DISTRICT COURT, CITY AND COUNTY OF DENVER, COLORADO Court Address: 1437 Bannock Street Denver, Colorado 80202

Plaintiffs: COLORADO ETHICS WATCH and COLORADO COMMON CAUSE v. Defendant: SCOTT GESSLER, in his capacity as Secretary of State of Colorado And Plaintiffs: DAVID PALADINO; MICHAEL COURT USE ONLY CERBO; PRO-CHOICE COLORADO PAC; PPRM BALLOT ISSUE COMMITTEE; and Case Numbers: 2012CV2133 CITIZENS FOR INTEGRITY, INC. and 2012CV2153 v. Defendant: SCOTT GESSLER, as Secretary of Courtroom: 280 State for the State of Colorado Attorneys for Plaintiffs in 2012CV2133: Luis Toro, #22093 Margaret Perl, #43106 1630 Welton Street, Suite 415 Denver, Colorado 80202 Telephone: (303) 626-2100 Fax: (303) 626-2101 E-mail: ltoro@coloradoforethics.org pperl@coloradoforethics.org Attorneys for Colorado Ethics Watch Jennifer H. Hunt, # 29964 Hill & Robbins, P.C. 1441 18th Street, Suite 100 Denver, CO 80202-1256 Telephone: (303) 296-8100 Fax: (303) 296-2388 E-mail: jhunt@hillandrobbins.com Attorneys for Colorado Common Cause JOINT OPENING BRIEF OF COLORADO ETHICS WATCH AND COLORADO COMMON CAUSE

INTRODUCTION Plaintiffs in these consolidated actions challenge the Secretary of States complete revision of the Campaign and Political Finance Rules in a way that fundamentally undermines the contribution limits and disclosure regime enacted by Colorado voters and the Colorado General Assembly. The combined result of these new rules is that vast amounts of spending in Colorado candidate and ballot measure elections will no longer be subject to public disclosure, and some groups working directly to support or oppose candidates will be able to operate without compliance with the constitutional contribution limits. In their Complaint, Colorado Ethics Watch (Ethics Watch) and Colorado Common Cause (CCC) identified seven rules in the revision that contradict constitutional and statutory mandates. One of the seven rules has since been modified in a way that addresses the harm alleged in the complaint.1 For the reasons set forth herein, the six remaining rules under challenge should be set aside. BACKGROUND A. The Foundations of Colorado Campaign Finance Law

In 2002, Colorado voters passed Amendment 27, which became Article XXVIII of the Colorado Constitution. Article XXVIII creates a comprehensive campaign and political finance system, including specific contribution limits and disclosure thresholds and requirements for various types of committees and political spending. Most relevant to this case are the following Article XXVIII provisions:

On May 23, 2012, the Secretary adopted a new Rule 6.1.3, which prevents any funds raised by a county committee of a political party in a home rule jurisdiction from being transferred to other county committees or the state committee. This rule change appears to render moot Plaintiffs Seventh Claim for Relief, which challenged Rule 14.4 on the ground that it permitted evasion of contribution limits. See Air Pollution Control Commn v. Colorado-Ute Electric Assn, 672 P.2d 993, 997 (Colo. 1983) (change of rule under challenge rendered case moot). 2

Electioneering Communication is defined as a communication that unambiguously refers to any candidate and is broadcast, printed in a newspaper or billboard, direct mailed or distributed to members of the electorate for that candidates office within 30 days before a primary election or 60 days before any general election. Colo. Const. art. XXVIII, 2(12)(a).

Political Committee is defined as any person or group of persons that have accepted or made contributions or expenditures in excess of $200 to support or oppose the nomination or election or one of more candidates. Colo. Const. art. XXVIII, 2(12)(a).

Issue Committee is defined as a person or group of persons that has a major purpose of supporting or opposing any ballot issue or ballot question or has accepted contributions or made expenditures in excess of $200 in support or opposition of any ballot issue. Colo. Const. art. XXVIII, 2(10)(a).

The Fair Campaign Practices Act (FCPA) and subsequent legislation supplement this constitutional scheme. See C.R.S. 1-45-101 et seq. Among other provisions, the statute states that major purpose for purposes of the constitutional definition of issue committee is determined by an organizations specifically identified objectives in its organizational documents or the organizations demonstrated pattern of conduct as shown by annual expenditures made in relation to a ballot issue or involvement in communications in support or opposition to a ballot issue. C.R.S. 1-45-103(12)(b). The statute also contains a number of provisions requiring additional disclosure of political spending. A specific reporting regime was created in statute for political organizations, defined as follows:

A political organization defined in section 527(e)(1) of the federal Internal Revenue Code of 1986, as amended, that is engaged in influencing or attempting to influence the selection, nomination, election or appointment of any individual to any state or local public office in the state and that is exempt, or intends to seek any exemption, from taxation pursuant to section 527 of the internal revenue code. C.R.S. 1-45-103(14.5). A political organization is required to report any contributions and spending2 of more than $20 in one reporting period. C.R.S. 1-45-108.5. The FCPA also requires all candidates, political committees, issue committees and political parties to file a specific report if they receive any contribution of $1,000 or more within the last 30 days before a primary or general election. C.R.S. 1-45-108(2.5). This major contributor report is required to be filed within 24 hours of receipt of the contribution and is required in addition to any report already required to be filed on a periodic basis. C.R.S. 145-108(2.5). The statute authorizes a civil penalty of $50 per day for each day that a major contributor report is not filed. C.R.S. 1-45-111.5(c). B. Plaintiffs Interest in Campaign Finance Rules

