ORTRIE D. SMITH, SENIOR JUDGE.
On November 8, 2016, seventy percent of Missouri voters approved Initiative Petition 2016-007, thereby amending, effective December 8, 2016, Article VIII of the Missouri Constitution to add Section 23.
Section 23 imposes campaign finance regulations and restrictions on individuals
Under Section 23's monetary limit on contributions, no individual may contribute more than $2,600 "[t]o elect an individual to the office of governor, lieutenant governor, secretary of state, state treasurer, state auditor, attorney general, office of state senator, office of state representative or any other state or judicial office...." Mo. Const., art. VIII, § 23.3(1)(a). A political party may not accept contributions, in aggregate, greater than $25,000 from an individual or political committee during any one election in which a political party participates. § 23.3(2)(a)-(b).
Section 23 imposes restrictions on contribution sources by dividing political candidates and committees into several overlapping categories, which are used to place restrictions on the sources from which these groups may receive contributions.
Section 23 also includes measures to prevent evasion of the new regulations and restrictions. Section 23 prohibits: (1) any person from contributing under a fictitious or borrowed name (§ 23.3(7)); (2) any person from contributing anonymously in amounts greater than $25 (§ 23.3(8)); (3) any committee from receiving more than $500 in anonymous contributions (§ 23.3(9)), with a narrow exception for certain well-documented group events (§ 23.3(10)); and (4) any committee or political party from accepting a cash contribution over $100 per election (§ 23.3(6)). Section 23 broadly forbids transferring "anything of value to any committee with the intent to conceal ... the identity of the actual source." § 23.3(14). Further, Section 23 prohibits anyone from being reimbursed for contributions (§ 23.3(15)), and requires contributions from children under
Defendant Missouri Ethics Commission ("MEC") is charged with enforcing Section 23. Anyone who violates Section 23 may face civil and criminal penalties. §§ 23.3(14), 23.4(1)-(6); 23.5; 23.6; see also Mo. Rev. Stat. §§ 105.955-.977 (2017). Any person may file a complaint, and local county prosecutors may also bring charges for a violation of Section 23. Doc. #75. Finally, and relevant here, Section 23 includes a severability provision that provides, "[i]f any provision of this section is found by a court of competent jurisdiction to be unconstitutional or unconstitutionally enacted, the remaining provisions of this section shall be and remain valid." § 23.8.
Following Section 23's enactment, the MEC received questions from interested parties seeking to clarify what conduct Section 23 did or did not prohibit. On January 6, 2017, the MEC approved a resolution in which it acknowledged "interest of the regulated community in receiving interpretation" of many questions regarding Section 23, but the MEC declined "to issue the opinions on this date due to pending litigation but will consider the issuance on these questions on a future date." Doc. #35-1, at 6. On February 10, 2017, the MEC issued several advisory opinions interpreting provisions of Section 23. The Court will discuss applicable advisory opinions in detail below.
On December 7, 2016, Plaintiffs Association of Missouri Electric Cooperatives ("AMEC"), Association of Missouri Electric Cooperatives PAC ("AMEC-PAC"), David Klindt ("Klindt"), and Legends Bank (collectively "AMEC Plaintiffs") brought suit in the United States District Court for the Eastern District of Missouri against the State of Missouri, the MEC, and the MEC's Commissioners in their official capacities. Case No. 17-4006, Doc. #1.
AMEC-PAC is a PAC formed and maintained by AMEC. AMEC-PAC alleges Section 23 unconstitutionally prohibits it from accepting contributions from its member organizations, both foreign and domestic. Legends Bank is a Missouri chartered bank organized under chapter 362. Legends Bank made contributions to PACs in the past, but alleges Section 23 now prohibits future contributions.
The MEC is a state agency acting under Missouri's executive branch. The MEC investigates and enforces Missouri's campaign finance laws, and is composed of six members appointed by the Governor with the Missouri Senate's advice and consent. Each member is a Missouri citizen and resident, and serves a four-year term. Currently, the commission members are Chair Nancy Hagan, and Vice Chairs Bill Deeken, Eric L. Dirks, Don Summers, Kim Benjamin, and George Ratermann.
AMEC Plaintiffs allege Section 23's prohibitions on contributions violate their First Amendment rights to free speech and assembly, their Fourteenth Amendment equal protection rights, and their
On December 23, 2017, Plaintiffs Free and Fair Election Fund ("FFEF"), Missourians for Worker Freedom ("Worker Freedom"), American Democracy Alliance ("ADA"), John Elliott ("Elliott"), Herzog Services, Inc. ("HSI"), and Farmers State Bank ("Farmers") (collectively "FFEF Plaintiffs") brought suit in this Court against the MEC, its commissioners in their official capacities, and James Klahr in his official capacity as Executive Director of the MEC.
Although AMEC Plaintiffs brought suit in the United States District Court for the Eastern District of Missouri, Judge Catherine Perry ordered the case transferred to the Central Division of this Court. Case No. 17-4006, Doc. #45. The Court then consolidated the AMEC matter with FFEF's challenge, and set a hearing on Plaintiffs' motions for preliminary injunction.
On March 3, 2017, the Court held a hearing. All parties were expertly represented by counsel. During the hearing, the Court found several areas of agreement among the parties, and encouraged the parties to continue their dialogue regarding
The issues before the Court are numerous. First, the Court considers Defendants' motions to dismiss. Second, the Court considers Plaintiffs' motions for permanent injunctive relief.
Defendants filed two motions to dismiss. First, Defendants move to dismiss the State of Missouri and all state-law claims presented in AMEC Plaintiffs' Amended Complaint. Doc. #28. Second, Defendants move to dismiss the operative complaints in both matters in their entirety. Doc. #30. The Court grants Defendants' first motion (Doc. #28), and denies Defendants' second motion (Doc. #30).
