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People for Pearce v. Oliver

United States District Court, D. New Mexico

November 28, 2017

PEOPLE FOR PEARCE and STEVE E. PEARCE, U.S. Representative for New Mexico's Second Congressional District, Plaintiffs,
v.
MAGGIE T. OLIVER, in her individual capacity and her official capacity as Secretary of State of the State of New Mexico; HECTOR H. BALDERAS, JR., in his individual capacity and his official capacity as Attorney General of the State of New Mexico; and DIANNA LUCE, in her official capacity as Fifth Judicial District Attorney of New Mexico, Defendants.

          MEMORANDUM OPINION AND ORDER

         On August 31, 2017, Plaintiffs People for Pearce and Steve E. Pearce (“Plaintiffs”) filed a Motion for Preliminary Injunction and Memorandum Brief in Support (ECF No. 16). Plaintiffs seek a preliminary injunction against enforcement of certain provisions of the New Mexico Campaign Reporting Act (the “CRA”), codified at N.M. Stat. § 1-19-25 to -36, the restrictions of which are described in an advisory opinion letter dated July 19, 2017 issued by Defendant Secretary of State of the State of New Mexico Maggie T. Oliver (the “Secretary of State” or “Defendant Oliver”). Plaintiffs assert that the Secretary of State's interpretation of the CRA to impose the individual contribution limits in an election cycle on the transfer of funds from their federal campaign committee account to their state campaign committee account is an unconstitutional infringement of their First Amendment free speech and free association rights. Defendant Attorney General Hector H. Balderas (“Defendant Balderas”) filed a Motion to Dismiss Complaint for Failure to State a Claim, Lack of Standing, and Immunity (ECF No. 26), and Defendant Oliver filed a Motion to Dismiss Claims against the Secretary of State in her Individual Capacity and Claims for Injunctive Relief (ECF No. 36). The Court held a hearing on the motion for preliminary injunction and Defendant Balderas' motion to dismiss. The parties represented at the hearing that an additional hearing to consider Defendant Oliver's motion to dismiss was not warranted. Having considered the parties' motions, briefs, oral arguments, evidence, and applicable law, the Court will grant Plaintiffs' motion for preliminary injunction and will deny the motions to dismiss.

         I. FACTUAL BACKGROUND

         A. The Federal Election Campaign Act and the New Mexico Campaign Reporting Act

         The Federal Election Campaign Act of 1971, as amended, 2 U.S.C. §§ 431 et seq. (“FECA”), regulates federal campaign money and preempts any state laws with respect to election to federal office. See 52 U.S.C. § 30143(a); 11 C.F.R. § 108.7(b). In enacting FECA, Congress sought to limit and regulate political contributions and independent expenditures on behalf of candidates for federal office. See Buckley v. Valeo, 424 U.S. 1, 12-13 (1976). At all relevant times, FECA has required public disclosure of donors contributing more than $200 within the calendar year or election cycle. See 52 U.S.C. § 30104(b)(3)(A), (F)-(G).

         FECA requires that all contributions received and expenditures made go through a principal campaign committee. See Id. §§ 30102(e)(1), (f)(1), (h)(1). A “principal campaign committee” under FECA is “a political committee designated and authorized by a candidate” under § 30102(e)(1). Id. § 30101(5). Reporting under FECA for New Mexico-based candidates is required to both the Federal Election Commission (“FEC”) and the New Mexico Secretary of State. See 52 U.S.C. §§ 30104 & 30113(a)-(b). Congress limited the contributions any person could make to a candidate with respect to an election to an aggregate of $2, 000, adjusted by the consumer price index. See Id. § 30116(a)(1)(A) and (c). The parties agree that from 2009-2018 FECA contributions limits ranged from $2, 400 to $2, 700 for individuals and PACs. See Decl. of Andrea Todd-Goff ¶ 5, ECF No. 16-2; Hr'g Tr. 51:5-12, 141:22-142:1, Oct. 16, 2017 (hereinafter “Hr'g Tr.”).[1]

         Under FECA, candidates have to report to the FEC each donor's name, occupation, employer, amount donated, address, and their aggregate donation amount in the two-year election cycle, all of which is available to the public on the FEC website. See Hr'g Tr. 47:20-49:12, 53:7-14. FECA has a method of measuring pass-through contributions made by a donor's business entities, so that, for example, the sum total of all contributions given by the donor personally and all of his companies can be tracked. See Id. 51:13-52:17; Decl. of Andrea Todd-Goff ¶ 9, ECF No. 16-2. FECA does not permit corporate contributions. Hr'g Tr. 51:2-13.

