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Phil Thalheimer; Associated Builders v. City of San Diego

January 20, 2012

PHIL THALHEIMER; ASSOCIATED BUILDERS & CONTRACTORS PAC, SPONSORED BY ASSOCIATED BUILDERS &
CONTRACTORS, INC. SAN DIEGO CHAPTER; LINCOLN CLUB OF SAN DIEGO COUNTY; REPUBLICAN PARTY OF SAN DIEGO; AND JOHN NIENSTEDT, SR., , AND PLAINTIFFS,
v.
CITY OF SAN DIEGO; RICHARD M. VALDEZ, CHAIR, CITY OF SAN DIEGO ETHICS COMMISSIONER, SUED IN HIS OFFICIAL CAPACITY; W. LEE BIDDLE, CITY OF SAN DIEGO ETHICS COMMISSIONER, SUED IN HIS OFFICIAL CAPACITY; GUILLERMO CABRERA, CITY OF SAN DIEGO ETHICS COMMISSIONER, SUED IN HIS OFFICIAL CAPACITY, ALSO KNOWN AS GIL; CLYDE FULLER, CITY OF SAN DIEGO ETHICS COMMISSIONER, SUED IN HIS OFFICIAL CAPACITY; DOROTHY LEONARD, CITY OF SAN DIEGO ETHICS COMMISSIONER, SUED IN HER OFFICIAL CAPACITY; LARRY S. WESTFALL, CITY OF SAN DIEGO ETHICS COMMISSIONER, SUED IN HIS OFFICIAL CAPACITY; JERRY SANDERS, THE HONORABLE MAYOR OF SAN DIEGO, SUED IN HIS OFFICIAL CAPACITY; JAN GOLDSMITH, CITY ATTORNEY FOR THE CITY OF SAN DIEGO, SUED IN HIS OFFICIAL CAPACITY; AND ELIZABETH MALAND, CITY CLERK OF SAN DIEGO, SUED IN HER OFFICIAL CAPACITY, DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER: (1) GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT. [Doc. No. 119] (2) GRANTING IN PART AND DENYING IN PART DEFENDANT CITY OF SAN DIEGO'S MOTION FOR PARTIAL SUMMARY JUDGMENT, [Doc. No. 115].

This is an action challenging the constitutionality of San Diego's campaign finance laws on First Amendment grounds. At issue are six provisions of the San Diego Municipal Election Campaign Control Ordinance ("ECCO"), which is a comprehensive law governing all aspects of campaign financing in San Diego city elections. Currently before the Court are the parties' cross-motions for summary judgment. Having considered the parties' arguments, and for the reasons set forth below, the Court concludes that the following ECCO sections violate the First Amendment: § 27.2938(a), to the extent it prohibits candidates from spending their own money prior to twelve months before an election; § 27.2936(b), to the extent it sets a limit on how much individuals and non-individuals can contribute to general purpose recipient committees, including political parties, making independent expenditures; §§ 27.2950 and 27.2951, to the extent they completely ban direct contributions to candidates by political parties; and § 27.2934(b), which was enacted after this Court's grant of preliminary injunction and which places a $1,000 limit on direct contributions to candidates by political parties. On the other hand, the Court concludes that the following ECCO sections are closely drawn to achieve a sufficiently important interest, and therefore do not violate the First Amendment: § 27.2938(a), to the extent it prohibits contributions prior to twelve months before an election; § 27.2935(a), which places a $500 limit on individual contributions to candidates; § 27.2936(b), to the extent it places a $500 limit and an "individual" attribution on contributions to general purpose recipient committees, including political parties, when they make direct contributions to candidates; and §§ 27.2950 and 27.2951, to the extent they completely ban direct contributions to candidates by non-individuals other than political parties. Accordingly, both Plaintiffs' motion for summary judgment and Defendant City of San Diego's partial motion for summary judgment are GRANTED IN PART and DENIED IN PART.

BACKGROUND

Plaintiffs are Phil Thalheimer, a former and future city council candidate; ABC PAC, a political action committee formed by the San Diego chapter of the Associated Builders and Contractors, Inc.; the Lincoln Club, a registered political action committee; the Republican Party of San Diego, the local branch of the national Party; and John Nienstedt, a San Diego resident who regularly contributes to local candidates and political committees. Plaintiffs filed this lawsuit to enjoin enforcement of several provisions of the San Diego campaign finance laws they claim violate their respective First Amendment rights, facially and as applied.

Plaintiffs' complaint named as Defendants the City of San Diego ("the City") and several government officials in their official capacity. On January 8, 2010, the Court granted the parties' joint motion to dismiss all Defendants except the City. [Doc. No. 9.] The dismissed Defendants remain bound by the Court's rulings with respect to the matters at issue. [Id.]