Defendants seek to dismiss the State of Missouri and all state-law claims brought by AMEC Plaintiffs. "The Eleventh Amendment immunizes an unconsenting State from damage actions brought in federal court, except when Congress has abrogated that immunity for a particular federal cause of action." Becker v. Univ. of Neb. at Omaha, 191 F.3d 904, 908 (8th Cir. 1999); see generally Kimel v. Fla. Bd. of Regents, 528 U.S. 62, 73, 120 S.Ct. 631, 145 L.Ed.2d 522 (2000) ("[F]or over a century now, we have made clear that the Constitution does not provide for federal jurisdiction over suits against nonconsenting States."). Three exceptions to Eleventh Amendment immunity exist: (1) where the state waives immunity by consenting to suit in federal court, (2) where Congress abrogates the state's immunity through valid exercise of its powers, and (3) under Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 S.Ct. 714 (1908), where the plaintiff files suit against state officials seeking prospective equitable relief for ongoing violations of federal law. Sundquist v. Neb., 122 F.Supp.3d 876, 876 (D. Neb. 2015).
AMEC Plaintiffs argue the State of Missouri is not immune from suit for declaratory judgment actions under state law, and maintain the state waived immunity by appearing in this matter. The Court rejects these arguments. AMEC Plaintiffs point to case law in which actions seeking a declaration that Missouri laws are unconstitutional proceeded against the State of Missouri. See, e.g., Rizzo v. State, 189 S.W.3d 576 (Mo. banc 2006); Legends Bank v. State, 361 S.W.3d 383 (Mo. banc 2012). However, AMEC Plaintiffs' Count V, the only count presenting a challenge solely under Missouri law, was dismissed after the parties stipulated to Count V's dismissal. Doc. #87. As it relates to AMEC Plaintiffs' Amended Complaint, the Court is left with counts alleging violations of both federal and state law. The Court will address the merits of these claims in a manner that does not involve state law. Furthermore, the entry of an appearance and filing of an answer, in which the state asserted sovereign immunity, does not amount to a waiver of the state's immunity.
Defendants also moved to dismiss all state-law claims presented in AMEC Plaintiffs' Amended Complaint. Defendants argue the Court lacks subject matter jurisdiction because Plaintiffs invoked jurisdiction only under 28 U.S.C. § 1331, which provides jurisdiction over claims invoking federal law. This Court has supplemental jurisdiction "over all other claims that are so related to claims in the action within such original jurisdiction they form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367(a). The Court addresses the merits of Plaintiffs claims under the United States Constitution, and does not consider Plaintiffs' claims under the Missouri Constitution. Accordingly, the Court dismisses the state-law claims without prejudice. The Court grants Defendants' first motion to dismiss (Doc. #28).
In their second motion to dismiss, Defendants seek dismissal of all claims by both sets of plaintiffs. Defendants give four reasons why the Court should grant their second motion to dismiss. First, Defendants argue Plaintiffs mistake the actual requirements of Section 23, and accordingly, Plaintiffs' lack standing, and their claims are not ripe.
The "irreducible constitutional minimum" of standing has three elements. Spokeo, Inc. v. Robins, ___ U.S. ___, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). A plaintiff must have "(1) suffered an injury in fact, (2) that is
Two types of injuries can confer standing in the First Amendment context when a plaintiff seeks prospective relief. Missourians for Fiscal Accountability v. Klahr, 830 F.3d 789, 794 (8th Cir. 2016) (citations omitted). First, a plaintiff can establish standing by alleging "an intention to engage in a course of conduct arguably affected with a constitutional interest, but proscribed by a statute, and there exists a credible threat of prosecution thereunder." Id. (quoting Babbitt v. United Farm Workers Nat'l Union, 442 U.S. 289, 298, 99 S.Ct. 2301, 60 L.Ed.2d 895 (1979)). A threat of future or present prosecution must be "credible" rather than "wholly speculative." Iowa Right to Life Comm., 717 F.3d at 584 (citations omitted). Second, a plaintiff can establish standing by alleging it self-censored. Missourians for Fiscal Accountability, 830 F.3d at 794 (citing 281 Care Comm. v. Arneson, 638 F.3d 621, 627 (8th Cir. 2011)). "A party need not expose itself to arrest or prosecution under a criminal statute to challenge it in federal court." Iowa Right to Life Comm., 717 F.3d at 584. A party suffering from a credible threat of future prosecution suffers from an ongoing injury resulting from the statute's chilling effect on his desire to exercise his First Amendment rights. Missourians for Fiscal Accountability, 830 F.3d at 794 (citations omitted).
Faced with a claim of self-censorship, the Court must consider whether a party's decision to chill its speech in light of the challenged statute was objectively reasonable. Id. (citing 281 Care Comm., 638 F.3d at 627) (quotations omitted)). Although complaints against plaintiffs may not reach the criminal stage or prosecution may not be threatened, non-criminal consequences contemplated by a challenged statute may contribute to the objective reasonableness of an alleged chill. Id.
In addition to finding Plaintiffs have standing to bring their claims, the Court must determine whether Plaintiffs' claims are ripe for review. Rather than prematurely adjudicating a dispute, the ripeness doctrine prevents Courts "from entangling themselves in abstract disagreements over administrative policies, and also protects the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties." Id. at 796 (quoting Nat'l Right to Life Political Action Comm. v. Connor, 323 F.3d 684 (8th Cir. 2003)). "To decide ripeness, courts consider: (1) the hardship to the plaintiff caused by delayed review; (2) the extent to which judicial intervention would interfere with administrative action; and (3) whether the court would benefit from further factual development." Id. at 796-97 (citation omitted). The touchstone of a ripeness inquiry is whether the harm asserted has matured enough to warrant judicial intervention. Id. at 797 (citation and quotations omitted).
The MEC issued advisory opinions after receiving inquiries from various entities. Defendants argue these advisory opinions accurately represent how Section 23 will be enforced, and are binding legal authorities establishing Plaintiffs will not suffer
The MEC has statutory authority to issue advisory opinions "regarding any issue that the commission can receive a complaint on pursuant to Section 105.957." Mo. Rev. Stat. § 105.955.16(1). Section 105.957 enumerates provisions on which the MEC may receive a complaint. Mo. Rev. Stat. § 105.957.1(1)-(6). Relevant to Plaintiffs' challenge, the MEC may receive complaints regarding alleged violations of "the constitution ... relating to the official conduct of officials or employees of the state and political subdivisions." Mo. Rev. Stat. § 105.957.1(6). Plaintiffs note Defendants' advisory opinions on provisions of Section 23 do not relate to the conduct of officials or state employees. Nor does Section 23 expressly grant the MEC authority to receive a complaint on the provisions at issue in this matter. See generally Section 23.
