Colo. Ethics Watch v. Gessler

• Decision Date: 12 December 2013
• Docket Number: Court of Appeals No. 12CA1712
• Citation: 363 P.3d 727 (Mem)
• Parties: COLORADO ETHICS WATCH and Colorado Common Cause, Plaintiffs–Appellees and Cross–Appellants, and David Paladino; Michael Cerbo; Pro–Choice Colorado PAC; PPRM Ballot Issue Committee; and Citizens for Integrity, Inc., Plaintiffs–Appellees, v. Scott GESSLER, in his official capacity as Colorado Secretary of State, Defendant–Appellant and Cross–Appellee.
• Court: Colorado Court of Appeals

363 P.3d 727 (Mem)

COLORADO ETHICS WATCH and Colorado Common Cause, Plaintiffs–Appellees and Cross–Appellants,andDavid Paladino; Michael Cerbo; Pro–Choice Colorado PAC; PPRM Ballot Issue Committee; and Citizens for Integrity, Inc., Plaintiffs–Appellees,

v.Scott GESSLER, in his official capacity as Colorado Secretary of State, Defendant–Appellant and Cross–Appellee.

Court of Appeals No. 12CA1712

Colorado Court of Appeals, Div. VI.

Announced December 12, 2013

As Modified on Denial of Rehearing February 27, 2014

Luis Toro, Margaret Perl, Denver, Colorado, for Plaintiff–Appellee and Cross–Appellant Colorado Ethics Watch.

Hill & Robbins, P.C., Jennifer H. Hunt, Denver, Colorado, for Plaintiff–Appellee and Cross–Appellant Colorado Common Cause.

Heizer Paul Grueskin, LLP, Mark G. Grueskin, Denver, Colorado, for Plaintiffs–Appellees.

John W. Suthers, Attorney General, Leeann Morrill, First Assistant Attorney General, Frederick R. Yarger, Assistant Solicitor General, Matthew D. Grove, Assistant Attorney General, Denver, Colorado, for Defendant–Appellant and Cross–Appellee.

Opinion by JUDGE FURMAN

¶ 1 Defendant, Scott Gessler, in his official capacity as Colorado Secretary of State (Secretary), appeals the district court's judgment invalidating several of his campaign finance rules because they conflict with the Campaign and Political Finance Amendment (Amendment), Article XXVIII of the Colorado Constitution; and the Fair Campaign Practices Act (FCPA), sections 1–45–101 to –118, C.R.S.2013. The Secretary urges us to reverse based on judicial deference to his rulemaking authority.

¶ 2 Colorado Ethics Watch and Colorado Common Cause (collectively, Ethics Watch) cross-appeal the district court's judgment refusing to invalidate one of the Secretary's rules because this rule was sufficiently similar to a rule that preceded it that it was entitled to deference. Ethics Watch urges us to reverse because the court gave too much deference to the Secretary's new rule.

¶ 3 Because we disagree with the Secretary, and agree with Ethics Watch, we affirm in part and reverse in part.

I. The Amendment

¶ 4 The Amendment is a comprehensive initiative regulating campaign financing. See Sanger v. Dennis, 148 P.3d 404, 407 (Colo.App.2006). Its purpose is to require various participants in the election process, such as "issue committees" and "political committees," to comply with disclosure requirements, and it requires public disclosure filings when certain types of advertisements, called "electioneering communications," are distributed in the last weeks of an election. See Colo. Const. art. XXVIII, § 2 (2); Independence Inst. v. Coffman, 209 P.3d 1130, 1135 (Colo.App.2008).

¶ 5 The Amendment includes a two-track system for enforcing disclosure requirements. Late disclosures are subject to a fine of fifty dollars per day, which may be reduced by the Secretary on a showing of "good cause." Colo. Const. art. XXVIII, § 10 (2). Other violations of the Amendment and the FCPA are enforced through a litigation process. Colo. Const. art. XXVIII, § 9 (2)(a). In this process, "any person" may file a complaint with the Secretary. Id. The Secretary then refers the case to an administrative law judge for resolution. Id.

A. The Amendment's Definitions

¶ 6 The Amendment also includes numerous definitions applicable to its campaign finance provisions. As relevant to this case, an "issue committee" is defined as follows:

any person, other than a natural person, or any group of two or more persons, including natural persons ... [t]hat has a major purpose of supporting or opposing any ballot issue or ballot question; or ... [t]hat has accepted or made contributions or expenditures in excess of two hundred dollars to support or oppose any ballot issue or ballot question.

Colo. Const. art. XXVIII, § 2 (10)(a) (emphasis added).

¶ 7 Article XXVIII, section 2 (12)(a), defines "political committee" as "any person, other than a natural person, or any group of two or more persons, including natural persons that have accepted or made contributions or expenditures in excess of $200 to support or oppose the nomination or election of one or more candidates." (Emphasis added.) Article XXVIII, section 2(8)(a), defines an "expenditure" as money spent "for the purpose of expressly advocating" the election or defeat of a candidate or ballot measure.

