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COLORADO COURT OF APPEALS
2 East 14th Avenue
Denver, CO 80203
District Court, City and County of Denver
Honorable J. Eric Elliff, Judge
Case No. 2012 CV 2133
(consolidated with 2012 CV 2153)
Defendant/Appellant/Cross-Appellee: SCOTT
GESSLER, in his official capacity as Secretary of
State for the State of Colorado,
v.
Plaintiffs/Appellees/Cross-Appellants:
COLORADO ETHICS WATCH and COLORADO
COMMON CAUSE
and
Plaintiffs/Appellees: DAVID PALADINO;
MICHAEL CERBO; PRO-CHOICE COLORADO
PAC; PPRM BALLOT ISSUE COMMITTEE; and
CITIZENS FOR INTEGRITY, INC.
COURT USE ONLY
Case No. 12 CA 1712
JOHN W. SUTHERS, Attorney GeneralLEEANN MORRILL, First Assistant Attorney
General
FREDERICK R. YARGER, Assistant Solicitor
General, Reg. No. 39479*
MATTHEW D. GROVE, Assistant Attorney General,
Reg. No. 34269*
1300 Broadway, 10th Floor
Denver, Colorado 80203
Telephone: (720) 508-6551
E-Mail: [email protected];
*Counsel of Record
Opening Brief of Appellant / Cross-Appellee
Colorado Secretary of State
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Certificate of Compliance
This brief complies with the requirements of C.A.R. 28 and C.A.R. 32,including all formatting requirements. Specifically, I certify the
following:
The brief complies with C.A.R. 28(g) because
It contains 9,144 words.o It does not exceed 30 pages.o The brief does not comply with CAR 28(g) because it exceeds
the word and/or page limit. A motion to accept the over lengthbrief has been filed contemporaneously with the brief.
The brief complies with C.A.R. 28(k) because,
For the party raising the issue: It contains under a separateheading (1) a concise statement of the applicable standard of
appellate review with citation to authority; and (2) a citation to
the precise location in the record (R. __, p. __), not to an entire
document, where the issue was raised and ruled on.
For the party responding to the issue: It contains, under a
separate heading, a statement of whether such party agrees
with the opponents statements concerning the standard of
review and preservation for appeal, and if not, why not.
/s/ Frederick R. Yarger
Frederick R. Yarger
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TABLE OF CONTENTS
PAGE
i
Introduction ................................................................................................ 1Issues on Appeal ......................................................................................... 2Statement of the Case and Facts ............................................................... 3
A. The Secretarys rulemaking effort. .................................................. 3B. Plaintiffs lawsuit............................................................................... 6C. The decision below. ............................................................................ 7D.The Secretarys request for a stay and the parties appeals. ......... 9
Summary of Argument ............................................................................... 9Argument .................................................................................................. 11
I. Standard of Review. ........................................................................ 11A. In enacting administrative rules, the Secretary must follow
the law, including binding judicial interpretations of the
law..................................................................................................... 13B. The Court must defer to the Secretarys Rules, asking only
whether the Rules are based on a permissibleinterpretation of the law. ................................................................19II. The five rules at issue in this appeal are all within the
Secretarys authority and discretion to promulgate. ..................... 23A.As the district court observed, the major purpose test of
Rule 1.18.2 is undeniably required by Colorado case law. ........ 231. The Supreme Courts major purpose test refines the
scope of political committee regulation. ................................ 242. Rule 1.18.2 acknowledges the major purpose test and
explains how it applies. .......................................................... 253. The district court improperly held that the Secretarys
rules must ignore the existence of the major purpose
test. ......................................................................................... 26
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B. Rule 1.12 clarifies the definition of issue committee basedon criteria the General Assembly specified. ..................................291. Rule 1.12 fills a gap left by the General Assembly. .............. 312. The Secretarys decision to use a 30% threshold is
reasonable in light of governing law. .................................... 343. The district courts flawed analysis of Rule 1.12 must
be overturned. ........................................................................ 36C. Rules 7.2 and 1.10 use existing law to clarify the definition
of political organization. ...............................................................411. Rule 7.2s major purpose requirement is based on 26
U.S.C. 527. ........................................................................... 422. Rule 1.10 uses longstanding case law to clarify the
meaning of influencing or attempting to influence. .......... 44D.Rule 18.1.8(a) implements the Secretarys authority to
waive penalties for failure to file major contributor reports. ...... 48Conclusion ................................................................................................. 52
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TABLE OF AUTHORITIES
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iii
CASESAlliance for Colo.s Families v. Gilbert, 172 P.3d 964 (Colo. App.
2007) ............................................................................................... passim
Buckley v. Valeo, 424 U.S. 1 (1976) ................................................. passim
Cerbo v. Protect Colorado Jobs, Inc., 240 P.3d 495, 502 (Colo. App.
2010) ............................................................................... 31, 33, 36, 37, 38
Holliday v. Regl Transp. Dist., 43 P.3d 676 (Colo. App. 2001) .............. 16
Citizens for Free Enter. v. Dept of Revenue, 649 P.2d 1054 (Colo.
1982) ........................................................................................... 20, 23, 39
Citizens United v. Federal Election Commission, 130 S. Ct. 876
(2010) ................................................................................................ 16, 39
Colo. Citizens for Ethics in Govt v. Comm. for the Am. Dream,
187 P.3d 1207 (Colo. App. 2008) ............................................... 12, 23, 50
Colo. Common Cause v. Gessler, 2012 COA 147 (2012) ................ 18, 22
Colo. Ethics Watch v. Senate Majority Fund, 269 P.3d 1248 (Colo.
2012) ........................................................................................... 27, 29, 47
Colo. Ground Water Commn v. Eagle Peak Farms, 919 P.2d 212
(Colo. 1996) ............................................................................................ 12
Colo. Right to Life Comm. v. Coffman, 498 F.3d 1137 (10th Cir.
2007) ............................................................................................... passim
Fed. Election Comm'n v. Massachusetts Citizens for Life, 479 U.S.
238 (1986) ....................................................................... 16, 17, 24, 26, 35
Fed. Election Commn v. Wis. Right to Life, Inc., 551 U.S. 449
(2007) ................................................................................................ 34, 36Hyatt v. Heckler, 807 F.2d 376 (4th Cir. 1986) ....................................... 15
Independence Institute v. Coffman, 209 P.3d 1130 (Colo. App.
2008) ............................................................................................... passim
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Ithaca Coll. v. Natl Labor Relations Bd., 623 F.2d 224 (2d Cir.
1980) ....................................................................................................... 15Janssen v. Indus. Claim Appeals Office, 40 P.3d 1 (Colo. App.
2001) ................................................................................................. 22, 39
Lopez v. Heckler, 572 F. Supp. 26 (1983), affd, 725 F.2d 1489 (9th
Cir. 1984) vacated on other grounds, 469 U.S. 1082 (1984) ................ 15
Minn. Citizens Concerned for Life, Inc. v. Swanson, 692 F.3d 864
(8th Cir. 2012) ............................................................................ 19, 24, 43
N.C. Right to Life, Inc. v. Leake, 525 F.3d 274 (4th Cir. 2008) .............. 13
Natl Org. for Marriage v. McKee, 649 F.3d 34 (1st Cir. 2011) .............. 46
NLRB v. Ashkenazy Prop. Mgmt. Corp., 817 F.2d 74 (9th Cir.
1987) ....................................................................................................... 15
People v. Lowrie, 761 P.2d 778 (Colo. 1988) ............................................ 20
Sampson v. Buescher, 625 F.3d 1247 (10th Cir. 2010) ..................... 22, 34
Sanger v. Dennis, 148 P.3d 404 (Colo. App. 2006) .................................. 21
Swanson v. Town of Mountain View, 577 F.3d 1196 (10th Cir.
2009) ....................................................................................................... 15
Vaughan v. McMinn, 945 P.2d 404 (Colo. 1997) ..................................... 45
Vt. Right to Life Comm., Inc. v. Sorrell, 875 F. Supp. 2d 376 (D.