If the MEC has authority to issue these advisory opinions, Plaintiffs argue an advisory opinion may be withdrawn at any time by the MEC, the state legislature's Joint Committee on Administrative Rules, or the General Assembly. See Mo. Rev. Stat. § 105.955.16(1). During the hearing in this matter, the Court requested supplemental briefing regarding whether previous MEC advisory opinions were rescinded, other than in response to legislation superseding prior opinions. All parties filed supplemental briefing on the matter. Docs. #76-78. Defendants state sixteen advisory opinions, of 407 total, were rescinded, and twelve of those rescissions occurred in response to new legislation. Plaintiffs recognize several advisory opinions were rescinded after legislative changes, but they cite to advisory opinions withdrawn after the MEC determined the opinion incorrectly interpreted the law, an allegation made regarding several advisory opinions at issue here. Plaintiffs also cite to an advisory opinion regarding the Missouri Constitution's nepotism clause that was allegedly withdrawn sua sponte by the MEC.
Defendants note passage of section 105.957, delineating issues on which the MEC may receive complaints, predates passage of Section 23, and argue the MEC has inherent authority to interpret the law given its regulatory and administrative function overseeing Missouri's campaign finance laws. This is a reasonable position. Plaintiffs argue the advisory opinions exceed the MEC's authority, incorrectly interpret the law, and do not provide reliable guidance on what conduct may be lawful because Plaintiffs fear the opinions may be withdrawn. On the record before the Court, this is also a reasonable position.
While the Court has doubts that the potential rescission of an advisory opinion would expose Plaintiffs to liability for an alleged violation occurring before rescission, the Court need not decide whether the MEC exceeded its authority by issuing advisory opinions interpreting Section 23
Plaintiffs allege Section 23 affects their ability to contribute to various entities and/or accept contributions from entities. AMEC-PAC desires to accept contributions from its domestic and foreign member organizations not organized under chapters 347 through 360, but alleges Section 23 prevents it from accepting these contributions.
FFEF wants to accept contributions from other Plaintiffs, but will not because it fears investigation, prosecution, and sanctions. FFEF intends to raise funds in unlimited amounts and use contributions to make independent expenditures in support of one or more candidates in the 2018 Republican primary for Missouri State Auditor.
In this First Amendment case, Plaintiffs must demonstrate there is a credible threat of enforcement or they engaged in self-censorship to establish standing. Relying on Plaintiffs' alleged misinterpretations of Section 23 and recent
Plaintiffs' strongest argument in favor of standing is their self-censorship. Self-censorship must be objectively reasonable. Missourians for Fiscal Accountability, 830 F.3d at 794. As detailed above, Plaintiffs allege Section 23 prohibits them from receiving and making their desired contributions. Violations of Section 23 may result in criminal and monetary sanctions. Given confusion regarding the validity of the advisory opinions, and confusion regarding what conduct Section 23 proscribes, Plaintiffs' self-censorship is objectively reasonable. Thus, Plaintiffs have standing.
Next, the Court must determine whether Plaintiffs' claims are ripe for adjudication. The parties agree two claims are ripe: (1) Section 23.3(12)'s prohibition on contributions by entities not formed under chapters 347 through 360, and (2) Section 23.3(12)'s prohibition on PAC to PAC contributions. However, again relying on advisory opinions and Plaintiffs' alleged misinterpretations of Section 23, Defendants argue Plaintiffs' remaining claims are not ripe because Plaintiffs do not face criminal or civil penalties for the conduct in which they wish to engage.
"To decide ripeness, courts consider: (1) the hardship to the plaintiff caused by delayed review; (2) the extent to which judicial intervention would interfere with administrative action; and (3) whether the court would benefit from further factual development." Id. at 796-97 (citation omitted). Plaintiffs have refrained from making or receiving desired contributions, and the Court heard testimony regarding Legends Bank's contribution to the Missouri Bankers Association being returned because Section 23 prohibited the contribution. Delayed review of the provisions at issue will further impose on Plaintiffs' ability to participate in political conduct in which they wish to engage. Further, the MEC issued advisory opinions interpreting Section 23, and in this regard, there is no judicial interference with any administrative action. Finally, the Court has received extensive briefing and heard testimony on these issues. Further factual development is not needed. Given these circumstances, the Court finds Plaintiffs' claims are ripe.
As detailed above, Plaintiffs initially sought preliminary injunctions. Given the nature of this case and the need for a timely resolution, the Court converted the hearing on Plaintiffs' preliminary injunction motions to a hearing on Plaintiffs' requests for permanent injunction. Doc. #63. To obtain a preliminary injunction against an allegedly unconstitutional state law, a plaintiff must prove the injunction's necessity under the factors set forth in Dataphase Systems, Inc., v. C L Systems, Inc., 640 F.2d 109, 114 (8th Cir. 1981). Gen. Motors Corp. v. Harry Brown's, LLC, 563 F.3d 312, 316 (8th Cir. 2009). These factors are: (1) a "threat of irreparable harm to the movant"; (2) "the state of balance between this harm" and any injury that granting the injunction will cause to others; (3) the "probability that movant will succeed on the merits"; and (4) "the public interest." Dataphase, 640 F.2d at 114. "While no single factor is determinative, the probability of success factor is the most significant." Home Instead, Inc. v. Florance, 721 F.3d 494, 497 (8th Cir. 2013) (internal quotations and citations omitted). For a First Amendment challenge, if a plaintiff does not show a likelihood of success on the merits, it likely has not met the remaining requirements for preliminary injunction. Powell v. Noble, 798 F.3d 690, 702 (8th Cir. 2015). "When a plaintiff has shown a likely violation of his or her First Amendment rights, the other requirements for obtaining a preliminary injunction are generally deemed to have been satisfied." Minn. Citizens Concerned for Life, Inc. v. Swanson, 692 F.3d 864, 870 (8th Cir. 2012) (hereinafter "MCCL") (quoting Phelps-Roper v. Troutman, 662 F.3d 485, 488 (8th Cir. 2011)).
