaflets, brochures and even books have played an important role in the progress of mankind.” Id. at 64. Noting that “[e]ven the Federalist Papers, written in favor of the adoption of our Constitution, were published under fictitious names,” the Supreme Court concluded that “[i]t is plain that anonymity has sometimes been assumed for the most constructive purposes.” Id. at 65.

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29. This is incorrect. Common Sense’s policy views lean right in a state that, by any measure, is one of the most Democratic in the nation.17 See, e.g., Pollard v. Roberts, 283 F. Supp. 248, 258 (E.D. Ark. 1968) (recognizing that the “potential detriment to be apprehended from an unjustified disclosure of member and contributor identities would appear to bear particularly heavily upon a party, like the Republican Party in Arkansas, which for many years was and still is a minority party, as far as numbers of regular adherents are concerned”), aff’d, 393 U.S. 14 (1968). Donors to conservative nonprofit groups and other figures with strong conservative affiliations are routinely subject to harassment or other reprisals after their viewpoints have become public. For example, in 2007, a businessman’s substantial contribution to a Section 527 organization became a topic of contention at a Senate hearing on his potential ambassadorship appointment.18 The restaurant chain Chick-fil-A has faced numerous protests and negative media coverage over the years based on its owners’ contributions to organizations opposed to same-sex marriage.19 And in 2013, a liberal group threatened to boycott Whole Foods based on its CEO’s negative comments regarding “Obamacare.”20
                                                             17 See, e.g., Lydia Saad, Heavily Democratic States Are Concentrated in the East, Gallup Politics, Aug. 3, 2012, available at http://www.gallup.com/poll/156437/heavily-democratic-states-concentrated-east.aspx (determining that New York is the third most Democratic state in the United States, based on the party identification of its residents).
18

See Associated Press, John Kerry Grills Belgium Ambassador Nominee Over Swift Boat Donation, FoxNews.com, Feb. 28, 2007, available at http://www.foxnews.com/story/2007/02/28/john-kerry-grillsbelgium-ambassador-nominee-over-swift-boat-donation/. This article was cited in an amicus brief filed with the Supreme Court in Citizens United, in opposition to certain statutory disclosure requirements. See Brief of Amici Curiae Institute for Justice at 13-16, Citizens United v. FEC, 558 U.S. 310 (2010) (No. 08205). The Supreme Court in Citizens United observed that this example of reprisal, and others, were “cause for concern” but concluded that the risk of reprisal was absent in that case because “Citizens United has been disclosing its donors for years and has identified no instance of harassment or retaliation.” 558 U.S. at 370. Here, in contrast, Common Sense has taken great care to preserve the anonymity afforded by the law to its donors.

19

See, e.g., Kim Severson, Chick-fil-A Thrust Back Into Spotlight on Gay Rights, N.Y. Times, July 25, 2012, available at http://www.nytimes.com/2012/07/26/us/gay-rights-uproar-over-chick-fil-awidens.html.

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The high-profile, inflammatory nature of the Commission’s investigation heightens the risk of reprisal against Common Sense’s donors. As Respondent’s brief and the Commission’s Report demonstrate, the media has a keen interest in Common Sense and the source of its funding. See Hendon Aff. Exh. A at 39-40; Opp. Br. at 9 n.9. This curiosity has been fanned by the Commission’s publicly available Report, which casts the organization in noir terms (“operating in [the] shadows” of New York politics with the aid of “ghost companies”) before asking provocatively, “So who pays for Common Sense’s political spending in New York?” Hendon Aff. Exh. A at 40. If the names of Common Sense’s donors were to be publicized, the media scrutiny of those donors would surely be intense – and the prevalent media view of the organization is not favorable. See id. at 39-40; Opp. Br. at 9 n.9. Respondent also summarily asserts that Common Sense’s donors do not “face any realistic threat of governmental reprisals or intimidation,” Opp. Br. at 29, but this assertion is belied by the very nature of the Commission’s investigation. The Commission was created by Democratic Governor Cuomo and includes numerous high-powered Democratic players, such as the state Attorney General. The Commission quotes Democratic State Senator O’Brien as stating that he wishes “to hold” someone “accountable” for these ads, a statement with foreboding implications. Opp. Br. at 10; Marton Aff. Exh. H. The Commission has made it clear that it takes an extremely negative view of Common Sense’s advocacy efforts and the organization’s diligence in maintaining the privacy of its donors, despite – or perhaps because of – Common
                                                                                                                                                                                                 
20

David McCormack, Whole Foods Threatened with Boycott by Liberal Customers After CEO Compares Obamacare to ‘Fascism,’ U.K. Daily Mail, Jan. 17, 2013, available at http://www.dailymail.co.uk/news/ article-2264307/Whole-Foods-threatened-boycott-liberal-customers-CEO-compares-Obamacarefascism.html. Similarly, Whole Foods was boycotted in 2009 because of its CEO’s negative comments regarding universal healthcare. Joe Weisenthal, Liberals Threaten Whole Foods Boycott Over CEO’s Healthcare Stance, Business Insider, Aug. 15, 2009, available at http://www.businessinsider.com/l iberals-threaten-whole-foods-boycott-over-ceos-healthcare-stance-2009-8.

