While California Donor Disclosure Law Not Facially Unconstitutional, Court Finds It Unconstitutional Given State's Inability to Keep Donor Lists Confidential

California’s law requiring providing the California Attorney General with an unredacted list of donors was held constitutional by the Ninth Circuit, but less than a year later a District Court in the same Circuit found that the ruling only found the law not “facially unconstitutional” but that using an “as-applied” test the law was unconstitutional, granting again an injunction against its enforcement.

But, as we’ll describe below, the rulings are not as contradictory as they might appear when reading just the headlines.

In the first case (Center for Competitive Politics v. Harris, 115 AFTR 2d ¶ 2015-703, CA9, No. 14-15978) the Ninth Circuit Court of Appeals affirmed a District Court’s denial of the plaintiff’s request for a preliminary injunction requiring providing to the California Attorney General an unredacted list of donors from Schedule B, Form 990 of a §501(c)(3) organization.

The organization was a §501(c)(3) organization that, was described in the opinion as follows:

CCP is a Virginia non-profit corporation, recognized by the IRS as an educational organization under § 501(c)(3). CCP’s “mission is to promote and defend the First Amendment rights of free political speech, assembly, association, and petition through research, education, and strategic litigation.” CCP supports itself through financial donations from contributors across the United States, including California.

Under federal law the list of donors provided on Schedule B of Form 990 is not subject public disclosure pursuant to IRC §6104(b), although other information provided is subject to disclosure.  However California regulations required an organization soliciting donations in the state of California to provide information to the state, including a complete copy of the Form 990 filed.  While much of the information submitted to California would be subject to public inspection, the regulation provided that the Schedule B would remain confidential.

Originally the organization had provided to the California Attorney General a copy of the Form 990 with a redacted Schedule B that omitted donor information not subject to disclosure by the IRS.  However eventually the Attorney General’s office balked and demanded an unredacted copy of the Schedule B.  At that point the charity filed its lawsuit to block the filing.

The charity argued that it should not be required to provide this information for two reasons:

  • The disclosure of the data would have a chilling effect on free speech, as donors would be intimidated by the disclosure of their names.  This, the organization, meant California’s rule was in violation of the First Amendment
  • As well, the organization argued that Congress’s enactment of §6104 in 2006 was meant to protect donors and pre-empt any contrary state laws.

The Ninth Circuit rejected the first contention, holding that a ruling that disclosure itself was a violation of First Amendment rights could only be justified if the interests of the state government in requiring disclosure was not greater than the actual burden on First Amendment rights. 

The Court’s decision found that cases cited by the organization in support of their position merely held that disclosure could be a First Amendment violation, but not that all such disclosures were violations.  In each case cited that found a violation the Court argued that the plaintiff had produced evidence of actual harm that would occur.  In this case the Court found that the plaintiff had not produced any evidenced that parties had or would refuse to make donations if the documents were filed with the state in addition to the IRS.

The fact the documents were to be held in confidence by California seems to put that disclosure in the same position as the disclosure to the IRS.  The Court found that the plaintiff’s arguments that California’s ability to insure that information would remain confidential and there was a possibility the information may not remain confidential was not strong enough was a purely speculative claim.

The Court noted that this was a motion for a preliminary injunction only, and did hold that if the organization could demonstrate the likelihood of actual harm from disclosure at trial the provision might be, in their case, a violation of the First Amendment in practice (referred to as the “as-applied” test).  But the panel found that no such information was presented at this point, and there was no support for finding that such disclosure would always present a First Amendment problem.

The Court also did not find clear evidence that Congress meant to pre-empt states from requiring such disclosure, effectively limiting the disclosure to the federal government alone.  The Court noted that while Congress can enact laws that pre-empt federal rules, prior case law and federalism principles in general require a clear showing of such intent on behalf of Congress, something that did not exist in this case.

Another court, hearing a similar case (Americans for Prosperity Foundation v. Harris), before the Ninth’s Circuit ruling in Center for Competitive Politics, had found the law facially unconstitutional and, on appeal, the Ninth Circuit overturned that ruling but sent the base back down for consideration of the “as-applied” issue.