"The standard for issuing a preliminary or permanent injunction is essentially the same, excepting one key difference: a permanent injunction requires the moving party to show actual success on the merits, rather than the fair chance of prevailing on the merits required for a preliminary injunction. See Planned Parenthood Minn., N.D., S.D. v. Rounds, 530 F.3d 724, 732 (8th Cir. 2008); Randolph v. Rodgers, 170 F.3d 850, 857 (8th Cir.1999). If a court finds a movant is actually successful on the merits, it then considers the following factors in deciding whether to grant a permanent injunction: (1) the threat of irreparable harm to the moving party; (2) the balance of harms with any injury an injunction might inflict on other parties; and (3) the public interest. See Planned Parenthood, 530 F.3d at 729 n.3; Dataphase, 640 F.2d at 113.
The Court first addresses the merits of Plaintiffs' claims. Finding partial success on the merits, the Court details appropriate injunctive relief.
The Court must determine what level of scrutiny applies to Plaintiffs' claims. The Supreme Court has set forth different standards of review for different kinds of campaign finance regulations. Wagner v. F.E.C., 793 F.3d 1, 5 (D.C. Cir. 2015) (citing Buckley v. Valeo, 424 U.S. 1, 19-25, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976); McCutcheon v. F.E.C., ___ U.S. ___, 134 S.Ct. 1434, 1444, 188 L.Ed.2d 468 (2014)). Laws limiting independent expenditures on electoral advocacy are subject to strict scrutiny. Id. (citing McCutcheon, 134 S.Ct.
AMEC Plaintiffs urge the Court to apply strict scrutiny to invalidate portions of Section 23. They argue strict scrutiny applies because laws burdening political speech are subject to strict scrutiny. See Citizens United, 558 U.S. at 340, 130 S.Ct. 876; MCCL, 692 F.3d at 878 ("[c]ontributing to a political campaign is a form of political speech, as well as association.") (citing Buckley, 424 U.S. at 20-21, 96 S.Ct. 612)). However, the Supreme Court, in Citizens United, recognized the "variance in the rigor of scrutiny used to review independent expenditures and contributions... and neither endorsed nor condemned the distinction." MCCL, 692 F.3d at 878. The Supreme Court has repeatedly applied the "closely drawn" standard to challenges to campaign contribution restrictions. See Wagner, 793 F.3d at 5 n.3 (collecting cases). Furthermore, the Supreme Court has not revisited Buckley's distinction between contributions and expenditures, nor the distinction between standards of review for these types of activities. Wagner, 793 F.3d at 5 n.4 (collecting cases).
In Beaumont, the Supreme Court applied the "closely drawn" test to uphold a federal law banning direct corporate campaign contributions. Beaumont, 539 U.S. at 149, 123 S.Ct. 2200. The suggestion that Citizens United overruled Beaumont or "cast doubt" on its precedential value has floated throughout various courts in the years after Citizens United was decided. See, e.g., Wagner, 793 F.3d at 6; MCCL, 692 F.3d at 879 n.12. However, the Eighth Circuit declined to disregard Beaumont, and applied the "closely drawn" standard to a Minnesota law prohibiting corporate contributions to political candidates and committees. MCCL, 692 F.3d at 879. The "closely drawn" standard remains applicable in reviewing a law banning or limiting campaign contributions. Wagner, 793 F.3d at 6 (collecting cases applying the "closely drawn" standard).
Plaintiffs do not allege Section 23 prevents them from making independent expenditures in support or opposition of a candidate. Plaintiffs allege Section 23 prevents them from making and receiving contributions among themselves and other entities. FFEF Plaintiffs also present a challenge to Section 23.3(1)(a)'s $2,600 contribution limit. Although a contribution limit burdens speech, it is not subject to strict scrutiny. See Beaumont, 539 U.S. at 162, 123 S.Ct. 2200 ("It is not that the
Defendants must assert a sufficiently important interest in support of Section 23. Defendants assert Section 23 promotes the important interests in preventing corruption or the appearance thereof, promoting transparency, and preventing circumvention of campaign finance regulations.
The appearance of corruption is of equal concern because it can threaten the citizenry's confidence in the representative government system. Wagner, 793 F.3d at 8 (citing Buckley, 424 U.S. at 26-27, 96 S.Ct. 612). Failing to address corruption or the appearance thereof can give rise to the "cynical assumption that large donors call the tune [and] jeopardize the willingness of voters to take part in democratic governance." Nixon v. Shrink Mo. Gov't PAC, 528 U.S. 377, 390, 120 S.Ct. 897, 145 L.Ed.2d 886 (2000). The people of Missouri must have faith in elected officials and their appointees. See Nixon, 528 U.S. at 390, 120 S.Ct. 897 ("Democracy works only if the people have faith in those who govern, and that faith is bound to be shattered when high officials and their appointees engage in activities which arouse suspicions of malfeasance and corruption.") (citation and quotations omitted).
Transparency in the electoral process serves the important government interest to "provide information to the electorate about who is speaking — information that is vital to the efficient functioning of the marketplace of ideas, and thus to advancing the democratic objectives underlying the First Amendment." Yamada v. Snipes, 786 F.3d 1182, 1197 (9th Cir. 2015) (citations and internal quotations omitted). "[T]ransparency enables the electorate to make informed decisions and give proper weight to different speakers and messages." Citizens United, 558 U.S. at 371, 130 S.Ct. 876; see also Ala. Democratic
Section 23.3(3)(a) states "[i]t shall be unlawful for a corporation or labor organization to make contributions to a campaign committee, candidate committee, exploratory committee, political party committee or a political party...." § 23.3(3)(a). Section 23.3(16)(c) makes it unlawful for a "campaign committee, candidate committee, continuing committee, exploratory committee, political party committee, and political party" to knowingly accept contributions from "any foreign corporation that does not have the authority to transact business in [Missouri] pursuant to chapter 347, RSMo, as amended from time to time." Section 23.7(6)(a) defines "campaign committee" as
§ 23.7(6)(a).
