Californians for Political Reform Foundation v. Fair Political Practices Com.

• Decision Date: 10 February 1998
• Docket Number: No. C026314,C026314
• Citation: 71 Cal.Rptr.2d 606,61 Cal.App.4th 472
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 1067, 98 Daily Journal D.A.R. 1441 CALIFORNIANS FOR POLITICAL REFORM FOUNDATION, Plaintiff and Respondent, v. FAIR POLITICAL PRACTICES COMMISSION, Defendant and Appellant.

Page 606

71 Cal.Rptr.2d 606

61 Cal.App.4th 472, 98 Cal. Daily Op. Serv. 1067,

98 Daily Journal D.A.R. 1441

CALIFORNIANS FOR POLITICAL REFORM FOUNDATION, Plaintiff and Respondent, v. FAIR POLITICAL PRACTICES COMMISSION, Defendant and Appellant.

No. C026314.

Court of Appeal, Third District, California.

Feb. 10, 1998.

Review Denied April 22, 1998.

Steven G. Churchwell, Sacramento, and Deborah Maddux Allison, Fair Political Practices Commission for Defendant and Appellant.

Charles H. Bell, Thomas W. Hiltachk, Bell, McAndrews & Hiltachk, Santa Monica, N. Eugene Hill, George Waters, Mary-Beth Moylan, Olson, Hagel, Fong, Leidigh, Waters & Fishburn, Sacramento, Amici Curiae for Appellant.

Tony Miller, Pleasant Grove, for Plaintiff and Respondent

PUGLIA, Presiding Justice.

The Fair Political Practices Commission (Commission) appeals from a judgment granting a peremptory writ of mandate directing it to vacate, ab initio, an emergency regulation which provides that certain payments by a sponsoring organization to its political action committee are not contributions as defined by the Political Reform Act of 1974 (the Act) (Gov.Code, § 81000 et seq.). The Commission contends the superior court erred in concluding the regulation conflicts with the Act. We agree and shall reverse with directions to the superior court to enter judgment denying the petition.

In November 1996, California voters passed Proposition 208, an initiative measure limiting campaign contributions and spending. Proposition 208 became effective January 1, 1997. Among the express purposes of the initiative are "[t]o ensure that individuals and interest groups in our society have a fair and equitable opportunity to participate in the elective and governmental processes" and "[t]o minimize the potentially corrupting influence and appearance of corruption caused by excessive contributions and expenditures in campaigns by providing for reasonable contribution and spending limits for candidates." (Gov.Code, § 85102, subds. (a), (b); further statutory references to sections of an undesignated code are to the Government Code.) ¹

Labor unions, trade associations, corporations and other similar organizations typically make political contributions through a committee, known as a political committee or a political action committee ("political committee" or "PAC"). Under the Act, a PAC is a "sponsored committee." (§ 82048.7, subd. (a).) The sponsoring organization establishes and operates the PAC and collects the political contributions of members and supporters. The PAC then pools these funds and from the pooled funds makes contributions to candidates or causes that advance the common political objectives of the PAC and its contributors. The sponsoring organization also typically provides all or most of the funds and in-kind services necessary to administer its PAC, paying rent or otherwise providing office space, and defraying the cost of utilities, supplies, salaries, and legal and accounting fees incurred to comply with relevant disclosure laws. Section 82048.7, which sets forth the criteria for determining when a "person" sponsors a PAC, provides:

"(a) 'Sponsored committee' means a committee, other than a candidate controlled committee, which has one or more sponsors. Any person, except a candidate or other individual, may sponsor a committee.

"(b) A person sponsors a committee if any of the following apply:

"(1) The committee receives 80 percent or more of its contributions from the person or its members, officers, employees, or shareholders.

"(2) The person collects contributions for the committee by the use of payroll deductions or dues from its members, officers, or employees.

"(3) The person alone or in combination with other organizations, provides all or nearly all of the administrative services for the committee.

"(4) The person, alone or in combination with other organizations, sets the policies for soliciting contributions or making expenditures of committee funds."