         The CRA contains disclosure provisions for state campaigns, requiring public disclosure of the identities of all donors, except those donors giving anonymous cash donations of less than $100. See N.M. Stat. Ann. §§ 1-19-31(A), -34(B). The CRA requires that all contributions received and expenditures made go through a campaign committee for reporting purposes, but reporting is only to the New Mexico Secretary of State. See Id. § 1-19-26(Q), -27. The CRA's provisions do not apply to any federal candidate subject to FECA. See Id. § 1-19-37.

         The New Mexico legislature amended the CRA in 1993 to add a provision expressly prohibiting the use in state election campaigns of contributions received in a federal election campaign. See 1993 N.M. Laws Ch. 46, § 6 (later codified at N.M. Stat. § 1-19-29.1(C)). Then-Congressman Bill Richardson challenged the constitutionality of this provision. New Mexicans for Bill Richardson v. Gonzales, No. Civ. 93-1135 JP, Mem. Op. and Order (ECF No. 73), (D.N.M. Aug. 2, 1996). The Honorable James A. Parker ruled that § 1-19-29.1(C) violated the First Amendment because the provision's “[l]imitations on political campaign expenditures” infringed on core First Amendment rights and was not sufficiently narrowly tailored. Id. at 2-3. Judge Parker explained that, to further New Mexico's stated interest in shining the beneficial light of disclosure on sources of contributions, the legislature could have more carefully limited the statute's wording to say that a person can use funds acquired in federal election campaigns in state campaigns only if that person complies with state disclosure laws. Id. at 3.

         In 2009, New Mexico enacted campaign contribution limits for statewide and non-statewide elections. Republican Party of New Mexico v. King, 741 F.3d 1089, 1091 (10th Cir. 2013). The legislation was introduced in response to numerous pay-to-play corruption scandals involving New Mexico politicians. See Hr'g Tr. 83:8-91:25. These corruption scandals were widely and extensively reported in the news. See id.; Def.'s Hr'g Ex. 11-13.[2] The scandals had provoked considerable hostility by the public towards public officials. See Hr'g Tr. 94:25-95:19.

         Since its effective date of November 3, 2010, the CRA prohibits persons and political committees from knowingly soliciting or accepting contributions in excess of the contribution limits provided for in the CRA. See N.M. Stat. Ann. § 1-19-34.7(C). The CRA defines a contribution to include “a … deposit of money … that is made or received for a political purpose….” Id. § 1-19-26(F). In contrast, the CRA defines “expenditure” as “a payment, transfer or distribution or obligation or promise to pay, transfer or distribute any money or other thing of value for a political purpose.” Id. § 1-19-26(J). A “political purpose” in turn means “influencing or attempting to influence an election or pre-primary convention.” Id. § 1-19-26(M).