Plaintiffs allege these provisions prevent them from contributing to a campaign committee formed for the purpose of supporting or opposing one or more ballot initiatives. A complete ban on corporate contributions to support or oppose ballot initiatives is unconstitutional. See First Nat'l Bank v. Bellotti, 435 U.S. 765, 795, 98 S.Ct. 1407, 55 L.Ed.2d 707 (1978) (holding a Massachusetts statute prohibiting corporate expenditures on a tax referendum violated the First Amendment). Citing Bellotti, Defendants indicated, in briefing and during the hearing, they will not enforce Section 23's restrictions on corporate or union contributions to campaign committees whose only purpose is supporting or opposing ballot initiatives. Doc. #31, at 23, 35-37. Plaintiffs are not satisfied with Defendants' assurances because such assurances have no legally binding effect. At the conclusion of the hearing, counsel for all parties indicated a willingness to discuss a possible consent judgment this Court could enter to resolve this issue. Subsequently, the parties submitted a proposed consent order of permanent injunction. Doc. #86. Accordingly, the Court incorporates the parties' proposed consent judgment and will enjoin enforcement of Section 23's restrictions on corporate or union contributions to campaign committees whose sole purpose is supporting or opposing ballot initiatives.
FFEF Plaintiffs challenge Section 23.3(1)(a).
Defendants argue Section 23.3(1)(a) does not limit contributions to "one or more candidates," "multiple candidates" or "individuals." Rather, the limit applies on contributions to "elect an individual" to a singular office enumerated in the provision. The limit plainly applies to contributions in a single election to elect a single individual to an office.
Count VI alleges Section 23.3(1)(a) prohibits ADA, Elliott, HSI, and Farmers from making contributions in excess of $2,600 to FFEF even though FFEF is an independent expenditure only committee. ADA, Elliott, HSI, and Farmers construe Section 23.3(1)(a) as applying to all contributions made in an election, including contributions to PACs. Plaintiffs argue they could not contribute a maximum amount of $2,600 to candidate A, and then contribute additional funds to a PAC that makes independent expenditures in support of or directly contributes to candidate A.
Defendants argue Section 23.3(1)(a) does not apply to contributions to PACs that only make independent expenditures because a "contribution" does not include contributions to independent expenditure only committees. Section 23.3(1)(a) does not specifically state the contribution limit applies to PAC contributions. However, the definition of "contribution" does not specifically exclude contributions to an independent expenditure only committee. § 23.7(7). Defendants find support for their position in an advisory opinion issued by the MEC. Advisory Opinion No. 2017.02.CF.003 states, "[i]t is the Commission's opinion that the contribution limits apply to candidate committees and only to continuing committees/political action committees if a contribution to that committee is restricted or designated for a candidate." The MEC advises:
Advisory Opinion No. 2017.02.CF.003. The MEC further states "previous Commission opinions also found that the contribution limits did not apply to contributions received by continuing committees..., nor to campaign committees...." Id. The Court will enjoin enforcement of Section 23.3(1)(a) in a manner inconsistent with Advisory Opinion No. 2017.02.CF.003.
In Count VII, Elliott and FFEF allege Section 23.3(1)(a) is void for vagueness in that a person of ordinary intelligence cannot discern what conduct is prohibited under the amendment. Section 23.3(1)(a) is not a model of statutory clarity, but Elliott and FFEF strain to interpret it in a manner that would result in finding it unconstitutional. The plain language indicates contributions to elect an individual to an office shall not exceed $2,600 in a single election. For what it is worth, the MEC's advisory opinion clarifies Section 23.3(1)(a)'s applicability to contributions made to a PAC — the MEC will not enforce the $2,600 limit on contributions to a PAC unless the contribution is specifically designated for an individual candidate. Advisory Opinion No. 2017.02.CF.003. At the hearing, Defendants indicated they do not oppose entry of an injunction formalizing the MEC's advisory opinions. The Court will enjoin the MEC from interpreting Section 23.3(1)(a) in a manner inconsistent with Advisory Opinion No. 2017.02.CF.003.
The Court now turns to Plaintiffs' challenge to Section 23's prohibitions on the sources of certain types of contributions. First, Plaintiffs challenge Section 23.3(16)(c), which provides "[n]o campaign committee, candidate committee, continuing committee, exploratory committee, political party committee, and political party shall knowingly accept contributions from: Any foreign corporation that does not have the authority to transact business in [Missouri] pursuant to Chapter 347, RSMo, as amended from time to time." § 23.3(16)(c). Chapter 347 governs only limited liability companies ("LLC"). Second, Plaintiffs challenge Section 23.3(12), which provides "[p]olitical action committees shall only receive contributions from individuals; unions; federal political action committees; and corporations, associations, and partnerships formed under chapters 347 to 360, RSMo, as amended from time to time." § 23.3(12). Chapters 347 through 360 govern corporations, associations, and partnerships.
Plaintiffs' first challenge involves Section 23.3(16)(c)'s prohibition on receiving contributions from foreign LLCs, unless the LLC has a certificate of authority to do business in Missouri.
Advisory Opinion No. 2017.02.CF.006.
Chapters 347 through 360 provide a foreign corporation with a certificate of authority to do business in Missouri has the same rights and privileges as an in-state corporation. Mo. Rev. Stat. §§ 351.582.2, 356.031, 358.500, 358.510, 347.157. HSI, a for-profit corporation organized under Kansas laws, has a certificate of authority to transact business in Missouri pursuant to chapter 351. AMEC Plaintiffs' Amended Complaint lists KAMO Power, an Oklahoma corporation authorized to do business in Missouri pursuant to chapter 355, as a rural electric cooperative that has contributed to AMEC-PAC in the past, and wishes to do so in the future. AMECPAC believes Section 23.3(16)(c) prohibits it from receiving KAMO Power's contribution, but Advisory Opinion No. 2017.02.CF.006 indicates such a contribution is lawful in the MEC's view.
As with several challenges in this matter, Defendants argue their advisory opinions are legally binding, and therefore, the Court should find this claim is not ripe because these foreign corporations have authority to transact business in Missouri under chapters 347 through 360. Although the MEC's advisory opinion potentially provides clarity about Section 23.3(16)(c)'s application, the Court finds the entry of a permanent injunction enjoining enforcement of Section 23.3(16)(c) in a manner inconsistent with Advisory Opinion No. 2017.02.CF.006 appropriate. Accordingly, the Court will enjoin enforcement of Section 23.3(16)(c) in a manner inconsistent with Advisory Opinion No. 2017.02.CF.006.