¶ 8 Article XXVIII, section 2 (7)(a), defines "electioneering communication" as follows:

any communication ... that ... [u]nambiguously refers to any candidate; and ... [i]s broadcasted, printed, mailed, delivered, or distributed within thirty days before a primary election or sixty days before a general election; and ... [i]s broadcasted to, printed in a newspaper distributed to, mailed to, delivered by hand to, or otherwise distributed to an audience that includes members of the electorate for such public office.

B. The FCPA

¶ 9 Consistent with the Amendment's purpose and its definitions, the FCPA requires issue committees and political committees to register and report all contributions, the names and addresses of all persons who contribute twenty dollars or more, and all expenditures. See § 1–45–108(I)(a)(I), (2.5), C.R.S.2013.

¶ 10 In 2007, the FCPA was amended to add "political organizations" to its provisions and to require these organizations to file reports of contributions and "spending" in excess of twenty dollars. § 1–45–103(14.5); see § 1–45–108.5 (providing disclosure requirements for "political organizations"). The FCPA defines "political organization" as follows:

a political organization defined in section 527(e)(1) of the federal ‘Internal Revenue Code of 1986’, as amended, that is engaged in influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any state or local public office in the state and that is exempt, or intends to seek any exemption, from taxation pursuant to section 527 of the internal revenue code.

§ 1–45–103(14.5). Under 26 U.S.C. § 527(e)(1)-(2), an entity is a "political organization" if it is "organized and operated primarily for the purpose of ... influencing or attempting to influence" an election.

¶ 11 In 2010, the General Assembly amended section 1–45–103(12)(b) to define the phrase "a major purpose" (which appears in Article XXVIII, section 2(10)(a) ) in part, as follows:

support of or opposition to a ballot issue or ballot question that is reflected by ... [a]n organization's specifically identified objectives in its organizational documents at the time it is established or as such documents are later amended; or demonstrated pattern of conduct based upon its ... [a]nnual expenditures in support of or opposition to a ballot issue or ballot question....

II. The Secretary's Rulemaking

¶ 12 In 2012, the Secretary issued new campaign finance rules to clarify "the increasingly confusing field of campaign finance law." He promulgated some of these new rules to incorporate what he felt were controlling legal standards announced in federal and state court decisions. The Secretary's new rules addressed several of the definitions found in the Amendment and the FCPA.

¶ 13 Two groups of plaintiffs, (1) Ethics Watch and (2) David Paladino, Michael Cerbo, Pro–Choice Colorado PAC, PPRM Ballot Issue Committee, and Citizens for Integrity, Inc. (collectively Paladino), filed separate suits for judicial review, challenging certain of these new rules as exceeding the Secretary's authority to administer and enforce Colorado's campaign finance laws. These complaints were consolidated.

¶ 14 After briefing and oral argument, the district court issued a lengthy, well-reasoned order. The court respected the Secretary's "pragmatism" in attempting to harmonize Colorado campaign finance laws with judicial decisions through his rulemaking. But, the court determined that the Secretary lacked the authority to do so. Its judgment invalidated a number of the Secretary's new rules, including Rules 1.12, 1.18, 7.2, 1.10, and 18.1.8, because they contradicted the Amendment and the FCPA. Yet, the district court upheld the validity of the new Rule 1.7 because this rule was sufficiently similar to the rule preceding it that it was entitled to deference.

¶ 15 On appeal, the Secretary challenges the district court's judgment invalidating his new rules. On cross-appeal, Ethics Watch seeks reversal of the district court's determination as to new Rule 1.7.

¶ 16 We first turn to the Secretary's challenges. Because the parties disagree over what standard of review applies to this case, we begin by identifying the standards that guide our analysis.

III. Standard of Review

¶ 17 The Secretary is the official in Colorado authorized to "[p]romulgate such rules in accordance with article 4 of title 24, C.R.S., or any successor section, as may be necessary to administer and enforce" the state's campaign finance laws. Colo. Const. art. XXVIII, § 9 (1)(b); see also § 1–45–111.5(1), C.R.S.2013. Thus, campaign finance rules must comply with the Administrative Procedure Act (APA), sections 24–4–101 to –108, C.R.S.2013. The APA provides two standards that guide our review in this case. First, an administrative agency may not issue a rule

except within the power delegated to the agency and as authorized by law. A rule shall not be deemed to be within the statutory authority and jurisdiction of any agency merely because such rule is not contrary to the specific provisions of a statute. Any rule or amendment to an existing rule issued by any agency ... which conflicts with a statute shall be void.

§ 24–4–103(8)(a), C.R.S.2013.

¶ 18 Second, a reviewing court may invalidate an agency rule if the rule is:

arbitrary or capricious, a denial of statutory right, contrary to constitutional right, power, privilege, or immunity, in excess of statutory jurisdiction, authority, purposes, or limitations, not in accord with the procedures or procedural limitations of this article or as otherwise required by law, an abuse or clearly unwarranted

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