Shale Energy All., Inc. v. Mac Warner, 20-0270
| Decision Date | 14 June 2021 |
| Docket Number | No. 20-0270,20-0270 |
| Court | West Virginia Supreme Court |
| Parties | Shale Energy Alliance, Inc., a Delaware Corporation, Defendant Below, Petitioner v. Mac Warner, West Virginia Secretary of State, Plaintiff Below, Respondent. |
Petitioner Shale Energy Alliance, Inc. (sometimes referred to as "SEA"), by counsel Jason B. Torchinsky, Kathleen M. Guith,1 Danielle M. Waltz, M. Shane Harvey, and Chelsea A. Creta, appeals the order of the Circuit Court of Wood County, entered on April 2, 2020, granting respondent West Virginia Secretary of State Mac Warner's motion for summary judgment, determining that petitioner is a political action committee ("PAC") under West Virginia Code § 3-8-1a(21)(2013),2 and denying petitioner's cross-motion for summary judgment. Respondent, bycounsel Patrick Morrisey, Lindsay S. See, Curtis R.A. Capehart, and Thomas T. Lampman, filed a response to which petitioner replied.
After considering the parties' written and oral arguments, as well as the record on appeal and the applicable law, this Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the circuit court's order is appropriate under Rule 21 of the Rules of Appellate Procedure.
This case concerns whether petitioner was required to register as a PAC and make certain public disclosures regarding its political advertising and its concomitant expenditures. In this regard, the undisputed facts are that petitioner was first incorporated in the State of Delaware in 2015 under Internal Revenue Code § 501(c)(4) as a nonprofit social welfare organization, and was registered to do business in this State later that year.3 Petitioner's by-laws provide that its purpose was "to raise and expend funds in support or opposition to public policy relating to oil and natural gas development and general business issues." Further, in tax documents relating to its nonprofit status, it describes its "mission or most significant activities" as follows:
To raise and expend funds on public education campaigns regarding public policy issues critical to oil and natural gas development in multiple states, including Pennsylvania and West Virginia and future states to be determined[.] To raise and expend funds on public education campaigns regarding public policy issues critical to general business development such as taxation and labor issues in multiple states including Pennsylvania and West Virginia and future states to be determined[.] Advocate for candidates seeking public office whose views align with the organization's priorities[.]
(Emphasis added).
(Footnote and citations to joint appendix omitted).
In specific regard to petitioner's activities relating to the 2018 election cycle, its leadership decided that there had not been much progress with its agenda in the prior two years, so it made a decision to "ramp[] up" the organization's efforts. According to the appendix record, petitioner commissioned a $20,000 video advertisement expressly advocating against the election of a specific candidate and aired it in 468 distinct "spots" in the two weeks preceding the primary. Petitioner also made eighteen distinct expenditures for mailing campaigns, some expressly advocating against a candidate and others expressly advocating for a different candidate. While some of petitioner's mailings to voters focused on issues involving natural gas, oil, and taxes, others endorsed a candidate's position on issues such as the "Second Amendment" and "fight[ing] the opioid crisis." Further, petitioner purchased an ad in a local newspaper expressly advocating "[v]ote to keep [a candidate] in office," again commending the candidate's "Second Amendment" record. Petitioner's disclosures indicate that the cost of its 2018 primary election advocacy campaign totaled $77,178.22.
By letter dated May 29, 2018, Donald M. Kersey, III, Elections Director and Deputy Legal Counsel with the West Virginia Secretary of State's Office, notified petitioner that the Secretary of State had received a formal complaint alleging, among other things, that petitioner had violated West Virginia Code §§ 3-8-2 and 3-8-4(a) "by expressly advocating the defeat of one or more clearly identified candidates without filing the proper organizational paperwork as a political action committee (PAC) with the Secretary of State (or Federal Election Commission) no later than twenty-eight days prior to the Primary Election on May 8, 2018[.]" Thereafter, respondent assisted petitioner with coming into partial compliance, with petitioner filing disclosure forms for its 2018 primary election independent expenditures. However, petitioner did not agree that it was required to register as a PAC, to file the detailed transaction reports required from PACs, or topay the penalties due to its delinquent filings.4 On June 4, 2018, respondent filed a complaint in the Circuit Court of Wood County against petitioner, alleging multiple violations of West Virginia's election statutes, including petitioner's failure to register and report as a PAC.
Respondent maintains that even after the complaint was filed, as the 2018 general election got closer, petitioner spent $79,000 on direct mail advocating on behalf of seven distinct candidates, and $10,500 to commission four public opinion polls, which petitioner admitted were done to make its "political advertisements more effective." Once again, petitioner did not disclose these expenditures to respondent until it received a cease and desist letter. The disclosures revealed that petitioner's general election mailing campaign expenditures totaled $78,983.03. Thus, the grand total for petitioner's advertising, mailing, and polling related to the 2018 election cycle was $166,661.25.5 Petitioner's total expenditures for 2018 were $332,108, so the expenditures directed toward the 2018 election cycle accounted for more than half of petitioner's total spending for the entire year.
The parties ultimately reached a partial settlement in August of 2019, wherein they resolved most of the allegations contained in the complaint. Petitioner was required to file disclosures for the election communications expenses from 2018, and further agreed to make partial disclosures of its financial transactions in order to toll the accrual of timeliness penalties. Petitioner also agreed to "pay all penalties for delinquent filing of independent expenditure reports and electioneering communications disclosures calculated to have accrued as of the Effective Date [August 19, 2019], specifically twelve thousand, nine hundred sixty-three dollars ($12,963) (the "Settlement Amount")." However, the parties were unable to settle the question before us: whether petitioner met the statutory definition of a PAC, requiring it to register with respondent as such.
Thereafter, the parties filed cross-motions for summary judgment concerning the PAC issue. See W. Va. Code § 3-8-1a(21). Petitioner primarily argued that it did not meet the statutory definition of a PAC because it was not organized for the sole purpose of expressly advocating for or against candidates. See id. Significantly, petitioner did not raise any arguments relating to the constitutionality of West Virginia Code § 3-8-1a(21). Conversely, respondent argued that petitioner met the statutory definition of a PAC, see id., and was required to register as such and comply with the requirements associated therewith. The circuit court held a hearing on the motions on March 9, 2020, and by order entered April 2, 2020, it granted summary judgment to respondent, and denied petitioner's cross-motion.
Specific to the issues herein, the circuit court found that (Footnote omitted). The circuit court concluded that because the word "organized" was not defined in the electionstatute, under rules of statutory construction, it is given its "ordinary and plain meaning."6 Relying upon the Merriam-Webster Collegiate Dictionary definition of the word "organized," the circuit court determined that it meant "having a formal organization to coordinate and carry out activities." The circuit court also determined that "[t]he Election Code expressly contemplates the possibility that an entity organized for non-electoral purposes can also be organized for the purpose of influencing elections." In support of this conclusion, and by way of analogy, the circuit court reasoned:
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