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Sense’s compliance with all applicable laws. See, e.g., Hendon Aff. Exh. A at 39-40. Further, many of New York City’s most powerful political figures – including Mayor Bill de Blasio, former Speaker of the City Council Christine Quinn, and former New York City Comptroller William Thompson, all Democrats – have spoken negatively, on the record, about contributors to such organizations. See Opp. Br. Ex. F, at 15-34. In this highly charged atmosphere, if donor names are revealed, the government’s investigative and enforcement arms are virtually certain to be out for blood. The potential harm in this case extends beyond the threat of economic or political reprisal to Common Sense’s donors. Compelling the disclosure of the identities of private donors to a 501(c)(4) organization would also inevitably chill donations not only to Common Sense, but to other 501(c)(4) organizations whose donors value, and reasonably expect, anonymity. See Odescalchi Aff. ¶ 12; see also Pollard, 283 F. Supp. at 258 (“For various reasons, including fear of reprisal or harassment, the possibility of disclosure of their party affiliations and contributions, if any, tends to inhibit citizens from exercising their right to participate meaningfully in American political life”). The danger of this chilling effect, like the risk of reprisal, is heightened because the Commission has made Common Sense its poster child for this type of organization. Forced disclosure to the Commission of the names of those associated with Common Sense, notwithstanding statutory protections against such disclosure, would inhibit participation in 501(c)(4) organizations, since donors to such organizations rely on the laws preserving their anonymity when electing to express their political views through such organizations. See Odescalchi Aff. ¶ 12. The Subpoenas also pose harm to Petitioners themselves. Respondent argues that the requested disclosures would neither chill Petitioner Odescalchi’s communications with clients

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nor hurt his business. Opp. Br. at 26. Respondent broadly claims that Mr. Odescalchi’s affirmation is “conclusory [and] self-serving” and that “merely asserting” the possibility of a chilling effect cannot avoid compelled disclosure. Id. This ignores the fact that Mr. Odescalchi is an experienced practitioner in his field who is well-qualified to speak on the repercussions of sharing client information and communications. See Odescalchi Aff. ¶ 4. Party affidavits such as Mr. Odescalchi’s can support a judicial finding of potential harm. See, e.g., United States v. Church of World Peace, 775 F.2d 265, 266 (10th Cir. 1985).21 Respondent also argues that “Petitioners’ arguments concerning anonymity ring especially hollow because their business model relies on promoting, not shielding, the names of their clients,” pointing to the fact that SAI’s website “extensively and specifically advertises both their political work and the names of their clients[.]” Opp. Br. at 27. This contention reveals a fundamental misunderstanding of Petitioners’ “business model.” As in any client-service industry, Petitioners’ continued financial success depends on their ability to accommodate their clients’ individual needs. Certain of Petitioners’ clients, including Common Sense, value their privacy, and Mr. Odescalchi does not place such clients’ names – much less their private donor information – on his website or otherwise advertise his association with them.22
                                                             21 Respondent cites Matter of Nicholson v. State Commission on Judicial Conduct, 50 N.Y.2d 597 (1980), and John Doe No. 1 v. Reed, 561 U.S. 186 (2010), for the proposition that Petitioners’ assertions, standing alone, are inadequate to demonstrate a First Amendment harm. Opp. Br. at 26. But this is a fact-specific inquiry, and, as noted, in the appropriate circumstances, courts have premised a finding of potential harm on the sworn statements of a party. In any event, Respondent’s argument ignores the fact that the potential harm to Petitioners is only one component of the potential harm posed by the Subpoenas, and thus must be considered in conjunction with the potential harm to Common Sense and those affiliated with it, as well as the chilling effect on others who seek to voice their views through 501(c)(4) organizations.
22

Respondent cites Bailey v. Maine Commission on Government Ethics and Election Practices, 900 F. Supp. 2d 75, 85 (D. Me. 2012). Opp. Br. at 27. There, on cross-motions for summary judgment, the court noted that the fact that the plaintiff had publicly made personal attacks on a candidate undercut his argument that revealing his connection to a political website advocating against that candidate would subject him to reprisals. Id. at 95. Here, in contrast, the fact that Petitioners have highlighted their