         Section 1-19-34.7 of the CRA limits a person and a “political committee” from making contributions greater than $5, 000 in aggregate during a primary election or $5, 000 in aggregate during a general election to a candidate for statewide office, including the candidate's campaign committee. See N.M. Stat. Ann. § 1-19-34.7(A)(1) & (2). The contribution amounts are indexed for inflation, see Id. § 1-19-34.7(D), and it has not been disputed that the CRA contribution limits in 2009 were $4, 800, increasing every two years, to the current limit of $5, 500 for any person, corporation, and political committee, including for a PAC, donating to a candidate running for statewide office. See Decl. of Andrea Todd-Goff ¶¶ 8, ECF No. 16-2; Hr'g Tr. 151:2-13, 210:19-211:9. The CRA defines a “political committee” as “two or more persons, other than members of a candidate's immediate family or campaign committee or a husband and wife who make a contribution out of a joint account, who are selected, appointed, chosen, associated, organized or operated primarily for a political purpose.” Id. § 1-19-26(L). The CRA separately defines a “campaign committee” as “two or more persons authorized by a candidate to raise, collect or expend contributions on the candidate's behalf for the purpose of electing the candidate to office, ” id. § 1-19-26(D), but the meaning of “candidate” is limited to a person seeking office in an election covered by the CRA, id. § 1-19-26(E).

         FECA is generally more stringent than the CRA, with stricter contribution limits than the CRA at all points relevant to this case. See Decl. of Andrea Todd-Goff ¶¶ 5, 8, ECF No. 16-2. Because the CRA does not forbid corporate donations, unlike FECA, the CRA currently permits a wealthy donor to donate up to $11, 000 of personal funds in an election cycle, and give up to $11, 000 for every single corporation and company he or she owns. See Hr'g Tr. 53:15-54:10. The CRA, unlike FECA, does not require campaign reports to contain the donor's employer or the aggregate amount for the election cycle. See id. 55:16-56:25; Pl.'s Hr'g Ex. B.

         Under the CRA, a candidate for one state elective office may transfer contributions received to an account for a different state elective office. See N.M. Stat. Ann. § 1-19-29.1(A)(5) (permitting candidate to make expenditures of contributions received for “expenditures incurred by the candidate when seeking election to another public office covered by [the Act]”). See also Hr'g Tr. 112:19-24, 213:3-12, 257:5-13; Office of the Secretary of State, Candidate Information for Campaign Reporting, available at http://www.sos.state.nm.us/uploads/FileLinks/ca39fa62c82b4aa18c995f8740bcce9e/CandidateI nformationforCampaignReportingv21.pdf (last visited October 4, 2017) (providing, in campaign report form, box to check to “Please transfer my current remaining campaign balance listed in CFIS to my new campaign indicated below”). The Secretary of State's office has not instituted enforcement actions against candidates for state races who have transferred funds in excess of $11, 000 from one state campaign account to another. See Hr'g Tr. 73:5-80:23, 226:4-228:8. The position of the Secretary of State's office is the transfers are permitted under the CRA because all transferred funds were raised pursuant to the CRA. See Id. 213:3-22, 226:4-228:8. Nevertheless, because it is not uncommon for supporters to contribute to a candidate each time he or she runs for office, it is possible that the transfers of funds between accounts for different state elective office contain contributions, which if aggregated, could potentially have exceeded the individual contributions limits under the CRA. See Id. 77:4-23, 178:8-19.

         A person who violates the CRA may face civil and criminal penalties. See N.M. Stat. Ann. §§ 1-19-34.6, -36. If the secretary of state reasonably believes that a person has committed or is about to commit a violation of the CRA, she “shall refer the matter to the attorney general or a district attorney for enforcement.” Id. § 1-19-34.6(A). See also Id. § 1-19-34.4(G) (“The secretary of state may refer a matter to the attorney general or a district attorney for a civil injunctive or other appropriate order or for criminal enforcement.”). The CRA gives both the attorney general and district attorney authority to institute a civil action for any violation of the CRA or to prevent a CRA violation that involves an unlawful solicitation or the making or acceptance of an unlawful contribution. Id. § 1-19-34.6(B). They may seek civil penalties and forfeiture of any contribution received as a result of an unlawful solicitation or contribution, id. § 1-19-34.6(B)-(C), and institute criminal prosecutions for violations of the CRA, id. § 1-19-36.