Colorado Ethics Watch is a registered trade name of Citizens for Responsibility and Ethics in Washington (CREW), a non-profit corporation authorized to conduct business in Colorado that supports strong enforcement of Colorado ethics, transparency and campaign finance laws. Colorados system of campaign finance enforcement relies largely on individual prosecution of violations pursuant to Colo. Const. art. XXVIII, 9(2), which allows any person to file a complaint with the Secretary, who refers the matter to an administrative law judge (ALJ) for trial. See Colorado Ethics Watch v. Senate Majority Fund, LLC, 269 P.3d

Spending is specifically defined in the statute as funds expended influencing or attempting to influence the selection, nomination, election or appointment of any individual to any state or local public office in the state. C.R.S. 1-45-103(16.5). 4

1248, 1252, nn. 2 & 3 (Colo. 2012); Patterson Recall Comm., Inc. v. Patterson, 209 P.3d 1210, 1215 (Colo. App. 2009). Consistent with its mission, Ethics Watch has filed numerous complaints with the Secretary of State alleging violations of campaign finance laws. Ethics Watch has a clear interest in challenging rules that would keep information secret that should be disclosed and that would make it more difficult to prosecute alleged violations of Colorado campaign finance laws. CCC is a non-profit non-partisan membership organization with approximately 5,100 members within the state of Colorado, many of whom are registered Colorado voters and who regularly vote in Colorado elections. CCCs mission includes to strengthening public participation and public faith in our institutions of self-government, promoting fair and honest elections, and protecting the civil rights of all Americans. As part of its goal to promote open, honest and accountable government, CCC is committed to ensuring that the campaign finance disclosure requirements mandated in the Colorado Constitution and codified in C.R.S. 1-45108 are preserved and complied with. Indeed, CCC was the sponsoring entity behind the drafting of Amendment 27 in 2002 which passed with over 66% of the vote and is now Article XXVIII of the Colorado Constitution. As a non-partisan organization, CCC does not endorse any political candidates or contribute to partisan campaigns. It does, however, participate in and make contributions to non-partisan issue committees working on issues germane to the purposes of the organization. Last year, these two plaintiffs successfully challenged a change to the campaign finance rules that would have raised the contribution or expenditure threshold for issue committee registration from $200 to $5000. Colorado Common Cause v. Gessler, Denver District Court No. 2011CV4164 (Nov. 17, 2011) (Hon. A. Bruce Jones).

C.

The Secretary of States Recodification Rulemaking Proceedings

On November 15, 2011, the Secretary of State issued a Notice of Rulemaking Hearing and Proposed Statement of Basis, Purpose and Specific Statutory Authority. Administrative Record (AR), Tab 1. This rulemaking was not prompted by any particular legislative or judicial directive, but to generally clarify existing laws and regulations and address questions arising under State campaign and political finance. See id. The proposal reorganized the entirety of the Rules Concerning Campaign and Political Finance at 8 C.C.R. 1505-6 (Rules) and proposed substantive amendments to numerous Rules. A revised notice and set of proposed rules was issued on December 9, 2011. AR, Tabs 2 and 3. Pursuant to the revised notice, a public hearing was held on December 15, 2011. AR, Tabs 4, 5 and 6; Transcript of December 15, 2011 Rulemaking Hearing. In connection with the hearing, Ethics Watch, CCC, and many other groups testified or submitted written statements regarding the loss of disclosure and potential violations of contribution limits that would result from the proposed Rules. See id. Commenters in favor of changing Rules generally argued that campaign finance rules inhibit free speech and that the reporting regulations were too complicated for individuals and groups to understand and ensure compliance. See id. On February 22, 2012, the Secretary issued a Notice of Adoption for Temporary and Permanent Rules that is the subject of Plaintiffs claims in this case, to go into effect March 7, 2012. AR, Tab 8. A host of new provisions adding limitations, thresholds, and exceptions to terms defined in Article XXVIII and the FCPA were included the adopted Rules. Minimal explanation was included in the Statement of Basis, Purpose and Specific Authority for each specific change. However, many of the new provisions included citations to court cases.

Among the many new definitions of terms adopted, the Secretary repealed prior Rule 9.4 regarding electioneering communications and enacted a new Rule 1.7 which states: ELECTIONEERING COMMUNICATION IS ANY COMMUNICATION THAT (1) MEETS THE DEFINITION OF ELECTIONEERING COMMUNICATION IN ARTICLE XXVIII, SECTION 2(7), AND (2) IS THE FUNCTIONAL 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)]

The new Rules also modify the requirements for political committees, issue committees and political organizations. Rule 1.18 adds the following provision to the definition of 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)] Similarly, new Rule 1.12 adds a provision to the definition of 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 1-45103(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. 8

