Citizens United v. Schneiderman

• Decision Date: 29 August 2016
• Docket Number: 14-Cv-3703 (SHS)
• Citation: 203 F.Supp.3d 397
• Parties: CITIZENS UNITED and Citizens United Foundation, Plaintiffs, v. Eric SCHNEIDERMAN, in his official capacity as New York Attorney General, Defendant.
• Court: U.S. District Court — Southern District of New York

203 F.Supp.3d 397

CITIZENS UNITED and Citizens United Foundation, Plaintiffs,

v.Eric SCHNEIDERMAN, in his official capacity as New York Attorney General, Defendant.

14-Cv-3703 (SHS)

United States District Court, S.D. New York.

Signed August 29, 2016

Donald F. McGahn, II, Jones Day, Michael Boos, Citizens United, Washington, DC, Ian Samuel, Todd R. Geremia, Jones Day, New York, NY, for Plaintiffs.

Christine Anne Ryan, John Michael Schwartz, Linda Fang, Eva Lenore Dietz, Office of the New York State Attorney General, New York, NY, for Defendant.

OPINION & ORDER

SIDNEY H. STEIN, United States District Judge.

Plaintiffs Citizens United and Citizens United Foundation challenge the New York Attorney General's policy of requiring charities to disclose to him the names, addresses, and total contributions of their donors in order to be permitted to solicit funds in the state. Last year, this Court denied plaintiffs' motion for a preliminary injunction on the grounds that plaintiffs were not likely to succeed on the merits of their claims. Plaintiffs subsequently amended their complaint and Attorney General Eric Schneiderman has now moved to dismiss it. For the reasons that follow, the attorney general's motion is granted.

I. BACKGROUND

Citizens United is a nonprofit corporation which has federal tax-exempt status as a "social welfare" organization, see 26 U.S.C. § 501(c)(4). (First Am. Compl. ("FAC") ¶ 3.) Citizens United Foundation has federal tax-exempt status pursuant to 26 U.S.C. § 501(c)(3). (FAC ¶ 4.) Both plaintiffs pursue similar goals: they "seek[ ] to promote the traditional American values of limited government, free enterprise, strong families, and national sovereignty and security." (FAC ¶ 3; see also FAC ¶ 4.) The social welfare entity—Citizens United—advocates these positions by producing "high-impact documentaries on political themes." (FAC ¶ 11.) By contrast, Citizens United Foundation, as a section 501(c)(3) organization, cannot advocate but instead simply "inform [s]" and "educate[s]" the American public about essentially identical issues and themes. (FAC ¶¶ 4, 12.) Plaintiffs' ability to produce their advocacy documentaries (Citizens United) and their educational materials (Citizens United Foundation)—and to operate their organizations generally—is "entirely dependent on the donations they are able to raise" from their supporters. (FAC ¶ 15.)

Plaintiffs are well-known entities. Indeed, they allege that they "have gained a special measure of notoriety in recent years" and have even "been compared to al-Qaeda, described as an ‘enemy of the people,’ and worse." (FAC ¶ 35.) The amended complaint also alleges that plaintiffs' donors "value their privacy and donate to plaintiffs with the understanding that their names and other identifying information will not become public information." (FAC ¶ 15.) According to plaintiffs, their donors "reasonably fear public backlash, financial harm, and worse, should their support of politically contentious and controversial causes become known publicly. " (FAC ¶ 17.)

This brings us to the subject of this action: New York requires every "charitable organization"—whose definition includes both plaintiffs, defendant says, (see FAC ¶ 26)—to "file with the attorney general a prescribed registration form" in order for that charity to be able to solicit funds in New York. N.Y. Exec. Law § 172(1). The attorney general has promulgated regulations to set the requirements of that form. See 13 N.Y.C.R.R. § 91.5. One regulation requires charitable organizations to submit for the attorney general's review a copy of a form that plaintiffs file annually with the Internal Revenue Service—Form 990 and its Schedule B—which lists each of plaintiffs' donors and amounts contributed. (FAC ¶¶ 20, 23, 26); 13 N.Y.C.R.R. § 91.5(c)(3)(i)(a). Charities must submit this Schedule B—and thus reveal their donors' identities and amounts contributed—prior to soliciting funds in New York. (FAC ¶¶ 23, 26.)

Both plaintiffs (together, "Citizens United") have submitted to the attorney general their Schedule B forms "every year since 1995." (FAC ¶ 25.) Traditionally, however, they "filed only the first page of their Schedule B, which does not include any donor information." (FAC ¶ 30.) In 2012, they filed the first pages of their Schedules B as usual but received deficiency notices in response stating that they would need to file Schedules B that were unredacted. (FAC ¶ 26.) Plaintiffs have refused to comply. (FAC ¶ 29.) Consequently, they "face the loss of their registration, which would prohibit them from soliciting funds, as well as civil penalties of up to $100 per day for noncompliance." (FAC ¶ 31 (citing N.Y. Exec. Law § 177(2).)