         The secretary of state also has authority granted by the CRA to “adopt and promulgate rules and regulations to implement the provisions of the [CRA];” id. § 1-19-26.2, “initiate investigations to determine whether any provision of the [CRA] has been violated, ” id. § 1-19-34.4(B), and conduct a thorough examination of filed reports to determine compliance with the CRA, id. § 1-19-32.1(A). “The secretary of state, in consultation with the attorney general, shall issue advisory opinions, when requested in writing to do so, on matters concerning” the CRA. Id. § 1-19-34.4(A). The secretary of state may levy administrative penalties for violations of the CRA, which may be reviewed in arbitration. See Id. § 1-19-34.4(D)-(F).

         B. Representative Pearce's Federal Campaign Funds

         Plaintiff Steve E. Pearce is a sitting United States Congressman representing New Mexico's Second Congressional District in the House of Representatives, serving in this capacity from 2003 to 2009 and from 2011 to the present. Def. Oliver's Answer ¶ 10, ECF No. 27. People for Pearce (“PFP”) is Representative Pearce's principal campaign committee, which is registered with and reports to the FEC and which he has used since 2009 to raise and spend funds in support of his federal campaigns for election and reelection. See Decl. of Andrea Todd-Goff ¶¶ 3-4, ECF No. 16-2; Def.'s Hr'g Ex. 1-7. Congressional election cycles are every two years and encompass a primary election usually in June and a general election in November, both in the same even years. Hr'g Tr. 136:6-137:11.

         Although FECA does not require disclosure of the identities of contributors giving less than $200, PFP has tracked this information in order to reconcile their records with their bank account, and is able to disclose the information. See Id. at 62:11-63:21; Decl. of Andrea Todd-Goff ¶ 6, ECF No. 16-2. PFP has less than approximately $100 of truly anonymous contributions. See Decl. of Andrea Todd-Goff ¶ 6, ECF No. 16-2.

         Under FECA, it is permissible for PFP to carry over contributions given during one election cycle for use in a subsequent election cycle. See Decl. of Andrea Todd-Goff ¶ 10, ECF No. 16-2. As of the date of the hearing, PFP's account contained approximately $910, 000 in campaign contributions. Hr'g Tr. 50:2-7, 160:5-10. At no time when soliciting or accepting contributions for PFP did Representative Pearce or anyone associated with PFP ever promise or assert that the contribution would be used only in one specific election cycle or in pursuit of one specific elective office. See Hr'g Tr. 70:19-71:1; Decl. of Andrea Todd-Goff ¶ 7, ECF No. 16-2.

         Contributions made to PFP beginning in 2009 and going forward were deposited into one PFP account, and expenditures for each campaign cycle were made from the same account. See Hr'g Tr. 127:20-134:23. After each election cycle, PFP had some leftover funds that it rolled over for the next election cycle. See Id. Each contribution was not earmarked by the campaign to be spent for a particular purpose, so with each rollover, it is not possible to attribute the specific amounts rolled over to a particular contributor's donation or to attribute specific donations to particular expenditures made. See Id. By way of example, the Ernst & Young PAC gave Representative Pearce $5, 000 in aggregate donations in 2010, and gave additional donations to Representative Pearce in subsequent election cycles, in accordance with FECA, for a total aggregate donation amount of $30, 000 from 2010 through 2016. See Hr'g Tr. 142:5-150:9; Def.'s Ex. 1-7. Because expenditures were not earmarked from specific contributors, it is unknown how much of the $910, 000 Representative Pearce seeks to transfer come from a specific donor, such as Ernst & Young PAC. See Hr'g Tr. 150:12-151:22. This uncertainty similarly exists for funds rolled over from one campaign to another under the CRA. See Id. 77:4-23, 178:8-19. No contributions made before 2009 remain in the PFP account, and PFP stopped accepting contributions after the election day of Representative Pearce's last run for Congress to avoid receiving contributions arguably towards his gubernatorial run in a FECA account to prevent donors from being able to effectively contribute twice to his gubernatorial campaign by giving to PFP and then later to PFNM. See Decl. of Andrea Goff ¶ 3, ECF No. 16-2.