The new issue committee Rules also re-codify a $5,000 threshold on committee contributions or expenditures before registration and reporting is required into new Rule 4.1 and extend the application of this $5,000 threshold to issue committees in recall elections in new Rule 15.6. Changes were made to the definition of political organizations in new Rules 7.2 and 1.10, which state: 7.2 POLITICAL ORGANIZATIONS. IN THE CASE OF POLITICAL ORGANIZATIONS AS DEFINED IN SECTION 145-103(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)] 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 FOR COMMUNICATIONS THAT EXPRESSLY ADVOCATE THE ELECTION OR DEFEAT OF A CLEARLY IDENTIFIED CANDIDATE OR CANDIDATES. [BUCKLEY V. VALEO, 424 U.S. 1 (1976)] Finally, some of the Rules implementing reporting and recordkeeping requirements were also amended. A new provision governing major contributor reports in Rule 18.1.8 includes the following: (A) PENALTIES ASSESSED FOR FAILURE TO TIMELY FILE A MAJOR CONTRIBUTOR REPORT UNDER SECTION 1-45108(2.5), C.R.S., STOP ACCRUING ON THE DATE THAT THE 9

CONTRIBUTION IS FIRST DISCLOSED, EITHER ON THE MAJOR CONTRIBUTOR REPORT OR THE REGULARLYSCHEDULED 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.] On April 6, Plaintiffs Ethics Watch and CCC filed this action asking the Court to find Rules 1.7, 1.10, 1.12, 1.18, 4.1, 7.2, 15.6, and 18.1.8 unlawful and void. STANDARD OF REVIEW A. Administrative Procedure Act

Under the Colorado Administrative Procedure Act, C.R.S. 24-4-101, et seq. (2011), a challenged agency action must be held unlawful if the reviewing court finds: that the agency action is arbitrary or capricious, a denial of statutory right, contrary to constitutional right, power, privilege, or immunity, in excess of statutory jurisdiction, authority, purposes, or limitations, not in accord with the procedures or procedural limitations of this article or as otherwise required by law, an abuse or clearly unwarranted exercise of discretion, based upon findings of fact that are clearly erroneous on the whole record, unsupported by substantial evidence when the record is considered as a whole, or otherwise contrary to law... C.R.S. 24-4-106(7). Upon such a finding, the court must set aside the agency action and shall restrain enforcement of the order or rule under review . . . and afford such other relief as may be appropriate. Id. In undertaking this review, the court determines questions of law and interprets statutory and constitutional provisions de novo. Id. Although the court does defer to the agencys interpretation of the statutes and constitutional provisions relevant to its activities, its interpretation is not binding. See Bd. of County Commrs v. Colo. Pub. Utils. Commn, 157 P.3d 1083, 1088 (Colo. 2007); Colorado Citizens for Ethics in Govt v. Comm. for Am. Dream, 187 P.3d 1207, 1214 (Colo. App. 2008). The reviewing court is not bound by the agencys action if it 10

has resulted from a misconstruction or misapplication of the law. See id. at 1214 (an agencys decision should be reversed if the agency erroneously interpreted the law or exceeded its constitutional or statutory authority); Bd. of County Commrs, 157 P.3d at 1089 (deference not appropriate if agency interpretation defeats statutory intent or plain meaning of statute); Colorado Ethics Watch v. Clear the Bench Colorado, 2012 COA 42, 38 (no deference to agency statutory construction where the underlying facts are undisputed and the issue presented is one of law). Moreover, when a new Secretary of State interprets statutory provisions in a way contrary to the preceding Secretary, deference to agency construction of the statute is inapplicable. Colorado Common Cause v. Meyer, 758 P.2d 153, 159 (Colo. 1988). Any regulation that is inconsistent with or contrary to statute is void. C.R.S. 24-4-103(8)(a); Cartwright v. State Bd. of Accountancy, 796 P.2d 51, 53 (Colo. App. 1990). B. Declaratory Judgments

A declaratory judgment is [a] binding adjudication that establishes the rights and other legal relations of the parties without providing for or ordering enforcement. Black's Law Dictionary 918 (emphasis added). In Colorado, C.R.C.P. 57 governs declaratory judgments: District ... courts ... shall have power to declare rights, status, and other legal relations whether or not further relief is or could be claimed. No action or proceedings shall be open to objection on the ground that a declaratory judgment or decree is prayed for. The declaration may be either affirmative or negative in form and effect; and such declarations shall have the force and effect of a final judgment or decree. C.R.C.P. 57(a). The primary purpose of the declaratory judgment procedure is to provide a speedy, inexpensive, and readily accessible means of determining actual controversies which depend on the validity or interpretation of some written instrument or law. Toncray v. Dolan, 593 P.2d 956, 957 (Colo. 1979); see C.R.C.P. 57(k) ( This Rule is declared to be remedial; its

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purpose is to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations; and is to be liberally construed and administered.). C.R.C.P. 57 is to be liberally construed and administered. See Lakewood Fire Prot. Dist. v. City of Lakewood, 710 P.2d 1124, 1126 (Colo. App. 1985). Moreover, a claim under C.R.C.P. 57 is not precluded by the possibility of C.R.C.P. 106(a)(4) review of administrative agency action where C.R.C.P. 106(a)(4) review may be ineffective in addressing the issues raised by the petitioner. Denver Ctr. for the Performing Arts v. Briggs, 696 P.2d 299, 305 (Colo.1985). Rather, constitutional challenges to the validity of an agency action are more properly considered under C.R.C.P. 57. See Native Am. Rights Fund, Inc. v. City of Boulder, 97 P.3d 283, 287 (Colo. App. 2004). ARGUMENT A. The Secretary of States Authority is Limited to Delegated Powers

The recodification and extensive revisions of the Rules by the Secretary appears to be an attempt to rewrite Colorados campaign finance law based on his personal interpretation of what the law should be. By citing cases (some that that are decades old) as the basis for the new Rules, while ignoring more recent authority, the Secretary has moved beyond the boundaries of his executive branch position to perform the judicial and legislative functions. The Rules are inconsistent with the Secretarys limited authority under Article XXVIII and the FCPA to promulgate such rulesas may be necessary to enforce and administer the law. See art. XXVIII 9(1)(b); C.R.S. 1-45-111.5(1). The constitutional doctrine of separation of powers mandates that agencies act only within the scope of their delegated authority. Hawes v. Colo. Div. of Ins., 65 P.3d 1008, 1016 (Colo. 2003). The Secretary, as a member of the executive branch, has the authority to execute

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and enforce the states laws that are within the scope of his office. See McDonnell v. Juvenile Court in and for Second Judicial District, 864 P.2d 565, 567 (Colo. 1993). Enforcement in this context is commonly understood to mean to compel observance of existing law. Delta Sales Yard v. Patten, 892 P.2d 297, 299 (Colo. 1995). When exercising the delegated powers of rulemaking, the Secretarys office must comply strictly with its enabling statutes, and it has no authority to set aside or circumvent legislative mandates. Martinez v. Colo. Dept of Human Servs., 97 P.3d 152, 157 (Colo. App. 2003); see also Fred Schmid Appliance & Television Co. v. Denver, 811 P.2d 31, 33 (Colo. 1991) (an administrative agency cannot pass upon the constitutionality of the legislation under which it acts). To the extent the Secretary has any discretion in the interpretation of his constitutional and statutory mandates, such interpretation must be consistent with the law, not in conflict with it. Where a constitutional amendment or statute contains plain, clear language, rules of construction should not be applied to construe its meaning. Tivolino Teller House, Inc. v. Fagan, 926 P. 2d 1208, 1211 (Colo. 1996). Thus, rules or regulations that change, modify or conflict with an existing statute are without force and effect. Sanger v. Dennis, 148 P.3d 404, 413 (Colo. App. 2006); Adams v. Colo. Dept. of Soc. Services, 824 P.2d 83, 86 (Colo. App. 1991); C.R.S. 24-4-103(8)(a). Last year, another division of this District Court held that the Secretary had overstepped his authority in another campaign finance rulemaking similar to the one at issue here. See Common Cause Colorado v. Gessler, No. 2011CV4164 (Order dated November 17, 2011) (Hon. Bruce Jones, J). In that case, the Secretary revised Rule 4.27 to institute a new $5,000 threshold before any organization was required to file and report as an issue committee, disregarding the $200 threshold set in Article XXVIII 2(10)(a) on the basis of a federal court ruling. Id. at 5.

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The District Court found that the Secretary acted outside his delegated powers because the revision to the rule actually rewrites and thereby amends Article XXVIII. Id. Citing Sanger v. Dennis, 148 F.3d 404 (Colo. App. 2006), the Court struck down the Rule because it adds to, modifies, and conflicts with the constitutional provision it purports to enforce and administer. Id. at 6. The Court explained the limitations of the Secretarys power: [T]he Rule not only conflicts with, but abrogates, existing constitutional and statutory requirements. While the Secretarys desire to provide guidance in light of Sampson is understandable, perhaps even admirable given that First Amendment rights are at stake, it is simply not allowable given his authority. Id. at 7. As discussed more below, each of the Rules challenged by Plaintiffs in this case also attempts to amend definitions in the Article XXVIII and/or the FCPA based on the Secretarys interpretation of old campaign finance cases. Determinations of the impact, if any, of past federal court cases on Colorado law are properly within the power of the judicial branch. The legislature and Colorado voters have the authority to make amendments if actual changes to the FCPA or Article XXVIII are required, not the Secretary. Thus, the Rules exceed the Secretarys authority and are null and void. B. The Electioneering Communications Rule Limits the Constitutional Definition.

New Rule 1.7 constitutes a significant amendment to the constitutional definition of electioneering communications in Article XXVIII. Although Article XXVIII originally banned corporate and labor union funding of electioneering communications, subsequent federal and state court rulings have limited this provision to a disclosure-only requirement. The constitutional definition is clear and straightforward for individuals or groups to apply in order to

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determine whether reporting of that spending is required. The complicated requirements added in Rule 1.7 contradict the constitution and are beyond the scope of the Secretarys authority. The Secretarys revisions in Rule 1.7 are premised on obsolete state and federal court cases regarding electioneering communications that do not provide any authority to now restrict the scope of disclosure required under Article XXVIII. The electioneering communications provision in the Colorado Constitution was patterned after a similar provision in federal campaign finance law enacted in the Bipartisan Campaign Reform Act of 2002. See 2 U.S.C. 434(f)(3)(A). Both the Colorado and federal provisions define a category of communications which unambiguously refers to any candidate that are broadcast or otherwise distributed within the 30 days before a primary election, or the 60 days before a general election, within the district where the referenced candidate is appearing on the ballot. See art. XXVIII 2(7)(a); 2 U.S.C. 434(f)(3)(A). Electioneering communications were subject to reporting requirements and funding prohibitions; i.e. corporations and labor unions were prohibited from funding electioneering communications. See art. XXVIII 6(1)-(2); 2 U.S.C. 441b. Under Article XXVIII, persons who spend $1,000 or more in a calendar year on electioneering communications must report such spending and contributions received for the communications. See art. XXVIII 6(1); C.R.S. 1-45-108(1)(a)(III); 8 CCR 1505-6, Rule 11. The federal electioneering communications provisions complicated history of U.S. Supreme Court interpretation started with McConnell v. F.E.C., 540 U.S. 93, 203-209 (2003), which upheld the provision as constitutional in a facial challenge brought immediately after its enactment. Subsequently, an as-applied challenge resulted in the U.S. Supreme Court narrowing the federal provision to only prohibit corporate and labor union funding of electioneering communications which were the functional equivalent of express advocacy. F.E.C. v.

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Wisconsin Right to Life, 551 U.S. 449, 481 (2007). Pursuant to the Wisconsin Right to Life holding, the Federal Election Commission (FEC) adopted complicated regulations implementing the functional equivalent standard in order to narrow the scope of communications subject to the funding prohibitions. See 11 C.F.R. 114.15 (2011). This standard was in effect for one election cycle before the U.S. Supreme Court again examined the electioneering communications statute in a new facial challenge. See Citizens United v. F.E.C., 558 U.S. __, 130 S. Ct. 876 (2010). In Citizens United, the Court overruled McConnell in part, holding that funding prohibitions on electioneering communications were unconstitutional based on a corporations first amendment right to fund political speech. Id., 130 S. Ct. at 913. Although the funding prohibition was struck down, the Court upheld the electioneering communication disclosure requirement, holding that the First Amendment does not require that disclaimer and disclosure requirements apply only to ads that expressly advocate for or against candidates. Id. at 915-16. Citizens United also emphasized the importance of disclosure as necessary for voters to make informed decisions and give proper weight to different speakers and messages. Id. at 916. In light of these holdings, the Wisconsin Right to Life functional equivalent standard has little remaining practical significance. 3 After this landmark ruling, then-Governor Ritter asked the Colorado Supreme Court to provide guidance on the effect of Citizens United on Colorados Article XXVIII electioneering communications provision. See In re Interrogatories Propounded by Governor Ritter, Jr. Concerning the Effect of Citizens United v. Federal Election Commn, 558 U.S.___ (2010) on

Indeed, the FEC is current engaged in a rulemaking to repeal its functional equivalent regulations entirely. See Independent Expenditures and Electioneering Communications by Corporations and Labor Unions, 76 Fed. Reg. 80803 (Dec. 27, 2011). 16

Certain Provisions of Article XXVIII of The Constitution of the State of Colorado, 227 P.3d 892 (2010). The Colorado Supreme Court stated [t]o the extent that section 6(2) of article XXVIII of the Colorado Constitution makes it unlawful for a corporation or a labor organization to provide funding for an electioneering communication, it violates the dictates of the First Amendment pursuant to Citizens United. Id. at 893. The court left the reporting requirements in Article XXVIII undisturbed. Id. Shortly before the Secretary adopted the Rules under review, the Colorado Supreme Court rejected the functional equivalent test for determining when spending on an advertisement is an expenditure under Article XXVIII. Colorado Ethics Watch v. Senate Majority Fund, 2012 CO 12 (Senate Majority Fund). The court held that Colorado voters intended that an advertisement must contain so-called magic words such as vote for or reject in order for spending on that advertisement to be considered an independent expenditure, while electioneering communications need merely refer to a candidate without advocating for his or her election or defeat. Id. 29; see also Colorado Citizens for Ethics in Govt, 187 P.3d at 1214 (electioneering communications not limited to express advocacy). Rule 1.7 reaches back past the holdings in Citizens United, In re Interrogatories and Senate Majority Fund and cites Wisconsin Right to Life as authority for adding a functional equivalent standard to Colorados electioneering communications provision. The exceptions created in Rule 1.7 for communications that categorically do not meet this new functional equivalent standard are taken from the 2007 FEC Regulation. Compare 8 C.C.R. 1505-6, Rule 1.7.3 with 11 C.F.R. 114.15(b) (2011). However, this standard is now obsolete after In re Interrogatories limited the electioneering communications provision in Article XXVIII to a disclosure-only requirement and after Citizens United held that disclosure laws need not be

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limited to ads that are functionally equivalent to express advocacy. See Citizens United, 130 S. Ct. at 915 ([W]e reject Citizens Uniteds contention that the disclosure requirements must be limited to speech that is the functional equivalent of express advocacy). Rule 1.7 drastically reduces the amount of spending that must be disclosed as electioneering communications in direct conflict with the language and purpose of Article XXVIII. See art. XXVIII 1 (stating that the interests of the public are best served by providing for full and timely disclosure offunding of electioneering communications); Colo. Citizens for Ethics in Govt, 187 F.3d at 1216 (Exempting personswho regularly make electioneering communications for the purpose of influencing elections, from reporting requirements would frustrate Article XXVIIIs purpose of full disclosure). Article XXVIIIs standard for disclosure of electioneering communications in Colorado may not be modified by the Secretary. See Sanger v. Dennis, 148 P.3d 404, 413 (Colo App. 2006) (regulatory definition is invalid when it imposes new conditions are not contained in Article XXVIII). Therefore, Rule 1.7 is invalid and void. C. Political Committees and Issue Committees Rules Supplant Constitutional and Statutory Thresholds

Article XXVIII and the FCPA include detailed provisions providing the trigger for when groups must begin to register and report spending and contributions as political committees and issue committees. Timely disclosure is a key component of the campaign finance system that serves to educate voters and allow enforcement of the contribution limits on political committees. New Rules 1.18 and 1.12 replace these constitutional and statutory thresholds with proportional spending provisions that will likely eliminate disclosure by many groups spending in Colorado candidate and ballot initiative campaigns. Thus, these revisions far exceed the Secretarys authority and contravene the very purpose of Article XXVIII and the FCPA. 18

1. The Political Committee Definition is Improperly Limited by the Major Purpose Provision Rule 1.18 adds a major purpose test to the constitutional definition of political committee and limits the groups that would be required to register, report and comply with contribution limitations enacted by Colorado voters. Article XXVIIIs specific definition of political committee applies to any group that has made expenditures or received contributions in excess of $200 to support or oppose a candidate. See art. XXVIII 2(12)(a). The voters did not include a major purpose requirement in this definition a choice that must be seen as deliberate since a major purpose test was included in constitutional definition of issue committee. See art. XXVIII, 2(10)(a)(I). Therefore, Rule 1.18 narrows the scope of this provision in direct conflict with the will of the Colorado voters who enacted Article XXVIII. Once again, this new Rule cites a campaign finance court case as the basis for the amendments to the constitutional definition. It is not within the Secretarys authority to revise campaign finance law based on his own interpretation of case law. In the five years since Alliance for Colorados Families v. Gilbert, 172 P.3d 964 (Colo. App. 2007), the General Assembly or Colorado voters could have revised the FCPA or Article XXVIII. They chose not to. Rule 1.18 exceeds the Secretarys authority. The Secretarys rule also creates a specific, narrow definition of what major purpose means, relying only on specific wording in an organizations documents or a threshold that annual expenditures must be a majority of the organizations total spending. See 8 C.C.R. 1505-6, Rule 1.18.2. These provisions create a roadmap for groups to evade the constitutional contribution limits and reporting obligations of political committees. There is no basis in the constitution or FCPA for these requirements that serve only to further narrow the scope of the

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disclosure and contribution limitations. Rule 1.18 is arbitrary and capricious and should be declared invalid. 2. The Addition of a Percentage to the Issue Committee Threshold Arbitrarily Reduces the Scope of Constitutional and Statutory Provisions. The Secretary has also exceeded his authority by placing limitations on the definition of issue committee in Article XXVIII and C.R.S. 1-45-103(12). Rule 1.12 takes a statutory provision clarifying the constitutional major purpose requirement and grafts onto it a 30% threshold that has no basis in law or fact. As discussed above, Colorado voters specified that groups which have a major purpose of supporting or opposing a ballot issue or question in Colorado are required to register and report their activities. See art. XXVIII, 2(10)(a)(I). The Constitution does not define major purpose. However, in 2010, the General Assembly passed clarifying legislation stating that major purpose can be determined through the organizations objectives in organizational documents or the organizations demonstrated pattern of conduct. C.R.S. 1-45-103-12(b)(I)-(II). Going even further, the statute states that the pattern of conduct is based upon: (A) Annual expenditures in support of or opposition to an ballot issue or ballot question; or (B) Production or funding, or both, of written or broadcast communications, or both, in support of or opposition to a ballot issue or ballot question. C.R.S. 1-45-103-12(b)(II). The General Assembly specifically intended this new provision to incorporate the major purpose definition as articulated in Independence Institute v. Coffman, 209 P.3d 1130 (Colo. App. 2008). See C.R.S. 1-45-103(12)(c). Rule 1.12 ignores this deliberate choice by the General Assembly and inserts a 30% threshold into the rule. Under this Rule, no group must register and report as an issue committee until annual expenditures with regard to the ballot issue, or the cost of producing 20

communications with regard to the ballot issue, exceeds 30% of the groups total funding for the calendar year. See 8 C.C.R. 1505-6, Rule 1.12.3. As authority for this Rule, the Secretary cites a statement in Cerbo v. Protect Colo. Jobs, Inc.: Neither article XXVIII nor the Act defines a major purpose. Nor has the Secretary of State defined the term by regulation. 240 P.3d 495, 501 (Colo. App. 2010). However, when the revised section of 1-45-103(12)(b) took effect on January 1, 2011, this concern was addressed and there was no need or authority for the Secretary to substitute his own judgment for that of the legislature. The 30% threshold in Rule 1.12 is also arbitrary and capricious because there is no factual or legal basis for choosing that percentage over 25%, or 50%, or any other figure less than 100%. The legislature chose not to include a set percentage as a one-size-fits-all solution, and the statutory provision looks to the expenditures or communications made by the entity without necessarily comparing amounts spent to other spending by the entity in that year. Another illustration of the arbitrary nature of this threshold is its application to smaller and larger spenders in a ballot issue campaign. A major retail corporation may spend millions of dollars in an election year on expenditures and communications opposed to a ballot issue without having to publicly disclose a cent so long as the spending stays at 29.9% of the annual spending of the corporation as a whole. In contrast, a nonprofit citizens group making expenditures in support of the ballot issue would reach the 30% threshold at a much lower dollar figure and begin public disclosure much earlier in the campaign season. Such arbitrary treatment of political spenders based on size is inconsistent with the purposes of Article XXVIII. See art. XXVIII, 1 (stating that the people of Colorado are concerned regarding wealthy individuals, corporations and large special interest groups may exert disproportionate level of influence in the political process). The 2010 legislation clarifying the major purpose test in 1-45-103(12) included a legislative

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finding that a lack of disclosure in connection with communications supporting or opposing ballot issues leads to a perception of purposefully anonymous interests attempting to influence the outcome of the election on measuresthrough the expenditure of large sums of money. 2010 Colo. Sess. Laws 1239, 1(e). New Rule 1.12 undermines the purpose of the statute by allowing large sums of money to be spent without disclosure beneath the arbitrary 30% line. Finally, by triggering the duty to disclose only upon a comparison of political spending with the annual or calendar year spending of the group as a whole, Rule 1.12 effectively requires groups to wait until the end of a calendar year to calculate their total expenditures/spending ratio and see if the 30% threshold was met. It appears that these groups would then retroactively report their spending after the general election, when the information is useless to voters who were considering the ballot issue. Similar to the electioneering communications rule discussed above, this a disclosure-only regulatory scheme applied to issue committees. Without contribution prohibitions or limitations to be applied, there is no reason to narrow the scope of this statutory scheme simply requiring public disclosure which is justified by the public informational interest. See Citizens United, 130 S. Ct. at 916. Rule 1.12 exceeds the Secretarys authority, is arbitrary and capricious, and should be declared invalid. 3. The Issue Committee Threshold Rules Have Been Declared Invalid. Within the new Rules, the Secretary has re-enacted and expanded a provision changing the monetary thresholds for issue committees in Article XXVIII that was held invalid in Colorado Common Cause v. Gessler, Denver District Court No. 2011CV4164 (November 17, 2011). Rule 4.1 recodifies prior Rule 4.27 and states that no group must register and report as an issue committee until it spends or receives more than $5,000 in contributions or expenditures. Rule 4.1.1 also states that any contributions or expenditures received before the $5,000 threshold

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is reached need never be disclosed by the issue committee. In Colorado Common Cause, the District Court set aside prior Rule 4.27 as exceeding the Secretarys rulemaking authority. See id. at 9. Nonetheless, new Rule 4.1 keeps this rejected provision in the rules with a disclaimer that the Secretary will not enforce the rule unless or until the Colorado appellate courts reverse the District Courts decision. The new Rules go further, however, and amend the rules regarding recall elections to add the invalidated $5,000 threshold to issue committees involved in recalls in Rule 15.6. As adopted, Rule 15.6 did not include a disclaimer similar to the one in Rule 4.27. On May 23, the Secretary issued a revision to Rule 15.6 in which he acknowledged that Rule 15.6 is similar enough to Rule 4.1 that it too cannot be enforced unless and until the judgment in Colorado Common Cause is set aside. Thus, it appears undisputed that Rule 15.6 is invalid under the rationale of that case, and the Court should enter judgment accordingly. D. The Political Organizations Rules Operate to Repeal Statutory Provisions.

New Rules 7.2 and 1.10 take words and phrases that are unambiguous in the statute and redefine them in a way that is contrary to the plain language and legislative intent of the disclosure regime created for political organizations. The result is a complete erasure of this category of disclosure that far exceeds the Secretarys authority to administer Colorados campaign finance law. In 2007, the General Assembly passed legislation creating a new category of disclosing entity under the FCPA: political organizations. The carefully crafted legislative definition extends to organizations defined in section 527 of the federal tax code that are engaged in influencing or attempting to influence any candidate election in Colorado. C.R.S. 1-45103(14.5). Such organizations are required to report any contributions or spending over

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twenty dollars. C.R.S. 1-45-108.5. The statute defines spending as funds expended influencing or attempting to influence a candidate election, including a long list of possible expenses, including electioneering communications. C.R.S. 1-45-103(16.5). In contrast to the political committees already regulated under FCPA and Article XXVIII, political organizations are not subject to any contribution limitations or prohibitions. The new Rules directly contradict these statutory provisions and narrow the scope of the definition of political organization to a nonexistent category. First, Rule 7.2.1 changes the statutory definition from an organization that is engaged in influencing candidate elections in Colorado to an organization that has as its major purpose influencing Colorado candidate elections. The statutory language is clear and does not include a major purpose requirement for political organizations. [A] statute should be construed as written, giving full effect to the words chosen, as it is presumed that the General Assembly meant what it clearly said. Ceja v. Lemire, 154 P.3d 1064, 1066 (Colo. 2007) (citing State v. Nieto, 993 P.2d 493, 500 (Colo. 2000). The addition of a major purpose threshold narrows the range of groups that would be required to disclose, contradicting the legislative intent of C.R.S. 1-45-108.5. Second, Rule 1.10 purports to define influencing or attempting to influence as limited to making expenditures for communications that expressly advocate for or against candidates almost the exact opposite of the statutory definition. The new Rule opens up the very loophole that the General Assembly sought to close groups spending on communications that explicitly influence candidate elections but that did not rise to the level of express advocacy under Colorado law without any public disclosure. The General Assembly avoided any mention of express advocacy or expenditures in the political organization provisions. Indeed, the term spending was used and specifically defined with a broad provision that not only avoided