After plaintiffs initiated this action they moved for a preliminary injunction, which this Court denied, Citizens United v. Schneiderman, 115 F.Supp.3d 457 (S.D.N.Y.2015). Plaintiffs subsequently amended their complaint, and, as noted above, defendant has now moved to dismiss it in its entirety. Fed. R. Civ. P. 12(b)(6).

II. DISCUSSION

A. Legal Standard

The standard of review governing this motion is well-established: the Court must dismiss the complaint if it fails to allege facts that show plaintiffs' claims are "plausible." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ; Neopharm Ltd. v. Wyeth – Ayerst Int'l LLC, 170 F.Supp.3d 612, 615, 2016 WL 1076931, at *2 (S.D.N.Y. Mar. 18, 2016). Plaintiffs, however, cite to the retired standard set forth in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), which merely required a plaintiff's complaint to give a defendant "fair notice of what the plaintiffs claim is." Id. at 47. Conley no longer states the applicable law: The modern "plausibility" standard has governed motions to dismiss pleadings in federal court since 2007. E.g., Iqbal, 556 U.S. at 670, 129 S.Ct. 1937 ; Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ; E.E.O.C. v. Port Auth. o f N.Y. & N.J., 768 F.3d 247, 253 (2d Cir.2014).

Not all allegations are created equal in assessing the plausibility of a claim. Allegations that are conclusory or that simply parrot legal standards need not be credited. See, e.g., Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ; Port Auth., 768 F.3d at 253 ; Fisher v. JP Morgan Chase & Co., 703 F.Supp.2d 374, 390 (S.D.N.Y.2010). And facts that are pleaded merely "upon information and belief" can only be credited when those facts are "peculiarly within the possession and control of the defendant," or where plaintiffs' "information" or "belief" is "based on factual information that makes" the sought inference "plausible." Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir.2010) ; Moffett v. Town of Poughkeepsie, No. 11–cv–6243, 2012 WL 3740724, at *3, *5, *8 (S.D.N.Y. Aug. 29, 2012). Facts alleged properly, however, must be credited as true and viewed in the "light most favorable to the plaintiff." Cruz v. FXDirectDealer, LLC, 720 F.3d 115, 118 (2d Cir.2013).

B. First Amendment.

Citizens United has brought three First Amendment claims; Attorney General Schneiderman argues that none is plausible. The Court examines each in turn.

1. Prior Restraint.

Plaintiffs contend first that New York's charitable registration scheme is an unconstitutional prior restraint on speech. At the outset, it is clear that the regime is plausibly a prior restraint. See Citizens United, 115 F.Supp.3d at 469. Charitable organizations in New York are allegedly forbidden from engaging in expressive action—soliciting donations, see, e.g., Vill. of Schaumburg v. Citizens for a Better Env't, 444 U.S. 620, 632, 100 S.Ct. 826, 63 L.Ed.2d 73 (1980) —unless and until they file forms required by the attorney general's implementing regulations. See N.Y. Exec. Law § 172 ; 13 N.Y.C.R.R. § 91.5(c). This includes the attorney general's requirement that charities file unredacted versions of their Schedules B that disclose to the attorney general the names and contributions of Citizens United's donors. (FAC ¶ 26.)

Prior restraints are generally disfavored but are not " ‘unconstitutional per se.’ " Hobbs v. Cty. of Westchester, 397 F.3d 133, 148 (2d Cir.2005) (quoting South eastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 558, 95 S.Ct. 1239, 43 L.Ed.2d 448 (1975) ). In particular, the First Amendment does not countenance a system of prior restraint when it vests "unbridled discretion in a government official over whether to permit or deny expressive activity." City of Lakewood v. Plain Dealer Publ'g Co., 486 U.S. 750, 755, 108 S.Ct. 2138, 100 L.Ed.2d 771 (1988) ; Field Day, LLC v. Cty. of Suffolk, 463 F.3d 167, 176 (2d Cir.2006). However, if a system of prior restraint contains " ‘narrow, objective, and definite standards to guide the licensing authority’ " it survives a First Amendment challenge. Forsyth Cty. v. Nationalist Movement, 505 U.S. 123, 131, 112 S.Ct. 2395, 120 L.Ed.2d 101 (1992) (quoting Shuttlesworth v. City of Birmingham, 394 U.S. 147, 150-51, 89 S.Ct. 935, 22 L.Ed.2d 162 (1969) ).

The analysis begins with the governing statutory and regulatory text. See City of Lakewood, 486 U.S. at 769–70, 108 S.Ct. 2138. The statute—the New York Executive Law—requires all charities to "file with the attorney general an annual written financial report, on forms prescribed by the attorney general." N.Y. Exec. Law § 172–b(1) ; accord N.Y. Exec. Law § 172(1). That broad delegation to defendant was cabined when he formally promulgated regulations that limit the documents that charities need to file upon registering, including, inter alia, "a copy of the complete IRS form 990... with schedules." 13 N.Y.C.R.R. § 91.5(c)(3)(i)(a). Those regulations set forth a "closed set" of required documents which substantially fetter the attorney general's discretion. Citizens United, 115 F.Supp.3d at 469. See also Forsyth Cty, 505 U.S. at 131, 112 S.Ct. 2395 ; City of Lakewood, 486 U.S. at 770, 108...