Plaintiffs' second challenge involves the source prohibition on corporate entities found in Section 23.3(12), which restricts PACs to receiving contributions only from corporations, associations, and partnerships formed under chapters 347 through 360. Defendants term this limitation as one banning "heavily regulated industries" from contributing to PACs. While direct contributions to candidates, committees, and political parties by all corporations and unions are prohibited by Section 23.3(3)(a), Section 23.3(12) imposes a further restriction by banning contributions to PACs by these heavily regulated industries.
Defendants define a heavily regulated entity as one not formed under chapters 347 through 360. Although not an exhaustive list, businesses in a heavily regulated industry, applying Defendants' definition,
The ban on PAC contributions by businesses in heavily regulated industries affects multiple Plaintiffs. AMEC's member rural electric cooperatives are organized under chapter 394, and these organizations have contributed and wish to continue contributing to AMEC-PAC. Legends Bank and Farmers are state-chartered banks organized under chapter 362 that wish to contribute to PACs. Defendants maintain the ban on heavily regulated industries is constitutional, while Plaintiffs argue the ban is not closely drawn to a sufficiently important interest.
All parties agree Blount v. Securities Exchange Commission, 61 F.3d 938 (D.C. Cir. 1995), should guide the Court's review of this issue. There, regulators of municipal securities markets investigated reports of "ethically questionable practices" by municipal bond traders and became concerned these practices "were becoming more prevalent and were undermining the integrity of the $250 billion municipal securities market." 61 F.3d at 939. In response to this concern, the Securities Exchange Commission ("the Commission") approved new rules restricting the "ability of municipal securities professionals to contribute to and to solicit contributions to the political campaigns of state officials from whom they obtain business." Id. Under the new rules, a municipal securities professional is prohibited from engaging with an official of an issuer for a period of two years if the professional contributed to the official. Id. at 940. A contribution to a PAC is treated as a contribution to the official if the PAC is controlled by the official or "any municipal finance dealer whatsoever." Id. Further, the two-year restriction is not triggered by a contribution of less than $250 per official, per election, and if the securities professional is entitled to vote for the official. Id.
Applying strict scrutiny, the District of Columbia Circuit Court upheld the rule under First and Tenth Amendment challenges.
Id. at 944-45. In approving the rule, the Commission noted specific allegations of abuse in local and state governments, and cited newspaper clippings from thirteen
In light of the record, the court upheld the narrow rule. The rule applied only to the two potential parties to a quid pro quo, and did not apply to business awarded on a competitive basis. Id. at 947 n.5. The rule restricted only a narrow range of activity for a relatively short period of time. Id. Lastly, the court noted several ways the rule did not restrict political activity, such as the ability to make direct expenditures, give speeches, volunteer for political candidates, generally solicit support as opposed to requesting money, and solicit funds for a political party. Id. at 948.
Section 23.3(12) is distinguishable from the rule at issue in Blount. The rule in Blount is a targeted prohibition on contributions directly to a candidate, and only for a limited period of time. Section 23.3(12) is a complete prohibition on contributions to PACs by entities not formed under chapters 347 through 360. The Supreme Court has held, "there is not the same risk of quid pro quo corruption or its appearance when money flows through independent actors to a candidate, as when a donor contributes to a candidate directly." McCutcheon, 134 S.Ct. at 1452. The possibility of a quid pro quo between municipal bond traders and local and state governments is apparent in a direct contribution, but is not apparent in this case, where a PAC independently contributes to a candidate.
In addition to Blount, Defendants direct the Court to several cases purportedly supporting an outright ban on PAC contributions by businesses in heavily regulated industries. While a "particular threat to the integrity of State government posed by political contributions from participants in [a] tightly regulated industry" may be found in direct contributions to candidates, none of Defendants' cited cases stand for the proposition that an outright ban on PAC contributions passes constitutional muster. See, e.g., Green Party of Conn. v. Garfield, 616 F.3d 189, 213 (2d Cir. 2010) (upholding a limited portion of a statute prohibiting state contractors from making campaign contributions directly to candidates for state office); In re Earle Asphalt Co., 401 N.J.Super. 310, 950 A.2d 918, 923 (2008) (upholding a statute preventing a state agency from awarding a contract with a value over $17,500 to a business entity that contributed more than $300 during the preceding eighteen months to the Governor, candidates for Governor, or any state or county political party); Gwinn v. State Ethics Comm'n, 262 Ga. 855, 426 S.E.2d 890, 892 (1993) (upholding a statute that prohibited insurance companies from making campaign contributions to candidates for or occupants of the Office of Commissioner of Insurance).
While prohibitions on a limited class of businesses or individuals have been upheld, Section 23.3(12) draws no such distinction beyond a large grouping of businesses in what Defendants term heavily regulated industries. See, e.g., Wagner, 793 F.3d at 22 (upholding a ban on indirect and direct contributions to any political party, committee, or candidate by federal contractors during the period of contract negotiation and performance); Casino Ass'n of La. v. State ex rel. Foster, 820 So.2d 494, 495 (La. 2002) (upholding a statute prohibiting campaign contributions by riverboat and land-based casino industries); In re Petition of Soto, 236 N.J.Super. 303, 565 A.2d 1088, 1106 (1989) (upholding a statute prohibiting a casino officer or key
Defendants have not demonstrated Section 23.3(12)'s ban on PAC contributions by either state-chartered banks or rural electric cooperatives is closely drawn to the government's interests. Defendants indicated they developed a list of heavily regulated industries by researching the chapters under which the business is formed and examining the regulations imposed on the business or industry, but the Court can find little commonality among these businesses other than being organized outside title XXIII of the Missouri Revised Statutes. Certainly, not every business entity organized outside title XXIII is involved in a highly regulated industry. Defendants cite a particular danger of corruption or the appearance of corruption because these businesses are heavily regulated by the legislators to whom they wish to contribute. However, Section 23.3(12) is a ban on PAC contributions as opposed to contributions to candidates, and "there is not the same risk of quid pro quo corruption or its appearance when money flows through independent actors to a candidate, as when a donor contributes to a candidate directly." McCutcheon, 134 S.Ct. at 1452.