Plaintiffs challenge six provisions of the ECCO, which is a comprehensive law governing all aspects of campaign financing in San Diego city elections.*fn1 The ECCO was added to the San Diego Municipal Code in 1973, following a scandal that led to the indictment of the City's Mayor and eight of the City Council members on corruption charges ("the Yellow Cab scandal"). (See Declaration of Stacey Fulhorst in Support of Defendant's Motion for Summary Judgment ("Fulhorst Decl.") ¶ 5 [Doc. No. 115-5]; Declaration of Steven P. Erie, Ph.D. in Support of Defendant's Motion for Summary Judgment ("Erie Decl.") ¶ 6 [Doc. No. 115-6].)

In their initial verified complaint, filed on December 21, 2009, Plaintiffs challenged the following provisions of the ECCO, both facially and as applied to Plaintiffs: - Section 27.2935(a), which makes it "unlawful for an individual to make to any candidate or committee supporting or opposing a candidate, or for any candidate or committee supporting or opposing a candidate to solicit or accept, a contribution that would cause the total amount contributed by that individual to support or oppose the candidate to exceed $500 for any single election." - Section 27.2936(b), which makes it "unlawful for any general purpose recipient committee to use a contribution for the purpose of supporting or opposing a candidate unless the contribution is attributable to an individual in an amount that does not exceed $500 per candidate per election."*fn2 - Section 27.2938(a), which makes it "unlawful for any candidate or controlled committee seeking elective City office to solicit or accept contributions prior to the twelve months preceding the primary election for the office sought."*fn3

The San Diego Ethics Commission ("SDEC") has opined that this prohibition extends to a candidate spending personal funds in support of his or her own candidacy prior to the twelve months preceding the election. (See SDEC Informal Advice Letter No. IA06-11, at 2 (Dec. 5, 2006) (attached as Exhibit 3 to First Amended Verified Complaint [Doc. No. 94-1]).) - Section 27.2950, which makes it "unlawful for a candidate or controlled committee, or any treasurer thereof, or any other person acting on behalf of any candidate or controlled committee, to solicit or accept a contribution from any person other than an individual for the purpose of supporting or opposing a candidate for elective City office." ECCO § 27.2950(a). It also makes it "unlawful for a person other than an individual to make a contribution to a candidate or controlled committee for the purpose of supporting or opposing a candidate for elective City office." ECCO§ 27.2950(b). A "person" other than an individual includes a "proprietorship, firm, partnership, joint venture, syndicate, business trust, company, corporation, association, committee, labor union, or any other organization or group of persons acting in concert." ECCO § 27.2903. - Section 27.2951, which makes it "unlawful for any individual to make, or any committee to accept, a contribution drawn against a checking account or credit card account unless such account belongs to one or more individuals in their individual capacity."

As soon as they filed their verified complaint, Plaintiffs moved for a preliminary injunction to block enforcement of the challenged ECCO provisions before trial, a time period they noted would likely encompass at least two municipal elections: San Diego's June 8, 2010 primary, and the November 2, 2010 general election. On February 16, 2010, after hearing oral argument on the motion, the Court granted in part and denied in part the preliminary injunction. Specifically, the Court concluded that Plaintiffs were unlikely to succeed in challenging § 27.2935(a), the City's $500 individual contribution limit, except as it applied to contributions to committees making independent expenditures. The Court also held that Plaintiffs were unlikely to succeed in their First Amendment challenge to the temporal contribution ban, § 27.2938(a), except to the extent it prohibited the candidates from spending their own money. On the other hand, the Court preliminarily enjoined enforcement of § 27.2936(b), which set fund-raising/spending limits as to committees making only independent expenditures. Finally, as to the non-individual contribution limits, §§ 27.2950 and 27.2951, the Court concluded that Plaintiffs were unlikely to succeed on their claim that the laws were unconstitutional as applied to corporations and other organizational entities, but enjoined the provisions as applied to political parties. [Doc. No. 42.]

On February 19, 2010, in response to the parties' motions for clarification, the Court clarified that the injunction with respect to § 27.2936(b) enjoined the City from enforcing that provision as to both individual and non-individual contributions. [Doc. No. 46.] The Court also clarified that the City was enjoined from enforcing § 27.2951 to the extent that section prohibited committees that make only independent expenditures from accepting contributions drawn against a checking or credit card account belonging to a non-individual. [Id.]

