Litigation We're Watching

By Terry Martin

Last Updated 10/18/2019

Griffin, et al. v. Padilla (Eastern District of California opinion issued, appeal filed in the 9th Circuit): A recently-enacted California law requires presidential candidates to submit five years’ worth of federal income tax returns to the Secretary of State as a condition precedent to appearing on the state primary election ballot. Several individuals and groups filed suit in five related cases, claiming that such a law violates the Qualifications Clause of art. II of the U.S. Constitution because it has the purpose and effect of hindering the candidacies of individuals who choose not to submit such data, that it violates the First Amendment because it amounts to a functional bar against voters’ ability to cast an effective vote for candidates who wish to keep their tax returns private and because it interferes with individuals’ and political parties’ ability to select the candidate of their choice, that it violates the Equal Protection Clause of the Fourteenth Amendment because it subjects independent candidates to different burdens than major-party candidates without any valid reason, and that it is pre-empted by the Ethics in Government Act because Congress intended that statute to replace any general financial disclosure requirement or conflict of interest requirement for federal officeholders. The district court agreed that the plaintiffs were likely to succeed on all four claims and issued a preliminary injunction blocking the law’s enforcement. The appeal is expected to resolve the issue of if and how far a state can go to require disclosures of presidential candidates under the auspices of providing voters with information.

Citizens Union of the City of New York v. Attorney General (Southern District of New York opinion issued, awaiting appeal): New York state law requires nonprofit organizations exempt from tax under Section 501(c)(4) of the Internal Revenue Code engaged in issue advocacy, and those exempt under Section 501(c)(3) that provide in-kind support for such organizations that engage in lobbying to file reports disclosing their donors. A citizens’ group filed suit under the First Amendment claiming that such a law violates rights of these organizations, citing a line of cases that set out a right to donor privacy. As this particular type of law is relatively new, the case is considered to be a potential turning point in the ongoing legal tension in the federal courts between individuals’ and organizations’ right to donor privacy and governments’ interests in providing the public with information.

Victory Processing, LLC v. Fox (9th Circuit opinion issued, awaiting certiorari petition): Montana state law prohibits automated “robocalls” transmitted in support of political campaigns. A political consulting and data gathering firm challenged this law as a violation of the First Amendment, since it discriminated based on the content of the robocalls. The 9th Circuit agreed. The case adds another data point in the federal court system to the ongoing interpretation of the legality robocall statutes.

Schickel v. Dilger (6th Circuit opinion issued, awaiting petition for rehearing en banc or certiorari): Kentucky law bans legislators and legislative candidates from accepting campaign contributions during legislative session from lobbyist principals and political action committees, and at any time from lobbyists. It further prohibits legislators and their spouses from accepting gifts from lobbyists and lobbyist principals. These provisions were challenged under the First Amendment as not being properly supported by an adequate government interest, since the government did not cite sufficiently recent or applicable examples of corrupt dealings implicated by such activities. Although the trial court struck the year-round lobbyist contribution ban and lobbyist/lobbyist principal gift ban, leaving in place the legislative session contribution ban, a panel of the 6th Circuit upheld all three provisions, citing examples of corruption in the state’s history, notably involving the horse racing industry, and deeming this experience, albeit not recent or sharply targeted, adequate to sustain the provisions. As more aggressive state laws targeting lobbyist campaign finance activities become increasingly common, this case, in conjunction with Preston v. Leake (4th Cir. 2011) 660 F.3d 726 (similar North Carolina laws held constitutional) places further approval on such laws from the federal judiciary.

New York Republican State Committee and Tennessee Republican Party v. SEC (DC Circuit opinion issued, awaiting petition for en banc review or certiorari): The SEC, by regulation, prohibits local and state government officials responsible for holding and managing public funds, for example, pension funds, from receiving campaign contributions from investment advisors who manage plan assets, and such advisors from giving such contributions, within 2 years of those investment advisors, or certain associates, providing paid advisory services to the government entity. This 2-year “cooling off” period was recently expanded to placement agents who distribute or solicit compensation with a government entity on behalf of an advisor, and includes provisions intended to prevent circumvention of the rule by, for example, soliciting another entity to make a contribution that would be illegal for the placement agent to make. Two state Republican Party organizations sued the SEC, arguing that the rule is an ultra vires regulation of campaign finance, that it is arbitrary and capricious, and that it violates the First Amendment. The United States Court of Appeals for the District of Columbia Circuit ruled that the rule is not ultra vires, since it is a regulation of the market, to prevent fraud, and to protect investors within the SEC’s regulatory jurisdiction and the rule can co-exist with the Federal Election Commission’s authority. The court also ruled that the rule was not arbitrary and capricious because the SEC could reasonably find that the Federal Election Campaign Act did not address potential corruption by placement agents in the contracting process. Finally, the court ruled that the rule did not violate the First Amendment because the rule was closely drawn to target corruption or its appearance, since it restricted only a narrow range of activities for a limited lime in pursuit of an area susceptible to corruption – contracting with government agencies. The opinion is worded broadly, and is expected to allow much more stringent regulation of “pay to play” activities than previously thought regulable, not in the least bit because appointees of both Democratic and Republican presidents signed the opinion.

