Ctr. for Competitive Politics v. Harris

• Decision Date: 30 October 2017
• Docket Number: No. 2:14–cv–00636–MCE–DB,2:14–cv–00636–MCE–DB
• Citation: 296 F.Supp.3d 1219
• Parties: CENTER FOR COMPETITIVE POLITICS, Plaintiff, v. Kamala HARRIS, in her official capacity as Attorney General of the State of California, Defendant.
• Court: U.S. District Court — Eastern District of California

296 F.Supp.3d 1219

CENTER FOR COMPETITIVE POLITICS, Plaintiff,

v.Kamala HARRIS, in her official capacity as Attorney General of the State of California, Defendant.

No. 2:14–cv–00636–MCE–DB

United States District Court, E.D. California.

Signed October 30, 2017

Filed October 31, 2017

Allen Dickerson, Pro Hac Vice, Zachary Robert Morgan, Pro Hac Vice, Center for Competitive Politics, Alan Gura, Alexandria, VA, for Plaintiff.

Alexandra Robert Gordon, Jose Alfonso Zelidon–Zepeda, Kevin A. Calia, Department of Justice, Office of the Attorney General, San Francisco, CA, for Defendant.

MEMORANDUM AND ORDER

MORRISON C. ENGLAND, JR., UNITED STATES DISTRICT JUDGE

Through the present action, Plaintiff Center for Competitive Politics ("Plaintiff") seeks to permanently enjoin against Defendant Kamala Harris in her official capacity as Attorney General of the State of California ("Defendant") from requiring an unredacted copy of Plaintiff's IRS Form 990 Schedule B as a condition of soliciting funds in California on grounds that said requirement violates Plaintiff's rights under the First and Fourth Amendments to the United States Constitution, and further violates the Constitution's Supremacy Clause.¹ Plaintiff brings those claims under the auspices of 42 U.S.C. § 1983. Now before the Court is Defendant's Motion to Dismiss Plaintiff's First Amended Complaint ("FAC") in its entirety, brought under Federal Rule of Civil Procedure 12(b)(6) on grounds that it fails to state a claim upon which relief can be granted. For the reasons set forth below, Defendant's Motion is GRANTED.²

BACKGROUND

Plaintiff is a Virginia nonprofit corporation recognized by the Internal Revenue Service as a § 501(c)(3) public charity. FAC, ¶ 3. Its stated mission is "to promote and defend the First Amendment rights of free political speech, assembly, association, and petition through research, education, and strategic litigation." Center for Competitive Politics v. Harris ("CCP"), 784 F.3d 1307, 1311 (9th Cir. 2015). To support its activities, Plaintiff solicits charitable contributions nationwide, including California. Id.

To ensure that charitable status is not abused, the Attorney General has "broad powers under common law and California statutory law to carry out [its] charitable trust enforcement responsibilities." Id. at 1310 ; Cal. Gov't Code § 12598(a). In order to legally solicit tax-deductible contributions in California, for example, an entity must be registered with the state's Registry of Charitable Trusts ("Registry"), which is administered by California's Department of Justice under the Supervision of Trustees and Fundraisers for Charitable Purposes Act, Cal. Gov't Code §§ 12580 et seq. ("the Act"). In addition to requiring the California Attorney General to maintain a registry of charitable corporation and their trustees and trusts, the Act authorizes the Attorney General to obtain "whatever information, copies of instruments, reports, and records are needed for the establishment and maintenance of the [Registry]. Id. at § 2485.

To maintain membership in the Registry, nonprofit corporations must file annual periodic written reports with the state Attorney General, and the Act requires that the Attorney General promulgate rules and regulations specifying both the filing and procedures and the contents of the reports. Id. at § 12586(b); Cal. Code Regs. Tit. 11, §§ 300 et seq. (2014). One of the regulations adopted by the Attorney General requires the periodic written reports to include Internal Revenue Service Form 990. Form 990 has a supplement, Schedule B, which lists the names and addresses of an organization's contributors. Although many of the documents required by the Registry are open to public inspection, the contents of Form 990 Schedule B have always been considered confidential, accessible only to in-house-staff and handled separately from non-confidential documents. See CCP, 784 F.3d at 1311. Moreover, in order to codify that longstanding practice on only nonpublic disclosure, California Code of Regulations § 310 was amended effective July 8, 2016 to provide as follows:

Donor information exempt from public inspection pursuant to Internal Revenue Code section 6104(d)(3)(A) shall be maintained as confidential by the Attorney General and shall not be disclosed except as follows: (1) In a court or administrative proceeding brought pursuant to the Attorney General's charitable trust enforcement responsibilities; or (2) In response to a search warrant.

