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Campaign Integrity Watchdog v. Alliance for A Safe and Independent Woodmen Hills

Supreme Court of Colorado, En Banc

January 29, 2018

Campaign Integrity Watchdog, Petitioner
v.
Alliance for a Safe and Independent Woodmen Hills; and Colorado Secretary of State. Respondents

         C.A.R. 50 Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 16CA280 Office of Administrative Courts Case No. OS 2015-0014 Honorable Robert N. Spencer, Administrative Law Judge.

          Authorized Representative of Petitioner: Matthew Arnold Denver, Colorado.

          Attorneys for Respondent Alliance for a Safe and Independent Woodmen Hills: Hale Westfall, LLP Ryan R. Call Allan B. Hale Richard A. Westfall Peter J. Krumholz Denver, Colorado.

          Attorneys for Respondent Colorado Secretary of State: Cynthia H. Coffman, Attorney General Matthew D. Grove, Assistant Solicitor General Grant T. Sullivan, Assistant Solicitor General Denver, Colorado.

          OPINION

          HOOD JUSTICE.

         ¶1 Alliance for a Safe and Independent Woodmen Hills bought ads and social-media coverage in an election. Campaign Integrity Watchdog filed a complaint with the Colorado Secretary of State against Alliance, alleging that Alliance failed to comply with Colorado's campaign-finance laws requiring political committees to report contributions and expenditures. An Administrative Law Judge, or ALJ, ultimately ordered Alliance to pay fines and register as a political committee.

         ¶2 Alliance appealed the campaign-finance decision and defended itself in a related defamation suit, racking up hundreds of dollars in court costs and thousands in legal fees. Alliance didn't report those legal expenses. So, Watchdog filed another campaign-finance complaint, asserting that Alliance had received contributions to pay the legal expenses and should have reported both the contributions and the spending.

         ¶3 The ALJ concluded that the legal expenses were not reportable as expenditures but were reportable as contributions. Nonetheless, it ruled that the contribution-reporting requirement was unconstitutional as applied to Alliance for its post-election legal expenses. Watchdog appealed the ALJ's determinations regarding the reporting requirements, and the court of appeals asked us to take the appeal directly under C.A.R. 50. We accepted jurisdiction, in part because this case is related to another that we decide today: Coloradans for a Better Future v. Campaign Integrity Watchdog, 2018 CO 6, __P.3d__.

         ¶4 We affirm the ALJ's decision that the legal expenses were not expenditures but were contributions under Colorado law. First, section 1-45-108(1)(a)(I), C.R.S. (2017), requires political committees to report spending only for express advocacy for the election or defeat of a candidate, and legal expenses do not constitute such express advocacy. Second, because a payment to a third party for a political committee's legal defense is a payment "for the benefit" of the political committee, it counts as a contribution under article XXVIII, § 2(5)(a)(II).

         ¶5 However, we reverse the ALJ's determination that the reporting requirement is unconstitutional as applied to Alliance for its legal expenses. The Supreme Court of the United States has consistently upheld disclosure and reporting requirements for political committees that exist primarily to influence elections. It makes no difference here that the contributions were not used to directly influence an election-any contribution to a political committee that has the major purpose of influencing an election is deemed to be campaign related and thus justifies the burden of disclosure and reporting.

         ¶6 Accordingly, we affirm the ALJ's decision in part and reverse in part.

         I. Facts and Procedural History

         ¶7 Alliance for a Safe and Independent Woodmen Hills ("Alliance") was incorporated in the run-up to a 2014 Woodmen Hills Metropolitan District Board of Directors' election. Alliance raised funds and then sent postcards and established a Facebook page, all undermining one of the board candidates, Ron Pace. Campaign Integrity Watchdog ("Watchdog"), Ron Pace, and another Woodmen Hills resident filed complaints about Alliance with the Colorado Secretary of State (the "Secretary") under article XXVIII, section 9(2)(a) of the Colorado Constitution. Watchdog alleged, among other things, that Alliance should have but failed to (1) register as a political committee and (2) report certain contributions and expenditures. As required, the Secretary referred the complaints to the Office of Administrative Courts, where they were consolidated.

         ¶8 An Administrative Law Judge ("ALJ") held a hearing and then decided that Alliance had violated the Fair Campaign Practices Act, §§ 1-45-101 to -118, C.R.S. (2017) ("FCPA"), by failing to (1) register as a political committee and (2) file contribution and expenditure reports. The ALJ fined Alliance $9650 and ordered it to register and file the missing reports. Alliance filed a notice of appeal and several motions, but eventually withdrew its appeal.

         ¶9 Meanwhile, Mr. Pace had also sued Alliance and other defendants for defamation and negligence based on Alliance's campaign efforts. After several months of litigation, the district court granted Alliance's motion to dismiss the suit and awarded Alliance attorney fees. Alliance submitted a bill of fees and costs claiming about $42, 000 in attorney fees, supported by a law firm's billing statements showing charges and payments for defending the defamation case. The source of the payments had been redacted from the copies of the statements submitted.

         ¶10 Next, Watchdog filed the complaint at issue here, arguing Alliance (1) should have but failed to report its legal expenses for appealing the first ALJ decision and for defending the defamation case as contributions, (2) should have but failed to report those same expenses as expenditures or disbursements, and (3) had exceeded the contribution limit for political committees. The complaint was referred to an ALJ, and the Secretary intervened to submit a brief in support of Alliance.

         ¶11 First, the ALJ considered whether Alliance was required to report the legal expenses as a contribution. Watchdog pointed out that the constitution counts as a contribution "[a]ny payment made to a third party for the benefit of any . . . political committee, " Colo. Const. art. XXVIII, § 2(5)(a)(II), and it argued that payments to the court and the law firm as part of Alliance's legal defense fit the plain language of the definition. Warning of constitutional problems, Alliance and the Secretary asked the ALJ to construe the provision narrowly to include only payments made for the purpose for which the political committee was formed-influencing elections. They argued that post-election legal expenses do not serve that purpose.

         ¶12 The ALJ concluded that the provision was not susceptible of Alliance's narrow construction and held that the definition applied to the legal expenses, but it ruled for Alliance all the same. It held that requiring Alliance to report post-election legal expenses as contributions would violate Alliance's First Amendment rights under the United States Constitution. For the same reason, the ALJ concluded that a contribution cap was unconstitutional as applied to Alliance's post-election legal expenses. Therefore, Alliance was not required to report the legal expenses as a contribution.

         ¶13 Nor, the ALJ held, was Alliance required to report the legal expenses as expenditures. The constitution defines "expenditure" narrowly as spending "for the purpose of expressly advocating the election or defeat of a candidate." Colo. Const. art. XXVIII, § 2(8)(a) (emphasis added). And, as the ALJ noted, express advocacy under section 2(8)(a) has a still narrower meaning: "speech that explicitly advocates for the election or defeat of a candidate through the use of the 'magic words' set out in [Buckley v. Valeo, 424 U.S. 1, 44 n.52 (1976)][1] or substantially similar synonyms." Colo. Ethics Watch v. Senate Majority Fund, LLC, 2012 CO 12, ¶ 41, 269 P.3d 1248, 1259. The ALJ concluded that Alliance's spending for legal expenses after the election "was clearly not for the purpose of expressly advocating the election or defeat of a candidate."

         ¶14 Watchdog appealed the ALJ's determinations regarding the reporting requirements, [2] and the court of appeals asked us to accept the case directly under C.A.R. 50. We accepted jurisdiction, in part because this case is related to another case for which we had already granted certiorari, Coloradans for a Better Future v. Campaign Integrity Watchdog, 2018 CO 6. Both involved the ...


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