American Fed. Teachers v. Oregon Taxpayers

• Decision Date: 04 October 2006
• Docket Number: A122168.,0012-12632.,A122158 (Control).,0108-08942.
• Parties: AMERICAN FEDERATION OF TEACHERS-OREGON, AFT, AFL-CIO, an Oregon unincorporated association, Respondent, and State of Oregon, Intervenor-Respondent, v. OREGON TAXPAYERS UNITED PAC, an Oregon political committee; Oregon Taxpayers United Education Foundation, an Oregon nonprofit corporation, Appellants, and John Does 1 through 10, Defendants. Oregon Education Association, an Oregon nonprofit corporation, Respondent, and State of Oregon, Intervenor-Respondent, v. Oregon Taxpayers United PAC, an Oregon political committee; Oregon Taxpayers United Education Foundation, an Oregon nonprofit corporation, Appellants, and John Does 2 through 10, Defendants.
• Court: Oregon Court of Appeals

Page 1111

145 P.3d 1111

208 Or. App. 350

AMERICAN FEDERATION OF TEACHERS-OREGON, AFT, AFL-CIO, an Oregon unincorporated association, Respondent, and State of Oregon, Intervenor-Respondent, v. OREGON TAXPAYERS UNITED PAC, an Oregon political committee; Oregon Taxpayers United Education Foundation, an Oregon nonprofit corporation, Appellants, and John Does 1 through 10, Defendants.

Oregon Education Association, an Oregon nonprofit corporation, Respondent, and State of Oregon, Intervenor-Respondent, v. Oregon Taxpayers United PAC, an Oregon political committee; Oregon Taxpayers United Education Foundation, an Oregon nonprofit corporation, Appellants, and John Does 2 through 10, Defendants.

0108-08942.

0012-12632.

A122158 (Control).

A122168.

Court of Appeals of Oregon.

Argued and Submitted September 20, 2005.

Decided October 4, 2006.

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Gregory Byrne, Portland, argued the cause for appellants. With him on the opening brief was Barry Adamson. On the reply brief was Gregory Byrne.

Gregory A. Hartman and Gene Mechanic, Portland, argued the cause for respondents. With them on the joint brief were Michael J. Morris, Bennett, Hartman, Morris & Kaplan, LLP, and Mark S. Toledo, General Counsel for Oregon Education Association, and Robert Hamilton and Goldberg Mechanic Stuart & Gibson LLP, Portland.

Denise G. Fjordbeck, Assistant Attorney General, argued the cause for intervenor-respondent State of Oregon. With her on the brief were Hardy Myers, Attorney General, and Mary H. Williams, Solicitor General.

Before HASELTON, Presiding Judge, and BREWER, Chief Judge,^* and EDMONDS, Judge.

HASELTON, P.J.

Defendants Oregon Taxpayers United Political Action Committee (OTU-PAC) and Oregon Taxpayers United Education Foundation (OTU-EF) appeal a judgment in favor of plaintiffs, Oregon Education Association (OEA) and American Federation of Teachers (AFT), and intervenor State of Oregon in this action pursuant to the Oregon Racketeer Influenced and Corrupt Organizations Act (ORICO), ORS 166.715 to 166.735. Defendants raise numerous assignments of error pertaining to the availability of unsworn falsification, ORS 162.085(1), as a predicate for ORICO purposes, the sufficiency of plaintiffs' pleadings and proof of causation, and the scope of the trial court's injunction. As explained below, we conclude that the trial court erred in entering judgment against OTU-PAC on the third count ("unsworn falsification") of plaintiffs' complaints and, consequently, in enjoining OTU-PAC based on liability on that count. We reject defendants' other contentions. Accordingly, we affirm in part, reverse in part, and, with respect to one provision of the injunction, vacate and remand for reconsideration.

The circumstances of this case are unprecedented. As described more fully below, plaintiffs and the state, as intervenor, sought and obtained a judgment under ORICO based on defendants' allegedly unlawful activities in connection with two 2000 initiative measures, Measures 92 and 98. Those measures would have severely restricted, or prohibited, the ability of school districts and other employers to implement "check-offs" for payroll deductions for union dues when some part of those dues were used for political purposes. Although the voters ultimately rejected both proposed measures in November 2000, plaintiffs contended that they had been injured by defendants' activities in that those activities were calculated to, and did in fact, cause plaintiffs to expend substantial resources in opposition to the proposed measures.

Plaintiffs are labor organizations who represent, inter alia, public school teachers and classified employees, as well as community college instructors and other employees. Defendant OTU-PAC is an unincorporated association acting as a political committee organized under ORS 260.042. Defendant OTU-EF was, at all material times, an Oregon nonprofit public benefit corporation that purported to operate as a tax-exempt charitable or educational organization for purposes of Internal Revenue Code section 501(c)(3).