Vt. 2012) ................................................................................................. 47
Wine & Spirits Wholesalers v. Colo. Dept of Revenue, 919 P.2d
984 (Colo. App. 1996) ........................................................... 19, 22, 30, 39
CONSTITUTIONSColo. Const., Art. XXVIII.................................................................... 27, 28
Colo. Const., Art. XXVIII, 2(10)(a)(I) .............................................. 17, 29
Colo. Const., Art. XXVIII, 2(12)(a) .................................................. 23, 27
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Colo. Const., Art. XXVIII, 3(5) .............................................................. 24
Colo. Const., Art. XXVIII, 3(9) .............................................................. 24
Colo. Const., Art. XXVIII, 3(10) ............................................................ 24
Colo. Const., Art. XXVIII, 3(12) ............................................................ 24
Colo. Const., Art. XXVIII, 9(1)(b) .................................................... 11, 16
Colo. Const., Art. XXVIII, 10 ............................................................. 3, 48
Colo. Const., Art. XXVIII, 10(2)(c) .................................................. 48, 50
STATUTES 1-45-103(12), C.R.S. (2012) .................................................................... 33
1-45-103(12)(b), C.R.S. (2012) ............................................. 26, 30, 31, 38
1-45-103(12)(c), C.R.S. (2012) .......................................................... 30, 33
1-45-103(14.5), C.R.S. (2012) ................................................................. 41
1-45-108(1), C.R.S. (2012) ...................................................................... 29
1-45-108(1)(a), C.R.S. (2012) ................................................................. 24
1-45-108(2.5), C.R.S. (2012) ................................................................... 48
1-45-111.5(1), C.R.S. (2012) ................................................................... 11
1-45-111.5(1.5)(c), C.R.S. (2012) ...................................................... 48, 51
26 U.S.C. 527.......................................................................................... 43
26 U.S.C. 527(e)(1) ................................................................................. 42
26 U.S.C. 527(e)(2) ................................................................................. 42
OTHER AUTHORITIESAm. Heritage Coll. Dictionary 1106 (4th ed. 2002) ................................. 42
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Introduction
In an effort to clarify the increasingly confusing field of campaign
finance law, the Secretary of State promulgated rules in early 2012 that
answered specific questions not directly addressed by Colorados
Constitution or the campaign finance statutes. Some of the rules
adopted controlling legal standards announced in federal and state
court decisions. Plaintiffs challenged those rules (as well as a rule
implementing the Secretarys authority to waive campaign finance
penalties for good cause), arguing that the Secretary cannot enact
campaign finance rules based on case law.
The new rules, however, did not deviate from past practice.
Several of the Secretarys predecessors had previously enacted rules in
direct response to federal and state court case law. Rules like these
diminish the need for ordinary citizens to research and read hundreds
of pages of judicial opinions (in addition to dense pages of constitutional
provisions and statutes) before engaging in protected First Amendment
activity.
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Despite this precedent, and although none of the Secretarys rules
contravene statutory or constitutional provisions, the district court
struck down five of the Secretarys new rules. The district court
respected the Secretarys pragmatism in attempting to harmonize
Colorado campaign finance laws with judicial decisions. But the court
believed the Secretary lacked the authority to do so.
The district courts reasoning is flawed. Nothing prevents public
officials from heeding the judiciary in enacting administrative rules. In
fact, public officials are required to adhere to case law. If upheld, the
courts order will require Colorado agencies to ignore binding judicial
decisions in promulgating their rules. This will serve only to confuse
areas of law that administrative rules are meant to clarify, and it will
mean that the public cannot trust the regulations they are obligated to
understand and follow.
Issues on Appeal
1. Can an administrative agency promulgate rules based oncontrolling and authoritative case law?
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2. If constitutional or statutory provisions fail to directly answerspecific regulatory questions, can a public official use case law to
arrive at reasonable interpretations of those provisions?
3. Can the Secretary, who is constitutionally empowered underArticle XXVIII, Section 10 to set aside campaign finance penalties
for good cause, enact rules to explain specific circumstances in
which fines will be waived?
Statement of the Case and Facts
A. The Secretarys rulemaking effort.Seeking to improve [the] organization and readability of existing
campaign finance rules, to clarify existing laws, and to achieve the
uniform and proper administration and enforcement of Colorado
campaign and political finance laws, the Secretary initiated a
rulemaking proceeding on November 15, 2011. (Admin. R. Vol. 1, Tab 1
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at 1.)1 As part of the rulemaking effort, the Secretary held a hearing on
December 15, 2011 (see Tr.) and solicited extensive written comments
(see R. Vol. 2). Many of the Plaintiffs in this case, and some of their
counsel, participated in those proceedings. (See R. Vol. 2, Tabs 2, 20, 32,
35, 41, and 42.)
The record included testimony from several members of the public
who described the difficulty of determining when their advocacy groups
might trigger Colorados campaign finance regulations. One commenter
noted, I myself have spent many hours reading about the rules, and yet
I feel totally incapable of obeying them. . . . For a small-scale project, a
political activist easily could spend far more hours navigating the
assorted campaign finance rules than the activist actually spends
1 Admin. R. Vol. 1 refers to the eight documents in the official
rulemaking record. Admin. R. Vol. 2 refers to written commentssubmitted by the public as part of the rulemaking hearing in December
2011. Tr. refers to pages of the transcript of the rulemaking hearing.
E-File R. refers to documents compiled in the compact disk e-filed by
the district court clerk (for these citations, page numbers refer to PDF
pages 1508).
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speaking out. (Admin. R. Vol. 2, Tab 4 at 1.) Another commenter noted
that
[C]itizens, especially those who work for
underfunded organizations or toward unpopular
ends[,] must often seek legal advice before
engaging in political activity in Colorado. The
complexity of state regulations, and the fact they
often do not reflect established constitutional law,
makes it difficult for a layperson to obtain
accurate guidance in the area of campaignfinance.
(Admin. R. Vol. 2, Tab 14 at 1.) Supporters of the Secretarys
rulemaking effort favored bright-line rules in the place of general or
intent-based guidelines and a one-stop location for private citizens
(that is, those without representation) to learn what is required of them
under Colorado law. (Admin. R. Vol. 2, Tab 14 at 1.) They supported
the Secretarys effort to adopt rules to explain the legal requirements
imposed by various court decisions.
Other commenters believed the Secretary lacked authority for
some of the revised rules. With respect to Rule 1.12, which includes a
30% spending threshold to trigger a groups classification as an issue
committee, one group argued that [t]he Colorado Constitution is silent
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on this matter, as are the statutes dealing with campaign finance.
(Admin. R. Vol. 2, Tab 2 at 1.) As for the major purpose requirement
for political committees, which Rule 1.18.2 codifies, some commenters
stated that the Colorado Constitution does not impose a major purpose
test. (Admin. R. Vol. 2, Tab. 41 at 3.) These comments, however, did
not cite decisions by the Colorado Courts, the Tenth Circuit Court of
Appeals, or the United States Supreme Court.
After considering the full rulemaking record, the Secretary issued
a Notice of Temporary and Permanent Adoption setting forth the
revised rules, as well as a comprehensive Statement of Basis, Purpose,
and Specific Statutory Authority, which explained the reason for each
new rule or revision and included references to governing law. (Admin.
R. Vol. 1, Tab 1 at 8.) Because some of the rules were promulgated to
incorporate judicial interpretations of existing law, the Statement of
Basis, Purpose, and Specific Statutory Authority included case citations.
B. Plaintiffs lawsuit.On April 6, 2012, two groups of plaintiffs filed complaints
challenging some of the Secretarys new rules under the Administrative
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Procedure Act. For convenience, this brief refers to all plaintiffs
together as Plaintiffs.
The Secretary answered the complaints on May 4, 2012. (E-File R.
at 17786.) Soon afterward, the Court set a briefing schedule and
reserved a half-day hearing for oral argument. (E-File R. at 500.)
Although the allegations in Plaintiffs complaints appeared to
challenge eleven of the Secretarys rules, Plaintiffs briefs sought a court
ruling on only eight: Rules 1.7, 1.10, 1.12, 1.18.2, 7.2, 18.1.8, 4.1, and
15.6.
Plaintiffs asserted that the Secretary had exceeded his authority
in passing the rules because in their view, [d]eterminations of the
impact, if any, of past federal court cases on Colorado law are properly
within the power of the judicial branch. (E-File R. at 200.) According to
Plaintiffs, the Secretary is required to ignore case law in drafting
campaign finance regulations.
C. The decision below.After considering the briefs, the administrative record, and the
parties arguments at the hearing, the district court issued a decision on
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August 10, 2012. (E-File R. at 420 (attached to this brief as
Addendum B).) The courts order upheld one of the Secretarys rules
(Rule 1.7), invalidated five of them (Rules 1.10, 1.12, 1.18.2, 7.2, and
18.1.8),2 and dismissed as unripe Plaintiffs challenges to the two
remaining rules (Rules 4.1 and 15.6).