         C. Representative Pearce's Gubernatorial Campaign

         Representative Pearce has announced his intention to run for the 2018 New Mexico gubernatorial election. Def. Oliver's Answer ¶ 10, ECF No. 27. A campaign committee under the CRA was set up for Representative Pearce's gubernatorial election, Pearce for New Mexico (“PFNM”). Decl. of Andrea Todd-Goff ¶ 8, ECF No. 16-2. Representative Pearce began fundraising for his gubernatorial election in July 2017, and as of October 9, 2017, he had raised a little more than one million dollars. See Hr'g Tr. 153:10-20; Pls.' Hr'g Ex. B. In the most recent reporting period under the CRA, Representative Pearce reported approximately $88, 000 in expenditures. See Hr'g Tr. 125:8-22; Pls.' Hr'g Ex. B.

         Representative Pearce's gubernatorial campaign currently has two full-time staffers working in New Mexico, Andrea Todd-Goff, a senior advisor to and finance director for Representative Pearce, and Paul Smith, Campaign Manager for PFNM. Hr'g Tr. 44:17-20, 158:8-14, 181:7-8. Representative Pearce's campaign would like to hire four more campaign staffers: a press secretary, two field directors, and a social media assistant. Hr'g Tr. 158:8-160:4, 164:12-22, 185:1-5. The positions would assist the campaign to increase Congressman Pearce's name recognition statewide, to develop relationships with the press, and to determine how best to get out the campaign's message. See Id. 185:12-189:1. Two dark-money groups launched attack ads against Representative Pearce shortly after he entered the gubernatorial race, and had he had his PFP funds, the campaign would have paid for response ads to counteract the one-sided messaging. See Id. 166:7-167:11, 190:6-191:23.

         Representative Pearce's campaign has refrained from hiring the four positions and paying for ads, despite having around $900, 000, because of the nature of political campaigns. See Id. 158:8-161:2, 167:23-168:17. In political campaigns, large amounts of funds are needed near the time of the election to get out the vote and to advertise, so a campaign tries to preserve funds to ensure it has enough money for those crucial subsequent needs. See Id. 167:23-168:17. In New Mexico, state-wide television advertisements cost about $200, 000 per week, so campaigns need to hold onto the vast majority of their funds for later in the race. See Id. 189:12-21, 200:1-201:5.

         Campaign funds also serve as a demonstration of the strength of a candidate, particularly early in the race before polling begins, and large funds may deter additional opponents from deciding to run against the candidate. See id. 169:20-170:22, 182:23-183:14; Decl. of Andrea Todd-Goff ¶¶ 15, ECF No. 16-2. Although Representative Pearce does not currently have a challenger in the primary, the campaign needs to plan its budget for the possibility. See Hr'g Tr. 170:10-171:2. The strength of a candidate, measured early in the campaign largely by campaign funds, affects recruiting for campaign staff, as the top staffers generally want to work for strong campaigns with the greatest chance of winning. See Id. 183:5-24, 186:9-187:19. The pool of talent shrinks closer to the election, so the sooner a campaign can afford to bring on staffers, the better the chance of recruiting top, experienced talent. See Id. Representative Pearce wishes to transfer the campaign contributions in his PFP account into his PFNM account to use in his gubernatorial campaign immediately to hire the additional staff and pay for advertising. See Id. 158:8-161:2, 172:12-22, 184:19-25.

         By way of comparison, New Mexico Congresswoman Michelle Lujan Grisham is also currently running for New Mexico governor. Hr'g Tr. 123:13-24. On October 9, 2017, Representative Lujan Grisham reported having over $1.3 million in contributions and total expenditures of over $519, 000. See Pl.'s Ex. K; Hr'g Tr. 125:8-22. She has raised approximately $2.2 million total with approximately $1.6 million on hand. See Hr'g Tr. 192:11-15. Representative Pearce has considered Congresswoman Lujan Grisham's campaign funds in determining his own campaign expenditures, and if he had his federal funds, the campaign would be more comfortable increasing its expenditures. See Id. at 192:2-193:13. Although there are multiple challengers vying for the Democratic nomination for governor, the money they spend increasing their own name recognition gives an advantage over Representative Pearce, so he would like to spend money on advertising now. See Id. 204:16-205:12.