In December 2000, plaintiffs initiated this action against defendants for recovery of damages flowing from defendants' alleged racketeering activities, as well as for equitable relief. See ORS 166.725 (persons harmed by unlawful racketeering may obtain treble damages and various other forms of relief). Plaintiffs' complaints alleged three counts of racketeering activity. In the first count, plaintiffs alleged that Kelli Highley, while working as an employee and agent of both defendants, had forged signatures on statements of sponsorship for Measures 92 and 98,¹ in violation of ORS 165.007(1)(a).² Plaintiffs further alleged that, as a result of those forgeries, the Secretary of State approved for circulation initiative petitions for those measures. Thereafter, defendants gathered sufficient signatures on those petitions to place Measures 92 and 98 on the November 2000 general election ballot, compelling plaintiffs to expend substantial funds to oppose those measures.

In the second count, plaintiffs alleged that paid signature gatherers, acting as agents for defendants, had forged signatures on the initiative petitions for Measures 92 and 98 and falsely certified the petition sheets, again violating criminal forgery statutes. See ORS 165.007; ORS 165.013. Plaintiffs further alleged that, but for the "false, fraudulent or forged" signatures, neither measure would have qualified for the ballot.

In the third count, plaintiffs alleged that, through their agents Sizemore and Miller, OTU-EF had knowingly submitted false "CT-12" forms,³ and OTU-PAC had knowingly submitted false contribution and expenditure (C & E) reports, to state authorities. Plaintiffs further alleged that those false submissions violated ORS 162.085(1)⁴ and were calculated to facilitate and conceal the illicit funneling of funds raised by the tax-exempt OTU-EF to support OTU-PAC's efforts in promoting Measures 92 and 98. In particular, plaintiffs alleged that the CT-12 forms filed for OTU-EF "contain false statements about the use of OTU-EF funds"; that the false C & E reports filed for OTU-PAC "includ[ed] misstatements on the amount of funds received from OTU-EF and other contributors for use by OTU-PAC"; and that those false submissions, in combination, "conceal[ed] the source of contributions to Measure 92 and 98 and enabl[ed] more funds to be raised to support Measures 92 and 98 through the tax exempt OTU-EF."

The jury, by special verdict, found, as alleged in Count 1, that both defendants had engaged in a pattern of racketeering activity in connection with the forged sponsorship signatures for Measures 92 and 98, and further found that plaintiffs had been damaged by defendants' conduct. As to the second count, the jury found that both defendants had engaged in a pattern of racketeering activity in regard to signature-gathering on initiative petition 98, as well, but concluded that plaintiffs had not been damaged by that conduct. On Count 3, the jury found that defendants had engaged in a pattern of racketeering activity in regard to the filing of CT-12 and C & E reports and that plaintiffs had been damaged by defendants' conduct.

The jury awarded plaintiff OEA damages of $65,112 on Count 1 and $671,658 on Count 3, and awarded plaintiff AFT damages of $40,500 on Count 1 and $170,000 on Count 3.⁵ The subsequent judgment, based on the jury's special findings, awarded OEA damages of $2,014,974 ($671,658 trebled pursuant to ORS 166.725(7)(a)) and AFT damages of $510,000 ($170,000 trebled).

After the jury returned its verdict, the state intervened and, along with plaintiffs, sought injunctive relief. ORS 166.725(10). The trial court made extensive findings of fact in accordance with ORCP 62 and granted injunctive relief. In addition to finding essentially the same facts as the jury had with respect to defendants' racketeering activities, the court specifically found that, because of Highley's forgeries, Measures 92 and 98 ultimately were approved by the Secretary of State and placed on the 2000 general election ballot. The court further found that, if passed, those measures would have caused serious consequences to plaintiffs and that plaintiffs reasonably and necessarily expended funds to defeat those measures.⁶

As to Count 2, the court found that defendants' agents had submitted forged signatures on petitions and certification sheets for Measures 92 and 98, that those actions constituted racketeering activity, and that, as a result of those racketeering activities, Measures 92 and 98 had qualified for the 2000 general election ballot. That is, the court found that without the forgeries, neither measure would have qualified for the ballot.

Regarding Count 3, the court found that OTU-PAC was required under Oregon law to file periodic C & E reports and that OTU-PAC's agents had signed and filed false C & E reports from 1996 through 2000 by failing to disclose on those reports various cash and in-kind contributions that OTU-PAC had received from OTU-EF. The court determined that the result of those activities "was to cause tax deductible contributions which were made to OTU-EF, a charity, to be used illegally to fund OTU-PAC and to be paid to Bill Sizemore personally." The court further found that Bill Sizemore had developed schemes by which contributors could secretly provide financial support to OTU-PAC by funneling those contributions through other organizations and that those were in-kind contributions for the benefit of OTU-PAC that should have been reported on its C & E reports.

Regarding OTU-EF, the court found that defendant was required to submit annual reports (CT-12 reports) to the state in order to maintain its tax-exempt status; that Sizemore as agent for OTU-EF had falsely certified on each CT-12 from the years 1996 through 2000 that OTU-EF had not "attempted to influence national, state...