State v. Grocery Mfrs. Ass'n

Decision Date16 April 2020
Docket NumberNo. 96604-4,96604-4
Citation195 Wash.2d 442,461 P.3d 334
CourtWashington Supreme Court
Parties STATE of Washington, Petitioner/Cross-Respondent, v. GROCERY MANUFACTURERS ASSOCIATION, Respondent/Cross-Petitioner. Grocery Manufacturers Association, Respondent/Cross-Petitioner, v. Robert W. Ferguson, Attorney General of the State of Washington, in his official capacity, Petitioner/Cross-Respondent.

Garth Ahearn, Office of the Attorney General - Tacoma, 1250 Pacific Ave. Ste. 105, Po Box 2317, Tacoma, WA, 98401-2317, Karl David Smith, Attorney at Law, Po Box 40100, Olympia, WA, 98504-0100, for Petitioner.

Robert Bertelson Mitchell Jr., Aaron Edward Millstein, K&L Gates LLP, 925 4th Ave., Ste. 2900, Seattle, WA, 98104-1158, Daniel-Charles Van D. Wolf, K&L Gates LLP, 70 W. Madison St., Ste. 3300, Chicago, IL, 60602-4243, for Respondent.

Ryan P. McBride, Lane Powell PC, 1420 5th Ave., Ste. 4200, Seattle, WA, 98101-2375, Allen Dickerson, Owen Yeates, Institute for Free Speech, 121 S. West Street, Suite 201, Alexandria, VA, 22314, for Amicus Curiae on behalf of Institute for Free Speech.

Jennifer L. Robbins, Danielle Elizabeth Franco-Malone, Dmitri L. Iglitzin, Barnard Iglitzin & Lavitt LLP, 18 W. Mercer St., Ste. 400, Seattle, WA, 98119-3971, for Amicus Curiae on behalf of Seiu 775.

Catherine E. Stetson, Sean Marotta, Hogan Lovells US LLP, 555 Thirteenth Street, Nw, Washington, DC, 20004, Elizabeth Alice Och, Attorney at Law, 1601 Wewatta St., Ste. 900, Denver, CO, 80202-6314, for Amicus Curiae on behalf of National Association of Manufacturers.

YU, J.

¶ 1 This case concerns alleged intentional violations of Washington’s Fair Campaign Practices Act (FCPA), ch. 42.17A RCW, by the Grocery Manufacturers Association (GMA) during the 2013 election cycle. In November 2013, Washington voters rejected Initiative 522 (I-522), which would have required labels on packaged foods containing genetically modified organisms (GMOs). GMA opposes state-level GMO labeling laws, including I-522.

¶ 2 Over the course of the 2013 election cycle, GMA solicited over $14 million in optional contributions from its member companies, $11 million of which went to support the "No on 522" political committee. The payments to No on 522 were attributed solely to GMA itself, with no indication of which companies had provided the funds. Prior to the initiation of this lawsuit, GMA was not registered as a political committee and did not make any reports to the Public Disclosure Commission (PDC).

¶ 3 The State filed a complaint alleging that GMA intentionally violated the FCPA’s registration and disclosure requirements and the FCPA’s prohibition on concealing the sources of election-related spending. GMA countered that it cannot be subject to the FCPA’s registration and disclosure requirements because those requirements violate the First Amendment as applied. U.S. CONST. amend. I. The trial court agreed with the State, imposed a $6 million base penalty on GMA, and trebled the penalty to $18 million after determining that GMA’s violations were intentional. The Court of Appeals largely affirmed, but it reversed the treble penalty, holding that one must "subjectively intend to violate the law in order to be subject to treble damages." State v. Grocery Mfrs. Ass’n , 5 Wash. App. 2d 169, 209, 425 P.3d 927 (2018).

¶ 4 We affirm that GMA violated the FCPA and that the FCPA is constitutional as applied, but we reverse the Court of Appeals on the treble penalty issue and hold that the trial court applied the proper legal standard to determine that GMA intentionally violated the FCPA. We therefore remand to the Court of Appeals to consider GMA’s claim that the penalty imposed in this case violates the excessive fines clauses of the federal and state constitutions. U.S. CONST. amend. VIII ; WASH. CONST. art. I, § 14.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY
A. Factual background

¶ 5 In 2012, California voters rejected a ballot proposition (Prop 37) that would have required GMO labels on packaged foods. GMA and its member companies spent nearly $22 million dollars on the campaign opposing Prop 37, and some of GMA’s staff and member companies were threatened and boycotted as a result. Following its experience in California, GMA intended to continue opposing state-level GMO labeling laws throughout the country, but GMA’s board of directors (Board) "expressed a preference for GMA only to be identified as the funder of efforts to oppose state labeling efforts" in the future. Clerk’s Papers (CP) at 4056. At their January 2013 meeting, board members were advised "that GMA had developed a way to do this while shielding individual member companies from public scrutiny." Id. at 4055. GMA’s proposal was to create a segregated fund called the "Defense of Brands" (DOB) account.