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In short, though they need not have, Petitioners have demonstrated the substantial harm that they will suffer if this First Amendment-sensitive information is disclosed, and the substantial chilling effect that it will have on conservative political activity in New York in general and on Common Sense’s donors in particular. By acknowledging that it must show a substantial relationship between the information it seeks, i.e. the names of Common Sense’s contributors, and an important government interest, Opp. Br. at 21, Respondent effectively concedes that the Subpoenas implicate substantial First Amendment concerns. Were that true, no heightened showing would need to be made. B. No Compelling State Interest Warrants Disclosure The Commission is at pains to demonstrate that strong state interests warrant disclosure of the names of Common Sense’s donors. Opp. Br. at 21-25. It cannot do so: the Commission cannot even show that the information it seeks is relevant to its mission. In circumstances such as these, courts have not hesitated to quash subpoenas seeking the names of private citizens engaged in political activity and speech. Gibson v. Fla. Legislative Investigation Comm., 372 U.S. 539 (1963) (rejecting effort by legislative committee to acquire Section 501(c) organization’s names of members); DeGregory v. Attorney Gen. of State of N.H., 383 U.S. 825, (1966) (state Attorney General not permitted to compel former communist to disclose information relating to his former political associations, the meetings he attended, and the views and ideas expressed at any gatherings); NAACP, 357 U.S. 449 (1958) (rejecting state Attorney General’s effort to compel a Section 501(c) organization to produce records including the names of its members and agents); Pollard, 283 F. Supp. 248 (E.D. Ark. 1968), aff’d, 393
                                                                                                                                                                                                  association with certain clients in no way undercuts their argument that forced disclosures relating to other clients and their donors, who wish to remain anonymous, will negatively affect Petitioners’ business.

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U.S. 14 (1968) (enjoining prosecuting attorney’s attempts to enforce subpoena with respect to information containing the identity of contributors to a political party); Savola v. Webster, 644 F.2d 743 (8th Cir. 1981) (rejecting FBI interrogatories in civil suit seeking the names and addresses of members and sympathizers of Minnesota Communist Party); Ex Parte Lowe, 887 S.W.2d 1 (Tex. 1994) (granting habeas relief to Ku Klux Klan leader found in contempt for failing to disclose member names in response to Texas Commission on Human Rights subpoena where request violated First Amendment associational rights); Pacific-Union Club v. Superior Court, 232 Cal. App. 3d 60 (Cal. Ct. App. 1991) (vacating lower court order directing disclosure of private club’s members’ names in response to Franchise Tax Board administrative subpoena). The cases relied upon by the Commission, Opp. Br. at 21-23, are all inapposite. The Supreme Court’s decisions in McConnell v. FEC, 540 U.S. 93 (2003), and Buckley, 424 U.S. at 1, both involve legislatively enacted disclosure schemes that applied to all candidates or political committees. The state interest in preserving a legislatively enacted scheme (rather than a subpoena issued by a short-lived commission) applying to candidates and organizations across the political spectrum (rather than to just one, selectively chosen conservative social welfare organization) is far greater than exists here. Similarly, the “host” of federal appellate cases cited by Respondent, Opp. Br. at 22-23,23 all address existing legislative schemes affecting all organizations that fit within specific categories, rather than, as in the present case, the singling out of one organization whose conservative views are out of sync in this deep blue state, controlled by a Democratic governor, attorney general, and State Assembly. Particularly inapposite is Respondent’s quotation from SpeechNow.org v. FEC, in which the D.C. Circuit
                                                            
23

 See Ctr. for Individual Freedom v. Madigan, 697 F.3d 464, 470-71 (7th Cir. 2012) (addressing

the Illinois Code’s regulation of, inter alia, campaign advertisements and ballot initiatives); Human Life of Wash. Inc. v. Brumsickle, 624 F.3d 990, 994-95 (9th Cir. 2010) (addressing Washington State’s general disclosure requirements).   29
 