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express advocacy limitations, but explicitly included items such as electioneering communications which, by definition, are broader than express advocacy. See C.R.S. 1-45103(16.5); Colo. Citizens for Ethics in Govt, 187 F.3d at 1214 (electioneering communications cover any communication and is not limited to express advocacy). Expenditure is a technical term used throughout the FCPA, but it was rejected by the General Assembly when crafting the political organization provisions. See C.R.S. 2-4-101 (Words and phrases that have acquired a technical or particular meaning, whether by legislative definition or otherwise, shall be construed accordingly.). The Secretary cannot use this term to now limit the statutory provision through regulation. See Sanger, 148 P.3d at 413. The combination of these two revisions to the statutory definition of political organization collapses the distinction between this type of group and a political committee. Under new Rules 7.2 and 1.10, a political organization is a group whose major purpose is making express advocacy expenditures. Under new Rule 1.18, a political committee is a group whose major purpose is making express advocacy expenditures. Thus, the Secretary has erased the distinction between these two kinds of groups. See Colorado Ethics Watch v. Senate Majority Fund, 269 P.3d 1248, 1259 (Colo. 2012) (holding organizations whose communications do not meet the express advocacy standard for expenditure were properly registered as political organizations instead of political committees). This creates a system that undermines the contribution limits enacted by Colorado voters in Article XXVIII because groups that were previously considered political committees subject to contribution limits could now terminate and report as political organizations instead, shedding those contribution limitations while continuing their express advocacy expenditures. A statutory interpretation leading to an

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illogical or absurd result will not be followed. Frazier v. People, 90 P.3d 807, 812 (Colo. 2004). Similar to the electioneering communications rule discussed above, political organizations are only subject to disclosure requirements, not any contribution prohibitions or limitations. Therefore, any constitutional analysis from court cases applying major purpose and express advocacy as limiting constructions are inapplicable to political organizations. There is no reason to narrow the scope of this statutory scheme simply requiring public disclosure which is justified by the public informational interest. See Citizens United, 130 S. Ct. at 916. Rules 7.2 and 1.10 are beyond the Secretarys authority and should be declared invalid and void. E. The Major Contributor Rule Amends the Reporting Statute and Creates An Exception to the Obligation to Impose Penalties.

Based on the need for timely information in the final weeks of the election season, C.R.S. 1-45-108(2.5) requires a candidates, political parties, and political and issue committees to file a specific report within 24 hours of receiving any contribution of $1,000 or more in the last 30 days before an election. The Secretarys adoption of Rule 18.1.8 seeks to expressly overrule the statutory scheme governing major contributor reports in two specific ways. First, the statute specifically requires that this 24-hour major contributor report be filed in addition to any report already required to be filed on a regular basis. Id. However, Rule 18.1.8(A) states penalties will not be assessed for failure to file a major contributor report once the contribution is disclosed on any regularly-scheduled report. The Secretary does not have authority to read-out of the statutory requirements the specific directive to file a major contributor report in addition to a regularly-scheduled report. Second, the statute applies a civil penalty of $50 per day for each day that a major contributor report is not filed. See C.R.S. 26

1-45-111.5(c). Yet, Rule 18.1.8(A) boldly states that penalties will not accrue beyond the date of the election, regardless of whether a major contribution report is ever eventually filed. The Secretarys power to enforce the FCPA does not permit the creation of such an exception to the civil fines penalties that protect non-filers. In both respects, Rule 18.1.8 exceeds the Secretarys authority and is invalid under the statute. CONCLUSION The courts have a duty to invalidate administrative regulations that conflict with the design of the Colorado constitution or a statute. The Secretarys new Rules far exceed the scope of his authority to administer and enforce Article XXVIII and Colorados campaign finance statutes. The Rules systematically undermine the intent and purpose of the provisions legislated by voters and the General Assembly and cannot be allowed to stand. Thus, Plaintiffs request that this Court determine pursuant to C.R.S. 24-4-106(7) and C.R.C.P. 57(a) that Rules 1.7, 1.10, 1.12, 1.18, 4.1, 7.2, 15.6, and 18.1.8 are contrary to law, that the adoption of these Rules was arbitrary, capricious, and without authority, and that the Rules should be set aside.

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DATED: June 8, 2012.

[Original Signature on File] _/s/ Luis Toro ______________ Luis Toro Margaret Perl Colorado Ethics Watch 1630 Welton Street, Suite 415 Denver, CO 80202 Attorneys for Colorado Ethics Watch

[Original Signature on File] ___/s/ Jennifer Hunt__________ Jennifer H. Hunt Hill & Robbins, P.C. 1441 18th Street, Suite 100 Denver, CO 80202-1256 Attorney for Colorado Common Cause

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CERTIFICATE OF SERVICE The undersigned hereby certifies that on the 8th day of June, 2012, service of the foregoing JOINT OPENING BRIEF was made via LexisNexis File & Serve, addressed as follows: Maurice G. Knaizer State Services Department Office of the Attorney General 1525 Sherman Street, 7th Floor Denver, CO 80203 maurie.knaizer@state.co.us Mark Grueskin Heizer Paul Grueskin LLP 2401 15th Street, Suite 300 Denver CO 80202 mgrueskin@hpgfirm.com signed original on file

_/s/ Luis Toro ______________

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