Following the Court's order on the preliminary injunction, the City enacted § 27.2934(b), allowing political parties to contribute up to $1,000 per election to candidates in municipal elections.*fn4 In their First Amended Verified Complaint ("FAVC"), filed on August 12, 2010, Plaintiffs challenged the new provision and then sought preliminary injunction against its enforcement pending trial. On September 3, 2010, the Court denied the preliminary injunction in this respect. [Doc. No. 104.] The Court also denied Plaintiffs' request to enjoin § 27.2936(b) to the extent the City intended to apply it to political party committees making contributions to City candidates. The Court did so based on the City's representations that it will not enforce § 27.2936(b) "with regard to political party committees making contributions to City candidates for so long as the $1,000 limit on such contributions remains in effect." (See Declaration of Stacey Fulhorst in Support of Defendant's Response to Supplemental Authority ¶ 4 [Doc. No. 103-1].)

The parties cross-appealed the Court's order on the preliminary injunction, except as to the Court's decision not to enjoin the $500 contribution limit in § 27.2935(a) and the Court's decision to enjoin § 27.2938(a) as it applied to the candidates spending their own funds. Plaintiffs also did not appeal the Court's decision denying an injunction with respect to § 27.2934(b). On June 9, 2011, the Ninth Circuit affirmed this Court's initial preliminary injunction order in all respects. See Thalheimer v. City of San Diego, 645 F.3d 1109 (9th Cir. 2011).

The parties filed their cross-motions for summary judgment on November 23, 2011, together with their respective statements of undisputed facts. The parties filed their oppositions on December 9, 2011, and their replies on December 16, 2011. On December 28 and 29, 2011, the City filed two notices of supplemental authority, bringing to this Court's attention two recently decided cases: Ognibene v. Parkes, - F.3d -, 2011 WL 6382451 (2d Cir. Dec. 21, 2011), amended and superseded by - F.3d -, 2012 WL 89358 (Jan. 12, 2012), and Family PAC v. McKenna, - F.3d -, 2011 WL 6826338 (9th Cir. Dec. 29, 2011). Plaintiffs filed a response to the City's first notice of supplemental authority on January 3, 2012. The Court heard oral argument on the parties' cross-motions for summary judgment on January 6, 2012.

LEGAL STANDARD

Summary judgment is proper where the pleadings and materials demonstrate "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

The moving party bears "the initial responsibility of informing the district court of the basis for its motion." Celotex, 477 U.S. at 323. To satisfy this burden, the movant must demonstrate that no genuine issue of material fact exists for trial. Id. at 322. To withstand a motion for summary judgment, the non-movant must then show that there are genuine factual issues which can only be resolved by the trier of fact. Reese v. Jefferson Sch. Dist. No. 14J, 208 F.3d 736, 738 (9th Cir. 2000). A party asserting that a fact cannot be or is genuinely disputed cannot rely solely on its pleadings, but must support that assertion with affidavits, depositions, or answers to interrogatories. Fed. R. Civ. P. 56(c)(1); see also Celotex, 477 U.S. at 324.

Due to the nature of the issues presented, challenges to campaign finance laws rarely involve disputed issues of fact, and thus are often proper subject matter for summary judgment.

DISCUSSION

In Buckley v. Valeo, 424 U.S. 1, 14 (1976) (per curiam), the Supreme Court held that campaign finance regulations that impose expenditure and contribution limitations "operate in an area of the most fundamental First Amendment activities." "Discussion of public issues and debate on the qualifications of candidates are integral to the operation of the system of government established by our Constitution. The First Amendment affords the broadest protection to such political expression in order 'to assure (the) unfettered interchange of ideas for the bringing about of political and social changes desired by the people.'" Id. (citation omitted). "A restriction on the amount of money a person or group can spend on political communication during a campaign necessarily reduces the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached." Id. at 19.

The crucial distinction, according to the Supreme Court in Buckley, is between limits on campaign expenditures and campaign contributions. The Supreme Court reasoned that expenditure limits "represent substantial rather than merely theoretical restraints on the quantity and diversity of political speech," whereas contribution limits "entail[] only a marginal restriction upon the contributor's ability to engage in free communication." Id. at 20. Thus:

A contribution serves as a general expression of support for the candidate and his views, but does not communicate the underlying basis for the support. The quantity of communication by the contributor does not increase perceptibly with the size of his contribution, since the expression rests solely on the undifferentiated, symbolic act of contributing. At most, the size of the contribution provides a very rough index of the intensity of the contributor's support for the candidate. A limitation on the amount of money a person may give to a candidate or campaign organization thus involves little direct restraint on his political communication, for it permits the symbolic expression of support evidenced by a contribution but does not in any way infringe the contributor's freedom to discuss candidates and issues. While contributions may result in political expression if spent by a candidate or an association to present views to the voters, the transformation of contributions into political debate involves speech by someone other than the contributor.

