State v. Foundation

• Decision Date: 07 November 2017
• Docket Number: No. 50224-1-II.,50224-1-II.
• Citation: 404 P.3d 618
• Court: Washington Court of Appeals
• Parties: STATE of Washington, Appellant, v. EVERGREEN FREEDOM FOUNDATION, d/b/a Freedom Foundation, Respondent.

404 P.3d 618

STATE of Washington, Appellant,

v.EVERGREEN FREEDOM FOUNDATION, d/b/a Freedom Foundation, Respondent.

No. 50224-1-II.

Court of Appeals of Washington, Division 2.

November 7, 2017

Linda Anne Dalton, Attorney General's Office Campaign Finance, Chad Corwyn Standifer, Rebecca R. Glasgow, Attorney General's Office, PO Box 40100, 1125 Washington Street Se, Olympia, WA, 98504-0100, Counsels for Appellant.

Mark Christopher Lamb, The North Creek Law Firm, 12900 Ne 180th Street Suite 235, Bothell, WA, 98011-5773, Philip Albert Talmadge, Talmadge/ Fitzpatrick/Tribe, 2775 Harbor Avenue Sw, Third Floor Suite C, Seattle, WA, 98126-2138, Counsel for Respondent.

PART PUBLISHED OPINION

MAXA, J.

¶ 1 The State of Washington appeals the CR 12(b)(6) dismissal of its regulatory enforcement action against the Evergreen Freedom Foundation (the Foundation). The State filed suit after learning from a citizen complaint that the Foundation had provided pro bono legal services in support of local initiatives in Sequim, Chelan, and Shelton without reporting the value of those services to the Public Disclosure Commission (PDC).

¶ 2 RCW 42.17A.255(2) requires a person to report to the PDC certain "independent expenditures," defined in RCW 42.17A.255(1) to include any expenditure made in support of a "ballot proposition." RCW 42.17A.005(4) defines "ballot proposition" to include any initiative proposed to be submitted to any state or local voting constituency "from and after the time when the proposition has been initially filed with the appropriate election officer of that constituency before its circulation for signatures."

¶ 3 The language of RCW 42.17A.005(4) tracks the procedure for statewide initiatives, in which a proposition must be filed with election officials before any signatures are solicited. However, in many local jurisdictions—including in Sequim, Chelan, and Shelton—the initiative procedure requires that the appropriate number of signatures be obtained before a proposition is filed with election officials.

¶ 4 Here, the Foundation's pro bono legal services were provided after the Sequim, Chelan, and Shelton initiatives had been filed with local election officials but also after the initiatives had been circulated for signatures. The State argues that these initiatives were "ballot propositions" under the RCW 42.17A.005(4) definition. The Foundation argues, and the trial court ruled, that the initiatives were not "ballot propositions" when the legal services were provided because the initiatives already had been circulated for signatures. Under the Foundation's argument and the trial court's ruling, a local initiative filed in a jurisdiction where signatures must be obtained before filing could never constitute a "ballot proposition."

¶ 5 We hold that (1) under the only reasonable interpretation of RCW 42.17A.005(4), the Sequim, Chelan, and Shelton initiatives qualified as "ballot propositions" because the Foundation provided services after the initiatives had been filed with the local election officials, regardless of the additional qualification that the proposition had to be filed before its circulation for signatures; and (2) the disclosure requirement for independent expenditures under RCW 42.17A.255(2) does not violate the Foundation's First Amendment right to free speech. In the unpublished portion of this opinion, we reject the Foundation's additional arguments.

¶ 6 Accordingly, we reverse the trial court's dismissal of the State's regulatory enforcement action regarding the Sequim, Chelan, and Shelton initiatives, and we remand for further proceedings.

FACTS

Proposition Proposals

¶ 7 In 2014, groups of citizens in Sequim, Chelan, and Shelton prepared initiatives concerning collective bargaining between municipalities and the bargaining representatives of their employees, circulated the initiatives, and obtained signatures in their communities. The proponents then submitted the initiatives and signatures to all three cities. The Sequim city council failed to take any action. The Chelan city council directed its city attorney to file an action to determine the initiative's validity. The Shelton city commission declared the initiatives invalid and took no further action.

¶ 8 In response, the proponents of each initiative filed a lawsuit against their respective cities. The lawsuits requested that the initiatives be placed on the ballot to be voted on by city residents. In each case, the proponents were represented by attorney staff members of the Foundation. Apparently, attorneys representing various labor unions opposed each lawsuit. All three lawsuits were dismissed and none were appealed.

