State v. Grocery Manufacturers Ass'n, 99407-2

• Court: United States State Supreme Court of Washington
• Writing for the Court: GonzAlez, C.J.
• Parties: STATE OF WASHINGTON, Respondent, v. GROCERY MANUFACTURERS ASSOCIATION Petitioner.
• Docket Number: 99407-2
• Decision Date: 20 January 2022

STATE OF WASHINGTON, Respondent,
v.
GROCERY MANUFACTURERS ASSOCIATION Petitioner.

No. 99407-2

Supreme Court of Washington

January 20, 2022

GonzAlez, C.J.

Voters have a right to know who funds their elections. To enforce that right, candidates and political committees are required to disclose their contributors or face a penalty for failing to do so. We are asked today whether the penalty for intentionally concealing the source of political contributions may be based on the amount concealed. We conclude that it may and accordingly affirm.

Background

Washington voters have the constitutional right to propose laws and, when the legislature does not enact their proposals, vote on final passage. Wash. Const. art. II, § 1. Using this power, Washington voters proposed and passed Washington's Fair Campaign Practices Act (FCPA or act), ch. 42.17A RCW. The FCPA is an attempt to make elections and politics as fair and transparent as

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possible; and to accomplish that goal, the act requires candidates, political committees, and lobbyists to disclose their campaign contributions and spending. LAWS OF 1973, ch. 1 (codified in part at chapter 42.17A RCW); see also Voters Educ. Comm. v. Pub. Disclosure Comm'n 7, 161 Wn.2d 470, 479-80, 166 P.3d 1174 (2007). The FCPA establishes that it is "the public policy of the State of Washington . . . [t]hat political campaign and lobbying contributions and expenditures be fully disclosed to the public and that secrecy is to be avoided" and "[t]hat the public's right to know of the financing of political campaigns ... far outweighs any right that these matters remain secret and private." LAWS OF 1973, ch. 1, § 1(1), (10) (currently codified at RCW 42.17A.001(1), (10)).

The FCPA compels disclosure and "compelled disclosure may encroach on First Amendment rights by infringing on the privacy of association and belief." Voters Educ. Comm., 161 Wn.2d at 482 (citing Buckley v. Valeo, 424 U.S. 1, 64, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976)). To guard against infringing on these First Amendment rights, laws mandating disclosure "must survive 'exacting scrutiny.'" Id. (quoting Buckley, 424 U.S. at 64). FCPA's compelled registration and disclosure requirements have been upheld by state and federal courts many times over the years. See id. at 497-98; State v. Evergreen Freedom Found., 192 Wn.2d 782, 801, 432 P.3d 805 (2019); Human Life of Wash. Inc. v. Brumsickle, 624 F.3d 990, 994-95, 1005 (9th Cir. 2010) (rejecting an initiative-opponent's First

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Amendment challenge to FCPA under the exacting scrutiny standard of Citizens United v. FEC, 558 U.S. 310, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010); U.S. Const, amend. I).

We are not the only state where the voters have the power to propose and pass legislation. In 2012, Proposition 37 was presented to California voters. This proposition would have required some manufacturers to disclose whether packaged food contained genetically modified organisms (GMO). The Grocery Manufacturer's Association (GMA) and many of its member companies successfully campaigned against Proposition 37, and some received negative responses from the public for doing so.

In the wake of the Proposition 37 campaign, Washington sponsors filed Initiative 522. Like Proposition 37, this initiative would have required GMO labels on packaged food and like Proposition 37, GMA opposed it. GMA developed a campaign strategy to work against the initiative while shielding its member companies from the sort of negative public response that happened in California. As part of that campaign strategy, GMA created a segregated "Defense of Brands" strategic account that would hold and disburse contributions raised to oppose labeling requirements. GMA staffers explained that '"state GMO related spending will be identified as coming from GMA which will provide anonymity and eliminate state filing requirements for contributing members.'" Clerk's Papers

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(CP) at 4054 (quoting Ex. 15). Nothing in the record or briefing suggests GMA brought a declaratory judgment action under chapter 7.24 RCW to determine whether and how the FCPA would apply to its campaign work.

GMA raised more than $14 million to oppose GMO labeling efforts. GMA in turn contributed $11 million to the "No on 522" campaign from the Defense of Brands strategic account. Despite its political activities in Washington, GMA did not register as a political committee with the Public Disclosure Commission (PDC) and did not make any PDC reports until after this lawsuit was filed. In response to the suit, GMA registered "under duress" but, as of the time of trial, still had not filed all of the required reports.