Id. at 21. The Supreme Court reaffirmed the expenditure-contribution distinction most recently in Arizona Free Enterprise Club's Freedom Club PAC v. Bennett, 131 S. Ct. 2806, 2816-17 (2011).

Because of the greater infringement on the core First Amendment rights, expenditure limits are subject to strict scrutiny, "which requires the Government to prove that the restriction 'furthers a compelling interest and is narrowly tailored to achieve that interest.'" See Citizens United v. Fed. Election Comm'n, 130 S. Ct. 876, 898 (2010) (citation omitted); see also Fed. Election Comm'n v. Nat'l Conservative Action Comm., 470 U.S. 480, 496 (1985) ("NCPAC") (in examining an expenditure limit, the Supreme Court looks to whether it is "narrowly tailored" to serve a "sufficiently strong governmental interest"); Buckley, 424 U.S. at 44-45 ("[T]he constitutionality of [an expenditure limit] turns on whether the governmental interests advanced in its support satisfy the exacting scrutiny applicable to limitations on core First Amendment rights of political expression."). On the other hand, contribution limits are subject to a lower level of scrutiny ("closely drawn" scrutiny), and are permissible as long as the government demonstrates that they are "closely drawn" to match "a sufficiently important interest." See Buckley, 424 U.S. at 25; see also Randall v. Sorrell, 548 U.S. 230, 247 (2006) (plurality); Davis v. Fed. Election Comm'n, 554 U.S. 724, 737 (2000); Nixon v. Shrink Missouri Gov't PAC, 528 U.S. 377, 387-88 (2000) ("Shrink") ("[U]nder Buckley'sstandard of scrutiny, a contribution limit involving 'significant interference' with associational rights, could survive if the Government demonstrated that contribution regulation was 'closely drawn' to match a 'sufficiently important interest,' though the dollar amount of the limit need not be 'fine tuned.'" (internal citations omitted)).*fn5

I. The $500 per election individual contribution limit in § 27.2935(a).

The parties both move for summary judgment with respect to the constitutionality of § 27.2935(a), which makes it unlawful for any individual to make, or for any candidate or committee to solicit or accept, "a contribution that would cause the total amount contributed by that individual to support or oppose the candidate to exceed $500 for any single election."*fn6 The City contends that this case is governed by the general principles set forth in Buckley, 424 U.S. 1, and its progeny, which have deferred to the contribution limits imposed by the legislature. Plaintiffs, on the other hand, contend that this is a unique case where specific "danger signs" exist that make the $500 limit on individual contributions unconstitutionally low. See Randall, 548 U.S. at 249. Because it is a contribution limit, § 27.2935(a) must be "closely drawn" to match "a sufficiently important interest." See Shrink, 528 U.S. at 387-88; Buckley, 424 U.S. at 25.

A. Legal standard

In Buckley, the Supreme Court upheld a $1,000 contribution limit, concluding that the interest in preventing corruption and its appearance was "sufficiently important" to justify the limit. Id. at 26-29. The Supreme Court also found the contribution limit before it was "closely drawn." Id. at 29-30. Pointing out that it had "'no scalpel to probe, whether, say, a $2,000 ceiling might not serve as well as $1,000,'" id. at 30 (citation omitted), the Supreme Court found no indication that the $1,000 contribution limit would have "any dramatic adverse effect on the funding of campaigns." Id. at 21. The Supreme Court concluded that any distinctions in degree would become significant "only when they can be said to amount to differences in kind." Id. at 30. Since Buckley, "the [Supreme] Court has consistently upheld contribution limits in other statutes." Randall, 548 U.S. at 247 (citing cases). That is, until Randall.

In Randall, the Supreme Court reiterated that, "[i]n practice, the legislature is better equipped to make . . . empirical judgments [as to contribution limits], as legislators have 'particular expertise' in matters related to the costs and nature of running for office." Id. at 248. Nonetheless, the Supreme Court concluded that it must recognize the existence of some "lower bound," whereby the contribution limit becomes unconstitutionally low. Id. "That is because contribution limits that are too low can also harm the electoral process by preventing challengers from mounting effective campaigns against incumbent officeholders, thereby reducing democratic accountability." Id. at 248-49. Thus, when faced with contribution limits, a court must determine whether those limits "prevent candidates from 'amassing the resources necessary for effective campaign advocacy;' whether they magnify the advantages of incumbency to the point where they put challengers to a significant disadvantage; in a word, whether they are too low and too strict to survive First Amendment scrutiny." Id. at 248 (internal citation omitted).