The State's Lawsuit

¶ 9 In October 2015, the State filed a complaint against the Foundation. The complaint alleged that RCW 42.17A.255 required the Foundation to report to the PDC the legal services provided by its staff in support of the initiatives. The State sought the imposition of a civil penalty as well as temporary and permanent injunctive relief.

¶ 10 The Foundation moved to dismiss under CR 12(b)(6) for failure to state a claim. The trial court granted the Foundation's motion and dismissed the State's complaint. The court reasoned that the applicable statutes were ambiguous and vague as to whether the Foundation was obligated to report its legal services.

¶ 11 The State appeals the trial court's dismissal order.

ANALYSIS

A. STANDARD OF REVIEW

¶ 12 The Foundation filed its motion to dismiss the State's complaint under CR 12(b)(6), which provides that a complaint may be dismissed if it fails to state a claim upon which relief can be granted. We review a trial court's CR 12(b)(6) order dismissing a claim de novo. J.S. v. Vill. Voice Media Holdings, LLC , 184 Wash.2d 95, 100, 359 P.3d 714 (2015). We accept as true all facts alleged in the plaintiff's complaint and all reasonable inferences from those facts. Id. Dismissal under CR 12(b)(6) is appropriate if the plaintiff cannot allege any set of facts that would justify recovery. Id.

B. STATUTORY BACKGROUND

1. Fair Campaign Practices Act Reporting Requirements

¶ 13 In 1972, Washington citizens passed Initiative 276, which established the PDC and formed the basis of Washington's campaign finance laws. Voters Educ. Comm. v. Pub. Disclosure Comm'n , 161 Wash.2d 470, 479, 166 P.3d 1174 (2007). Initiative 276 is codified in portions of Chapter 42.17A RCW, which is known as the Fair Campaign Practices Act (FCPA).

¶ 14 RCW 42.17A.001 sets forth the declaration of policy of the FCPA. The public policy of the state includes:

(1) That political campaign and lobbying contributions and expenditures be fully disclosed to the public and that secrecy is to be avoided.

....

(5) That public confidence in government at all levels is essential and must be promoted by all possible means.

....

(10) That the public's right to know of the financing of political campaigns and lobbying and the financial affairs of elected officials and candidates far outweighs any right that these matters remain secret and private.

(11) That, mindful of the right of individuals to privacy and of the desirability of the efficient administration of government, full access to information concerning the conduct of government on every level must be assured as a fundamental and necessary precondition to the sound governance of a free society.

RCW 42.17A.001 (emphasis added). In addition, RCW 42.17A.001 states that "[t]he provisions of this chapter shall be liberally construed to promote complete disclosure of all information respecting the financing of political campaigns and lobbying."

¶ 15 The FCPA requires candidates and political committees to report to the PDC all contributions received and expenditures made. RCW 42.17A.235(1). A "political committee" includes any organization receiving donations or making expenditures in support of or in opposition to a ballot proposition. RCW 42.17A.005(37).

¶ 16 A person who violates any provision in chapter 42.17A RCW may be subject to a civil penalty of not more than $10,000 for each violation. RCW 42.17A.750(1)(c). In addition, a court may compel the performance of any reporting requirement. RCW 42.17A.750(1)(h). The attorney general and local prosecuting authorities "may bring civil actions in the name of the state for any appropriate civil remedy, including but not limited to the special remedies provided in RCW 42.17A.750." RCW 42.17A.765(1). The PDC also may refer certain violations for criminal prosecution. RCW 42.17A.750(2).

2. Statewide and Local Initiative Process

¶ 17 The requirements for reporting expenditures under chapter 42.17A RCW involve the processes for submitting ballot initiatives at the statewide and local levels. The initiative processes at each level are established by state law and involve somewhat different requirements.

¶ 18 At the state level, chapter 29A.72 RCW governs the process for submitting initiatives to the voters. A person who desires to submit a "proposed initiative measure" to the people must file a copy of the proposed measure with the secretary of state. RCW 29A.72.010. After review by the office of the code reviser, the proponent must file the proposed measure along with a certificate of review with the secretary of state for assignment of a serial number. RCW 29A.72.020. The attorney general also formulates a ballot title for the proposed initiative. RCW 29A.72.060.

¶ 19 After the proposed initiative has been filed with the secretary of state and a ballot title has been prepared, the proponent can prepare petitions for signature. RCW 29A.72.100, .120. The proponent must obtain a certain number of signatures from legal voters, after which the petitions are "submitted to the secretary of state for filing." RCW 29A.72.150. The secretary of state then verifies the signatures. RCW 29A.72.230. If the petition is sufficient, the secretary of state places the proposed initiative on the ballot. RCW 29A.72.250.

¶ 20 At the local level, RCW 35.17.260 allows ordinances...