The Volokh Conspiracy
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Washington S. Ct. Upholds $18M Fine for Violating Campaign Disclosure Rules
The court rejected an Excessive Fines Clause challenge (by a 5-4 vote) and a First Amendment challenge.
From Chief Justice Steven Gonzalez's majority opinion in State v. Grocery Manufacturers Ass'n:
Voters have a right to know who funds their elections. To enforce that right, candidates and political committees are required to disclose their contributors or face a penalty for failing to do so. We are asked today whether the penalty for intentionally concealing the source of political contributions may be based on the amount concealed. We conclude that it may and accordingly affirm….
In the wake of the [California] Proposition 37 campaign, Washington sponsors filed Initiative 522. Like Proposition 37, this initiative would have required GMO labels on packaged food and like Proposition 37, GMA opposed it. GMA developed a campaign strategy to work against the initiative while shielding its member companies from the sort of negative public response that happened in California. As part of that campaign strategy, GMA created a segregated "Defense of Brands" strategic account that would hold and disburse contributions raised to oppose labeling requirements. GMA staffers explained that "'state GMO related spending will be identified as coming from GMA which will provide anonymity and eliminate state filing requirements for contributing members.'" Nothing in the record or briefing suggests GMA brought a declaratory judgment action under chapter 7.24 RCW to determine whether and how the FCPA would apply to its campaign work.
GMA raised more than $14 million to oppose GMO labeling efforts. GMA in turn contributed $11 million to the "No on 522" campaign from the Defense of Brands strategic account. Despite its political activities in Washington, GMA did not register as a political committee with the Public Disclosure Commission (PDC) and did not make any PDC reports until after this lawsuit was filed. In response to the suit, GMA registered "under duress" but, as of the time of trial, still had not filed all of the required reports….
[T]he trial court found that GMA had intentionally violated Washington's campaign finance laws. It found that GMA and its board intended to use the Defense of Brands account "to shield the contributions made from GMA members from public scrutiny" and to "eliminate the requirement and need to publicly disclose GMA members' contributions on state campaign finance disclosure reports." It also concluded that GMA concealed the amount and source of contributions, registered 224 days late, and did not properly or timely file at least 47 reports. The trial court specifically rejected testimony from GMA officers that they had not intended to violate the law, finding "it is not credible that GMA executives believed that shielding GMA's members as the true source of contributions to GMA's Defense of Brands Account was legal."
The judge imposed a $6 million base penalty, trebled to $18 million because the violation was intentional (which was authorized by state statute). The majority upheld this, concluding (to vastly oversimplify) that:
- The fine wasn't unconstitutionally excessive, because it was proportioned to the magnitude of the transgression (here, the amount that was spent in violation of campaign finance rules).
- The fine didn't violate the First Amendment, because the First Amendment allows what are in effect punitive damages on a showing of intentional misconduct, and because there was no evidence that the law was being applied in a viewpoint-based way.
Judge Sheryl Gordon McCloud's dissent disagreed as to the Excessive Fines Clause (and didn't opine as to the First Amendment; again, to oversimplify). The dissent reasoned:
The Grocery Manufacturers Association (GMA) committed only the regulatory violation of failing to comply with a reporting requirement. The FCPA punishes just that—failure to report. It does not make the receipts, expenditures, or political speech that the expenditures funded illegal, and it does not punish such receipts, expenditures, or speech. Hence, under the Eighth Amendment, the penalty imposed for the FCPA violation must be proportionate to the failure to report, not to the amount of the receipts, expenditures, or speech that the expenditures funded.
