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Watchdog v. Coloradans For a Better Future

Court of Appeals of Colorado, First Division

April 7, 2016

Campaign Integrity Watchdog, Plaintiff-Appellant,
v.
Coloradans for a Better Future, Respondent-Appellee, and Office of Administrative Courts, Appellee.

         Office of Administrative Courts Case No. OS 2014-0008

          Matthew Arnold, Denver, Colorado, Authorized Representative of Campaign Integrity Watchdog

          Cynthia H. Coffman, Attorney General, Frederick R. Yarger, Solicitor General, Matthew D. Grove, Assistant Solicitor General, Denver, Colorado, for Amicus Curiae

          ORDER AFFIRMED IN PART, REVERSED IN PART, AND CASE REMANDED WITH DIRECTIONS

          TAUBMAN JUDGE.

          ¶ 1 This is the fourth in a series of complaints brought by claimant, Campaign Integrity Watchdog (CIW), or its principal officer, Matthew Arnold, against Coloradans for a Better Future (CBF), a political organization under section 1-45-103(14.5), C.R.S. 2015, to challenge CBF's alleged failure to report contributions and spending. In 2012, Arnold lost the Republican primary election for University of Colorado Regent to Brian Davidson. During the runup to the primary election, CBF purchased a radio advertisement supporting Davidson and other radio advertisements containing messages unfavorable to Arnold. After the election, Arnold, and later CIW with Arnold as its principal officer, filed a series of complaints with the Colorado Secretary of State (Secretary) alleging violations of the Fair Campaign Practices Act (FCPA).

         ¶ 2 CIW now appeals the decision of the administrative law judge (ALJ) concluding that no reporting violations for both billed and donated legal services had been established on the part of CBF.[1] Specifically, CIW challenges CBF's spending on legal fees in 2012 and 2013, as well as donated legal services in 2013 and 2014. We affirm in part, reverse in part, and remand to the ALJ for further proceedings.

         I. Background

         ¶ 3 CIW appeals the rejection of its fourth complaint against CBF. In the first complaint, Arnold v. Coloradans for a Better Future, No. OS 2012-0024 and No. OS 2012-0025 (O.A.C. Jan. 11. 2013), the ALJ imposed a penalty of $4525 for CBF's failure to report certain electioneering communications.

         ¶ 4 In the second complaint, Arnold v. Coloradans for a Better Future, No. OS 2013-0007 (O.A.C. Dec. 26, 2013), Arnold alleged that CBF did not report in April 2013 the legal services it received to defend the first case as either contributions or expenditures. An ALJ found that Arnold did not prove any violation because there was no evidence that CBF paid for legal services as part of any express advocacy. A division of our court affirmed in Arnold v. Coloradans for a Better Future, (Colo.App. No. 14CA0122, Feb. 5, 2015) (not published pursuant to C.A.R. 35(f)).[2]

         ¶ 5 In the third complaint, Campaign Integrity Watchdog v.Coloradans for a Better Future, No. OS 2014-004 (O.A.C. Feb. 25, 2015), CIW alleged that CBF failed to accurately report contributions it had received and expenses it had incurred to pay Arnold's court costs from an earlier case. The case was continued pending CBF's response to a subpoena duces tecum.

         ¶ 6 In the fourth and present case, CIW alleges that CBF did not report in April 2013, July 2013, October 2013, and January 2014 legal services it had received as either contributions or spending. An ALJ held a hearing on September 2, 2014, at which CBF did not appear. Nevertheless, the ALJ found in favor of CBF.

         ¶ 7 CBF did not file an answer brief in this appeal, but the Secretary filed a brief as amicus curiae in support of the ALJ's ruling.

          II. Mootness

         ¶ 8 We ordered CIW and the Secretary to show cause why we should not dismiss the appeal as moot. The record indicates that CBF was terminated[3] as a political organization on March 6, 2014 (before the ALJ issued his decision), and it was not clear to us that there was any practical relief that we could afford the organization if CIW were to prevail on appeal. Accordingly, we must first address whether this appeal is moot.