Contributions to a PAC by a rural electric cooperative do not implicate the concerns raised by Defendants. Public utilities are regulated by the Public Service Commission, an independent executive agency, on myriad issues. Rural electric cooperatives are regulated only on one, the issue of safety.
Likewise, Defendants do not establish a ban on contributions to a PAC by a state-chartered bank implicates the concerns they raised. The Court acknowledges a history of corruption or the appearance of corruption involving contributions by banking entities previously served as the basis for the implementation of campaign contribution limits in Missouri. See Nixon, 528 U.S. at 394-95, 120 S.Ct. 897. Defendants assert state-charted banks are properly characterized as a heavily regulated industry because chapter 362, and other regulations and statutes, impose numerous restrictions and requirements on state-chartered banks.
Plaintiffs also bring a facial challenge to this portion of Section 23. As explained above, the Court finds Defendants have not demonstrated Section 23.3(12)'s ban on contributions to PACs from rural electric cooperatives organized under chapter 394, or state-chartered banks organized under chapter 362, is closely drawn to avoid unnecessary abridgement of Plaintiffs' First Amendment freedoms. As the Supreme Court has held, "there is not the same risk of quid pro quo corruption or its appearance when money flows through independent actors to a candidate, as when a donor contributes to a candidate directly." McCutcheon, 134 S.Ct. at 1452. Here, Section 23.3(12) prohibits contributions through independent actors, PACs, that do not raise the same risk of quid pro quo corruption or the appearance thereof. Consequently, the Court finds the outright ban on contributions to PACs by businesses not formed under chapters 347 through 360 is unconstitutional.
Plaintiffs also allege Section 23.3(12)'s prohibition on PAC to PAC contributions is unconstitutional. Section 23.3(12) provides "[p]olitical action committees ... shall be prohibited from receiving contributions from other political action committees, candidate committees, political party committees, campaign committees, exploratory committees, or debt service committees." § 23.3(12). A "political action committee" is defined as follows:
§ 23.7(20). AMEC-PAC and FFEF allege they are unconstitutionally prohibited from making contributions to and receiving contributions from other PACs organized under Missouri law. Defendants assert this prohibition is necessary to prevent corruption or the appearance of corruption, promote transparency in the flow of money, and prevent circumvention of Section 23's restrictions.
There are differences between FFEF and AMEC-PAC, and those differences affect the Court's analysis. FFEF is a PAC whose purpose is to receive contributions and make independent expenditures to influence voters. FFEF does not contribute to candidates or their committees. FFEF does not intend to make contributions to political parties, and does not engage in coordination with candidates, candidate committees, political parties, or political party committees.
AMEC-PAC has contributed and wishes to contribute in the future to candidates
Although FFEF and AMEC-PAC challenge the constitutionality of Section 23.3(12)'s ban on PAC to PAC contributions, their challenges differ based upon the conduct in which each party wishes to engage. FFEF's challenge is, in a sense, narrower. FFEF seeks only for a judicial determination that Section 23.3(12) is unconstitutional when applied to PACs that only engage in independent expenditures. AMEC-PAC brings a broader challenge, arguing the PAC to PAC contribution ban is unconstitutional when applied to PACs that contribute to candidates, as well as PACs that make independent expenditures.
Defendants, in the context of this matter, state Section 23.3(12)'s ban does not apply to a PAC that seeks to receive funds from another PAC, but only uses its funds to make independent expenditures. Defendants cite Section 23's definition of "contribution" to support their position. Section 23.7(7) defines a "contribution" as follows:
§ 23.3(7). Defendants argue this language does not apply to contributions to PACs making only independent expenditures. Furthermore, the MEC issued Advisory Opinion No. 2017.02.CF.004, which states, "[w]hile the Missouri Constitution and Chapter 130 do not specifically refer to `independent expenditures,' the [MEC] has long given guidance that expenditures made by a candidate do not constitute contributions if those expenditures were `not requested to be made by, directed or controlled by, or made in cooperation with, or made with the express or implied consent of the candidate.'" The advisory opinion further states, "§ 23.3(4) and § 23.3(12) place prohibitions on contributions and not expenditures by a candidate committee to other candidate committees and political action committees/continuing committees."
Although Defendants indicate they will not enforce Section 23.3(12) in the manner feared by FFEF, case law is also instructive on this issue. The Supreme Court has recognized "independent expenditures do not lead to, or create the appearance of, quid pro quo corruption." Citizens United, 558 U.S. at 360, 130 S.Ct. 876. Because an independent expenditure is political speech that is not coordinated with a candidate, a state's interest in preventing corruption or the appearance of corruption may not justify regulation of independent expenditures when a contribution to or coordination with a candidate is not present. See Ala. Democratic Conference, 838 F.3d at 1066, cert denied, ___ U.S. ___, 137 S.Ct. 1837, 197 L.Ed.2d 758, 2017 WL 1427593 (Apr. 24, 2017). Circuit Courts throughout
Defendants urge this Court to find FFEF's challenge is not ripe because Defendants interpret Section 23 in a way that does not injure FFEF. However, based on the case law described above, Section 23.3(12)'s prohibition against a PAC's contribution to another PAC is impermissible when applied to an independent expenditure only PAC. Although Defendants interpret "contribution" in a manner that does not encompass contributions to an independent expenditure only PAC, this interpretation is not apparent based on Section 23's language.
AMEC-PAC argues Section 23.3(12)'s PAC to PAC contribution ban is unconstitutional when applied to PACs that contribute to candidates, as well as PACs that make independent expenditures. AMEC-PAC argues there is no risk of corruption or the appearance of corruption in a PAC to PAC contribution, as opposed to the state's interest in regulating contributions directly to candidates which do raise a risk of corruption or the appearance thereof. Defendants argue a PAC to PAC contribution raises the risk of corruption or the appearance thereof, and the prohibition serves the government's interest in preventing evasion or circumvention of Section 23's contribution limits to candidates.