¶ 6 The DOB account was "expected and intended" to "(1) solicit, receive and hold contributions from specific GMA members (most of whom held a place on the GMA Board), (2) address the GMO strategy work nationwide and, (3) also specifically oppose Initiative 522 in Washington State." Id. at 4059. Two specific reasons for using the DOB account to accomplish these purposes were 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." Id. The Board held a final vote approving the DOB account at its February 28, 2013 meeting.

¶ 7 The DOB account was not funded by GMA’s ordinary member dues. Instead, it was funded by optional contributions from some of GMA’s member companies, most of which had a seat on the Board. GMA members were regularly updated on the campaign opposing I-522 and "GMA members who contributed to the Defense of Brands Account were informed when their contributions were going to be transferred from the Defense of Brands Account to the No on 522 campaign." Id. at 4061. Contributing GMA members were also given "information on how to respond if they received media or other inquiries" about GMA’s contributions to No on 522, "in part to divert attention from the true source of the funds, namely, the individual GMA members." Id.

¶ 8 In total, GMA collected over $14 million for the DOB account in 2013, and it contributed $11 million of that amount to the No on 522 political committee. Before this lawsuit was initiated, GMA did not register with the PDC as a political committee, did not submit finance disclosure reports, did not disclose which of its members contributed to the DOB account, and did not report its contributions or expenditures.

B. Procedural history

¶ 9 On October 16, 2013, the State filed a complaint alleging that GMA had failed to comply with the FCPA’s registration and disclosure requirements for political committees and had concealed the true source of its contributions. The next day, GMA registered as a political committee and began filing reports with the PDC "in excess of caution." Id. at 37.

¶ 10 After I-522 was rejected by the voters in November, the State filed an amended complaint and requested that the court impose a civil fine on GMA, award the State its costs and attorney fees, and treble the judgment pursuant to former RCW 42.17A.765(5) (2010), recodified as RCW 42.17A.780. GMA filed an answer and counterclaim seeking a declaratory judgment that the FCPA’s requirements violate the First Amendment as applied. GMA also filed a separate lawsuit against the attorney general pursuant to 42 U.S.C. § 1983, and the two cases were consolidated.

¶ 11 On cross motions for summary judgment, the trial court ruled that GMA had violated the FCPA and that the FCPA is constitutional as applied to GMA. GMA’s violations included

a. Failing to timely register with the Public Disclosure Commission as a political committee in violation of RCW 42.17A.205 ;
b. Failing to timely identify a treasurer and [bank] account in violation of RCW 42.17A.205 ;
c. Failing to timely and regularly disclose contributions it received from its members in the Defense of Brands Account in violation of RCW 42.17A.235 ;
d. Failing to timely and regularly disclose expenditures it made from the Defense of Brands Account in violation of RCW 42.17A.240 ;[1] and
e. Concealing the true sources of the contributions it received and expenditures it made in opposing Initiative 522.

Id. at 3339.

¶ 12 The court reserved for trial the issues of "whether GMA intentionally violated the law and if so, whether the judgment in this case should be trebled as punitive damages as allowed under [former] RCW 42.17A.765(5)." Id. at 3340. The court also issued a pretrial ruling that for purposes of determining whether an FCPA violation is intentional, the relevant question is "whether the person acted with the purpose of accomplishing an illegal act under RCW 42.17A." Id. at 3684. Therefore, an intentional violation "is not limited to only those instances where the person subjectively knew their actions were illegal and acted anyway." Id. Following the bench trial, the court found that "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" and concluded "that GMA intentionally violated Washington State public campaign finance laws." Id. at 4068, 4072.

¶ 13 As to damages, the State requested a base penalty of $14,622,820, trebled to $43,868,460. The court found mitigating factors favoring a smaller penalty, including "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." Id. at 4069. However, the court also found aggravating factors, including

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,
...

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    ...(3) the other penalties that may be imposed for the violation, and (4) the extent of the harm caused.’ " State v. Grocery Mfrs. Ass'n , 195 Wash.2d 442, 476, 461 P.3d 334 (2020) (quoting United States v. $100,348.00 in U.S. Currency , 354 F.3d 1110, 1122 (9th Cir. 2004) (citing Bajakajian ,......
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