         A. Applicable Law

         ¶ 9 A political organization may only terminate by filing a termination report if the organization's TRACER[4] account has a zero balance, indicating that it has no cash or assets on hand and that there are no outstanding debts, penalties, or obligations. Dep't of State Reg. 1505-6, 8 Colo. Code Regs. 1505-6:12.

         ¶ 10 We normally refrain from addressing issues that have become moot because any opinion would not have a practical effect on an alleged controversy. Trinidad Sch. Dist. No. 1 v. Lopez By & Through Lopez, 963 P.2d 1095, 1102 (Colo. 1998).

         B. Analysis

         ¶ 11 CIW contends that to conclude that a political organization that had filed a termination report could not be sued would lead to the absurd result that entities which were potentially liable for violating the FCPA could escape accountability by "terminating." We agree. Although CBF terminated its existence as a political organization before CIW filed its fourth complaint, we conclude the appeal is not moot.

         ¶ 12 The primary campaign finance law in Colorado is Article XXVIII of the Colorado Constitution, which was approved by the voters in 2002. Article XXVIII imposes contribution limits, as well as reporting and disclosure requirements, and creates an enforcement process for violations of its provisions. Colorado also has the FCPA, §§ 1-45-101 to -118, C.R.S. 2015, which was originally enacted in 1971, repealed and re-enacted by initiative in 1996, substantially amended in 2000, and again substantially revised by initiative in 2002 as the result of the adoption of Article XXVIII. The Secretary further regulates campaign finance practices. See Dep't of State Reg. 1505-6, 8 Code Colo. Regs. 1505-6.

         ¶ 13 Neither the regulations nor the Colorado Campaign and Political Finance Manual, a manual produced by the Secretary which provides guidelines for proper compliance with campaign finance laws in Colorado, permits an entity to avoid potential liability for campaign finance violations by filing a termination report. See Colo. Sec. of State, Colorado Campaign and Political Finance Manual 34-35 (rev. July 2015), https://perma.cc/D792-UDVK; see also Dep't of State Reg. 1505-6, 8 Code Colo. Regs. 1505-6:4.4 (issue committees); 1505-6:12.3 (committees generally); 1505-6:18 (application penalties and violations for failure to comply). While the regulations and the manual only apply the term "terminate" to candidates, candidate committees, and issue committees, the Secretary has applied "terminate" to political organizations, and we will do the same.

         ¶ 14 The Secretary notes that he routinely refers complaints filed against terminated entities to the Office of Administrative Courts (OAC), and the OAC typically resolves those cases on the merits. Indeed, section 9(2)(a) of article XXVIII states that "[a]ny person . . . may file a written complaint with the secretary of state no later than one hundred eighty days after the date of the alleged violation" and makes no distinction between active entities and terminated ones. While penalties imposed against a terminated political organization may prove difficult to collect, they are not mooted by a political organization's termination. Cf. W. Spring Serv. Co. v. Andrew, 229 F.2d 413, 420 (10th Cir. 1956) (under Colorado law, judgment against dissolved partnership is permissible). Concluding the appeal is not moot, we turn to the merits of the appeal.

         III. Interpretation of Article XXVIII and FCPA

         ¶ 15 CIW raises two contentions on appeal: (1) the ALJ erred when he concluded that CBF did not need to report certain legal services as spending and (2) the ALJ erred when he concluded that CBF only needed to report contributions that were for the purpose of promoting a candidate's nomination or election. We disagree with the first contention but agree with the second.

         A. Standard of Review

         ¶ 16 We review de novo (1) statutory provisions, Bryant v. Cmty.

         Choice Credit Union, 160 P.3d 266, 274 (Colo.App. 2007); (2) constitutional provisions, Rocky Mountain Animal Def. v. Colo. Div. of Wildlife, 100 P.3d 508, 513 (Colo.App. 2004); and (3) an administrative agency's conclusions of ...


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