The court, like Plaintiffs, believed that the Secretary cannot codify
legal standards announced in court decisions, even when they are
undeniably required by federal and state jurisprudence. (Adden. B at
7.) At the same time, the court upheld Rule 1.7 because it is based on
case law. According to the court, Rule 1.7 adds no substantive
additional terms and imposes no additional restrictions except those
found in decisions by the United States Supreme Court and Colorado
Court of Appeals. (Adden. B at 5.) The court did not explain why Rule
1.7s explicit reliance on case law was appropriate, while the Secretarys
other rules, also based on case law, automatically exceeded his
administrative authority.
2 The text of these six rules is set forth in Addendum A to this brief. For
the complete campaign finance rules, see 8 CCR 1505-6.
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D. The Secretarys request for a stay and theparties appeals.
Because the 2012 elections were only months away, the Secretary
sought a stay in the district court and simultaneously filed a notice of
appeal. (E-File R. at 397.) The Secretary also requested that this Court
enter a temporary stay while the district court considered a permanent
one. When these requests were denied (see E-File R. at 452, 486), the
Secretary announced publicly that he would not enforce rules 1.10,
1.12.3, 1.18.2, 7.2.1, and 18.1.8 unless or until the Colorado appellate
courts reverse the District Courts decision.
Plaintiffs later filed a joint notice of cross-appeal, seeking to
overturn the district courts decision as to Rule 1.7. (See E-File R. at
491.) The Secretary will respond to Plaintiffs arguments about Rule 1.7
in an answer-reply brief.
Summary of Argument
The district court believed that an administrative agency exceeds
its authority by codifying unambiguous requirements of judicial
precedent into concise rules. But no tenet of Colorado case law
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precludes an agency from doing so. Indeed, careful rulemakers will stay
abreast of relevant court decisions, ensuring a full understanding of the
area of law they administer. By harmonizing administrative regulations
with case law, rulemakers enhance the clarity and legal accuracy of
their rules.
Four of the rules at issue hereRules 1.18.2, 1.12, 7.2, and 1.10
embody longstanding requirements of case law. In doing so, these rules
explain how the law applies in practice; answering specific questions
that Colorados Constitution and campaign finance statutes fail to
directly answer. The district court should have deferred to the
Secretarys discretion to enact these rules, asking only whether his
interpretation of the law was permissible. It must be permissible for
an administrative agency to rely on the judiciary for interpretations of
the law. The rules are therefore valid.
The final rule at issue here, Rule 18.1.8, implements the
Secretarys constitutional authority to waive campaign finance
penalties for good cause. But rather than deferring to the Secretary, the
court engaged in an analysis of whether, in its view, the rule reflected
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sound policy. This inquiry exceeded the courts role. Moreover, the
courts decision to invalidate the rule was based on a mistaken and
incomplete understanding of the record and the regulatory framework.
When reviewed in the proper setting, Rule 18.1.8 was a routine exercise
of the Secretarys rulemaking power.
Argument
I. Standard of Review.Both the Colorado Constitution and the campaign finance statutes
expressly delegate rulemaking authority to the Secretary. Colo. Const.
art. XXVIII, 9(1)(b) (The secretary of state shall . . . [p]romulgate
such rules . . . as may be necessary to administer and enforce any
provision of this article . . . .); C.R.S. 1-45-111.5(1) (The secretary of
state shall promulgate such rules . . . as may be necessary to enforce
and administer any provision of this article.). Thus, in adjudicating
Plaintiffs challenge to the Secretarys rules, the Court must presume
the rules are valid. Plaintiffs bear a heavy burden in rebutting this
presumption: they must establish [the] invalidity of [each] rule by
demonstrating that the [Secretary] violated constitutional or statutory
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law, exceeded [his] authority, or lacked a basis in the record for the
rule. Colo. Ground Water Commn v. Eagle Peak Farms, 919 P.2d 212,
217 (Colo. 1996). And they must prove the invalidity of each rule beyond
a reasonable doubt. Colo. Citizens for Ethics in Govt v. Comm. for the
Am. Dream, 187 P.3d 1207, 1217 (Colo. App. 2008).
The district court cited these general standards but made two
errors related to the standard of review. First, the court assumed that
an administrative agency automatically exceed[s] [its] delegated
authority when it bases a rule on judicial precedent. (SeeAdden. B at
8.) Second, although it purported to defer to the precise content of the
Secretarys rules, the court opined on whether, in the courts view, the
rules work[e]d . . . mischief or were income neutral. (Adden. B at 6.)
These errors were critical. This Court should make clear that
administrative agencies are empowered to incorporate binding case law
into their rules, as the Secretarys predecessors have repeatedly done.
If, as the district court assumed, regulators must close their eyes to
judicial precedent, a large number of administrative rules in Colorado
will be inaccurate and potentially misleading.
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The Court should also reaffirm that administrative agencies with
delegated rulemaking authority are the appropriate entities to
determine whether a particular rule is wise or will work mischief.
Courts must maintain their limited role of asking only whether a
challenged rule is permissible under governing standards, maintaining
the vital rulemaking discretion that allows administrative agencies to
hone their rules to ensure they work well in practice under evolving
conditions.
A. In enacting administrative rules, the Secretarymust follow the law, including binding judicial
interpretations of the law.
Campaign finance law has become a maze of rules, sub-rules, and
cross-references, all of which an individual or organization must
navigate to do nothing more than project a basic political message.
N.C. Right to Life, Inc. v. Leake,525 F.3d 274, 296 (4th Cir. 2008).
Colorado law is no exception. As one commenter observed during the
rulemaking proceeding,
Before an activist can even begin to speak out for
or against any ballot measure or candidate with
the intention of spending even small amounts of
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resources, the activist must learn the rules
(broadly defined). The assorted Constitutional
provisions, statutes, bureaucratic rules, andsurrounding court cases constitute many scores of
pages of dense legalese. Even learning whether
certain forms of speech fall under these rules
requires substantial effort . . . .
(Admin. R. Vol. 2 Tab 4.)
To fully understand when they will trigger the laws of campaign
finance, regulated entities cannot rely solely on the language of
Colorados constitutional and statutory provisions. Judicial precedent
informs the meaning of these laws and, more importantly, the way in
which the laws may be constitutionally applied. For example, both this
Court and the Tenth Circuit have held that an organization cannot be
regulated as a political committee under Colorado law, and therefore
cannot be subject to reporting and disclosure requirements, unless the
organization meets the major purpose test announced inBuckley v.
Valeo, 424 U.S. 1 (1976). See Alliance for Colo.s Families v. Gilbert, 172
P.3d 964 (Colo. App. 2007); Colo. Right to Life Comm. v. Coffman, 498
F.3d 1137 (10th Cir. 2007). The district court itself acknowledged the
impact of cases like these on Colorados scheme of campaign finance
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regulation, observing that the Supreme Courts First Amendment
jurisprudence undeniably applies in Colorado. (Adden. B at 7.)
The Secretary must abide by this jurisprudence. [G]overnmental
agencies, like all individuals and other entities, are obliged to follow
and apply the law as interpreted by the courts. Lopez v. Heckler, 572 F.
Supp. 26, 29 (1983), affd, 725 F.2d 1489, 1497, 1503 (9th Cir. 1984)
vacated on other grounds, 469 U.S. 1082 (1984); see also Hyatt v.
Heckler, 807 F.2d 376, 379 (4th Cir. 1986); Ithaca Coll. v. Natl Labor
Relations Bd., 623 F.2d 224, 228 (2d Cir. 1980). Public officials are not
free to ignore case law within their jurisdiction. See NLRB v. Ashkenazy
Prop. Mgmt. Corp., 817 F.2d 74, 75 (9th Cir. 1987); see also Swanson v.
Town of Mountain View, 577 F.3d 1196, 1200 (10th Cir. 2009).
If, for example, the Secretary attempted to regulate, as political
committees, a class of organizations that do not meet the major purpose
requirement ofBuckley, this Court would prevent him from doing so.
See Alliance for Colo.s Families, 172 P.3d at 97273 (vacating penalties
imposed on an organization because the administrative law judge failed
to determine whether the organization met the major purpose test).
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Because the Secretary has a mandatory duty to [p]romulgate such
rules . . . as may be necessary to administer and enforce the campaign
finance laws, Colo. Const. art. XXVIII, 9(1)(b), he must ensure that his
rules comport with judicial precedent. Cf.Holliday v. Regl Transp.
Dist., 43 P.3d 676, 681 (Colo. App. 2001) (permitting a challenge to the
RTDs policies because, in light of federal constitutional jurisprudence
they may have amounted to an impermissible intrusion upon First
Amendment protections).