Cal. Code Regs., tit. 11, § 310(b) (2016).

Plaintiff has been a member of the Registry since 2008. On January 9, 2014, Plaintiff filed its Annual Registration Renewal Fee Report with Defendant, including a copy of its Form 990 and a redacted version of its Schedule B omitting the names and addresses of its contributors. Plaintiff subsequently received a letter from Defendant dated February 6, 2014 ("Letter"). See ECF No. 37–2. In the Letter, Defendant acknowledged receipt of Plaintiff's periodic written report, but stated that "[t]he filing is incomplete because the copy of [its] Schedule B, Schedule of Contributors, does not include the names and addresses of contributors." Id. (emphasis omitted). The Letter advised that "[t]he Registry retains Schedule B as a confidential record for IRS Form 990 and 990–EZ filers" and requires that Plaintiff must "[w]ithin 30 days of the date of this letter ... submit a complete copy of Schedule B, Schedule of Contributors, for the fiscal year noted above, as filed with the Internal Revenue Service." Id. (emphasis omitted).

On March 7, 2014, Plaintiff filed the present suit against then Attorney General Kamala Harris, in her official capacity, challenging the Attorney General's disclosure requirements and seeking declaratory and injunctive relief. Plaintiff subsequently filed a motion for preliminary injunction claims on grounds that said requirements unconstitutionally infringed upon its freedom of association, and that requiring the submission of an unredacted Schedule B was preempted by federal law in any event. That motion was denied. With respect to the freedom of association claim, the Court reasoned that Plaintiff had not articulated any objective, specific harm that would befall its members as a result of compliance with the Schedule B Requirement, and thus had failed to make a prima facie showing of infringement concerning its associational rights. Center for Competitive Politics v. Harris, No. 2:14-cv-00636-MCE-DAD, 2014 WL 2002244 at *6 (E.D. Cal. May 14, 2014). The Court further opined that the requirement was valid in any event because it substantially related to the Attorney General's compelling interest in performing her regulatory and oversight functions. Id. at *7.

Plaintiff appealed this Court's denial of its preliminary injunction request and the Ninth Circuit affirmed, determining, in relevant part, that the requirement to disclose unredacted Schedule B information to the Attorney General posed no actual burden on Plaintiff's First Amendment rights and was facially constitutional. CCP, 784 F.3d at 1317. In assessing the burden on Plaintiff's First Amendment rights as a result of the disclosure requirements, the appellate panel made it clear that compelled disclosure alone does not constitute a First Amendment injury. See id. at 1314. Rather to prevail on a First Amendment challenge to compelled disclosure of its donor information, the court found Plaintiff had to produce "evidence to suggest that their significant donors would experience threats, harassment, or other potentially chilling conduct as a result of the Attorney General's disclosure requirements." Id. at 1316. Plaintiff did not attempt, and thus failed to make, any such showing. Id.

Given the absence of any actual burden on Plaintiff's First Amendment rights, the Ninth Circuit then weighed the Attorney General's "compelling interest in enforcing the laws of California," which included having "immediate access to form 990 Schedule B" filings. Id. at 1316. The panel recognized that immediate access to Schedule B filings "increases her investigative efficiency" by allowing her to "flag suspicious activity" by reviewing significant donor information. The court thus concluded that requiring the disclosure of Schedule Bs "bears a ‘substantial relation’ " to a " ‘sufficiently important’ government interest", therefore satisfying examination under exacting scrutiny. Id.

Following the Ninth Circuit's denial of its interlocutory appeal, Plaintiff filed a petition for writ of certiorari, which was denied by the United States Supreme Court on November 9, 2015. Plaintiff then filed its FAC on August 12, 2016. ECF No. 37. The FAC continues to allege that the Attorney General's unredacted Schedule B requirement violates Plaintiff's First Amendment rights to free association and speech and is preempted by federal law. Plaintiff further argues that its Fourth Amendment right to be free from unreasonable search and seizure is also being violated. Plaintiff allegedly has chosen to cease fundraising in California rather than comply with the requirement that it file a complete copy of its Schedule B with the Registry. FAC, ¶ 51.

STANDARD

On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336,337–38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual...