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Hispanic Leadership Fund, Inc. v. Walsh

United States District Court, N.D. New York

August 28, 2014

THE HISPANIC LEADERSHIP FUND, INC., and FREEDOM NEW YORK, Plaintiffs,
v.
JAMES A. WALSH, Co-chair of New York State Board of Elections; DOUGLAS A. KELLNER, Co-chair New York State Board of Elections; EVELYN J. AQUILA, Commissioner of New York State Board of Elections; GREGORY P. PETERSON, Commissioner of New York State Board of Elections, Defendants, and NEW YORK STATE, Intervenor-Defendant

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[Copyrighted Material Omitted]

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For The Hispanic Leadership Fund, Inc.: JASON B. TORCHINSKY, ESQ., OF COUNSEL, HOLTZMAN, VOGEL & JOSEFIAK, PLLC, Warrenton, Virginia.

For Freedom New York: DOUGLAS CHALMERS, ESQ., OF COUNSEL, POLITICAL LAW GROUP a CHALMERS LLC, Johns Creek, Georgia.

For Freedom New York: JAMES E. WALSH, ESQ., OF COUNSEL, JAMES E. WALSH LAW FIRM, Ballston Spa, New York.

For Freedom New York: LAURENCE LEVY, ESQ., OF COUNSEL, BRACEWELL & GIULIANI, LLP, New York, New York.

For Walsh and Peterson, Defendants: PATRICK E. BROWN, ESQ., OF COUNSEL, BROWN & WEINRAUB, PLLC, Albany, New York.

For Kellner and Aquila, Defendants: KENNETH A. MANNING, ESQ. CRAIG R. BUCKI, ESQ., OF COUNSEL, PHILLIPS LYTLE, LLP, Buffalo, New York.

For New York State, Intervenor-Defendant: KELLY L. MUNKWITZ, AAG, JAMES SEAMAN, AAG, JOSHUA PEPPER, AAG, CATHY Y. SHEEHAN, AAG, OF COUNSEL, OFFICE OF THE NEW YORK STATE ATTORNEY GENERAL, Albany, New York.

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MEMORANDUM AND DECISION

Mae A. D'Agosting, United States District Judge.

I. INTRODUCTION

On August 28, 2012, Plaintiffs filed this action asking the Court to find several provisions of the New York State Election Law unconstitutional facially and as applied. See Dkt. No. 1. On the same day, Plaintiffs filed an emergency motion for a preliminary and permanent injunction. See Dkt. No. 4. On October 23, 2012, the Court denied Plaintiffs' motion for a preliminary injunction. See Dkt. No. 32. On September 26, 2013, the Court denied Defendants' motions to dismiss and for expedited discovery. See Dkt. No. 78. On October 18, 2013, Plaintiffs' moved for summary judgment, which Defendants have opposed. See Dkt. No. 89.

In light of the upcoming November elections, in a July 2, 2014 Order, the Court summarily granted Plaintiffs' motion for summary judgment, enjoined Defendants from enforcing the relevant provisions of the New York State Election Law, and indicated that an opinion articulating the rationale for its decision would follow. In accordance with the July 2, 2014 Order, the Court now issues the following Memorandum and Decision explaining its reasons for granting Plaintiffs' motion.

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II. BACKGROUND

A. Statutory and regulatory background

To protect against corruption and the appearance of corruption, New York Election Law limits contributions that an individual or corporation may make to candidates and political parties. Schwartz v. Romnes, 495 F.2d 844, 849 (2d Cir. 1974). Moreover, to ensure that voters have sufficient information to intelligently participate in elections, to deter corruption, and to enable the New York State Board of Elections (" Board of Elections" ) to enforce contribution limits, New York law requires certain organizations that seek to promote the election or defeat of a candidate or ballot issue to register and disclose certain information about themselves and those who contribute to them.

1. Contributions and independent expenditures

New York sets limits on the amount that corporations and individuals may contribute to candidates, parties, and political committees. A corporation doing business in New York may make contributions of up to $5,000 in any year for purposes related to elections for New York State office, local office, or party positions. See N.Y. Elec. Law § 14-116(2). An individual may make contributions, loans, or guarantees of funds of up to $150,000 per year " in connection with the nomination or election of persons to state and local public offices and party positions within the State of New York in any one calendar year." Id. at § 14-114. In an opinion issued by the New York State Board of Elections, this $150,000 limit applies to " contributions to independent committees[.]" See Dkt. No. 4-7 at 3.

The Election Law defines a " contribution" as follows:

(1) any gift, subscription, outstanding loan (to the extent provided for in section 14-114 of this chapter), advance, or deposit of money or any thing of value, made in connection with the nomination for election, or election, of any candidate, or made to promote the success or defeat of a political party or principle, or of any ballot proposal,
(2) any funds received by a political committee from another political committee to the extent such funds do not constitute a transfer,
(3) any payment, by any person other than a candidate or a political committee authorized by the candidate, made in connection with the nomination for election or election of any candidate, or any payment made to promote the success or defeat of a political party or principle, or of any ballot proposal including but not limited to compensation for the personal services of any individual which are rendered in connection with a candidate's election or nomination without charge; provided however, that none of the foregoing shall be deemed a contribution if it is made, taken or performed by a candidate or his spouse or by a person or a political committee independent of the candidate or his agents or authorized political committees.

N.Y. Elec. Law § 14-100(9). Therefore, a payment of money to promote the success or defeat of a candidate is not a " contribution" if the payment is " made, taken or performed . . . by a person or a political committee independent of the candidate or his agents or authorized political committees." Id.

2. Political Action Committees

Political Action Committees (" PACs" ) are designated by the Board of Elections as " committee type 2, and cannot make expenditures to aid or take part in the nomination, election or defeat of a candidate,

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other than in the form of contributions." See Dkt. No. 18-27 at ¶ 27 (citing Election Law § § 14-112, 14-118(1)). According to Defendants, " [t]he reason why committees that only make contributions (PACs) are not required to list candidates being supported or opposed, is that there is no requirement that they comply with candidate limits, as PACs are not authorized committees." See id. at ¶ 28 (citing Election Law § § 14-112, 14-114). Moreover, Defendants claim that PACS do not have to list candidates to be supported or opposed, or to disclose whether they are authorized by candidates or not, because contributions made by PACs are subject to the applicable limit of the recipient candidate or that candidate's authorized committee, and must be disclosed both on the PAC's campaign finance report, as well as the corresponding recipient candidate/committee's report. See id. at ¶ 29.

3. Authorized/Unauthorized Committees

An " authorized committee" is the term derived from the Election Law relating to those political committees which are specifically authorized by a candidate to " aid or take part in his election." N.Y. Elec. Law § § 14-112, 14-100(9)(3) & 14-104(1)-(2). An unauthorized committee is the term derived from the Election Law relating to, as the name implies, committees not authorized by a candidate to " aid or take part in his election." Id. This committee is designated as a " Type 9" by the Board of Elections.

Pursuant to the Election Law, " [a]ny political committee aiding or taking part in the election or nomination of any candidate, other than by making contributions, shall file, in the office in which the statements of such committee are to be filed pursuant to this article, either a sworn verified statement by the treasurer of such committee that the candidate has authorized the political committee to aid or take part in his election or that the candidate has not authorized the committee to aid or take part in his election." N.Y. Elec. Law § 14-112. This authorization statement, which is a single page, is referred to as a CF-03 " Committee Authorization Status" form. This provision and the CF-03 form are intended to allow the Board of Elections and the public, including other candidates, to ascertain whether or not a contribution limit applies to that particular committee.

On or about August 17, 2012, Plaintiff FNY filed its CF-03 with the Board of Elections. See Dkt. No. 18-30. When asked to list the candidate(s) " for whom your committee is aiding or taking part in their election or nomination (other than by making contributions) but who have not authorized your committee to do so," Plaintiff FNY answered " to be determined." Id. (emphasis in original).

B. Plaintiff HLF

Plaintiff Hispanic Leadership Fund, Inc. (" HLF" ) is a tax-exempt organization primarily focused on issue advocacy. It is a non-partisan 501(c)(4) social welfare organization incorporated in Virginia. See Dkt. No. 44 at ¶ 6. Plaintiff HLF accomplishes its advocacy mission through the use of television, radio, and print advertisements. See id. at ¶ 13. HLF also makes contributions to " like-minded organizations[,]" and will occasionally engage in political speech " expressly advocating for the election or defeat of a candidate, but HLF's major purpose is issue advocacy." See id. at ¶ ¶ 14-15.