The Secretarys predecessors held this view. They used
rulemaking to ensure compliance with judicial precedent, even when
their rules contravened the plain language of Colorados constitution
and statutes. Former Rule 4.13, for example, exempted certain entities
from Colorados ban on corporate electioneering communications before
Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010),
established that all corporations have a right to engage in protected
speech. Rule 4.13 was based upon another Supreme Court case, Federal
Election Commission v. Massachusetts Citizens for Life, 479 U.S. 238
(1986), which held that Some [small nonprofit] corporations . . . should
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not have to bear burdens on independent spending solely because of
their incorporated status. Id. at 263. This contradicted the Colorado
Constitutions absolute ban on corporate electioneering, but the rule
was necessary to comport with the First Amendment. See Colo. Right to
Life, 498 F.3d at 1140 (noting that the Secretary passed former Rule
4.13 to follow[] the United States Supreme Courts teachings in
MCFL).
The Secretarys predecessors have even used rulemaking to
change the meaning of a specific word in the Colorado Constitution. In
defining the term issue committee, Article XXVIII 2(10)(a)(I) uses
the disjunctive or to explain how the definitional criteria (a dollar
limit and a major purpose test) apply. One of the Secretarys
predecessors, however, interpreted this provision in the conjunctive,
replacing or with the word and, see Rule 1.12.2 (former Rule 1.7(b)),
because the First Amendment compels this linguistic change. See Colo.
Right to Life, 498 F.3d at 1154 ([T]he $200 trigger, standing alone,
cannot serve as a proxy for the major purpose test . . . .). As a result,
an organization is an issue committee only if it (1) has spent or
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collected more than $200 to support or oppose a ballot question and
(2) has a major purpose of ballot-issue advocacy. See Colo. Common
Cause v. Gessler, 2012 COA 147 4 n.2 (2012) (Although the
Amendment uses the disjunctive or, the Secretarys rules interpret it to
require both conditions before a group is considered an issue
committee.).
Unlike these examples, none of the rules Plaintiffs have
challenged here actually contravenes any specific constitutional or
statutory provision. Nonetheless, the district court believed the
Secretary is required to ignore case law in promulgating campaign
finance rules. According to the district court, even when binding judicial
precedent requires a certain interpretation of the law, the Secretary
must wait for the legislature or the citizens to act before he can
acknowledge case law through rulemaking. (Adden. B at 7.) This
approach would require the public to wade through pages of case law to
understand whether their speech will be regulated. And it would
require the Secretary to shun formal pronouncements in favor of
informal promises that he will not violate the First Amendment.
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Those who seek to engage in protected political speech, however,
are entitled to more than informal assurance[s]. Minn. Citizens
Concerned for Life, Inc. v. Swanson, 692 F.3d 864, 87374 & n.8 (8th
Cir. 2012). They are entitled to clear guidance. The Secretary must have
the discretion to acknowledge through rulemaking what the case law
unambiguously requires.
B. The Court must defer to the Secretarys Rules,asking only whether the Rules are based on a
permissible interpretation of the law.
The district court cited the proper standard for reviewing the
substance of an administrative rule: if the statute is silent or
ambiguous with respect to the specific issue, the question for the court
is whether the agencys answer is based on apermissible construction of
the statute . . . . [A] court may not substitute its own construction of a
statutory provision for a reasonable interpretation made by the
administrator of an agency. (Adden. B at 3 (quoting Wine & Spirits
Wholesalers v. Colo. Dept of Revenue, 919 P.2d 984, 897 (Colo. App.
1996) (emphasis added)).) Yet the court failed to defer to the Secretarys
interpretation of the law, and it ignored his policy judgment that bright-
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line rules are more effective for triggering disclosure and reporting
requirements than are potentially ambiguous intent-based standards.
(Adden. B at 6.)
Judicial deference to agency rulemaking precludes second-
guessing the wisdom of a rule or whether, in the courts view, a
different rule might be more effective or more desirable. See Citizens for
Free Enter. v. Dept of Revenue, 649 P.2d 1054, 1063 (Colo. 1982).
Agencies must have flexibility to adapt the law to changing
circumstancesit will often be impracticable for the General Assembly
to fix rigid standards to guide agency action.People v. Lowrie, 761 P.2d
778, 781 (Colo. 1988). This is especially true in a regulatory area like
campaign finance, where the [t]he law . . . is in a state of flux as the
courts attempt to balance the desire of Congress and the states to enact
legislation that will reduce the potential for corruption . . . against
contributors First and Fourteenth Amendments guarantees of freedom
of speech and association.Alliance for Colo.s Families, 172 P.3d at
969.
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Agency discretion is not unlimited, however. In Sanger v. Dennis,
this Court stated that an administrative rule cannot add, [] modify,
and [] conflict with the [governing] constitutional provision. 148 P.3d
404, 413 (Colo. App. 2006). In Sanger, the Secretary passed a rule that
violated the United States Supreme Courts First Amendment
jurisprudence by imposing barriers to collective speech and
consequently restrict[ing] the overall quantum of speech available to
the election process. Id. at 414 (internal quotation marks omitted).
Here, in contrast, the Secretary is seeking to use rulemaking to make
Colorado law consistent with the First Amendment. In doing so, he has
not added new legal requirements that conflict with existing ones. Id.
at 413. Sanger, while relevant to this case, presented a different
situation.
This Court recently applied Sanger to invalidate a campaign
finance rule that directly modified a specific constitutional provision.
Case law from the Tenth Circuit had held that the $200 threshold for
triggering issue committee status is far too low, and the Secretary
consequently increased the threshold to $5,000, ensuring that the
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financial burden of state regulation would not approach[] or exceed[]
the value of [a groups] financial contributions to their political effort.
Sampson v. Buescher, 625 F.3d 1247, 1261 (10th Cir. 2010). This Court
held that the Secretarys rule exceed[ed] the holding of the governing
case law. Colo. Common Cause, 2012 COA 147 24.
Colorado Common Cause, like Sanger,is inapposite to the rules
challenged in this case.3 Here, the question is more nuanced. The rules
at issue do not contradict specific constitutional or statutory provisions.
They simply seek to answer precise questions that the constitution
and campaign finance statutes do not directly address[]. Wine &
Spirits Wholesalers, 919 P.2d at 897. The Court must therefore ask only
whether the rules reflect permissible interpretations of governing law.
Janssen v. Indus. Claim Appeals Office, 40 P.3d 1, 4 (Colo. App. 2001).
3 The Secretary disagrees with the holding ofColorado Common Cause
and has filed a petition for writ of certiorari to seek review of that
decision. That decision, however, is irrelevant to the issues presented
here.
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II. The five rules at issue in this appeal are all within theSecretarys authority and discretion to promulgate.
Plaintiffs bear the burden of establishing that each of the
Secretarys rules is invalid beyond a reasonable doubt. Colo. Citizens for
Ethics in Govt v. v. Comm. For the Am. Dream, 187 P.3d 1207, 1217
(Colo. App. 2008). The Court must separately ask whether each rule
reflects a permissible construction of the law. See, e.g., Citizens For Free
Enter. v. Colo. Dept of Revenue, 649 P.2d 1054, 106970 (Colo. 1982)
(reviewing two rules separately; upholding one rule and invalidating
the other). When viewed with proper deference and in light of the full
legal landscapewhich includes relevant constitutional and statutory
provisions as well as judicial precedenteach rule at issue in this case
was well within the Secretarys authority.
A. As the district court observed, the majorpurpose test of Rule 1.18.2 is undeniably
required by Colorado case law.
In Colorado, an organization that meets the definition of political
committee in Article XXVIII, Section 2(12)(a) of the Colorado
Constitution must satisfy various reporting and disclosure
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requirements. See C.R.S. 1-45-108(1)(a); Colo. Const., art. XXVIII,
3(5), (9), (10), and (12). Rule 1.18.2 clarifies when an entity is subject
to these regulations. It does so by codifying the major purpose test, a
longstanding fixture of First Amendment jurisprudence.
1. The Supreme Courts major purposetest refines the scope of political
committee regulation.
Years ago, decades before Colorados current regime of campaign
finance regulation was put in place, the United States Supreme Court
held that an entity may be regulated as a political committee only if it
meets an important constitutional requirement: its major purpose
must be to support or oppose the nomination or election of political
candidates.Buckley, 424 U.S. at 79; see also Fed. Election Commn v.
