Colorado Ethics Watch v. Senate Majority Fund, LLC

• Decision Date: 18 March 2010
• Docket Number: Nos. 08CA2689,09CA0384.,s. 08CA2689
• Citation: 275 P.3d 674
• Parties: COLORADO ETHICS WATCH, Petitioner–Appellant and Cross–Appellee, v. SENATE MAJORITY FUND, LLC, Respondent–Appellee and Cross–Appellant,andColorado Leadership Fund, LLC, Respondent–Appellee,andOffice of Administrative Courts, Appellee.
• Court: Colorado Court of Appeals

275 P.3d 674

COLORADO ETHICS WATCH, Petitioner–Appellant and Cross–Appellee,

v.SENATE MAJORITY FUND, LLC, Respondent–Appellee and Cross–Appellant,andColorado Leadership Fund, LLC, Respondent–Appellee,andOffice of Administrative Courts, Appellee.

Nos. 08CA2689

09CA0384.

Colorado Court of Appeals, Div. II.

March 18, 2010.

Luis Toro, Chantell Taylor, Denver, Colorado, for Petitioner–Appellant and Cross–Appellee.

Hackstaff Gessler LLC, Scott E. Gessler, Mario D. Nicolais, II, Denver, Colorado, for Respondent–Appellee and Cross–Appellant Senate Majority Fund, LLC.

Brownstein Hyatt Farber Schreck, LLC, Jason R. Dunn, Denver, Colorado, for Respondent–Appellee Colorado Leadership Fund, LLC.No Appearance for Appellee.Opinion by Judge GABRIEL.

This case requires us to determine the meaning of “expressly advocating the election or defeat of a candidate,” as that phrase is used within the definition of “expenditure” contained in article XXVIII, section 2(8) of the Colorado Constitution. Petitioner, Colorado Ethics Watch (Ethics Watch), contends that “expressly advocating” encompasses more than just advertisements using the so-called “magic words” of electoral advocacy delineated in Buckley v. Valeo, 424 U.S. 1, 44 n. 52, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976), and their synonyms. Ethics Watch argues instead that “expressly advocating” encompasses campaign advertisements that are the functional equivalent of express advocacy. From this premise, it asserts that certain campaign advertisements placed by respondents, Senate Majority Fund, LLC (SMF) and Colorado Leadership Fund, LLC (CLF), during the 2008 election cycle amounted to “expressly advocating” and were subject to regulation under article XXVIII. Respondents disagree.

Addressing a matter of first impression, we conclude that “expressly advocating the election or defeat of a candidate,” as that phrase is used in the definition of “expenditures” in the Colorado Constitution, encompasses only communications using the so-called “magic words” of Buckley, 424 U.S. at 44 n. 52, 96 S.Ct. 612, and words substantially similar or synonymous thereto, and requires an express exhortation that the reader, viewer, or listener take action to elect or defeat a candidate. Applying this construction here, we affirm the administrative law judge's (ALJ's) order dismissing Ethics Watch's complaint against respondents.

I. Factual Background

Respondents are both so-called “527” tax-exempt political organizations, registered with the Internal Revenue Service pursuant to 26 U.S.C. § 527 (2009). During the 2008 election cycle, respondents each paid for and distributed a series of print advertisements discussing certain candidates for the state legislature. SMF also produced and aired television advertisements. In general, these advertisements indicated that the candidates were running for office, discussed the candidates' qualifications, and encouraged voters to call the candidates to thank them for their work on particular issues. Both respondents filed reports as 527 political organizations with the Colorado Secretary of State.

In September 2008, Ethics Watch filed a complaint with the secretary of state, alleging that both respondents had violated Colorado's campaign finance laws. Specifically, Ethics Watch alleged that respondents had engaged in advertising for the purpose of expressly advocating the election of certain candidates. Ethics Watch contended that this rendered both organizations “political committees” pursuant to article XXVIII, section 2(12)(a) of the Colorado Constitution and section 1–45–103(14), C.R.S.2009. Accordingly, Ethics Watch claimed that respondents were required (1) to register as political committees with the secretary of state, (1) to comply with certain restrictions as to the amount of contributions that they could accept, and (3) to file certain independent expenditure reports. Ethics Watch alleged that respondents violated each of these requirements and requested that they be fined for such violations.

Respondents denied all of Ethics Watch's allegations and moved to dismiss the complaint.

In a detailed and thorough order, the ALJ granted respondents' motion to dismiss, finding that the advertisements in question did not constitute “express advocacy” as the ALJ construed that phrase. Accordingly, the ALJ concluded that the advertisements did not subject respondents to regulation as political committees, as Ethics Watch contended.