         D. The July Advisory Opinion

         Before Representative Pearce declared his candidacy for governor, in April 2016 William Canfield, counsel for PFP, asked the Secretary of State whether transfers from a candidate's FECA account into a CRA account were permitted, and if so, if they were subject to restrictions or limitations. See Letter from Amy B. Bailey dated June 15, 2016, ECF No. 1-2 at 72 of 82; Letter from William B. Canfield III dated June 20, 2017, ECF No. 76 of 82. On June 15, 2016, Amy B. Bailey, General Counsel for the Office of the Secretary of State, responded affirmatively that a federal officeholder may transfer funds from a FECA candidate campaign committee to a state candidate campaign committee, noting that the Section 1-19-29.1(C) restriction had been declared unconstitutional in a federal court. See Letter from Amy B. Bailey dated June 15, 2016, ECF No. 1-2 at 72-73 of 82. Ms. Bailey, however, stated that there were restrictions on the transfer of such funds, citing Section 1-19-34.7's limitations on contributions a candidate or political committee may receive, and giving as an example the $5, 400 maximum aggregate contribution limit from a single donor for each election during the cycle. Id. In response to Mr. Canfield's inquiry whether the balance of funds in a FECA campaign committee could be considered the candidate's personal funds, Ms. Bailey replied, “No. The FECA candidate campaign committee is a campaign committee under the CRA.” Id. Ms. Bailey further stated that any contribution that is not a candidate's personal funds is subject to the limits of Section 1-19-34.7(A). Id.

         Subsequently, PFP sought the current Secretary of State's position on the same issues, and after back-and-forth correspondence, see Compl. Ex. B, ECF No. 1-2 at 74-79 of 82, New Mexico Deputy Secretary of State John Blair wrote a letter to Mr. Canfield dated July 19, 2017, setting forth Secretary of State Oliver's position (hereinafter “the July 2017 Advisory Opinion”), see Id. at 80-82 of 82. Mr. Blair stated, “[T]he official position of this office continues to be that Congressman Steve Pearce may transfer $5, 500 from his FECA account to a CRA account for a gubernatorial campaign both for the 2018 primary election and for the 2018 general election.” Id. at 80 of 82. Mr. Blair wrote that the CRA “only contemplates the term ‘transfer' in terms of an expenditure made under the CRA when seeking an election for an office covered by the CRA, ” and that the CRA does not provide any process or guidance whereby funds can be transferred into a campaign account governed by the CRA from a campaign account not governed by the CRA. Id. at 81 of 82. He explained that Section 1-19-34.7(A)(2)(b) uses the term “contribution” when discussing the limits of a contribution from one political committee to another, and that because “contribution” under the CRA includes a “deposit of money, ” the Secretary of State concluded that the desired “transfer” from the FECA account is a “deposit of money” subject to contribution limits. Id. Mr. Blair concluded: “Your request to transfer the entirety of Congressman Pearce's FECA account would be to do so without restriction or limitation in direct contravention of Ms. Bailey's letter and the CRA.” Id. at 82 of 82.

         The Secretary of State's office also advised Congresswoman Lujan Grisham that the transfer of her federal campaign funds were likewise subject to the CRA contribution limits. See Hr'g Tr. 213:23-215:9.

         E. Federal Complaint

         On July 20, 2017, People for Pearce and Representative Pearce filed a Complaint for Injunctive and Declaratory Relief, and Attorneys' Fees against, according to the caption, Secretary of State Oliver in her individual and official capacities, Attorney General Balderas in his individual and official capacities, and Fifth Judicial District Attorney of New Mexico Dianna Luce in her official capacity. Compl. 1, ECF No. 1. In the body of the Complaint, Plaintiffs assert claims for declaratory and injunctive relief against all Defendants in their official capacities for violations of the First Amendment and the Equal Protection Clause. See Id. ΒΆΒΆ 64-80. They seek to enjoin ...


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