Mass. Citizens for Life, Inc., 479 U.S. 238, 252 n.6 (1986). The test
ensures that the regulation of political committees is not impermissibly
broad. Minn. Citizens Concerned for Life, 692 F.3d at 872 (quoting
Buckley, 424 U.S. at 7980).
Two courts have held that the major purpose test applies to
political committees in Colorado. In Colorado Right to Life Committee,
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the Tenth Circuit held that Colorado cannot regulate as a political
committee an entity that fails the major purpose test. 498 F.3d at
1153. The same year, this Court echoed that holding, recognizing that
the test is required by Buckley although it does not appear in the text
of the Colorado Constitution.Alliance for Colorados Families, 172 P.3d
at 972. The Court overturned the ruling of an administrative law judge
who had imposed retroactive penalties on an advocacy group without
considering the major purpose test. The Court remanded the case with
explicit instructions for the ALJ to apply the test; the group could be
subject to regulation as a political committee only if its major purpose
was supporting or opposing a political candidate. Id.
2. Rule 1.18.2 acknowledges the majorpurpose test and explains how it
applies.
Rule 1.18.2 formally acknowledges thatBuckleys major purpose
test is a required element of Colorados definition of political
committee. The rule should be uncontroversial. Below, Plaintiffs
conceded that [a]s a matter of constitutional law, a political committee
must have the major purpose to support or oppose candidates. (E-File
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R. at 303 (emphasis added) (quotingBuckley, 424 U.S. at 79).) And the
district court observed thatAlliance for Colorados Families and
Colorado Right to Life undeniably required application of theBuckley
test. (Adden. B at 7.)
The rule also explains precisely how the test applies, using two
criteria drawn from case law: (1) the objectives of the entity set forth in
its organizing documents and (2) whether [a]nnual expenditures made
to support or oppose [a] nomination or election . . . are a majority of the
organizations total spending. As the Tenth Circuit recognizes, the
Supreme Court endorses this very same two-pronged approach. Colo.
Right to Life Comm., 498 F.3d at 1152 (citing Mass. Citizens for Life,
Inc., 479 U.S. at 252 n.6, 262). So does the General Assembly: it used
similar criteria to define the a major purpose requirement for issue
committees. See C.R.S. 1-45-103(12)(b).
3. The district court improperly held thatthe Secretarys rules must ignore theexistence of the major purpose test.
The district court, while acknowledging the validity of the major
purpose test, struck down Rule 1.18.2 for two reasons. First, the court
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believed that the major purpose test is contrary to the political
committee definition in [Article] XXVIII and would add a new, strict
limitation to the definition. (Adden. B at 7.) Second, the court believed
that the major purpose test is contrary to the intent of Art. XXVIII
2(12)(a) as passed by the citizens of Colorado. (Adden. B at 7.) This
reasoning, however, violates recent guidance from the Colorado
Supreme Court.
In Colorado Ethics Watch v. Senate Majority Fund, the Colorado
Supreme Court interpreted another term in the Colorado Constitution:
express advocacy, which is used to define the activities of political
committees. 269 P.3d 1248 (Colo. 2012). The plaintiff in Colorado Ethics
Watchwho is also a plaintiff hereargued that express advocacy
should be interpreted to encompass a broad range of political speech,
thereby expanding the definition of the term political committee and
exposing more advocacy groups in Colorado to campaign finance
regulation. The Colorado Supreme Court disagreed with this approach,
relying explicitly onBuckley for guidance in how to construe the
Colorado Constitution. The Court noted that the plaintiffs
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interpretation would require us to ignore the settled definition of
express advocacy that existed at the time that Amendment 27 [the
Campaign Finance Amendment] was adopted by the voters. Id. at
1256. According to the Court, when Colorado voters used term[s] of art
in Amendment 27, they incorporated the decades of campaign finance
jurisprudence that has attempted to balance the public concerns
related to the impact of independent financing in elections and the
constitutional concerns outlined inBuckley. Id.
Under this reasoning, Rule 1.18.2 simply codifies a legal
requirement that Colorado voters adopted when they enacted
Amendment 27. The rule does not, as the district court assumed,
contradict the language or intent of the Colorado Constitution. Nothing
in the language of Article XXVIII suggests an intent to preclude the
major purpose test, and two courts have explicitly recognized that to
comport withBuckley, the term political committee must include a
major purpose requirement. Colo. Right to Life, 498 F.3d at 1153;
Alliance for Colo.s Families, 172 P.3d at 972. Courts must presume
that the electorate was aware of the legal significance of the
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terminology they chose to use in Colorados campaign finance laws.
Colorado Ethics Watch, 269 P.3d 1256. This includes the decades-old
major purpose test.
Plaintiffs themselves have not attempted to argue that the major
purpose test is invalid or should not apply within the state; they
simply seek to prevent the Secretary from formally acknowledging it.
This serves no purpose other than to increase the chance that citizens
might fail to realize that the protections of the test might apply to them.
Rule 18.1.2 must be upheld.
B. Rule 1.12 clarifies the definition of issuecommittee based on criteria the General
Assembly specified.
Entities that advocate for or against ballot measures in
Coloradoissue committeesare regulated much like political
committees. See C.R.S. 1-45-108(1). The Colorado Constitution defines
issue committees as groups that take in or spend at least $200 on ballot
issue advocacy and have a major purpose of supporting or opposing any
ballot issue or ballot question. Colo. Const., art. XXVIII, 2(10)(a)(I).
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But the a major purpose requirement has been challenged as
unconstitutionally vague and overbroad, Independence Institute v.
Coffman, 209 P.3d 1130, 113640 (Colo. App. 2008), and the General
Assembly enacted a multi-factor test to confine its application in light of
this case law. Under the statute, whether an entity has a major
purpose of advocating ballot issues is informed by
(1) specifically identified objectives in . . .
organizational documents or
(2) a demonstrated pattern of conduct, which in
turn is informed by the entitys
(a) annual expenditures in support of or
opposition to a ballot issue or ballot
question or
(b) [p]roduction or funding, or both, ofwritten or broadcast communications.
C.R.S. 1-45-103(12)(b); see also id. 1-45-103(12)(c) (citing
Independence Institute).
This statutory methodology, however, does not directly answer a
specific question relevant to the a major purpose requirement. Wine
& Spirits Wholesalers, 919 P.2d at 897. It fails to explain how an entity
must weigh its expenditures and production or funding . . . of written
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or broadcast communications. To clarify how this definition operates in
practice, the Secretary enacted Rule 1.12.
Under the rule, if either prong of the statutory methodology
expenditures or production or funding . . . of written or broadcast
communicationsexceeds 30% of an entitys total budget, the entity
has a major purpose of supporting or opposing any ballot issue or ballot
question. The rule was meant to take the guesswork out of applying
1-45-103(12)(b). It create[s] a bright line test for issue committees
an easily-measurable 30% thresholdmaking it easier for any person
or group of persons to understand when campaign finance law applies.
(Admin. R. Vol. 1, Tab 1 at 2.)
1. Rule 1.12 fills a gap left by the GeneralAssembly.
Absent the guidance provided by Rule 1.12, the a major purpose
requirement has proven difficult to apply in practice.
In Cerbo v. Protect Colorado Jobs, Inc., for example, this Court
overturned the decision of an administrative law judge who had erred
in her analysis of the test. 240 P.3d 495, 502 (Colo. App. 2010).
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Although the ALJ articulated the proper factors, she placed undue
weight on one of them, gave too much weight to another, and failed
to give weight to other facts relevant to the inquiry. Id. The Court
conducted its own fact-specific analysis, considering the
interrelationships of [the entitys] officers and agents, the amount of
time spent promoting the ballot issue, and the portion of funds the
entity expended promoting th[e] ballot issue. Id. at 50204. Based on
this revised analysis, the Court concluded that the entity was, in fact,
an issue committee and was potentially subject to sanctions for
nondisclosure of its expressive activity. Id. at 504.
In another case, this Court considered a collateral First
Amendment challenge to a decision of the same ALJ. This time,
however, the Court upheld the ALJs ruling. The Court noted that the
ALJ properly conducted a fact-specific inquiry into the organizations
original purpose, its organizational structure, the various issues
with which it had been involved, and the amount of money it spent on
advocacy in proportion to its annual budget. Independence Institute,
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209 P.3d at 1139. This multi-factor inquiry, the Court held, was not
unconstitutionally vague.