The State sued, contending that GMA intentionally, flagrantly, and repeatedly violated the FCPA. GMA filed a separate lawsuit against the State for injunctive and declaratory relief, arguing that the State was unconstitutionally attempting to enforce Washington's fair campaign laws. The suits were consolidated. At summary judgment, the trial court found that GMA was a political committee subject to the FCPA and that it had broken the law by failing to register with the PDC and failing to file disclosure reports. Concluding there were factual issues about whether GMA had intentionally violated the law (which would permit statutory punitive treble damages), the judge reserved the penalty for trial.

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After a bench trial, the trial court found that GMA had intentionally violated Washington's campaign finance laws. It found that GMA and its board intended to use the Defense of Brands account "to shield the contributions made from GMA members from public scrutiny" and to "eliminate the requirement and need to publicly disclose GMA members' contributions on state campaign finance disclosure reports." CP at 4059. It also concluded that GMA concealed the amount and source of contributions, registered 224 days late, and did not properly or timely file at least 47 reports. The trial court specifically rejected testimony from GMA officers that they had not intended to violate the law, finding "it is not credible that GMA executives believed that shielding GMA's members as the true source of contributions to GMA's Defense of Brands Account was legal." CP at 4068.

The State asked for a base penalty of $14, 622, 820 based largely on the amount of campaign funds that GMA had collected and concealed. Basing the penalty on the amount intentionally concealed is explicitly authorized in the FCPA. RCW 42.17A.750(1)(g). The State also asked the trial judge to impose punitive treble damages for a total of $43, 868, 460, which is also explicitly authorized under the act. RCW 42.17A.780. GMA asked for "a [m]odest, [p]artially [s]uspended, [p]enalty." CP at 3476.

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The trial court rejected both approaches. It entered several relevant unchallenged findings of fact:

106. In exercising its discretion in determining an appropriate penalty in this case, the court should and did review the applicable statutes, administrative code provisions, case law and penalties imposed by other courts. Although the court would not allow testimony or argument on penalties in other cases, the court has reviewed all of the briefing submitted, including GMA's briefing and arguments regarding penalties imposed in other cases. The court has considered all of that in making its determination regarding a penalty.

107.Mitigating factors in this case include lack of any prior violations by GMA, that GMA is not a repeat violator and that GMA cooperated with the PDC once this case was filed. Those factors weigh in favor of a smaller penalty.

108.There are also factors that weigh in favor of the court imposing a more substantial penalty, including trebling of damages. Those factors include: violation of the public's right to know the identity of those contributing to campaigns for or against ballot title measures on issues of concern to the public, the sophistication and experience of GMA executives, the failure of GMA executives to provide complete information to their attorneys, the intent of GMA to withhold from the public the true source of its contributors against Initiative 522, the large amount of funds not reported, the large number of reports filed either late or not at all, and the lateness of the eventual reporting just shortly before the 2013 election.

CP at 4069.

Based on these aggravating and mitigating factors, and based on former RCW 42.l7A.75O(1)(f) (2013), ^[1] the trial court imposed a $6 million base penalty.

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Since the violation was intentional, the trial court imposed treble damages. See RCW 42.17A.780 (allowing for punitive treble damages for intentional violations of FCPA). It also imposed attorney fees.

GMA appealed both liability and damages, arguing, among other things, that it was not a political committee and that, even if it was, requiring it to register and disclose contributions and expenditures violated Washington's campaign financing laws and several constitutional provisions. State v. Grocery Mfrs. Ass'n, 195 Wn.2d 442, 454, 461, 461 P.3d 334 (2020) (GMA II). The Court of Appeals affirmed the trial court's decision that GMA was a political committee subject to FCPA and that FCPA was constitutionally applied, but it found that treble damages were inappropriate under the act. State v. Grocery Mfrs. Ass 'n, 5 Wn. App. 2d 169, 176-77, 209, 425 P.3d 927 (2018) (GMA I) (citing former RCW 42.I7A.765(5) (2010)). GMA I did not reach GMA's argument that the penalty violated the excessive fines clauses of the state and federal constitutions. Id. at 177 n.2.

This court largely affirmed the trial court, holding that Washington's campaign finance laws were constitutional as applied to GMA, that the trial court had applied the correct standard to determine whether GMA had intentionally violated the law, and that treble damages were permissible under the statute. GMA...