Indetermining whether the contribution limit in Randall was unconstitutionally low, the three-justice plurality first reviewed to see if there were "danger signs" present, that would suggest the contribution limits were "sufficiently low as to generate suspicion that they are not closely drawn." Id. at 249. The plurality found the following "danger signs": (1) the $400 limit was per election cycle, which included both a primary and general election; (2) the limit was well below the limits upheld in Buckley, especially when adjusted to reflect its value in 1976 (the year Buckley was decided); (3) considered as a whole, the contribution limits were the lowest in the nation; (4) the limit was well below the lowest limit the Supreme Court has previously upheld ($1,075); and (5) the limit was not adjusted for inflation. Id. at 249-51. Having found these "danger signs," the plurality noted that it was required to "review the record independently and carefully with an eye toward assessing the statute's 'tailoring.'" Id. at 249 (citation omitted).

Having reviewed the record, the plurality was convinced that the contribution limits in Randall were "too restrictive," and therefore not "closely drawn." Id. at 253. It identified the following five factors: (1) the record suggested the limits would "significantly restrict funding available for challengers to run competitive campaigns," id. at 253-56; (2) the low limits threatened the right to associate in a political party, id. at 256-59; (3) the limits possibly impeded the effective use of volunteers, id. at 259-60; (4) the limits were not adjusted for inflation, id. at 261; and (5) there was no "special justification" to warrant these burdens, id. at 261.

B. Analysis

To begin with, the City has demonstrated "a sufficiently important interest." The Supreme Court has concluded that "preventing corruption or the appearance of corruption are the only legitimate and compelling government interests thus far identified for restricting campaign finances." NCPAC, 470 U.S. at 496-97 (1985); see also Buckley, 424 U.S. at 26-27 ("To the extent that large contributions are given to secure a political quid pro quo from current and potential office holders, the integrity of our system of representative democracy is undermined. Although the scope of such pernicious practices can never be reliably ascertained, . . . the problem is not an illusory one."); id. at 27 ("Of almost equal concern as the danger of actual quid pro quo arrangements is the impact of the appearance of corruption stemming from public awareness of the opportunities for abuse inherent in a regime of large individual financial contributions.").

In this case, the record sufficiently demonstrates corruption in the San Diego municipal government. The history of corruption stretches back to at least the early 1970s, when the City Mayor and eight City Council members were indicted on corruption charges in the Yellow Cab scandal. (See Fulhorst Decl ¶ 5; Erie Decl. ¶ 6; see also Def. RJN, Exs. 6, 7, 8, 9.) Then, in 1985, San Diego Mayor Roger Hedgecock resigned after being convicted of concealing illegal campaign contributions. (Fulhorst Decl. ¶ 6; Erie Decl. ¶¶ 7, 8; see also Def. RJN, Exs. 8, 10.) In 2001, City Council member Valerie Stallings resigned after pleading guilty to corruption charges. (Fulhorst Decl. ¶ 7; Erie Decl. ¶ 9; see also Def. RJN, Exs. 8, 11.) Most recently, three City Council members were indicted on fraud and conspiracy counts involving channeling campaign contributions from the adult entertainment industry in exchange for an agreement to repeal the no-touch laws in strip clubs. (Fulhorst Decl. ¶ 8; Erie Decl. ¶ 10; see also Def. RJN, Exs. 8, 12, 13.) Indeed, the Ninth Circuit recently acknowledged that its case law "contains a vivid illustration of corruption in San Diego municipal government involving campaign contributions timed to coincide with the donors' particular business before the city council." Thalheimer, 645 F.3d at 1123 n.3; see also United States v. Inzunza, 638 F.3d 1006 (9th Cir. 2011) (affirming the conviction of a former San Diego Council member on charges stemming from a bribery scandal).

Next, applying the Randall analysis, there are no sufficient "danger signs" in this case that would suggest the contribution limit is not closely drawn. Plaintiffs first argue that the $500 limit is impermissibly low because the City's own Ethics Commission, the body established "to monitor, administer, and enforce the City's governmental ethics laws [and] propose new governmental ethics law reforms," see San Diego Municipal Code, ch. 2, art. 6, div. 4, ยง 26.0401, has recommended that the contribution limit be increased to $1,000. (See SDEC Minutes for Meeting of Thursday, May 8, 2008 (attached as Exhibit 5 to the FAVC) [Doc. No. 84-2].) However, as this Court previously noted in denying Plaintiffs' motion for preliminary injunction, "the fact that the Commission recommended a higher limit does not necessarily mean that a lower amount would be unconstitutional." (See ...


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