Court of Appeals SOS Opening Brief EW v.Gessler

7/30/2019 Court of Appeals SOS Opening Brief EW v.Gessler

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COLORADO COURT OF APPEALS

2 East 14th Avenue

Denver, CO 80203

District Court, City and County of Denver

Honorable J. Eric Elliff, Judge

Case No. 2012 CV 2133

(consolidated with 2012 CV 2153)

Defendant/Appellant/Cross-Appellee: SCOTT

GESSLER, in his official capacity as Secretary of

State for the State of Colorado,

v.

Plaintiffs/Appellees/Cross-Appellants:

COLORADO ETHICS WATCH and COLORADO

COMMON CAUSE

and

Plaintiffs/Appellees: DAVID PALADINO;

MICHAEL CERBO; PRO-CHOICE COLORADO

PAC; PPRM BALLOT ISSUE COMMITTEE; and

CITIZENS FOR INTEGRITY, INC.

COURT USE ONLY

Case No. 12 CA 1712

JOHN W. SUTHERS, Attorney GeneralLEEANN MORRILL, First Assistant Attorney

General

FREDERICK R. YARGER, Assistant Solicitor

General, Reg. No. 39479*

MATTHEW D. GROVE, Assistant Attorney General,

Reg. No. 34269*

1300 Broadway, 10th Floor

Denver, Colorado 80203

Telephone: (720) 508-6551

E-Mail: [email protected];

[email protected]

*Counsel of Record

Opening Brief of Appellant / Cross-Appellee

Colorado Secretary of State


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Certificate of Compliance

This brief complies with the requirements of C.A.R. 28 and C.A.R. 32,including all formatting requirements. Specifically, I certify the

following:

The brief complies with C.A.R. 28(g) because

It contains 9,144 words.o It does not exceed 30 pages.o The brief does not comply with CAR 28(g) because it exceeds

the word and/or page limit. A motion to accept the over lengthbrief has been filed contemporaneously with the brief.

The brief complies with C.A.R. 28(k) because,

For the party raising the issue: It contains under a separateheading (1) a concise statement of the applicable standard of

appellate review with citation to authority; and (2) a citation to

the precise location in the record (R. __, p. __), not to an entire

document, where the issue was raised and ruled on.

For the party responding to the issue: It contains, under a

separate heading, a statement of whether such party agrees

with the opponents statements concerning the standard of

review and preservation for appeal, and if not, why not.

/s/ Frederick R. Yarger

Frederick R. Yarger


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TABLE OF CONTENTS

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Introduction ................................................................................................ 1Issues on Appeal ......................................................................................... 2Statement of the Case and Facts ............................................................... 3

A. The Secretarys rulemaking effort. .................................................. 3B. Plaintiffs lawsuit............................................................................... 6C. The decision below. ............................................................................ 7D.The Secretarys request for a stay and the parties appeals. ......... 9

Summary of Argument ............................................................................... 9Argument .................................................................................................. 11

I. Standard of Review. ........................................................................ 11A. In enacting administrative rules, the Secretary must follow

the law, including binding judicial interpretations of the

law..................................................................................................... 13B. The Court must defer to the Secretarys Rules, asking only

whether the Rules are based on a permissibleinterpretation of the law. ................................................................19II. The five rules at issue in this appeal are all within the

Secretarys authority and discretion to promulgate. ..................... 23A.As the district court observed, the major purpose test of

Rule 1.18.2 is undeniably required by Colorado case law. ........ 231. The Supreme Courts major purpose test refines the

scope of political committee regulation. ................................ 242. Rule 1.18.2 acknowledges the major purpose test and

explains how it applies. .......................................................... 253. The district court improperly held that the Secretarys

rules must ignore the existence of the major purpose

test. ......................................................................................... 26


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TABLE OF CONTENTS

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B. Rule 1.12 clarifies the definition of issue committee basedon criteria the General Assembly specified. ..................................291. Rule 1.12 fills a gap left by the General Assembly. .............. 312. The Secretarys decision to use a 30% threshold is

reasonable in light of governing law. .................................... 343. The district courts flawed analysis of Rule 1.12 must

be overturned. ........................................................................ 36C. Rules 7.2 and 1.10 use existing law to clarify the definition

of political organization. ...............................................................411. Rule 7.2s major purpose requirement is based on 26

U.S.C. 527. ........................................................................... 422. Rule 1.10 uses longstanding case law to clarify the

meaning of influencing or attempting to influence. .......... 44D.Rule 18.1.8(a) implements the Secretarys authority to

waive penalties for failure to file major contributor reports. ...... 48Conclusion ................................................................................................. 52


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TABLE OF AUTHORITIES

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CASESAlliance for Colo.s Families v. Gilbert, 172 P.3d 964 (Colo. App.

2007) ............................................................................................... passim

Buckley v. Valeo, 424 U.S. 1 (1976) ................................................. passim

Cerbo v. Protect Colorado Jobs, Inc., 240 P.3d 495, 502 (Colo. App.

2010) ............................................................................... 31, 33, 36, 37, 38

Holliday v. Regl Transp. Dist., 43 P.3d 676 (Colo. App. 2001) .............. 16

Citizens for Free Enter. v. Dept of Revenue, 649 P.2d 1054 (Colo.

1982) ........................................................................................... 20, 23, 39

Citizens United v. Federal Election Commission, 130 S. Ct. 876

(2010) ................................................................................................ 16, 39

Colo. Citizens for Ethics in Govt v. Comm. for the Am. Dream,

187 P.3d 1207 (Colo. App. 2008) ............................................... 12, 23, 50

Colo. Common Cause v. Gessler, 2012 COA 147 (2012) ................ 18, 22

Colo. Ethics Watch v. Senate Majority Fund, 269 P.3d 1248 (Colo.

2012) ........................................................................................... 27, 29, 47

Colo. Ground Water Commn v. Eagle Peak Farms, 919 P.2d 212

(Colo. 1996) ............................................................................................ 12

Colo. Right to Life Comm. v. Coffman, 498 F.3d 1137 (10th Cir.

2007) ............................................................................................... passim

Fed. Election Comm'n v. Massachusetts Citizens for Life, 479 U.S.

238 (1986) ....................................................................... 16, 17, 24, 26, 35

Fed. Election Commn v. Wis. Right to Life, Inc., 551 U.S. 449

(2007) ................................................................................................ 34, 36Hyatt v. Heckler, 807 F.2d 376 (4th Cir. 1986) ....................................... 15

Independence Institute v. Coffman, 209 P.3d 1130 (Colo. App.

2008) ............................................................................................... passim


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Ithaca Coll. v. Natl Labor Relations Bd., 623 F.2d 224 (2d Cir.

1980) ....................................................................................................... 15Janssen v. Indus. Claim Appeals Office, 40 P.3d 1 (Colo. App.

2001) ................................................................................................. 22, 39

Lopez v. Heckler, 572 F. Supp. 26 (1983), affd, 725 F.2d 1489 (9th

Cir. 1984) vacated on other grounds, 469 U.S. 1082 (1984) ................ 15

Minn. Citizens Concerned for Life, Inc. v. Swanson, 692 F.3d 864

(8th Cir. 2012) ............................................................................ 19, 24, 43

N.C. Right to Life, Inc. v. Leake, 525 F.3d 274 (4th Cir. 2008) .............. 13

Natl Org. for Marriage v. McKee, 649 F.3d 34 (1st Cir. 2011) .............. 46

NLRB v. Ashkenazy Prop. Mgmt. Corp., 817 F.2d 74 (9th Cir.

1987) ....................................................................................................... 15

People v. Lowrie, 761 P.2d 778 (Colo. 1988) ............................................ 20

Sampson v. Buescher, 625 F.3d 1247 (10th Cir. 2010) ..................... 22, 34

Sanger v. Dennis, 148 P.3d 404 (Colo. App. 2006) .................................. 21

Swanson v. Town of Mountain View, 577 F.3d 1196 (10th Cir.

2009) ....................................................................................................... 15

Vaughan v. McMinn, 945 P.2d 404 (Colo. 1997) ..................................... 45

Vt. Right to Life Comm., Inc. v. Sorrell, 875 F. Supp. 2d 376 (D.

Vt. 2012) ................................................................................................. 47

Wine & Spirits Wholesalers v. Colo. Dept of Revenue, 919 P.2d

984 (Colo. App. 1996) ........................................................... 19, 22, 30, 39

CONSTITUTIONSColo. Const., Art. XXVIII.................................................................... 27, 28

Colo. Const., Art. XXVIII, 2(10)(a)(I) .............................................. 17, 29

Colo. Const., Art. XXVIII, 2(12)(a) .................................................. 23, 27


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Colo. Const., Art. XXVIII, 3(5) .............................................................. 24

Colo. Const., Art. XXVIII, 3(9) .............................................................. 24

Colo. Const., Art. XXVIII, 3(10) ............................................................ 24

Colo. Const., Art. XXVIII, 3(12) ............................................................ 24

Colo. Const., Art. XXVIII, 9(1)(b) .................................................... 11, 16

Colo. Const., Art. XXVIII, 10 ............................................................. 3, 48

Colo. Const., Art. XXVIII, 10(2)(c) .................................................. 48, 50

STATUTES 1-45-103(12), C.R.S. (2012) .................................................................... 33

1-45-103(12)(b), C.R.S. (2012) ............................................. 26, 30, 31, 38

1-45-103(12)(c), C.R.S. (2012) .......................................................... 30, 33

1-45-103(14.5), C.R.S. (2012) ................................................................. 41

1-45-108(1), C.R.S. (2012) ...................................................................... 29

1-45-108(1)(a), C.R.S. (2012) ................................................................. 24

1-45-108(2.5), C.R.S. (2012) ................................................................... 48

1-45-111.5(1), C.R.S. (2012) ................................................................... 11

1-45-111.5(1.5)(c), C.R.S. (2012) ...................................................... 48, 51

26 U.S.C. 527.......................................................................................... 43

26 U.S.C. 527(e)(1) ................................................................................. 42

26 U.S.C. 527(e)(2) ................................................................................. 42

OTHER AUTHORITIESAm. Heritage Coll. Dictionary 1106 (4th ed. 2002) ................................. 42


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Introduction

In an effort to clarify the increasingly confusing field of campaign

finance law, the Secretary of State promulgated rules in early 2012 that

answered specific questions not directly addressed by Colorados

Constitution or the campaign finance statutes. Some of the rules

adopted controlling legal standards announced in federal and state

court decisions. Plaintiffs challenged those rules (as well as a rule

implementing the Secretarys authority to waive campaign finance

penalties for good cause), arguing that the Secretary cannot enact

campaign finance rules based on case law.

The new rules, however, did not deviate from past practice.

Several of the Secretarys predecessors had previously enacted rules in

direct response to federal and state court case law. Rules like these

diminish the need for ordinary citizens to research and read hundreds

of pages of judicial opinions (in addition to dense pages of constitutional

provisions and statutes) before engaging in protected First Amendment

activity.


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Despite this precedent, and although none of the Secretarys rules

contravene statutory or constitutional provisions, the district court

struck down five of the Secretarys new rules. The district court

respected the Secretarys pragmatism in attempting to harmonize

Colorado campaign finance laws with judicial decisions. But the court

believed the Secretary lacked the authority to do so.

The district courts reasoning is flawed. Nothing prevents public

officials from heeding the judiciary in enacting administrative rules. In

fact, public officials are required to adhere to case law. If upheld, the

courts order will require Colorado agencies to ignore binding judicial

decisions in promulgating their rules. This will serve only to confuse

areas of law that administrative rules are meant to clarify, and it will

mean that the public cannot trust the regulations they are obligated to

understand and follow.

Issues on Appeal

1. Can an administrative agency promulgate rules based oncontrolling and authoritative case law?


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2. If constitutional or statutory provisions fail to directly answerspecific regulatory questions, can a public official use case law to

arrive at reasonable interpretations of those provisions?

3. Can the Secretary, who is constitutionally empowered underArticle XXVIII, Section 10 to set aside campaign finance penalties

for good cause, enact rules to explain specific circumstances in

which fines will be waived?

Statement of the Case and Facts

A. The Secretarys rulemaking effort.Seeking to improve [the] organization and readability of existing

campaign finance rules, to clarify existing laws, and to achieve the

uniform and proper administration and enforcement of Colorado

campaign and political finance laws, the Secretary initiated a

rulemaking proceeding on November 15, 2011. (Admin. R. Vol. 1, Tab 1


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at 1.)1 As part of the rulemaking effort, the Secretary held a hearing on

December 15, 2011 (see Tr.) and solicited extensive written comments

(see R. Vol. 2). Many of the Plaintiffs in this case, and some of their

counsel, participated in those proceedings. (See R. Vol. 2, Tabs 2, 20, 32,

35, 41, and 42.)

The record included testimony from several members of the public

who described the difficulty of determining when their advocacy groups

might trigger Colorados campaign finance regulations. One commenter

noted, I myself have spent many hours reading about the rules, and yet

I feel totally incapable of obeying them. . . . For a small-scale project, a

political activist easily could spend far more hours navigating the

assorted campaign finance rules than the activist actually spends

1 Admin. R. Vol. 1 refers to the eight documents in the official

rulemaking record. Admin. R. Vol. 2 refers to written commentssubmitted by the public as part of the rulemaking hearing in December

2011. Tr. refers to pages of the transcript of the rulemaking hearing.

E-File R. refers to documents compiled in the compact disk e-filed by

the district court clerk (for these citations, page numbers refer to PDF

pages 1508).


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speaking out. (Admin. R. Vol. 2, Tab 4 at 1.) Another commenter noted

that

[C]itizens, especially those who work for

underfunded organizations or toward unpopular

ends[,] must often seek legal advice before

engaging in political activity in Colorado. The

complexity of state regulations, and the fact they

often do not reflect established constitutional law,

makes it difficult for a layperson to obtain

accurate guidance in the area of campaignfinance.

(Admin. R. Vol. 2, Tab 14 at 1.) Supporters of the Secretarys

rulemaking effort favored bright-line rules in the place of general or

intent-based guidelines and a one-stop location for private citizens

(that is, those without representation) to learn what is required of them

under Colorado law. (Admin. R. Vol. 2, Tab 14 at 1.) They supported

the Secretarys effort to adopt rules to explain the legal requirements

imposed by various court decisions.

Other commenters believed the Secretary lacked authority for

some of the revised rules. With respect to Rule 1.12, which includes a

30% spending threshold to trigger a groups classification as an issue

committee, one group argued that [t]he Colorado Constitution is silent


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on this matter, as are the statutes dealing with campaign finance.

(Admin. R. Vol. 2, Tab 2 at 1.) As for the major purpose requirement

for political committees, which Rule 1.18.2 codifies, some commenters

stated that the Colorado Constitution does not impose a major purpose

test. (Admin. R. Vol. 2, Tab. 41 at 3.) These comments, however, did

not cite decisions by the Colorado Courts, the Tenth Circuit Court of

Appeals, or the United States Supreme Court.

After considering the full rulemaking record, the Secretary issued

a Notice of Temporary and Permanent Adoption setting forth the

revised rules, as well as a comprehensive Statement of Basis, Purpose,

and Specific Statutory Authority, which explained the reason for each

new rule or revision and included references to governing law. (Admin.

R. Vol. 1, Tab 1 at 8.) Because some of the rules were promulgated to

incorporate judicial interpretations of existing law, the Statement of

Basis, Purpose, and Specific Statutory Authority included case citations.

B. Plaintiffs lawsuit.On April 6, 2012, two groups of plaintiffs filed complaints

challenging some of the Secretarys new rules under the Administrative


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Procedure Act. For convenience, this brief refers to all plaintiffs

together as Plaintiffs.

The Secretary answered the complaints on May 4, 2012. (E-File R.

at 17786.) Soon afterward, the Court set a briefing schedule and

reserved a half-day hearing for oral argument. (E-File R. at 500.)

Although the allegations in Plaintiffs complaints appeared to

challenge eleven of the Secretarys rules, Plaintiffs briefs sought a court

ruling on only eight: Rules 1.7, 1.10, 1.12, 1.18.2, 7.2, 18.1.8, 4.1, and

15.6.

Plaintiffs asserted that the Secretary had exceeded his authority

in passing the rules because in their view, [d]eterminations of the

impact, if any, of past federal court cases on Colorado law are properly

within the power of the judicial branch. (E-File R. at 200.) According to

Plaintiffs, the Secretary is required to ignore case law in drafting

campaign finance regulations.

C. The decision below.After considering the briefs, the administrative record, and the

parties arguments at the hearing, the district court issued a decision on


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August 10, 2012. (E-File R. at 420 (attached to this brief as

Addendum B).) The courts order upheld one of the Secretarys rules

(Rule 1.7), invalidated five of them (Rules 1.10, 1.12, 1.18.2, 7.2, and

18.1.8),2 and dismissed as unripe Plaintiffs challenges to the two

remaining rules (Rules 4.1 and 15.6).

The court, like Plaintiffs, believed that the Secretary cannot codify

legal standards announced in court decisions, even when they are

undeniably required by federal and state jurisprudence. (Adden. B at

7.) At the same time, the court upheld Rule 1.7 because it is based on

case law. According to the court, Rule 1.7 adds no substantive

additional terms and imposes no additional restrictions except those

found in decisions by the United States Supreme Court and Colorado

Court of Appeals. (Adden. B at 5.) The court did not explain why Rule

1.7s explicit reliance on case law was appropriate, while the Secretarys

other rules, also based on case law, automatically exceeded his

administrative authority.

2 The text of these six rules is set forth in Addendum A to this brief. For

the complete campaign finance rules, see 8 CCR 1505-6.


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D. The Secretarys request for a stay and theparties appeals.

Because the 2012 elections were only months away, the Secretary

sought a stay in the district court and simultaneously filed a notice of

appeal. (E-File R. at 397.) The Secretary also requested that this Court

enter a temporary stay while the district court considered a permanent

one. When these requests were denied (see E-File R. at 452, 486), the

Secretary announced publicly that he would not enforce rules 1.10,

1.12.3, 1.18.2, 7.2.1, and 18.1.8 unless or until the Colorado appellate

courts reverse the District Courts decision.

Plaintiffs later filed a joint notice of cross-appeal, seeking to

overturn the district courts decision as to Rule 1.7. (See E-File R. at

491.) The Secretary will respond to Plaintiffs arguments about Rule 1.7

in an answer-reply brief.

Summary of Argument

The district court believed that an administrative agency exceeds

its authority by codifying unambiguous requirements of judicial

precedent into concise rules. But no tenet of Colorado case law


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precludes an agency from doing so. Indeed, careful rulemakers will stay

abreast of relevant court decisions, ensuring a full understanding of the

area of law they administer. By harmonizing administrative regulations

with case law, rulemakers enhance the clarity and legal accuracy of

their rules.

Four of the rules at issue hereRules 1.18.2, 1.12, 7.2, and 1.10

embody longstanding requirements of case law. In doing so, these rules

explain how the law applies in practice; answering specific questions

that Colorados Constitution and campaign finance statutes fail to

directly answer. The district court should have deferred to the

Secretarys discretion to enact these rules, asking only whether his

interpretation of the law was permissible. It must be permissible for

an administrative agency to rely on the judiciary for interpretations of

the law. The rules are therefore valid.

The final rule at issue here, Rule 18.1.8, implements the

Secretarys constitutional authority to waive campaign finance

penalties for good cause. But rather than deferring to the Secretary, the

court engaged in an analysis of whether, in its view, the rule reflected


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sound policy. This inquiry exceeded the courts role. Moreover, the

courts decision to invalidate the rule was based on a mistaken and

incomplete understanding of the record and the regulatory framework.

When reviewed in the proper setting, Rule 18.1.8 was a routine exercise

of the Secretarys rulemaking power.

Argument

I. Standard of Review.Both the Colorado Constitution and the campaign finance statutes

expressly delegate rulemaking authority to the Secretary. Colo. Const.

art. XXVIII, 9(1)(b) (The secretary of state shall . . . [p]romulgate

such rules . . . as may be necessary to administer and enforce any

provision of this article . . . .); C.R.S. 1-45-111.5(1) (The secretary of

state shall promulgate such rules . . . as may be necessary to enforce

and administer any provision of this article.). Thus, in adjudicating

Plaintiffs challenge to the Secretarys rules, the Court must presume

the rules are valid. Plaintiffs bear a heavy burden in rebutting this

presumption: they must establish [the] invalidity of [each] rule by

demonstrating that the [Secretary] violated constitutional or statutory


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law, exceeded [his] authority, or lacked a basis in the record for the

rule. Colo. Ground Water Commn v. Eagle Peak Farms, 919 P.2d 212,

217 (Colo. 1996). And they must prove the invalidity of each rule beyond

a reasonable doubt. Colo. Citizens for Ethics in Govt v. Comm. for the

Am. Dream, 187 P.3d 1207, 1217 (Colo. App. 2008).

The district court cited these general standards but made two

errors related to the standard of review. First, the court assumed that

an administrative agency automatically exceed[s] [its] delegated

authority when it bases a rule on judicial precedent. (SeeAdden. B at

8.) Second, although it purported to defer to the precise content of the

Secretarys rules, the court opined on whether, in the courts view, the

rules work[e]d . . . mischief or were income neutral. (Adden. B at 6.)

These errors were critical. This Court should make clear that

administrative agencies are empowered to incorporate binding case law

into their rules, as the Secretarys predecessors have repeatedly done.

If, as the district court assumed, regulators must close their eyes to

judicial precedent, a large number of administrative rules in Colorado

will be inaccurate and potentially misleading.


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The Court should also reaffirm that administrative agencies with

delegated rulemaking authority are the appropriate entities to

determine whether a particular rule is wise or will work mischief.

Courts must maintain their limited role of asking only whether a

challenged rule is permissible under governing standards, maintaining

the vital rulemaking discretion that allows administrative agencies to

hone their rules to ensure they work well in practice under evolving

conditions.

A. In enacting administrative rules, the Secretarymust follow the law, including binding judicial

interpretations of the law.

Campaign finance law has become a maze of rules, sub-rules, and

cross-references, all of which an individual or organization must

navigate to do nothing more than project a basic political message.

N.C. Right to Life, Inc. v. Leake,525 F.3d 274, 296 (4th Cir. 2008).

Colorado law is no exception. As one commenter observed during the

rulemaking proceeding,

Before an activist can even begin to speak out for

or against any ballot measure or candidate with

the intention of spending even small amounts of


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resources, the activist must learn the rules

(broadly defined). The assorted Constitutional

provisions, statutes, bureaucratic rules, andsurrounding court cases constitute many scores of

pages of dense legalese. Even learning whether

certain forms of speech fall under these rules

requires substantial effort . . . .

(Admin. R. Vol. 2 Tab 4.)

To fully understand when they will trigger the laws of campaign

finance, regulated entities cannot rely solely on the language of

Colorados constitutional and statutory provisions. Judicial precedent

informs the meaning of these laws and, more importantly, the way in

which the laws may be constitutionally applied. For example, both this

Court and the Tenth Circuit have held that an organization cannot be

regulated as a political committee under Colorado law, and therefore

cannot be subject to reporting and disclosure requirements, unless the

organization meets the major purpose test announced inBuckley v.

Valeo, 424 U.S. 1 (1976). See Alliance for Colo.s Families v. Gilbert, 172

P.3d 964 (Colo. App. 2007); Colo. Right to Life Comm. v. Coffman, 498

F.3d 1137 (10th Cir. 2007). The district court itself acknowledged the

impact of cases like these on Colorados scheme of campaign finance


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regulation, observing that the Supreme Courts First Amendment

jurisprudence undeniably applies in Colorado. (Adden. B at 7.)

The Secretary must abide by this jurisprudence. [G]overnmental

agencies, like all individuals and other entities, are obliged to follow

and apply the law as interpreted by the courts. Lopez v. Heckler, 572 F.

Supp. 26, 29 (1983), affd, 725 F.2d 1489, 1497, 1503 (9th Cir. 1984)

vacated on other grounds, 469 U.S. 1082 (1984); see also Hyatt v.

Heckler, 807 F.2d 376, 379 (4th Cir. 1986); Ithaca Coll. v. Natl Labor

Relations Bd., 623 F.2d 224, 228 (2d Cir. 1980). Public officials are not

free to ignore case law within their jurisdiction. See NLRB v. Ashkenazy

Prop. Mgmt. Corp., 817 F.2d 74, 75 (9th Cir. 1987); see also Swanson v.

Town of Mountain View, 577 F.3d 1196, 1200 (10th Cir. 2009).

If, for example, the Secretary attempted to regulate, as political

committees, a class of organizations that do not meet the major purpose

requirement ofBuckley, this Court would prevent him from doing so.

See Alliance for Colo.s Families, 172 P.3d at 97273 (vacating penalties

imposed on an organization because the administrative law judge failed

to determine whether the organization met the major purpose test).


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Because the Secretary has a mandatory duty to [p]romulgate such

rules . . . as may be necessary to administer and enforce the campaign

finance laws, Colo. Const. art. XXVIII, 9(1)(b), he must ensure that his

rules comport with judicial precedent. Cf.Holliday v. Regl Transp.

Dist., 43 P.3d 676, 681 (Colo. App. 2001) (permitting a challenge to the

RTDs policies because, in light of federal constitutional jurisprudence

they may have amounted to an impermissible intrusion upon First

Amendment protections).

The Secretarys predecessors held this view. They used

rulemaking to ensure compliance with judicial precedent, even when

their rules contravened the plain language of Colorados constitution

and statutes. Former Rule 4.13, for example, exempted certain entities

from Colorados ban on corporate electioneering communications before

Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010),

established that all corporations have a right to engage in protected

speech. Rule 4.13 was based upon another Supreme Court case, Federal

Election Commission v. Massachusetts Citizens for Life, 479 U.S. 238

(1986), which held that Some [small nonprofit] corporations . . . should


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not have to bear burdens on independent spending solely because of

their incorporated status. Id. at 263. This contradicted the Colorado

Constitutions absolute ban on corporate electioneering, but the rule

was necessary to comport with the First Amendment. See Colo. Right to

Life, 498 F.3d at 1140 (noting that the Secretary passed former Rule

4.13 to follow[] the United States Supreme Courts teachings in

MCFL).

The Secretarys predecessors have even used rulemaking to

change the meaning of a specific word in the Colorado Constitution. In

defining the term issue committee, Article XXVIII 2(10)(a)(I) uses

the disjunctive or to explain how the definitional criteria (a dollar

limit and a major purpose test) apply. One of the Secretarys

predecessors, however, interpreted this provision in the conjunctive,

replacing or with the word and, see Rule 1.12.2 (former Rule 1.7(b)),

because the First Amendment compels this linguistic change. See Colo.

Right to Life, 498 F.3d at 1154 ([T]he $200 trigger, standing alone,

cannot serve as a proxy for the major purpose test . . . .). As a result,

an organization is an issue committee only if it (1) has spent or


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collected more than $200 to support or oppose a ballot question and

(2) has a major purpose of ballot-issue advocacy. See Colo. Common

Cause v. Gessler, 2012 COA 147 4 n.2 (2012) (Although the

Amendment uses the disjunctive or, the Secretarys rules interpret it to

require both conditions before a group is considered an issue

committee.).

Unlike these examples, none of the rules Plaintiffs have

challenged here actually contravenes any specific constitutional or

statutory provision. Nonetheless, the district court believed the

Secretary is required to ignore case law in promulgating campaign

finance rules. According to the district court, even when binding judicial

precedent requires a certain interpretation of the law, the Secretary

must wait for the legislature or the citizens to act before he can

acknowledge case law through rulemaking. (Adden. B at 7.) This

approach would require the public to wade through pages of case law to

understand whether their speech will be regulated. And it would

require the Secretary to shun formal pronouncements in favor of

informal promises that he will not violate the First Amendment.


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Those who seek to engage in protected political speech, however,

are entitled to more than informal assurance[s]. Minn. Citizens

Concerned for Life, Inc. v. Swanson, 692 F.3d 864, 87374 & n.8 (8th

Cir. 2012). They are entitled to clear guidance. The Secretary must have

the discretion to acknowledge through rulemaking what the case law

unambiguously requires.

B. The Court must defer to the Secretarys Rules,asking only whether the Rules are based on a

permissible interpretation of the law.

The district court cited the proper standard for reviewing the

substance of an administrative rule: if the statute is silent or

ambiguous with respect to the specific issue, the question for the court

is whether the agencys answer is based on apermissible construction of

the statute . . . . [A] court may not substitute its own construction of a

statutory provision for a reasonable interpretation made by the

administrator of an agency. (Adden. B at 3 (quoting Wine & Spirits

Wholesalers v. Colo. Dept of Revenue, 919 P.2d 984, 897 (Colo. App.

1996) (emphasis added)).) Yet the court failed to defer to the Secretarys

interpretation of the law, and it ignored his policy judgment that bright-


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line rules are more effective for triggering disclosure and reporting

requirements than are potentially ambiguous intent-based standards.

(Adden. B at 6.)

Judicial deference to agency rulemaking precludes second-

guessing the wisdom of a rule or whether, in the courts view, a

different rule might be more effective or more desirable. See Citizens for

Free Enter. v. Dept of Revenue, 649 P.2d 1054, 1063 (Colo. 1982).

Agencies must have flexibility to adapt the law to changing

circumstancesit will often be impracticable for the General Assembly

to fix rigid standards to guide agency action.People v. Lowrie, 761 P.2d

778, 781 (Colo. 1988). This is especially true in a regulatory area like

campaign finance, where the [t]he law . . . is in a state of flux as the

courts attempt to balance the desire of Congress and the states to enact

legislation that will reduce the potential for corruption . . . against

contributors First and Fourteenth Amendments guarantees of freedom

of speech and association.Alliance for Colo.s Families, 172 P.3d at

969.


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Agency discretion is not unlimited, however. In Sanger v. Dennis,

this Court stated that an administrative rule cannot add, [] modify,

and [] conflict with the [governing] constitutional provision. 148 P.3d

404, 413 (Colo. App. 2006). In Sanger, the Secretary passed a rule that

violated the United States Supreme Courts First Amendment

jurisprudence by imposing barriers to collective speech and

consequently restrict[ing] the overall quantum of speech available to

the election process. Id. at 414 (internal quotation marks omitted).

Here, in contrast, the Secretary is seeking to use rulemaking to make

Colorado law consistent with the First Amendment. In doing so, he has

not added new legal requirements that conflict with existing ones. Id.

at 413. Sanger, while relevant to this case, presented a different

situation.

This Court recently applied Sanger to invalidate a campaign

finance rule that directly modified a specific constitutional provision.

Case law from the Tenth Circuit had held that the $200 threshold for

triggering issue committee status is far too low, and the Secretary

consequently increased the threshold to $5,000, ensuring that the


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financial burden of state regulation would not approach[] or exceed[]

the value of [a groups] financial contributions to their political effort.

Sampson v. Buescher, 625 F.3d 1247, 1261 (10th Cir. 2010). This Court

held that the Secretarys rule exceed[ed] the holding of the governing

case law. Colo. Common Cause, 2012 COA 147 24.

Colorado Common Cause, like Sanger,is inapposite to the rules

challenged in this case.3 Here, the question is more nuanced. The rules

at issue do not contradict specific constitutional or statutory provisions.

They simply seek to answer precise questions that the constitution

and campaign finance statutes do not directly address[]. Wine &

Spirits Wholesalers, 919 P.2d at 897. The Court must therefore ask only

whether the rules reflect permissible interpretations of governing law.

Janssen v. Indus. Claim Appeals Office, 40 P.3d 1, 4 (Colo. App. 2001).

3 The Secretary disagrees with the holding ofColorado Common Cause

and has filed a petition for writ of certiorari to seek review of that

decision. That decision, however, is irrelevant to the issues presented

here.


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II. The five rules at issue in this appeal are all within theSecretarys authority and discretion to promulgate.

Plaintiffs bear the burden of establishing that each of the

Secretarys rules is invalid beyond a reasonable doubt. Colo. Citizens for

Ethics in Govt v. v. Comm. For the Am. Dream, 187 P.3d 1207, 1217

(Colo. App. 2008). The Court must separately ask whether each rule

reflects a permissible construction of the law. See, e.g., Citizens For Free

Enter. v. Colo. Dept of Revenue, 649 P.2d 1054, 106970 (Colo. 1982)

(reviewing two rules separately; upholding one rule and invalidating

the other). When viewed with proper deference and in light of the full

legal landscapewhich includes relevant constitutional and statutory

provisions as well as judicial precedenteach rule at issue in this case

was well within the Secretarys authority.

A. As the district court observed, the majorpurpose test of Rule 1.18.2 is undeniably

required by Colorado case law.

In Colorado, an organization that meets the definition of political

committee in Article XXVIII, Section 2(12)(a) of the Colorado

Constitution must satisfy various reporting and disclosure


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requirements. See C.R.S. 1-45-108(1)(a); Colo. Const., art. XXVIII,

3(5), (9), (10), and (12). Rule 1.18.2 clarifies when an entity is subject

to these regulations. It does so by codifying the major purpose test, a

longstanding fixture of First Amendment jurisprudence.

1. The Supreme Courts major purposetest refines the scope of political

committee regulation.

Years ago, decades before Colorados current regime of campaign

finance regulation was put in place, the United States Supreme Court

held that an entity may be regulated as a political committee only if it

meets an important constitutional requirement: its major purpose

must be to support or oppose the nomination or election of political

candidates.Buckley, 424 U.S. at 79; see also Fed. Election Commn v.

Mass. Citizens for Life, Inc., 479 U.S. 238, 252 n.6 (1986). The test

ensures that the regulation of political committees is not impermissibly

broad. Minn. Citizens Concerned for Life, 692 F.3d at 872 (quoting

Buckley, 424 U.S. at 7980).

Two courts have held that the major purpose test applies to

political committees in Colorado. In Colorado Right to Life Committee,


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the Tenth Circuit held that Colorado cannot regulate as a political

committee an entity that fails the major purpose test. 498 F.3d at

1153. The same year, this Court echoed that holding, recognizing that

the test is required by Buckley although it does not appear in the text

of the Colorado Constitution.Alliance for Colorados Families, 172 P.3d

at 972. The Court overturned the ruling of an administrative law judge

who had imposed retroactive penalties on an advocacy group without

considering the major purpose test. The Court remanded the case with

explicit instructions for the ALJ to apply the test; the group could be

subject to regulation as a political committee only if its major purpose

was supporting or opposing a political candidate. Id.

2. Rule 1.18.2 acknowledges the majorpurpose test and explains how it

applies.

Rule 1.18.2 formally acknowledges thatBuckleys major purpose

test is a required element of Colorados definition of political

committee. The rule should be uncontroversial. Below, Plaintiffs

conceded that [a]s a matter of constitutional law, a political committee

must have the major purpose to support or oppose candidates. (E-File


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R. at 303 (emphasis added) (quotingBuckley, 424 U.S. at 79).) And the

district court observed thatAlliance for Colorados Families and

Colorado Right to Life undeniably required application of theBuckley

test. (Adden. B at 7.)

The rule also explains precisely how the test applies, using two

criteria drawn from case law: (1) the objectives of the entity set forth in

its organizing documents and (2) whether [a]nnual expenditures made

to support or oppose [a] nomination or election . . . are a majority of the

organizations total spending. As the Tenth Circuit recognizes, the

Supreme Court endorses this very same two-pronged approach. Colo.

Right to Life Comm., 498 F.3d at 1152 (citing Mass. Citizens for Life,

Inc., 479 U.S. at 252 n.6, 262). So does the General Assembly: it used

similar criteria to define the a major purpose requirement for issue

committees. See C.R.S. 1-45-103(12)(b).

3. The district court improperly held thatthe Secretarys rules must ignore theexistence of the major purpose test.

The district court, while acknowledging the validity of the major

purpose test, struck down Rule 1.18.2 for two reasons. First, the court


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believed that the major purpose test is contrary to the political

committee definition in [Article] XXVIII and would add a new, strict

limitation to the definition. (Adden. B at 7.) Second, the court believed

that the major purpose test is contrary to the intent of Art. XXVIII

2(12)(a) as passed by the citizens of Colorado. (Adden. B at 7.) This

reasoning, however, violates recent guidance from the Colorado

Supreme Court.

In Colorado Ethics Watch v. Senate Majority Fund, the Colorado

Supreme Court interpreted another term in the Colorado Constitution:

express advocacy, which is used to define the activities of political

committees. 269 P.3d 1248 (Colo. 2012). The plaintiff in Colorado Ethics

Watchwho is also a plaintiff hereargued that express advocacy

should be interpreted to encompass a broad range of political speech,

thereby expanding the definition of the term political committee and

exposing more advocacy groups in Colorado to campaign finance

regulation. The Colorado Supreme Court disagreed with this approach,

relying explicitly onBuckley for guidance in how to construe the

Colorado Constitution. The Court noted that the plaintiffs


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interpretation would require us to ignore the settled definition of

express advocacy that existed at the time that Amendment 27 [the

Campaign Finance Amendment] was adopted by the voters. Id. at

1256. According to the Court, when Colorado voters used term[s] of art

in Amendment 27, they incorporated the decades of campaign finance

jurisprudence that has attempted to balance the public concerns

related to the impact of independent financing in elections and the

constitutional concerns outlined inBuckley. Id.

Under this reasoning, Rule 1.18.2 simply codifies a legal

requirement that Colorado voters adopted when they enacted

Amendment 27. The rule does not, as the district court assumed,

contradict the language or intent of the Colorado Constitution. Nothing

in the language of Article XXVIII suggests an intent to preclude the

major purpose test, and two courts have explicitly recognized that to

comport withBuckley, the term political committee must include a

major purpose requirement. Colo. Right to Life, 498 F.3d at 1153;

Alliance for Colo.s Families, 172 P.3d at 972. Courts must presume

that the electorate was aware of the legal significance of the


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terminology they chose to use in Colorados campaign finance laws.

Colorado Ethics Watch, 269 P.3d 1256. This includes the decades-old

major purpose test.

Plaintiffs themselves have not attempted to argue that the major

purpose test is invalid or should not apply within the state; they

simply seek to prevent the Secretary from formally acknowledging it.

This serves no purpose other than to increase the chance that citizens

might fail to realize that the protections of the test might apply to them.

Rule 18.1.2 must be upheld.

B. Rule 1.12 clarifies the definition of issuecommittee based on criteria the General

Assembly specified.

Entities that advocate for or against ballot measures in

Coloradoissue committeesare regulated much like political

committees. See C.R.S. 1-45-108(1). The Colorado Constitution defines

issue committees as groups that take in or spend at least $200 on ballot

issue advocacy and have a major purpose of supporting or opposing any

ballot issue or ballot question. Colo. Const., art. XXVIII, 2(10)(a)(I).


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But the a major purpose requirement has been challenged as

unconstitutionally vague and overbroad, Independence Institute v.

Coffman, 209 P.3d 1130, 113640 (Colo. App. 2008), and the General

Assembly enacted a multi-factor test to confine its application in light of

this case law. Under the statute, whether an entity has a major

purpose of advocating ballot issues is informed by

(1) specifically identified objectives in . . .

organizational documents or

(2) a demonstrated pattern of conduct, which in

turn is informed by the entitys

(a) annual expenditures in support of or

opposition to a ballot issue or ballot

question or

(b) [p]roduction or funding, or both, ofwritten or broadcast communications.

C.R.S. 1-45-103(12)(b); see also id. 1-45-103(12)(c) (citing

Independence Institute).

This statutory methodology, however, does not directly answer a

specific question relevant to the a major purpose requirement. Wine

& Spirits Wholesalers, 919 P.2d at 897. It fails to explain how an entity

must weigh its expenditures and production or funding . . . of written


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or broadcast communications. To clarify how this definition operates in

practice, the Secretary enacted Rule 1.12.

Under the rule, if either prong of the statutory methodology

expenditures or production or funding . . . of written or broadcast

communicationsexceeds 30% of an entitys total budget, the entity

has a major purpose of supporting or opposing any ballot issue or ballot

question. The rule was meant to take the guesswork out of applying

1-45-103(12)(b). It create[s] a bright line test for issue committees

an easily-measurable 30% thresholdmaking it easier for any person

or group of persons to understand when campaign finance law applies.

(Admin. R. Vol. 1, Tab 1 at 2.)

1. Rule 1.12 fills a gap left by the GeneralAssembly.

Absent the guidance provided by Rule 1.12, the a major purpose

requirement has proven difficult to apply in practice.

In Cerbo v. Protect Colorado Jobs, Inc., for example, this Court

overturned the decision of an administrative law judge who had erred

in her analysis of the test. 240 P.3d 495, 502 (Colo. App. 2010).


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Although the ALJ articulated the proper factors, she placed undue

weight on one of them, gave too much weight to another, and failed

to give weight to other facts relevant to the inquiry. Id. The Court

conducted its own fact-specific analysis, considering the

interrelationships of [the entitys] officers and agents, the amount of

time spent promoting the ballot issue, and the portion of funds the

entity expended promoting th[e] ballot issue. Id. at 50204. Based on

this revised analysis, the Court concluded that the entity was, in fact,

an issue committee and was potentially subject to sanctions for

nondisclosure of its expressive activity. Id. at 504.

In another case, this Court considered a collateral First

Amendment challenge to a decision of the same ALJ. This time,

however, the Court upheld the ALJs ruling. The Court noted that the

ALJ properly conducted a fact-specific inquiry into the organizations

original purpose, its organizational structure, the various issues

with which it had been involved, and the amount of money it spent on

advocacy in proportion to its annual budget. Independence Institute,


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209 P.3d at 1139. This multi-factor inquiry, the Court held, was not

unconstitutionally vague.

But while they are not unconstitutionally vague, these multi-

factor inquirieswhich rely purely on hindsight and do not explain how

each factor appliesfail to provide adequate guidance to the public

before litigation ensues. Those who wish to know whether their speech

will be subject to the disclosure requirements issue committees are

obligated to follow must resort to a best guess. And this best guess, no

matter how well-intentioned, might be overturned in litigation. An ALJ

(or this Court) could hold that the advocacy group placed undue

weight on one factor or gave too little weight to another. Cerbo, 240

P.3d at 502.

Moreover, the statutory methodology of 1-45-103(12) does not

resolve the ambiguity. The statute explicitly states that it makes no

substantive change to the definition of a major purpose and is

intended only to reflect the holding ofIndependence Institute. See 1-

45-103(12)(c). The statute merely reiterates the factors cited in the case

law without explaining how to apply them.


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Rule 1.12 fills the gap. It uses the statutory methodology to create

an easy-to-apply standard, one that entail[s] minimal if any discovery

and allows parties to resolve disputes quickly without chilling speech

through the threat of burdensome litigation. Fed. Election Commn v.

Wis. Right to Life, Inc., 551 U.S. 449, 469 (2007). The Rule minimizes

the risk that a group seeking to engage in protected speech will guess

wrong and be forced to spend the time, energy, and money required to

defend against litigation. See Sampson, 625 F.3d at 1260. As one

member of the public testified at the rulemaking hearing, I do like the

idea that theres a clear rule here. There hasnt been a test at all. . . .

And so . . . [if you decide to engage in ballot-issue advocacy,] youre

running the risk that youre going to be dragged into court . . . . (Tr. at

114:413.)

2. The Secretarys decision to use a 30%threshold is reasonable in light of

governing law.

As the Secretary explained at the rulemaking hearing, the 30%

threshold of Rule 1.12 honors the difference between a major purpose

and the major purpose. (Tr. at 122:89 (emphasis added).) Unlike issue


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committees, political committees must have the major purpose of

supporting or opposing a candidate.Buckley, 424 U.S. at 79. The

Supreme Court and the Tenth Circuit have interpreted this to mean

that a political committee must spend the majority, or the

preponderance,of its budget on political advocacy. Colo. Right to Life

Comm., 498 F.3d at 1152 (citing Mass. Citizens for Life, Inc., 479 U.S. at

252 n.6, 262).

Issue committees, meanwhile, must meet the a major purpose

test. The 30% threshold of Rule 1.12 recognizes the distinction. It uses a

lower benchmark than the 50% threshold for political committees while

ensuring that a meaningful portion of an issue committees budget is

spent on ballot-issue advocacy.

The percentage-based approach is also rooted in case law.

Colorado court decisions addressing the a major purpose requirement

focus on theproportion of spending, not an absolute amount. For

example, in 2010 this Court held that an organization has a major

purpose of supporting a ballot issue if such support constitutes a

considerable or principalportion of the organizations total activities.


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Cerbo, 240 P.3d at 501 (internal quotation marks omitted) (emphasis

added). The Court found this requirement to be satisfied where an

entity spen[t] three-fourths of all of the funds it has ever expended

promoting that ballot issue. Id. at 504.

The United States Supreme Court forbids amorphous campaign

finance regulations. WRTL II, 551 U.S. at 469. Rule 1.12 avoids this

problem. Instead of using an open-ended rough-and-tumble of factors,

which invit[es] complex argument in a trial court and a virtually

inevitable appeal, id. (internal quotation marks omitted), Rule 1.12

uses a bright-line threshold. As demonstrated by cases applying the a

major purpose requirementcases that depend on fact-specific,

multi-prong inquiries, seeCerbo, 240 P.3d at 50304; Independence

Institute, 209 P.3d at 1139Rule 1.12 is necessary to avoid the

burdensome litigation that the First Amendment forbids.

3. The district courts flawed analysis ofRule 1.12 must be overturned.

In striking down Rule 1.12, the district court made three errors.


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First, the court implied that unless a statute is unconstitutionally

vague, it leaves no room for rulemaking. The court observed that two

cases . . . held that the term major purpose . . . [is] not ambiguous.

(Adden. B at 6.) By implication, then, the Secretary was precluded from

enacting Rule 1.12 to clarify the not ambiguous phrase a major

purpose.

Neither of the cases the district court cited, however, suggests

that the phrase a major purpose is so unambiguous that it cannot be

clarified. The first case, Independence Institute, analyzed only whether

the phrase is unconstitutionally vague or overbroad. 209 P.3d at 1136.

In denying the plaintiffs constitutional challenge, the Court identified

three factual considerations advocacy groups could consider in applying

the a major purpose test. Id. at 1139. Using these factual

considerationsand not merely the bare phrase a major purposea

group could make an informed decision before undertaking ballot

advocacy. Id.

The second case, Cerbo, also involved a vagueness and

overbreadth challenge to a major purpose. 40 P.3d at 500. And


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although Cerbo perceive[d] no ambiguity in the phrase it explicitly

relied on the three nonexclusive factors from Independence Institute to

guide its application of the phrasefactors the Court had used to

ensure the phrase could be constitutionally applied. Id. at 501. Cerbos

reliance on these factors illustrates that even though the phrase a

major purpose is not so ambiguous that it is unconstitutional, it must

be clarified to be applied in practice. Both cases illustrate that the

phrase is amenable to rulemaking.

The district courts second error was to assume that an

administrative agency cannot enact regulations to clarify how a statute

should be applied in practice. The court noted that the legislature . . .

codif[ied] the holding ofCerbo and Independence Institute in 1-45-

103(12)(b) without the use of Rule 1.12s 30% requirement. (See

Adden. B at 6.) In the district courts view, the statutes silence was

dispositive.

This reasoning misapplied the standard of review. Because 1-45-

103(12)(b) is silent . . . with respect to the specific issue of how to

apply the statutory factors, the only question the district court should


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have asked is whether the agencys answer is based on apermissible

construction of the statute. Wine & Spirits Wholesalers, 919 P.2d at

897 (emphasis added). Indeed, if administrative regulations were valid

only if they parroted existing statutory provisions, there would be no

need for rulemaking.

Finally, the court improperly relied on its own policy judgments to

evaluate the rule. The court believed the rule works further mischief in

that it appears not to be income neutral. (Adden. B at 6.) This second-

guessing the wisdom of Rule 1.12 exceeded the bounds of judicial

review. See Citizens for Free Enter., 649 P.2d at 1063. The district court

was not empowered to substitute its judgment for that of [the

Secretary]; it could only determine whether the rule is reasonable.

Janssen, 40 P.3d at 4.

In any event, the district courts evaluation of the wisdom of Rule

1.12 was misinformed. The rule is, in fact, income neutral. The 30%

threshold applies regardless of a speakers wealth or income. This

complies with First Amendment jurisprudence, which forbids regulating

political speech . . . based on a speakers wealth. Citizens United, 130


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S. Ct. at 904. The United States Supreme Court has rejected the

premise that the Government has an interest in equalizing the relative

ability of individuals and groups to influence the outcome of elections.

Id. (quotingBuckley v. Valeo, 424 U.S. 1, 48 (1976)). To regulate based

on the impermissible criterion of wealth would allow suppression of

political speech based on the speakers identity, something the First

Amendment generally forbidsespecially in the context of political

speech. Id. Contrary to the district courts appraisal, Rule 1.12s 30%

threshold provides a clear guideline while staying wealth-neutral (and

therefore identity-neutral), as the First Amendment requires.

Moreover, the 30% threshold actually promotes the interests of

organizations with modest resources. One public commenter noted that

[t]he grassroots activist, with limited time and funds, suffers the most

from having complicated, time-consuming regulations and draconian

penalties over his or her head. (Admin. R. Vol. 2, Tab 26 at 1.) The 30%

rule allows grassroots organizations to easily determine, without having

to pay for hours of attorney time, when they will trigger the reporting

and disclosure obligations of Colorados campaign finance laws.


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C. Rules 7.2 and 1.10 use existing law to clarify thedefinition of political organization.

In 2007, the General Assembly enacted legislation that imposed

disclosure and reporting obligations on political organizations, groups

organized as tax-exempt under Section 527 of the Internal Revenue

Code. Under 1-45-103(14.5), a political organization is an entity that

(1) meets the definition in section 527(e)(1) of the federal Internal

Revenue Code of 1986, and (2) is engaged in influencing or

attempting to influence the selection, nomination, election, or

appointment of any individual to any state or local public office.

Rules 7.2 and 1.10 clarify the two elements of the definition of

political organization. Contrary to the district courts view, the rules

do not add new requirements to 1-45-103(14.5) or narrow the

statutory definition. (SeeAdden. B at 9.) They use existing federal

statutory requirements and longstanding case law to provide guidance

to the public.


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1. Rule 7.2s major purpose requirementis based on 26 U.S.C. 527.

Section 527 of the Internal Revenue Code imposes a primary

purpose requirement on political organizations. Only if an entity is

organized and operatedprimarily for the purpose of . . . influencing or

attempting to influence an election can the entity be a political

organization. 26 U.S.C. 527(e)(1)(2) (emphasis added). Rule 7.2, in

requiring a political organization to have as its major purpose

influencing or attempting to influence elections, codifies 527s

primary purpose requirement.

The rule recognizes that the terms primary and major are

functionally identical. As an adjective, primary means [f]irst or

highest in rank, quality, or importance.Am. Heritage Coll. Dictionary

1106 (4th ed. 2002). And major means [g]reater than others in

importance or rank. Id. at 834. Given the words linguistic equivalence,

it was within the Secretarys rulemaking discretion to use the more

common word major, while codifying the primary purpose

requirement of Section 527.


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This requirement is not just a matter of federal statutory policy. It

is also based on the First Amendment. InBuckley, the U.S. Supreme

Courtadopted a major purpose test to trigger reporting and disclosure

requirements for advocacy groups, thereby ensuring that only

campaign related organizations would be subject to comprehensive

regulation. 424 U.S. at 79. The test ensures that government regulation

does not discourage[] associations, particularly small associations with

limited resources, from engaging in protected political speech. Minn.

Citizens Concerned for Life, 692 F.3d at 874.

The district court believed that the major purpose requirement

narrow[s] the definition of political organization. (Adden. B at 9.)

Rule 7.2, however, makes no additions to the law; it merely makes

explicit one requirement of 26 U.S.C. 527, the federal statute on which

Colorados definition of political organization is based. Through Rule

7.2, the Secretary sought to provide Colorado citizens with information

about existing legal requirements relevant to the definition of political

organization. Rather than being forced to flip back and forth between

judicial precedent, federal and state statutes, and administrative


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regulations, the public could consult a single resourcethe Secretarys

rulesto understand how the definition works. As one commenter

suggested, this creates a one-stop location for private citizens (that is,

those without representation) to learn what is required of them under

Colorado law. (Admin. R. Vol. 2, Tab 14 at 1.)

2. Rule 1.10 uses longstanding case law toclarify the meaning of influencing orattempting to influence.

The words influencing or attempting to influenceanother

element of the statutory definition of political organizationhave

acquired a specific meaning in the area of campaign finance law. Nearly

forty years ago inBuckley, the United States Supreme Court analyzed a

nearly identical phrase: for the purpose of . . . influencing. 424 U.S. at

7482. The phrase, used to trigger disclosure and reporting obligations,

pose[d] constitutional problems because of its potential to include

both issue discussion [which the First Amendment broadly protects]

and advocacy of a political result [which may be regulated more

stringently]. Id. at 77, 79.


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To remedy these constitutional problems, the Court adopted a

narrowing construction, holding that the phrase must only reach

activity that expressly advocate[s] the election or defeat of a clearly

identified candidate. Id. at 80.

Rule 1.10 makes explicit what the First Amendment has long

required. The rule incorporates the express advocacy standard into

the ambiguous phrase influencing or attempting to influence, using

language fromBuckley to avoid the phrases constitutional problems.

The General Assembly is presumed to adopt the construction which

prior judicial decisions have placed on particular language. Vaughan v.

McMinn, 945 P.2d 404, 407 (Colo. 1997). Rule 1.10 is not, therefore,

contrary to the clear terms of the statute and the intent of the

legislature, as the district court believed. (Adden. B at 9.) The rule

simply clarifies a term of art the General Assembly chose to adopt.

Recent case law affirms that Rule 1.10s construction of the term

influencing is constitutionally compelled. The First Circuit, for

example, held that the term influencing presents vagueness

problems. Natl Org. for Marriage v. McKee, 649 F.3d 34, 65 (1st Cir.


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2011). In the courts view, the term could be read to include various

types of speech, including advocacy for or against a candidates

election; championing an issue for inclusion in a candidates platform;

and encouraging all candidates to embrace public funding. Id. Without

more context, the term is uncertain enough that a person of average

intelligence would be forced to guess at its meaning and modes of

application. Id. (internal quotation marks omitted).

The defendants in that casestate public officials responsible for

administering Maines campaign finance lawsacknowledged that

influencing is insufficiently clear on its face to satisfy due process

standards. Id. at 66. They therefore officially adopted a narrowing

construction, as Rule 1.10 does, which interpreted influencing to

mean communications and activities that expressly advocate for or

against [a candidate] or that clearly identify a candidate by apparent

and unambiguous reference and are susceptible of no reasonable

interpretation other than to promote or oppose the candidate. Id. at

6667. This narrowed formulation, the court held, was considerably


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more precise than the original. Id. at 67. And so limited, the term

influencing was not so vague as to offend due process. Id.

Another federal court adopted a similar limiting construction to

ensure the phrase influencing an election was not unconstitutionally

vague. Vt. Right to Life Comm., Inc. v. Sorrell, 875 F. Supp. 2d 376 (D.

Vt. 2012). Indeed, the court held that it would have reached the same

conclusion in interpreting otherwise expansive language like

influencing. Id.

The Colorado Supreme Court recently observed that Colorado

campaign finance law must be construed to avoid the vagueness and

over-breadth concerns fromBuckley that are the bedrock of all

campaign finance political speech jurisprudence. Colo. Ethics Watch,

269 P.3d at 1258. By codifying a longstanding interpretation of the term

influencing that the General Assembly is presumed to have adopted,

this is precisely what Rule 1.10 accomplishes.


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D. Rule 18.1.8(a) implements the Secretarysauthority to waive penalties for failure to file

major contributor reports.

Major Contributor Reports are disclosures that must be filed by

candidate committees, political committees, issue committees, and

political parties within thirty days of an election. C.R.S. 1-45-108(2.5).

In these reports, entities must list any contribution of one thousand

dollars or more they received within the thirty-day time period. Id. The

reports must be filed no later than twenty-four hours after receipt of

said contribution. Id.

Under C.R.S. 1-45-111.5(1.5)(c), an entity that fails to file any

reportincluding a Major Contributor Reportis subject to a sanction

of up to $50 per day for each day that [the report] . . . is not filed by the

close of business on the day due. The Secretary may, upon receiving an

appeal of a sanctions order, set aside or reduce the penalty [for failure

to file a report] upon a showing of good cause. Colo. Const., art. XXVIII,

10(2)(c).

To implement the appeal provisions of Article XXVIII, 10, the

Secretary has created a system of uniform requests for waiver that a


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49

person or entity may file with the Secretary (or an administrative law

judge) after receiving a penalty for violation of the campaign finance

laws. See Rule 18.1. The Secretarys request-for-waiver rules explicitly

define the circumstances under which various penalties will be waived.

In doing so, the rules create clarity and predictability for those seeking

to engage in public debate but fearing that simple mistakes will lead to

large, unpredictable penalties.

As the record illustrates, these fears are legitimate. During

rulemaking, one commenter noted, I have been a volunteer treasurer

on a few campaigns and had the experience of making a mistake and

costing my candidate nearly $1,000 in a race that raised in the

neighborhood of $34,000. (Admin. R. Vol. 2, Tab 17 at 1.) The rookie

mistake this commenter described was failing to file a Major

Contributor Report. In the commenters view, the mistake was

unintentional and did not harm my candidates opponent or the public.

(Id.) She believes that those who should know better and [are] willful

violators of campaign finance laws should be punished with fines. (Id.)


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But where fines only serve to punish those who try to act in good faith,

they d[o] not benefit the public or the process. (Id.)

Rule 18.1.8(a) addresses these concerns by defining when a failure

to file a Major Contributor Report will be excused for good cause

under Article XXVIII, 10(2)(c). Rule 18.1.8(a) states that [p]enalties

assessed for failure to timely file a Major Contributor Report . . . stop

accruing on the date that the contribution is first disclosed, either on

the Major Contributor Report or the regularly-scheduled Report of

Contributions and Expenditures . . . . Penalties will not accrue beyond

the date of the general election. This rule recognizes that, once a

regularly-scheduled report is filed, or when an election is over, any

harm flowing from a failure to file a Major Contributor Report is

diminished.

