Washington S. Ct. Upholds $18M Fine for Violating Campaign Disclosure Rules

The majority opinion of Chief Justice Steven Gonzalez in State v. Grocery Manufacturers Ass’n:

It is the right of every voter to see who has funded them. Candidates and political committees must disclose the names of their donors to ensure that this right is protected. Failure to do so can result in a fine. Today we ask whether penalties for deliberately concealing sources of political donations may be determined by the amount hidden. We conclude that it may and accordingly affirm….

Following the [California]Proposition 37 Campaign, Washington Sponsors filed Initiative 522. This initiative, like Proposition 37 would have needed GMOs
GMA opposed the labeling of packaged food, and Proposition 37. GMA devised a campaign strategy that would work against the initiative and protect its members from negative reactions like those in California. GMA set up a “Defense of Brands” account which would receive and pay contributions to the opposition to labeling. GMA staffers stated that spending related to state GMOs will be identified with GMA. This will allow contributors members anonymity as well as eliminate the requirement for filing in order to identify who is contributing. GMA did not brief any record to suggest that it brought a declaratory judgement action under chapter 7.24 RCW in order to decide whether or how the FCPA would be applied to its campaign work.

GMA secured more than $14 Million to fight GMO labeling. GMA also contributed $11,000,000 to “No on 522,” a campaign against GMO labeling. This was through the Defense of Brands strategic bank account. GMA was not registered as a Washington political committee by the Public Disclosure Commission (PDC). It also did not file any PDC reports after the 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]GMA was found guilty by the trial court of violating Washington’s campaign financing laws. GMA and its board hoped to hide contributions by GMA members and eliminate the obligation and necessity to make public disclosures of GMA contributions on their state’s campaign finance disclosure reports. GMA failed to properly and timely file 47 reports, as well as concealing the source and amount of donations. GMA officers’ testimony that they did not intend to break the law was rejected by the trial court. The judge found it “not credible” that GMA executives thought that GMA members were the real source of GMA Defense of Brands account contributions.

Judge imposed $6 million as a base penalty. This was tripled to $18million because the violation had been intentional, which was allowed by state statute. To simplify things, the majority of judges upheld it.

  1. Because the fine was proportional to the severity of the offense (here the amount spent in violation campaign finance rules), it wasn’t constitutionally excessive.
  2. Because the First Amendment permits punitive damages upon a showing that intentional misconduct was shown, the fine was not in violation of the First Amendment. There was also no evidence to suggest the law was being used in a viewpoint-based manner.

Judge Sheryl Gordon McCloud, the dissident, disagreed with the Excessive Fines Clause. The dissent also didn’t comment on the First Amendment. Again, in order to simplify, the dissent argued:

Grocery Manufacturers Association was found guilty of only one regulatory violation, failing to report. The FCPA punishes just that—failure to report. The FCPA does not render the receipts or expenditures of political speech or the spending made illegal. It also does not penalize such receipts or expenditures. The Eighth Amendment states that the FCPA violations must be punished proportionately to the number of expenditures or receipts reported.