Defendants direct the Court to case law in which a limit on contributions to a PAC was challenged. In California Medical Association v. Federal Election Commission, 453 U.S. 182, 101 S.Ct. 2712, 69 L.Ed.2d 567 (1981), the Supreme Court upheld a statute that prohibited individuals and unincorporated associations from contributing more than $5,000 per year to any "multicandidate political committee."
The Eleventh Circuit's decision in Alabama Democratic Conference v. Attorney General of Alabama, 838 F.3d 1057 (2016), involves a prohibition on PAC to PAC contributions. There, Alabama law prohibited a PAC designed to contribute to several candidates, like AMEC-PAC, from contributing to another PAC that also contributed to candidates. 838 F.3d at 1060. The Eleventh Circuit found, as-applied to the plaintiff, the "ban serves an important anti-corruption interest while only marginally impacting political dialogue." Id. at 1070. Critically, Alabama's campaign finance law "does not limit the amount of money that a person, business, or PAC may contribute directly to a candidate's campaign." Id. at 1060. Because Alabama did not limit candidate contributions, the state had an important interest in preventing quid pro quo corruption that could arise from contributions to the plaintiff PAC. Id. at 1070.
Here, Defendants assert an interest in preventing corruption or the appearance thereof, and preventing evasion of contribution limits, but the Court is not persuaded Section 23.3(12) is closely drawn to achieve these goals. Under Missouri law, a "political action committee" is an independent actor. See § 23.7(20) (defining a PAC as "a committee of continuing existence which is not formed, controlled or directed by a candidate, and is a committee other than a candidate committee, political party committee, campaign committee, exploratory committee, or debt service committee, whose primary or incidental purpose is to receive contributions or make expenditures to influence or attempt to influence the action of voters...." (emphasis added)). Given this status as an independent actor, the Supreme Court's guidance in McCutcheon once again applies, leading the Court to conclude Defendants do not have a valid interest in preventing corruption or the appearance thereof by regulating PAC to PAC transfers by imposing an absolute ban as Section 23.3(12) does. See McCutcheon, 134 S.Ct. at 1452 (stating "there is not the same risk of quid pro quo corruption or its appearance when money flows through independent actors to a candidate, as when a donor contributes to a candidate directly. When an individual contributes to a candidate, a party committee, or a PAC, the individual must by law cede control over the funds.").
Defendants also cite an important interest in preventing evasion or circumvention of Section 23's contribution limits as a reason to uphold the PAC to PAC contribution ban. The Supreme Court and many circuits have found this is a valid interest. See, e.g., Cal. Med., 453 U.S. at 197-98, 101 S.Ct. 2712; N.C. Right to Life, Inc. v. Leake, 525 F.3d 274, 292 (4th Cir. 2008); Catholic Leadership Coal. of Tx. v. Reisman, 764 F.3d 409, 444 (5th Cir. 2014). However, AMEC-PAC and other Plaintiffs have not asserted a PAC is not subject to Section 23.3(1)(a)'s $2,600 contribution limit. In fact, AMEC Plaintiffs specifically state they are subject to these limits. See Doc. #34, at 3-4 (stating "Plaintiffs are not challenging the $2,600 limit on contributions from PACs to candidates found in Article VIII, Section 23" and "[i]n Missouri, PACs make both candidate contributions (subject to the $2,600 limit) and independent expenditures.").
Although probability of success is the most significant factor, the Court must address the remaining Dataphase factors. These factors are: (1) a "threat of irreparable harm to the movant"; (2) "the state of balance between this harm" and any injury that granting the injunction will cause to others; and (3) "the public interest." Dataphase, 640 F.2d at 114. If a plaintiff shows a violation of a constitutional right, the other requirements for injunctive relief are generally satisfied. See MCCL, 692 F.3d at 870.
Because the Court determined Plaintiffs established a violation of their constitutional rights, the other requirements for injunctive relief are generally satisfied. See MCCL, 692 F.3d at 870. The Court will briefly review these requirements. A loss of First Amendment rights poses a threat of irreparable harm to Plaintiffs. See Elrod v. Burns, 427 U.S. 347, 373, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976) (holding "[t]he loss of First Amendment freedoms, even for minimal periods of time, unquestionably constitutes irreparable injury."). Plaintiffs also seek a quick resolution of this matter so they may participate in ongoing legislative sessions and begin raising funds with which they will participate in upcoming elections. Furthermore, the Court finds granting a permanent injunction in this matter strikes a balance between the harms Plaintiffs face, and the harm granting this permanent injunction will cause to others. The Court recognizes Section 23 was passed by an overwhelming majority of Missouri voters. However, the Court but must balance the public's vote for campaign finance reforms with Plaintiffs' rights to engage in constitutionally protected conduct. The Court does not find Section 23 unconstitutional in full, but rather will enter a permanent injunction severing unconstitutional portions of Section 23, while upholding many provisions consistent with the MEC's advisory opinions. Finally, the public interest is in favor of protecting First Amendment freedoms. See Phelps-Roper v. Nixon, 545 F.3d 685, 690 (8th Cir. 2008) (stating "it is
The Court grants Defendants' first motion to dismiss (Doc. #28). AMEC Plaintiffs' claims against the State of Missouri are dismissed, and their state-law claims are dismissed without prejudice. The Court denies Defendants' second motion to dismiss (Doc. #30). The Court dismisses Count II of FFEF Plaintiffs' Complaint, pursuant to FFEF Plaintiffs' representation that they are abandoning this claim.
The Court partially grants Plaintiffs' motions for permanent injunction. Case No. 17-4006, Doc. #14; Case No. 14-4332, Doc. #18. In granting Plaintiffs' motions, the Court does not enjoin enforcement of Section 23 in its entirety. The Court finds unconstitutional portions of Section 23 are severable consistent with Section 23's severability provision. See § 23.8.
It is therefore Ordered:
At the hearing, Defendants requested this Court stay any injunctive relief ordered to allow Defendants the opportunity to appeal this Court's decision. The Court grants this request. The Court stays enforcement of the May 5, 2017 Order for a period of forty-five days after entry of the May 5, 2017 Order.
IT IS SO ORDERED.
§ 23.2.