But while they are not unconstitutionally vague, these multi-
factor inquirieswhich rely purely on hindsight and do not explain how
each factor appliesfail to provide adequate guidance to the public
before litigation ensues. Those who wish to know whether their speech
will be subject to the disclosure requirements issue committees are
obligated to follow must resort to a best guess. And this best guess, no
matter how well-intentioned, might be overturned in litigation. An ALJ
(or this Court) could hold that the advocacy group placed undue
weight on one factor or gave too little weight to another. Cerbo, 240
P.3d at 502.
Moreover, the statutory methodology of 1-45-103(12) does not
resolve the ambiguity. The statute explicitly states that it makes no
substantive change to the definition of a major purpose and is
intended only to reflect the holding ofIndependence Institute. See 1-
45-103(12)(c). The statute merely reiterates the factors cited in the case
law without explaining how to apply them.
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Rule 1.12 fills the gap. It uses the statutory methodology to create
an easy-to-apply standard, one that entail[s] minimal if any discovery
and allows parties to resolve disputes quickly without chilling speech
through the threat of burdensome litigation. Fed. Election Commn v.
Wis. Right to Life, Inc., 551 U.S. 449, 469 (2007). The Rule minimizes
the risk that a group seeking to engage in protected speech will guess
wrong and be forced to spend the time, energy, and money required to
defend against litigation. See Sampson, 625 F.3d at 1260. As one
member of the public testified at the rulemaking hearing, I do like the
idea that theres a clear rule here. There hasnt been a test at all. . . .
And so . . . [if you decide to engage in ballot-issue advocacy,] youre
running the risk that youre going to be dragged into court . . . . (Tr. at
114:413.)
2. The Secretarys decision to use a 30%threshold is reasonable in light of
governing law.
As the Secretary explained at the rulemaking hearing, the 30%
threshold of Rule 1.12 honors the difference between a major purpose
and the major purpose. (Tr. at 122:89 (emphasis added).) Unlike issue
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committees, political committees must have the major purpose of
supporting or opposing a candidate.Buckley, 424 U.S. at 79. The
Supreme Court and the Tenth Circuit have interpreted this to mean
that a political committee must spend the majority, or the
preponderance,of its budget on political advocacy. Colo. Right to Life
Comm., 498 F.3d at 1152 (citing Mass. Citizens for Life, Inc., 479 U.S. at
252 n.6, 262).
Issue committees, meanwhile, must meet the a major purpose
test. The 30% threshold of Rule 1.12 recognizes the distinction. It uses a
lower benchmark than the 50% threshold for political committees while
ensuring that a meaningful portion of an issue committees budget is
spent on ballot-issue advocacy.
The percentage-based approach is also rooted in case law.
Colorado court decisions addressing the a major purpose requirement
focus on theproportion of spending, not an absolute amount. For
example, in 2010 this Court held that an organization has a major
purpose of supporting a ballot issue if such support constitutes a
considerable or principalportion of the organizations total activities.
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Cerbo, 240 P.3d at 501 (internal quotation marks omitted) (emphasis
added). The Court found this requirement to be satisfied where an
entity spen[t] three-fourths of all of the funds it has ever expended
promoting that ballot issue. Id. at 504.
The United States Supreme Court forbids amorphous campaign
finance regulations. WRTL II, 551 U.S. at 469. Rule 1.12 avoids this
problem. Instead of using an open-ended rough-and-tumble of factors,
which invit[es] complex argument in a trial court and a virtually
inevitable appeal, id. (internal quotation marks omitted), Rule 1.12
uses a bright-line threshold. As demonstrated by cases applying the a
major purpose requirementcases that depend on fact-specific,
multi-prong inquiries, seeCerbo, 240 P.3d at 50304; Independence
Institute, 209 P.3d at 1139Rule 1.12 is necessary to avoid the
burdensome litigation that the First Amendment forbids.
3. The district courts flawed analysis ofRule 1.12 must be overturned.
In striking down Rule 1.12, the district court made three errors.
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First, the court implied that unless a statute is unconstitutionally
vague, it leaves no room for rulemaking. The court observed that two
cases . . . held that the term major purpose . . . [is] not ambiguous.
(Adden. B at 6.) By implication, then, the Secretary was precluded from
enacting Rule 1.12 to clarify the not ambiguous phrase a major
purpose.
Neither of the cases the district court cited, however, suggests
that the phrase a major purpose is so unambiguous that it cannot be
clarified. The first case, Independence Institute, analyzed only whether
the phrase is unconstitutionally vague or overbroad. 209 P.3d at 1136.
In denying the plaintiffs constitutional challenge, the Court identified
three factual considerations advocacy groups could consider in applying
the a major purpose test. Id. at 1139. Using these factual
considerationsand not merely the bare phrase a major purposea
group could make an informed decision before undertaking ballot
advocacy. Id.
The second case, Cerbo, also involved a vagueness and
overbreadth challenge to a major purpose. 40 P.3d at 500. And
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although Cerbo perceive[d] no ambiguity in the phrase it explicitly
relied on the three nonexclusive factors from Independence Institute to
guide its application of the phrasefactors the Court had used to
ensure the phrase could be constitutionally applied. Id. at 501. Cerbos
reliance on these factors illustrates that even though the phrase a
major purpose is not so ambiguous that it is unconstitutional, it must
be clarified to be applied in practice. Both cases illustrate that the
phrase is amenable to rulemaking.
The district courts second error was to assume that an
administrative agency cannot enact regulations to clarify how a statute
should be applied in practice. The court noted that the legislature . . .
codif[ied] the holding ofCerbo and Independence Institute in 1-45-
103(12)(b) without the use of Rule 1.12s 30% requirement. (See
Adden. B at 6.) In the district courts view, the statutes silence was
dispositive.
This reasoning misapplied the standard of review. Because 1-45-
103(12)(b) is silent . . . with respect to the specific issue of how to
apply the statutory factors, the only question the district court should
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have asked is whether the agencys answer is based on apermissible
construction of the statute. Wine & Spirits Wholesalers, 919 P.2d at
897 (emphasis added). Indeed, if administrative regulations were valid
only if they parroted existing statutory provisions, there would be no
need for rulemaking.
Finally, the court improperly relied on its own policy judgments to
evaluate the rule. The court believed the rule works further mischief in
that it appears not to be income neutral. (Adden. B at 6.) This second-
guessing the wisdom of Rule 1.12 exceeded the bounds of judicial
review. See Citizens for Free Enter., 649 P.2d at 1063. The district court
was not empowered to substitute its judgment for that of [the
Secretary]; it could only determine whether the rule is reasonable.
Janssen, 40 P.3d at 4.
In any event, the district courts evaluation of the wisdom of Rule
1.12 was misinformed. The rule is, in fact, income neutral. The 30%
threshold applies regardless of a speakers wealth or income. This
complies with First Amendment jurisprudence, which forbids regulating
political speech . . . based on a speakers wealth. Citizens United, 130
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S. Ct. at 904. The United States Supreme Court has rejected the
premise that the Government has an interest in equalizing the relative
ability of individuals and groups to influence the outcome of elections.
Id. (quotingBuckley v. Valeo, 424 U.S. 1, 48 (1976)). To regulate based
on the impermissible criterion of wealth would allow suppression of
political speech based on the speakers identity, something the First
Amendment generally forbidsespecially in the context of political
speech. Id. Contrary to the district courts appraisal, Rule 1.12s 30%
threshold provides a clear guideline while staying wealth-neutral (and
therefore identity-neutral), as the First Amendment requires.
Moreover, the 30% threshold actually promotes the interests of
organizations with modest resources. One public commenter noted that
[t]he grassroots activist, with limited time and funds, suffers the most
from having complicated, time-consuming regulations and draconian
penalties over his or her head. (Admin. R. Vol. 2, Tab 26 at 1.) The 30%
rule allows grassroots organizations to easily determine, without having
to pay for hours of attorney time, when they will trigger the reporting
and disclosure obligations of Colorados campaign finance laws.
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C. Rules 7.2 and 1.10 use existing law to clarify thedefinition of political organization.
In 2007, the General Assembly enacted legislation that imposed
disclosure and reporting obligations on political organizations, groups
organized as tax-exempt under Section 527 of the Internal Revenue
Code. Under 1-45-103(14.5), a political organization is an entity that
(1) meets the definition in section 527(e)(1) of the federal Internal
Revenue Code of 1986, and (2) is engaged in influencing or
attempting to influence the selection, nomination, election, or
appointment of any individual to any state or local public office.
Rules 7.2 and 1.10 clarify the two elements of the definition of
political organization. Contrary to the district courts view, the rules
do not add new requirements to 1-45-103(14.5) or narrow the
statutory definition. (SeeAdden. B at 9.) They use existing federal
statutory requirements and longstanding case law to provide guidance
to the public.