Under the Act, a "person" includes an individual, business organization, and any other organization or group acting in concert. (§ 82047.) ²

Proposition 208 amended the Act in several ways, among them, by limiting the amount PACs may contribute to candidates for state and local office. The maximum amount of such contribution is either $100, $250 or $500, depending on the population of the electoral district in which the supported candidate stands for election. ³

Proposition 208 also limits to a maximum of $500 the amount that any person can contribute to a PAC in a calendar year. (§ 85301, subd. (d).) ⁴ Moreover, a PAC that makes independent expenditures for or against a candidate totaling $1,000 or more shall not accept a contribution from any person in excess of $250 per election. (§ 85500, subd. (b).) ⁵

Given the strict limits imposed by Proposition 208 on "contributions" to PACs, it is not surprising that the controversy between the parties in this case turns on the definition of "contribution" in the Act. Section 82015 defines a "contribution" as "a payment ... except to the extent that full and adequate consideration is received unless it is clear from the surrounding circumstances that it is not made for political purposes." ⁶ Section 82015 pre-existed Proposition 208 and was not changed by it.

At the time Proposition 208 was enacted, the Commission's regulations deemed a payment to be for "political purposes" if it was (1) made "[f]or the purpose of influencing or attempting to influence the action of the voters for or against the nomination or election of a candidate or candidates, or the qualification or passage of any measure," or (2) received by "[a]n organization formed or existing primarily for political purposes, including, but not limited to, a political action committee established by any membership organization, labor union or corporation." (2 Cal.Code Regs. § 18215(a)(1), (a)(2)(D); further references to regulations ("Regs.") are to sections in title 2.) Regs. section 18419(c)(1) stated in relevant part: "A sponsoring organization makes contributions and expenditures in support of its sponsored committee when it provides the committee with member contributions, money from its treasury, supplies or administrative services...." According to the Commission, this regulation was adopted in 1977 simply to ensure that such payments were fully disclosed and reported.

After the passage of Proposition 208, the Commission reconsidered the Act and its implementing regulations. Of particular concern were the limits imposed by Proposition 208 on contributions to PACs. The Commission recognized that as a result of existing regulations, a PAC that relied on its sponsoring organization to assume overhead and administrative expenses was now faced with the prospect of a $500 annual limit on the amount the sponsoring organization could provide for such expenses. If the cash and in-kind services provided by a sponsor for the administrative overhead of its sponsored PAC were deemed "made for political purposes" (§ 82015) within the meaning of the Act, as the existing regulations provided, the contribution limits of Proposition 208 would effectively prohibit a sponsor from paying for all or even most of the overhead for its sponsored PAC.

Realizing that most small and intermediate size PACs would cease to exist were they limited to no more than $500 per calendar year from their sponsoring organization, and that it would be all but impossible for an organization to sponsor a new PAC if the seed money required to do so were counted against the same $500 cap, Commission staff proposed an emergency regulation to "undo" the regulatory classification of administrative support as a "contribution." The Commission proposed an amendment to Regs. section 18215 to exclude payments for administrative expenses from the definition of "contribution."

The Commission rejected the proposed regulation at its December 1996 meeting. Thereafter, two interested parties, plaintiff, Californians for Political Reform Foundation and Charles Bell, a member of the California Political Attorneys Association (representing amici curiae in this action), indicated they would negotiate compromise language for the regulation. ⁷ As a result, Commission staff presented an amended version of the proposed regulation for consideration at a January meeting of the Commission.

The Commission heard comments from interested parties at the January meeting. Those in favor of the emergency regulation stated that unless it was adopted, many PACs would be closed down because their sponsors would be prohibited from funding their administrative overhead; moreover, the $500 limitation on a sponsor providing overhead expenses was particularly unrealistic now because of the increased administrative burden imposed by Proposition 208. One speaker made the point that if a sponsor was allowed to pay all administrative costs, that would increase the political participation of contributors to the PAC, and thus reduce corruption. Another argued there was no governmental interest in limiting a sponsoring organization from supporting its PAC. A representative of the California Teachers Association pointed out that a sponsoring organization usually provides office space for the PAC, and that most PACs would be evicted if the proposed regulation was not passed.

An opponent of the proposed regulation, one of the drafters of Proposition 208, argued the Commission lacked authority to adopt the regulation. He noted that the drafters of Proposition 208, aware that federal law provides an exemption for administrative and establishment costs for PACs, purposely did not include a similar exemption.

The Commission adopted the emergency regulation as proposed by staff. (Regs. § 18215(c)(16).) The regulation provides in relevant part that the term "contribution" does not include "[a] payment by a sponsoring organization for the...