Mario Lopez is the President of Hispanic Leadership Fund. See Dkt. No. 89-7 at ¶ 1. Mr. Lopez claims that he is " '[t]he only person who has a right to determine the content, timing, or recipient of HLF's

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contributions." Id. (quoting Dkt. No. 60-6 at 15; Dkt. No. 60-3 at 2).[1] Further, Mr. Lopez contends that " [n]one of HLF's officers or directors have served, belong as members, or have any relationship with any political committee registered with the New York State Board of Elections." Id. at ¶ 3. Moreover, Plaintiff HLF claims that it only accepts general contributions, not earmarked contributions. See id. at ¶ 4.

Plaintiff HLF claims that it wants to make a contribution to Plaintiff FNY in excess of $5,000 " for the purpose of making independent expenditures '[r]elated to the election of candidates for New York State public office.'" Id. at ¶ 8 (citing Dkt. No. 60-6 at 19; Dkt. No. 4-9 at 2). Although it has already contributed $5,000, Plaintiff HLF contends that it has refrained from making contributions in excess of $5,000 to Plaintiff FNY because of New York's contribution limits. See id.

C. Plaintiff FNY

Although he was not affiliated with Plaintiff FNY when this lawsuit was first commenced, since approximately September 26, 2013, Dan Backer has served as the Treasurer and sole officer of Plaintiff FNY. See id. at ¶ 9; Dkt. No. 110 at ¶ 9. Plaintiff FNY has no members, directors, or employees. See id.

Plaintiff FNY is registered with the New York State Board of Elections as a Type 9, independent expenditure only committee. See id. at ¶ 10; Dkt. No. 110 at ¶ 10. Plaintiff FNY does not have a separate bank account for purposes of making contributions to candidates or political committees. See id. Plaintiff FNY contends that it does not make contributions to candidates and Defendants admit that Plaintiff FNY has not reported making any contributions to candidates. See id.

According to Plaintiffs, Mr. Backer serves as treasurer to only one other political committee that is registered with the Board of Elections. See id. at ¶ 11. Further, Plaintiffs contend that Mr. Backer is the only person who determines whether Plaintiff FNY makes an independent expenditure and is the only person who has the right to determine the content, timing, and medium of FNY's independent expenditures. See id. at ¶ 12. Additionally, Plaintiffs assert that Mr. Backer has sole

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discretion over whether to make an independent expenditure in a certain campaign. See id.

Plaintiffs contend that Plaintiff FNY only accepts general contributions and does not accept any contributions from foreign nationals. See id. at ¶ 15. Finally, Plaintiffs assert that Shaun McCutcheon wishes to contribute more than $150,000 in a calendar year to Plaintiff FNY but that it cannot solicit this money because to do so would violate New York's contribution limits. See id. at ¶ 16.

D. Plaintiffs' allegations

In their amended complaint, Plaintiffs claim that they wish to meaningfully participate in upcoming elections in New York. Plaintiff HLF wishes to spend more than $5,000 on independent expenditures in New York this year and to make contributions to like-minded organizations. See Dkt. No. 44 at ¶ ¶ 14, 16. Plaintiff HLF alleges that it " has never and does not plan on making any contribution to any candidate for any office. It does, however, wish to make contributions in excess of $5,000 to New York political committees, such as FNY, for the purpose of supporting FNY's independent expenditures." See id. at ¶ 17. Moreover, in order to avoid civil and criminal penalties, Plaintiff HLF alleges that it has refrained from making contributions to New York political committees in excess of $5,000. See id. at ¶ ¶ 18-19.

Plaintiff FNY claims that it wishes to solicit and accept corporate contributions in excess of $5,000, and more than $150,000 from individual contributors (as well as donations from contributors who would exceed the $150,000 aggregate annual limit), for the purpose of expressing its views through independent expenditures. See id. at ¶ ¶ 20-21. Plaintiff FNY claims that, " [d]ue to the restrictions imposed by the Election Law, [it] has refrained from soliciting and accepting contributions for the purpose of expressing its views through independent expenditures in ...


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