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1. Rule 7.2s major purpose requirementis based on 26 U.S.C. 527.
Section 527 of the Internal Revenue Code imposes a primary
purpose requirement on political organizations. Only if an entity is
organized and operatedprimarily for the purpose of . . . influencing or
attempting to influence an election can the entity be a political
organization. 26 U.S.C. 527(e)(1)(2) (emphasis added). Rule 7.2, in
requiring a political organization to have as its major purpose
influencing or attempting to influence elections, codifies 527s
primary purpose requirement.
The rule recognizes that the terms primary and major are
functionally identical. As an adjective, primary means [f]irst or
highest in rank, quality, or importance.Am. Heritage Coll. Dictionary
1106 (4th ed. 2002). And major means [g]reater than others in
importance or rank. Id. at 834. Given the words linguistic equivalence,
it was within the Secretarys rulemaking discretion to use the more
common word major, while codifying the primary purpose
requirement of Section 527.
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This requirement is not just a matter of federal statutory policy. It
is also based on the First Amendment. InBuckley, the U.S. Supreme
Courtadopted a major purpose test to trigger reporting and disclosure
requirements for advocacy groups, thereby ensuring that only
campaign related organizations would be subject to comprehensive
regulation. 424 U.S. at 79. The test ensures that government regulation
does not discourage[] associations, particularly small associations with
limited resources, from engaging in protected political speech. Minn.
Citizens Concerned for Life, 692 F.3d at 874.
The district court believed that the major purpose requirement
narrow[s] the definition of political organization. (Adden. B at 9.)
Rule 7.2, however, makes no additions to the law; it merely makes
explicit one requirement of 26 U.S.C. 527, the federal statute on which
Colorados definition of political organization is based. Through Rule
7.2, the Secretary sought to provide Colorado citizens with information
about existing legal requirements relevant to the definition of political
organization. Rather than being forced to flip back and forth between
judicial precedent, federal and state statutes, and administrative
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regulations, the public could consult a single resourcethe Secretarys
rulesto understand how the definition works. As one commenter
suggested, this creates a one-stop location for private citizens (that is,
those without representation) to learn what is required of them under
Colorado law. (Admin. R. Vol. 2, Tab 14 at 1.)
2. Rule 1.10 uses longstanding case law toclarify the meaning of influencing orattempting to influence.
The words influencing or attempting to influenceanother
element of the statutory definition of political organizationhave
acquired a specific meaning in the area of campaign finance law. Nearly
forty years ago inBuckley, the United States Supreme Court analyzed a
nearly identical phrase: for the purpose of . . . influencing. 424 U.S. at
7482. The phrase, used to trigger disclosure and reporting obligations,
pose[d] constitutional problems because of its potential to include
both issue discussion [which the First Amendment broadly protects]
and advocacy of a political result [which may be regulated more
stringently]. Id. at 77, 79.
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To remedy these constitutional problems, the Court adopted a
narrowing construction, holding that the phrase must only reach
activity that expressly advocate[s] the election or defeat of a clearly
identified candidate. Id. at 80.
Rule 1.10 makes explicit what the First Amendment has long
required. The rule incorporates the express advocacy standard into
the ambiguous phrase influencing or attempting to influence, using
language fromBuckley to avoid the phrases constitutional problems.
The General Assembly is presumed to adopt the construction which
prior judicial decisions have placed on particular language. Vaughan v.
McMinn, 945 P.2d 404, 407 (Colo. 1997). Rule 1.10 is not, therefore,
contrary to the clear terms of the statute and the intent of the
legislature, as the district court believed. (Adden. B at 9.) The rule
simply clarifies a term of art the General Assembly chose to adopt.
Recent case law affirms that Rule 1.10s construction of the term
influencing is constitutionally compelled. The First Circuit, for
example, held that the term influencing presents vagueness
problems. Natl Org. for Marriage v. McKee, 649 F.3d 34, 65 (1st Cir.
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2011). In the courts view, the term could be read to include various
types of speech, including advocacy for or against a candidates
election; championing an issue for inclusion in a candidates platform;
and encouraging all candidates to embrace public funding. Id. Without
more context, the term is uncertain enough that a person of average
intelligence would be forced to guess at its meaning and modes of
application. Id. (internal quotation marks omitted).
The defendants in that casestate public officials responsible for
administering Maines campaign finance lawsacknowledged that
influencing is insufficiently clear on its face to satisfy due process
standards. Id. at 66. They therefore officially adopted a narrowing
construction, as Rule 1.10 does, which interpreted influencing to
mean communications and activities that expressly advocate for or
against [a candidate] or that clearly identify a candidate by apparent
and unambiguous reference and are susceptible of no reasonable
interpretation other than to promote or oppose the candidate. Id. at
6667. This narrowed formulation, the court held, was considerably
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more precise than the original. Id. at 67. And so limited, the term
influencing was not so vague as to offend due process. Id.
Another federal court adopted a similar limiting construction to
ensure the phrase influencing an election was not unconstitutionally
vague. Vt. Right to Life Comm., Inc. v. Sorrell, 875 F. Supp. 2d 376 (D.
Vt. 2012). Indeed, the court held that it would have reached the same
conclusion in interpreting otherwise expansive language like
influencing. Id.
The Colorado Supreme Court recently observed that Colorado
campaign finance law must be construed to avoid the vagueness and
over-breadth concerns fromBuckley that are the bedrock of all
campaign finance political speech jurisprudence. Colo. Ethics Watch,
269 P.3d at 1258. By codifying a longstanding interpretation of the term
influencing that the General Assembly is presumed to have adopted,
this is precisely what Rule 1.10 accomplishes.
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D. Rule 18.1.8(a) implements the Secretarysauthority to waive penalties for failure to file
major contributor reports.
Major Contributor Reports are disclosures that must be filed by
candidate committees, political committees, issue committees, and
political parties within thirty days of an election. C.R.S. 1-45-108(2.5).
In these reports, entities must list any contribution of one thousand
dollars or more they received within the thirty-day time period. Id. The
reports must be filed no later than twenty-four hours after receipt of
said contribution. Id.
Under C.R.S. 1-45-111.5(1.5)(c), an entity that fails to file any
reportincluding a Major Contributor Reportis subject to a sanction
of up to $50 per day for each day that [the report] . . . is not filed by the
close of business on the day due. The Secretary may, upon receiving an
appeal of a sanctions order, set aside or reduce the penalty [for failure
to file a report] upon a showing of good cause. Colo. Const., art. XXVIII,
10(2)(c).
To implement the appeal provisions of Article XXVIII, 10, the
Secretary has created a system of uniform requests for waiver that a
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person or entity may file with the Secretary (or an administrative law
judge) after receiving a penalty for violation of the campaign finance
laws. See Rule 18.1. The Secretarys request-for-waiver rules explicitly
define the circumstances under which various penalties will be waived.
In doing so, the rules create clarity and predictability for those seeking
to engage in public debate but fearing that simple mistakes will lead to
large, unpredictable penalties.
As the record illustrates, these fears are legitimate. During
rulemaking, one commenter noted, I have been a volunteer treasurer
on a few campaigns and had the experience of making a mistake and
costing my candidate nearly $1,000 in a race that raised in the
neighborhood of $34,000. (Admin. R. Vol. 2, Tab 17 at 1.) The rookie
mistake this commenter described was failing to file a Major
Contributor Report. In the commenters view, the mistake was
unintentional and did not harm my candidates opponent or the public.
(Id.) She believes that those who should know better and [are] willful
violators of campaign finance laws should be punished with fines. (Id.)
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But where fines only serve to punish those who try to act in good faith,
they d[o] not benefit the public or the process. (Id.)
Rule 18.1.8(a) addresses these concerns by defining when a failure
to file a Major Contributor Report will be excused for good cause
under Article XXVIII, 10(2)(c). Rule 18.1.8(a) states that [p]enalties
assessed for failure to timely file a Major Contributor Report . . . stop
accruing on the date that the contribution is first disclosed, either on
the Major Contributor Report or the regularly-scheduled Report of
Contributions and Expenditures . . . . Penalties will not accrue beyond
the date of the general election. This rule recognizes that, once a
regularly-scheduled report is filed, or when an election is over, any
harm flowing from a failure to file a Major Contributor Report is
diminished.