Calzone v. Missouri Ethics Commission (8th Circuit opinion issued, on petition for rehearing en banc): The State of Missouri’s lobbying registration and reporting law applies to anyone designated by an organization to influence legislation, whether any payment is promised or not. The president, who is the sole officer, of an advocacy organization challenged this law as violative of the First Amendment because he is not being paid, removing the state interest in regulating his activity. The United States Court of Appeals for the Eighth Circuit disagreed, citing recent Supreme Court cases taking a permissive stance toward disclosure laws that are triggered by speaking about public officials and opining that broad transparency is important to combat possible corruption. Future proceedings will shed light on the scope of individual privacy while engaged in uncompensated political activity.

Institute for Free Speech v. Jackley (D. South Dakota, parties currently filing briefs after motion for TRO/PI granted in part and denied in part): South Dakota law requires organizations that incur expenditures over $100 for communications “concerning… ballot questions” to include a statement in their ads disclaiming coordination with any candidate, officeholder, or committee, further revealing the organization’s name, web address, and mailing address, and finally identifying the five largest contributors to the entity in the preceding calendar year. A nonprofit exempt from tax under IRC section 501(c)(3) challenged these restrictions under the First Amendment as being vague for failing to include sufficiently precise definitions for the conditions that trigger the law’s application and for failing to allow a state agency to provide advice as to the same, and by regulating advertisements about issues that are not campaign related. The case could provide a data point in determining at what point the state’s interest in providing the public with information via comprehensive regulation is overcome by the constitutional guarantee of fair notice, and additionally whether protections for “issue speech” that do not obviously relate to a campaign have continuing significance to campaign finance law in the area of public disclosure.

Citizens for Responsibility and Ethics in Washington v. Federal Election Commission (notice of appeal filed by subject party Crossroads GPS): Federal Election Commission (“FEC”) regulations interpreting the Federal Election Campaign Act (“FECA”) require a committee to disclose a third party contributor only if his contribution is earmarked for a specific independent expenditure. Citizens for Responsibility and Ethics in Washington (“CREW”) challenged this regulation as being an unreasonable narrowing of the FECA provision it was promulgated to implement. The lower court agreed and struck the regulation. The subject party, Crossroads GPS, has appealed to the U.S. Court of Appeals for the District of Columbia Circuit, with further proceedings expected to have immediate implications for transparency on the campaign trail and the scope of a federal agency’s authority to promulgate regulations.

Thompson v. Hebdon (9th Circuit, challenge sustained, on remand to D. Alaska where opening briefs are being filed): First Amendment law forbids discriminating against speakers based on identity, with rare exceptions such as certain forms of foreign national participation in the political process. Alaska enforces a statutory provision that limits the aggregate contributions a candidate may accept from out-of-state residents. A panel of the 9th Circuit ruled that such a law does in fact infringe unconstitutionally on First Amendment rights. Appeal to the 9th Circuit en banc is expected, with potential U.S. Supreme Court interest on the horizon.

Americans for Prosperity Foundation v. Becerra (9th Circuit opinion issued, awaiting certiorari petition): The California Attorney General requires nonprofits exempt from tax under Section 501(c)(3) of the Internal Revenue Code to submit an unredacted Schedule B list of donors and addresses with their annual IRS Form 990 tax returns. Americans for Prosperity Foundation (“AFPF”) challenged this requirement under the First Amendment’s implied guarantee of expressive association, claiming that by compelling AFPF to submit its donor information to the government, potential donors would be disincentivized for fear of government targeting if the officials disagree with AFPF’s viewpoint. The 9th Circuit rejected this challenge, arguing that because only the government would see the donor info, AFPF was unlikely to experience harassment, and the risk of inadvertent disclosure was only slight. The case comes against a wide split of authority among lower federal courts regarding the scope of First Amendment privacy rights and the authority of governments to compel disclosure of nonprofit or campaign donor information.