In the District Court’s second pass on the issue (Americans for Prosperity v. Harris, 117 AFTR2d ¶2016-644) the Court found that California’s actual application of the law did violate the “as-applied” test.

The District Court noted:

While the Ninth Circuit in Center for Competitive Politics foreclosed any facial challenge to the Schedule B requirement, it specifically left open the possibility that a party could show “‘a reasonable probability that the compelled disclosure of [its] contributors’ names will subject them to threats, harassment, or reprisal from either Government officials or private parties’ that would warrant relief on an as-applied challenge.” 784 F.3d at 1317 (quoting McConnell v. FEC, 540 U.S. 93, 199 (2003)). As the Supreme Court has held, unfounded speculation, conclusory statements, fear, and uncertainty untethered to the requirement at issue are insufficient. Buckley , 424 U.S. at 64, 69, 71–72. However, “[a] strict requirement that chill and harassment be directly attributable to the specific disclosure from which the exemption is sought would make the task even more difficult.” Id. at 74. Examples of the type of evidence sufficient to succeed on an as-applied challenge include past or present harassment of members due to their associational ties, or of harassment directed against the organization itself, or a pattern of threats or specific manifestations of public hostility. Id.

In this case the Court found both that the plaintiffs had brought forth evidence of actual harassment and threats against donors to the organization had taken place and that the California Attorney General failed to show that the agency’s current policy actually prevents the disclosure of the donor list, regardless of the regulation’s requirement that the list not be disclosed publicly.

Specifically, the Court noted:

Pursuant to the Attorney General’s purported confidentiality policy, Schedule Bs should never be accessible through its Registry’s public website. The Attorney General’s Registry receives more than 60,000 renewal filings each year, 90% of which are paper filings. Once the Registry receives these filings, it is supposed to scan and then electronically store the documents, separately tagging confidential documents such as Schedule Bs. Kevis Foley, former Registrar, testified at her deposition that separating out Schedule Bs and other confidential materials from public filings is “very tedious, very boring work” and that “there is room for errors to be made.” (Foley Dep. TX-734, p. 174:8–21). While human error can sometimes be unavoidable, the amount of careless mistakes made by the Attorney General’s Registry is shocking.

During the course of this litigation, AFP conducted a search of the Attorney General’s public website and discovered over 1,400 publically available Schedule Bs. (TX-56). Within 24 hours, all of those confidential documents were removed from the Registry’s website. (TX-736, p. 107:12–15). Just one example of the Attorney General’s inadvertent disclosures was the Schedule B for Planned Parenthood Affiliates of California. The Attorney General was made aware that the Registry had publically posted Planned Parenthood’s confidential Schedule B, which included all the names and addresses of hundreds of donors. (TX-131). An investigator for the Attorney General admitted that “posting that kind of information publically could be very damaging to Planned Parenthood...” (Johns Test. 2/25/16 Vol. II, p. 41:18–21). All told, AFP identified 1,778 confidential Schedule Bs that the Attorney General had publically posted on the Registry’s website, including 38 which were discovered the day before this trial. (McClave Test. 2/24/16 Vol. I, p. 27:6–32:17)

The case is probably a good lesson in taking care about “reading headlines” to absorb developments.  While the quick read is that Ninth Circuit found the law constitutional while the District Court found it was not, the details are incredibly important.  In the first case the Ninth Circuit found that such a law could be constitutional and would be presumed to be so absent a showing of actual harm.  In fact, in remanding the most recent case for the trial just discussed, the Ninth Circuit specifically noted that “plaintiffs have raised serious questions as to whether the Attorney General's current policy actually prevents public disclosure.”

Conversely, the District Court case, if read properly, makes it clear that if, in fact, the State had truly maintained the confidentiality of the Schedule Bs it received (not having 1,400 that were found on the agency’s website by the plaintiff) the law would not have been unconstitutional.  But the Court was not convinced that the State had shown its current procedures would truly be effective in preventing future erroneous disclosures.