A previous Secretary enacted a similar rule, former Rule 9.5.1,
which excused political committees from filing separate electioneering
reports so long as any expenditure for electioneering communications
[was] disclosed in a regularly filed disclosure report. See Colo. Citizens
for Ethics in Govt, 187 P.3d at 1213. In CCEG, this Court observed that
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a $1,000 penalty would not have accrued had Rule 9.5.1 been
promulgated before the offending conduct occurred. But because Rule
9.5.1 [had] only prospective application, the Court was required to
analyze whether the $1000 penalty . . . was erroneous. Id.
Despite the constitutional underpinnings of Rule 18.1.8and
despite this Courts recognition in CCEG that a similar rule is valid and
enforceablethe district court believed that Rule 18.1.8 substantially
denudes the statutory penalty and would improperly allow bad actors
to intentionally refuse to file a Major Contributor Report knowing that
the fine amount will be fixed on Election Day. But this scenario was
possible before the enactment of Rule 18.1.8(a): If a sophisticated entity
desired to hide its major contributions, it could do so if it were willing to
accrue penalties under Section 1-45-111.5(1.5)(c) until it filed a Major
Contributor Report the day after the election. Of course, to do so, the
entity would also have to delay filing a regularly-scheduled report, and
would therefore incur additional penalties, just as it would under Rule
18.1.8(a).
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Rule 18.1.8(a) therefore does not excuse bad behavior any more
than Section 1-45-111.5(1.5)(c) does; the Rule merely clarifies when
penalties will be set aside for good cause, protecting entities that
inadvertently fail to file a Major Contributor Report. This clarification
of the constitutional good cause standard is within the Secretarys
rulemaking authority and should be upheld.
Conclusion
The Secretary respectfully requests that the Court reverse the
district courts order as to Rules 1.18.2, 1.12, 7.2, 1.10, and 18.1.8(a) and
conclude that each of these rules is valid and enforceable.
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Respectfully submitted on February 1, 2013.
JOHN W. SUTHERSAttorney General
/s/ Frederick R. Yarger
LEEANN MORRILL
First Assistant Attorney General
Public Officials Unit
State Services Section
FREDERICK YARGER, 39479*
Assistant Solicitor General
MATTHEW GROVE, 34269*
Assistant Attorney General
Public Officials Unit
State Services Section
Attorneys for Secretary Gessler*Counsel of Record
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CERTIFICATE OF SERVICE
This is to certify that I have served this OPENING BRIEF
OF APPELLANT / CROSS-APPELLEE COLORADO SECRETARY OF
STATE on all parties by LexisNexis File & Serve at Denver, Colorado,
on February 1, 2013, addressed as follows:
Mark Grueskin
Heizer Paul Grueskin LLP2401 15th Street, Suite 300
Denver, Colorado 80202
Luis Toro
Margaret Perl
1630 Welton Street
Denver, Colorado 80202
Jennifer H. HuntHill & Robbins, P.C.
1441 18th Street, Suite 100
Denver, Colorado 80202-1256
/s/ Frederick Yarger
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Paladino v. Gessler, 12 CA 1712
Addendum A to the Secretarys Opening Brief:Campaign Finance Rules at Issue in this Appeal
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A - 1
Rule 1.7
Electioneering communication is any communication that (1) meets the definition
of electioneering communication in Article XXVIII, Section 2(7), and (2) is thefunctional equivalent of express advocacy. When determining whether a
communication is the functional equivalent of express advocacy:
1.7.1 A communication is the functional equivalent of express advocacy only
if it is subject to no reasonable interpretation other than an appeal to vote for
or against a specific candidate.
1.7.2 In determining whether a communication is the functional equivalent
of express advocacy, it shall be judged by its plain language, not by an intent
and effect test, or other contextual factors.
1.7.3 A communication is not the functional equivalent of express advocacy if
it:
(a) Does not mention any election, candidacy, political party, opposing
candidate, or voting by the general public,
(b) Does not take a position on any candidate's or officeholder's
character, qualifications, or fitness for office, and
(c) Merely urges a candidate to take a position with respect to an issue
or urges the public to adopt a position and contact a candidate with
respect to an issue.
[Federal Election Commission v. Wisconsin Right to Life, 551 U.S. 449 (2007)]
Former Rule 9.4 (predecessor to Rule 1.7)
Pursuant to the decisions of the Colorado Court of Appeals in the case of Harwood v.
Senate Majority Fund, LLC, 141 P.3d 962 (2006), and of the United States Supreme
Court in the case of FEC v. Wisconsin Right to Life, 127 S. Ct. 2652 (2007), a
communication shall be deemed an electioneering communication only if it is
susceptible to no reasonable interpretation other than as an appeal to vote for or
against a specific candidate. In making this determination, (1) there can be no free-
ranging intent-and-effect test; (2) there generally should be no discovery or inquiry
into contextual factors; (3) discussion of issues cannot be banned merely because theissues might be relevant to an election; (4) in a debatable case, the tie is resolved in
favor of not deeming a matter to be an electioneering communication.
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A - 2
Rule 1.10
Influencing or attempting to influence, for purposes of political organizations as
defined in section 1-45-103(14.5), C.R.S., means making expenditures forcommunications that expressly advocate the election or defeat of a clearly identified
candidate or candidates. [Buckley v. Valeo, 424 U.S. 1 (1976)]
Rule 1.12
Issue committee
* * *
1.12.3 For purposes of determining whether an issue committee has a major
purpose under Article XXVIII, Section 2(10)(a)(I) and section 1-45-
103(12)(b)(II)(A), C.R.S., a demonstrated pattern of conduct is established by:
(a) Annual expenditures in support of or opposition to ballot issues or
ballot questions that exceed 30% of the organizations total spending
during the same period; or
(b) Production or funding of written or broadcast communications in
support of or opposition to a ballot issue or ballot question, where the
production or funding comprises more than 30% of the organizations
total spending during a calendar year.
Rule 1.18
Political committee
* * *
1.18.2 Political committee includes only a person or group of persons that
support or oppose the nomination or election of one or more candidates as its
major purpose. For purposes of this Rule, major purpose means:
(a) The organization specifically identifies supporting or opposing the
nomination of one or more candidates for state or local public office as
a primary objective in its organizing documents; or
(b) Annual expenditures made to support or oppose the nomination or
election of one or more candidates for state or local public office are a
majority of the organizations total spending during the same period.
[Alliance for Colorados Families v. Gilbert, 172 P.3d 964, 970 (Colo. App. 2007)]
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A - 3
Rule 7.2
Political organizations. In the case of political organizations as defined in section 1-
45-103(14.5), C.R.S.:7.2.1 For purposes of section 1-45-108.5, C.R.S., an entity is considered a
political organization only if:
(a) Has as its major purpose influencing or attempting to influence
elections as defined in Rule 1.10; and
(b) Is exempt, or intends to seek exemption, from taxation by the
Internal Revenue Service.
[I.R.C. 527(i)(5)(B) (2010)]
* * *
Rule 18.1.8
18.1 Requests for waiver or reduction of campaign finance penalties
18.1.1 A request for waiver or reduction of campaign finance penalties
imposed under Article XXVIII, Section 10(2) must state the reason for the
delinquency. The filer should provide an explanation that includes all
relevant factors relating to the delinquency and any mitigating
circumstances, including measures taken to avoid future delinquencies.
Before the Secretary of State will consider a request, the report must be filed,
and a request including the information required by this paragraph must be
submitted
* * *
18.1.8 Major Contributor Reports
(a) Penalties assessed for failure to timely file a Major Contributor
Report under section 1-45-108(2.5), C.R.S., stop accruing on the date
that the contribution is first disclosed, either on the Major Contributor
Report or the regularly-scheduled Report of Contributions and
Expenditures. Penalties will not accrue beyond the date of the general
election. [Section 1-45-108(2.5) C.R.S.]
* * *
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Paladino v. Gessler, 12 CA 1712
Addendum B to the Secretarys Opening Brief:The District Courts August 10, 2012 Order
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DISTRICT COURT, CITY AND COUNTY OFDENVER, STATE OF COLORADO
1437 Bannock Street, Room 256Denver, Colorado 80202
COLORADO ETHICS WATCH COLORADOCOMMON CAUSE DAVID PALADINO, et al.,Plaintiffs,
v.
SCOTT GESSLER, as Secretary of State for the Stateof Colorado,Defendant. COURT USE ONLY
Case No.: 2012CV2133(consolidated with 2012CV2153)
Courtroom: 280
ORDER
THIS MATTER comes before the Court on Plaintiffs consolidated Complaintschallenging a number of rules promulgated by the Defendant in his capacity as ColoradosSecretary of State (Secret