A previous Secretary enacted a similar rule, former Rule 9.5.1,

which excused political committees from filing separate electioneering

reports so long as any expenditure for electioneering communications

[was] disclosed in a regularly filed disclosure report. See Colo. Citizens

for Ethics in Govt, 187 P.3d at 1213. In CCEG, this Court observed that


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51

a $1,000 penalty would not have accrued had Rule 9.5.1 been

promulgated before the offending conduct occurred. But because Rule

9.5.1 [had] only prospective application, the Court was required to

analyze whether the $1000 penalty . . . was erroneous. Id.

Despite the constitutional underpinnings of Rule 18.1.8and

despite this Courts recognition in CCEG that a similar rule is valid and

enforceablethe district court believed that Rule 18.1.8 substantially

denudes the statutory penalty and would improperly allow bad actors

to intentionally refuse to file a Major Contributor Report knowing that

the fine amount will be fixed on Election Day. But this scenario was

possible before the enactment of Rule 18.1.8(a): If a sophisticated entity

desired to hide its major contributions, it could do so if it were willing to

accrue penalties under Section 1-45-111.5(1.5)(c) until it filed a Major

Contributor Report the day after the election. Of course, to do so, the

entity would also have to delay filing a regularly-scheduled report, and

would therefore incur additional penalties, just as it would under Rule

18.1.8(a).


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Rule 18.1.8(a) therefore does not excuse bad behavior any more

than Section 1-45-111.5(1.5)(c) does; the Rule merely clarifies when

penalties will be set aside for good cause, protecting entities that

inadvertently fail to file a Major Contributor Report. This clarification

of the constitutional good cause standard is within the Secretarys

rulemaking authority and should be upheld.

Conclusion

The Secretary respectfully requests that the Court reverse the

district courts order as to Rules 1.18.2, 1.12, 7.2, 1.10, and 18.1.8(a) and

conclude that each of these rules is valid and enforceable.


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Respectfully submitted on February 1, 2013.

JOHN W. SUTHERSAttorney General

/s/ Frederick R. Yarger

LEEANN MORRILL

First Assistant Attorney General

Public Officials Unit

State Services Section

FREDERICK YARGER, 39479*

Assistant Solicitor General

MATTHEW GROVE, 34269*

Assistant Attorney General

Public Officials Unit

State Services Section

Attorneys for Secretary Gessler*Counsel of Record


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CERTIFICATE OF SERVICE

This is to certify that I have served this OPENING BRIEF

OF APPELLANT / CROSS-APPELLEE COLORADO SECRETARY OF

STATE on all parties by LexisNexis File & Serve at Denver, Colorado,

on February 1, 2013, addressed as follows:

Mark Grueskin

Heizer Paul Grueskin LLP2401 15th Street, Suite 300


Luis Toro

Margaret Perl

1630 Welton Street


Jennifer H. HuntHill & Robbins, P.C.

1441 18th Street, Suite 100

Denver, Colorado 80202-1256

/s/ Frederick Yarger


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Paladino v. Gessler, 12 CA 1712

Addendum A to the Secretarys Opening Brief:Campaign Finance Rules at Issue in this Appeal


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A - 1

Rule 1.7

Electioneering communication is any communication that (1) meets the definition

of electioneering communication in Article XXVIII, Section 2(7), and (2) is thefunctional equivalent of express advocacy. When determining whether a

communication is the functional equivalent of express advocacy:

1.7.1 A communication is the functional equivalent of express advocacy only

if it is subject to no reasonable interpretation other than an appeal to vote for

or against a specific candidate.

1.7.2 In determining whether a communication is the functional equivalent

of express advocacy, it shall be judged by its plain language, not by an intent

and effect test, or other contextual factors.

1.7.3 A communication is not the functional equivalent of express advocacy if

it:

(a) Does not mention any election, candidacy, political party, opposing

candidate, or voting by the general public,

(b) Does not take a position on any candidate's or officeholder's

character, qualifications, or fitness for office, and

(c) Merely urges a candidate to take a position with respect to an issue

or urges the public to adopt a position and contact a candidate with

respect to an issue.

[Federal Election Commission v. Wisconsin Right to Life, 551 U.S. 449 (2007)]

Former Rule 9.4 (predecessor to Rule 1.7)

Pursuant to the decisions of the Colorado Court of Appeals in the case of Harwood v.

Senate Majority Fund, LLC, 141 P.3d 962 (2006), and of the United States Supreme

Court in the case of FEC v. Wisconsin Right to Life, 127 S. Ct. 2652 (2007), a

communication shall be deemed an electioneering communication only if it is

susceptible to no reasonable interpretation other than as an appeal to vote for or

against a specific candidate. In making this determination, (1) there can be no free-

ranging intent-and-effect test; (2) there generally should be no discovery or inquiry

into contextual factors; (3) discussion of issues cannot be banned merely because theissues might be relevant to an election; (4) in a debatable case, the tie is resolved in

favor of not deeming a matter to be an electioneering communication.


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A - 2

Rule 1.10

Influencing or attempting to influence, for purposes of political organizations as

defined in section 1-45-103(14.5), C.R.S., means making expenditures forcommunications that expressly advocate the election or defeat of a clearly identified

candidate or candidates. [Buckley v. Valeo, 424 U.S. 1 (1976)]

Rule 1.12

Issue committee

* * *

1.12.3 For purposes of determining whether an issue committee has a major

purpose under Article XXVIII, Section 2(10)(a)(I) and section 1-45-

103(12)(b)(II)(A), C.R.S., a demonstrated pattern of conduct is established by:

(a) Annual expenditures in support of or opposition to ballot issues or

ballot questions that exceed 30% of the organizations total spending

during the same period; or

(b) Production or funding of written or broadcast communications in

support of or opposition to a ballot issue or ballot question, where the

production or funding comprises more than 30% of the organizations

total spending during a calendar year.

Rule 1.18

Political committee

* * *

1.18.2 Political committee includes only a person or group of persons that

support or oppose the nomination or election of one or more candidates as its

major purpose. For purposes of this Rule, major purpose means:

(a) The organization specifically identifies supporting or opposing the

nomination of one or more candidates for state or local public office as

a primary objective in its organizing documents; or

(b) Annual expenditures made to support or oppose the nomination or

election of one or more candidates for state or local public office are a

majority of the organizations total spending during the same period.

[Alliance for Colorados Families v. Gilbert, 172 P.3d 964, 970 (Colo. App. 2007)]


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A - 3

Rule 7.2

Political organizations. In the case of political organizations as defined in section 1-

45-103(14.5), C.R.S.:7.2.1 For purposes of section 1-45-108.5, C.R.S., an entity is considered a

political organization only if:

(a) Has as its major purpose influencing or attempting to influence

elections as defined in Rule 1.10; and

(b) Is exempt, or intends to seek exemption, from taxation by the

Internal Revenue Service.

[I.R.C. 527(i)(5)(B) (2010)]

* * *

Rule 18.1.8

18.1 Requests for waiver or reduction of campaign finance penalties

18.1.1 A request for waiver or reduction of campaign finance penalties

imposed under Article XXVIII, Section 10(2) must state the reason for the

delinquency. The filer should provide an explanation that includes all

relevant factors relating to the delinquency and any mitigating

circumstances, including measures taken to avoid future delinquencies.

Before the Secretary of State will consider a request, the report must be filed,

and a request including the information required by this paragraph must be

submitted

* * *

18.1.8 Major Contributor Reports

(a) Penalties assessed for failure to timely file a Major Contributor

Report under section 1-45-108(2.5), C.R.S., stop accruing on the date

that the contribution is first disclosed, either on the Major Contributor

Report or the regularly-scheduled Report of Contributions and

Expenditures. Penalties will not accrue beyond the date of the general

election. [Section 1-45-108(2.5) C.R.S.]

* * *


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Paladino v. Gessler, 12 CA 1712

Addendum B to the Secretarys Opening Brief:The District Courts August 10, 2012 Order


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DISTRICT COURT, CITY AND COUNTY OFDENVER, STATE OF COLORADO

1437 Bannock Street, Room 256Denver, Colorado 80202

COLORADO ETHICS WATCH COLORADOCOMMON CAUSE DAVID PALADINO, et al.,Plaintiffs,

v.

SCOTT GESSLER, as Secretary of State for the Stateof Colorado,Defendant. COURT USE ONLY

Case No.: 2012CV2133(consolidated with 2012CV2153)

Courtroom: 280

ORDER

THIS MATTER comes before the Court on Plaintiffs consolidated Complaintschallenging a number of rules promulgated by the Defendant in his capacity as ColoradosSecretary of State (Secret

Documents

Court of Appeals SOS Opening Brief EW v.Gessler