addressed disclosure requirements imposed upon “political committees.” 599 F.3d 686, 698 (D.C. Cir. 2010) (“If SpeechNow were not a political committee, it would not have to report contributions made exclusively for administrative expenses”). As discussed above, supra at 9, Common Sense is not a political committee for purposes of Election Law § 14-100(1). IV. The Commission’s Subpoenas Are Preempted by the Internal Revenue Code Finally, the Subpoenas must be quashed for the additional reason that the Commission’s effort to obtain Common Sense’s confidential donor information conflicts with the structure and scheme that Congress has established for tax-exempt 501(c)(3) and 501(c)(4) organizations and therefore is preempted by federal law. The Supremacy Clause of the Constitution provides that federal law “shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. It follows that “Congress has the power to preempt state law.” Arizona v. United States, 132 S. Ct. 2492, 2500 (2012). Thus, when a state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” it is preempted. Hillman v. Maretta, 133 S. Ct. 1943, 1950 (2013) (citations omitted); see also In re Methyl Tertiary Butyl Ether (MTBE) Prods. Liability Litig., 725 F.3d 65, 102 (2d Cir. 2013). The preemption doctrine also bars subpoenas issued by state agencies pursuant to state laws that are preempted. See generally Liberty Mut. Ins. Co. v. Donegan, --- F.3d ----, 2014 WL 401708, at *1-3, 10-11 (2d Cir. Feb. 4, 2014). While “[t]he mere fact of ‘tension’ between federal and state law is generally not enough to establish an obstacle supporting preemption, particularly when the state law involves the exercise of traditional police power,” federal law preempts state law when “the repugnance or

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conflict is so direct and positive that the two acts cannot be reconciled or consistently stand together.” Madeira v. Affordable Hous. Found., Inc., 469 F.3d 219, 241 (2d Cir. 2006). “Whatever the form” of preemption, “the purpose of Congress is the ultimate touchstone in every preemption case.” Biscone v. JetBlue Airways Corp., 957 N.Y.S.2d 361, 368 (2d Dep’t 2012). The Commission’s attempt to obtain confidential donor names and addresses from Common Sense is directly at odds with and repugnant to the structures for and obligations imposed upon tax-exempt organizations that have been established by Congress. Title 26, Section 501 of the United States Code prescribes the rules for establishing and the parameters for operating organizations that are exempt from taxation. Within this statutory scheme, the two most common kinds of nonprofit organizations, those established pursuant to Sections 501(c)(3) and 501(c)(4), have long been permitted to keep their donors’ names and addresses private. 26 U.S.C. §§ 6103, 6104(b), 6104(d)(3). Unambiguous federal law limits circumstances in which state officials may obtain the information Respondent seeks. The Internal Revenue Code provides an exception for “an appropriate state officer,” who may review such information “only to the extent necessary in[] the administration of State laws regulating the solicitation or administration of the charitable funds or charitable assets of such organizations.” 26 U.S.C. § 6104(c)(3) (emphasis added). The authorization for tax-exempt organizations to keep their donor information private codified in Sections 6103 and 6104 embodies a policy established by Congress to allow Americans to privately support such organizations – whether organized pursuant to Section 501(c)(3) or Section 501(c)(4) – without their support being publicized. It is a policy that allows a citizen to support Planned Parenthood or the Human Rights Campaign without worrying about ostracism at her job or in her church, or to support advocates of charter schools without worrying

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about jeopardizing one’s own business relations with New York City’s administrative agencies. These congressional policy decisions have profound effects on how Americans are able to engage in civic activities and organizations without worrying about reprisal based on the legitimate causes that they support. The Commission opines broadly about the state interest in accountability and integrity in elections. Opp. Br. at 21-23. But the decision to allow 501(c)(4) social welfare organizations to spend a certain portion of their money on political advertising while keeping their contributors’ names and home addresses confidential was made by the federal Congress and codified in the United States Code. 26 U.S.C. §§ 6103, 6104(b), 6104(d)(3). A state commission cannot override this act of Congress. See Woodward v. State of N.Y., 805 N.Y.S.2d 670, 674 (3d Dep’t 2005) (“any state law which interferes with or is contrary to a federal law must yield to that federal law”). If the Commission believes that the privacy protections granted by the IRS undermine accountability in the electoral process, then it should lobby Congress to make changes, but the Commission’s charge does not pertain to reevaluation of those federal laws and policies. Because Congress allowed tax-exempt organizations to establish and maintain themselves through private, non-public donations, the Commission’s authority to investigate and probe that very information has been impliedly preempted.

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CONCLUSION For the foregoing reasons, Petitioners respectfully request that the Court quash the Subpoenas, issue a protective order directing that Petitioners need not produce the materials sought, and deny Respondent’s motion to compel.

Dated: New York, New York March 13, 2014

Respectfully submitted, SPEARS & IMES LLP

By: /s/ Joanna C. Hendon Joanna C. Hendon Christopher W. Dysard Richard M. Benjamin Benjamin Silverman SPEARS & IMES LLP 51 Madison Avenue New York, NY 10010 (212) 213-6996 Attorneys for Petitioners

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