Thereafter, SMF filed a motion for attorney fees pursuant to section 1–45–111.5, C.R.S.2009, and C.R.C.P. 11, arguing that Ethics Watch's complaint was frivolous and vexatious. CLF initially joined in that motion but later withdrew its fee request. The ALJ concluded that Ethics Watch's complaint was not substantially frivolous, groundless, or vexatious and denied SMF's motion.

Ethics Watch now appeals the dismissal of its complaint against respondents, and SMF cross-appeals the denial of its request for attorney fees.

II. Citizens United v. Federal Election Commission

As a preliminary matter, we note that we ordered the parties here to submit supplemental briefs addressing the impact, if any, of the United States Supreme Court's recent decision in Citizens United v. Federal Election Commission, ––– U.S. ––––, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010). Although each of the parties asserts that Citizens United supports its arguments in this appeal, none of the parties asserts that the Supreme Court's decision affects the constitutionality of the provisions now before us. Nor do we perceive Citizens United as calling into question those provisions. Accordingly, we proceed to the issues presented here.

III. Campaign Finance Laws

In order to construe the phrase “expressly advocating,” as it is used in article XXVIII, section 2(8) of the Colorado Constitution, we first review the federal and state campaign finance laws that led to the 2002 adoption of article XXVIII by the people of Colorado.

A. Federal Campaign Finance Law

In the landmark campaign finance case of Buckley v. Valeo, 424 U.S. at 6, 96 S.Ct. 612, the United States Supreme Court was asked to review the constitutionality of certain provisions of the Federal Election Campaign Act of 1971 (FECA), 2 U.S.C. §§ 431 to 457 (1970 ed., Supp. IV). Congress had passed FECA and various amendments thereto to address perceived problems inherent in political campaign financing and to promote full disclosure of campaign-oriented spending, “to insure both the reality and the appearance of the purity and openness of the federal election process.” Id. at 78, 96 S.Ct. 612. Toward that end, FECA imposed broad restrictions on political contributions and expenditures, as well as certain reporting and disclosure requirements. Id. at 7, 12–13, 96 S.Ct. 612. For example, FECA prohibited any person from making any expenditure “relative to a clearly identified candidate during a calendar year which, when added to all other expenditures made by such person during the year advocating the election or defeat of such candidate, exceeds $1,000.” Id. at 39, 96 S.Ct. 612. The Buckley plaintiffs challenged FECA's various limitations and reporting and disclosure requirements on First Amendment grounds, asserting, among other things, that these requirements were unconstitutionally vague. Id. at 11, 40, 96 S.Ct. 612.

As pertinent here, in order to avoid invalidating FECA's expenditure limits on vagueness grounds, the Court interpreted the above-quoted provision to apply only to “expenditures for communications that in express terms advocate the election or defeat of a clearly identified candidate for federal office.” Id. at 44, 96 S.Ct. 612. The Court then stated in a now-famous footnote, “This construction would restrict the application of [the above-quoted provision] to communications containing express words of advocacy of election or defeat, such as ‘vote for,’ ‘elect,’ ‘support,’ ‘cast your ballot for,’ ‘Smith for Congress,’ ‘vote against,’ ‘defeat,’ ‘reject.’ ” Id. at 44 n. 52, 96 S.Ct. 612. These examples eventually gave rise to what is now known as the “magic words” requirement. See, e.g., McConnell v. Federal Election Comm'n, 540 U.S. 93, 191, 124 S.Ct. 619, 157 L.Ed.2d 491 (2003) (plurality opinion), overruled in part by Citizens United v. Federal Election Comm'n, ––– U.S. ––––, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010). Notwithstanding this narrow reading of the independent expenditure provision, however, the Buckley Court concluded that the government's interest in preventing corruption and the appearance of corruption was inadequate to justify that provision's ceiling on independent expenditures and thus invalidated it on First Amendment grounds. Buckley, 424 U.S. at 45, 96 S.Ct. 612.

The Buckley Court proceeded to discuss certain disclosure requirements included in FECA. Id. at 60–85, 96 S.Ct. 612. To ensure that the reach of the disclosure requirements at issue was not impermissibly broad, the Court employed the same construction of “express advocacy” in the disclosure context as it had employed in the context of expenditures, specifically referring back to the “magic words.” Id. at 80 & n. 108, 96 S.Ct. 612.

As a result of the Buckley Court's strict reading of the above-described provisions of FECA, the use or omission of the so-called “magic words” came to be viewed as marking a bright statutory line separating “express advocacy,” which could properly be regulated, and “issue advocacy” (i.e., communications regarding issues, as opposed to candidates), which could not. McConnell, 540 U.S. at 126, 124 S.Ct. 619.

Ultimately, however, the “magic words” test proved to be, in the words of five members of the Supreme Court, “functionally meaningless. Not only [could] advertisers easily evade the line by eschewing the use of magic words, but they would seldom choose to use such words even if permitted.” McConnell, 540 U.S. at 193, 124 S.Ct. 619 (citations omitted). “Little difference existed, for...