Free Other Notice - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

INSTITUTE FOR JUSTICE
Timothy D. Keller (019844) Jennifer M. Perkins (023087) 398 S. Mill Avenue, Suite 301 Tempe, AZ 85281 P: 480-557-8300/F: 480-557-8305 INSTITUTE FOR JUSTICE William R. Maurer (WSBA 25451) 1 811 First Avenue, Suite 625 Seattle, WA 98104 P: 206-341-9300/F: 206-341-3911 Attorneys for Plaintiffs

IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA
DEAN MARTIN, a citizen of the State ) of Arizona; and AZ FREE ) ENTERPRISE CLUB'S FREEDOM ) CLUB PAC, a candidate support or ) opposition committee; and ARIZONA ) TAXPAYER ACTION COMMITTEE, ) an independent expenditures ) committee, ) ) Plaintiffs, ) ) v. ) ) JAN BREWER, in her official capacity ) as Secretary of State of the State of ) Arizona; and GARY SCARAMAZZO, ) ROYANN J. PARKER, JEFFREY L. ) FAIRMAN, DONALD LINDHOLM and ) MARCIA BUSCHING, in their official ) capacity as members of the ) ARIZONA CITIZENS CLEAN ) ELECTIONS COMMISSION, )
1

Civil Action No. No. CV 04-0200-PHX-EHC

FIRST AMENDED COMPLAINT (Declaratory and Injunctive Relief)

Admitted pro hac vice.

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008

Page 1 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

) Defendants. ) ____________________________________) INTRODUCTION 1. This is a civil rights action seeking declaratory and injunctive relief

to vindicate the rights to freedom of speech and association in the conduct of political campaigns in Arizona, as well as the right to enjoy the equal protection of laws. 2. Arizona's scheme of publicly funding elections, the Citizens Clean

Elections Act (the "Act"), A.R.S. § 16-901 et seq., violates the First and Fourteenth Amendments to the United States Constitution by forcing candidates and independent political groups to abide by arbitrary expenditure limits, thus infringing on and chilling protected political speech and association without a sufficiently compelling governmental reason for doing so and without being narrowly tailored to achieve any legitimate governmental interest. Moreover, the provisions of the Act are overly broad, sweep within the Act's provisions constitutionally protected advocacy, and do so based on the content of the communication in question. 3. The Act also violates the guarantees of equal protection and due

process of the law contained in the Fourteenth Amendment to the U.S. Constitution in that it discriminates against Plaintiffs in their exercise of a fundamental right--the right of free speech--by penalizing candidates who

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 2

Page 2 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

choose to not receive government funding under the Act and by penalizing independent groups wishing to participate in the political process. 4. Plaintiffs thus seek to have the Act declared unconstitutional on its

face and as applied to them and to have this Court permanently enjoin Defendants' enforcement of the Act. JURISDICTION AND VENUE 5. Plaintiffs bring this action pursuant to 42 U.S.C. §§ 1983 and 1988

to vindicate rights violated under color of state law, and seek relief under 28 U.S.C. §§ 2201 and 2202, and 42 U.S.C. § 1988. 6. This Court has subject matter jurisdiction under 28 U.S.C. §§ 1331

and 1343(a)(3) and (4). 7. Venue properly lies with this Court under 28 U.S.C. § 1391(b). PARTIES 8. Plaintiff Dean Martin is a citizen of the United States, a resident of

the State of Arizona, the current Arizona State Treasurer, and a former member of the Arizona State Senate. Attachment 1 (Dean Martin Declaration) at ¶¶ 2-3. Treasurer Martin will run again for state office in 2010 and he will be subject again to the application of the Act; thus, the restriction on his constitutional rights that has occurred in the past will reoccur. Id. at ¶¶ 4-5. For his next campaign for state office, Martin desires to run a traditional, privately supported campaign, but may be forced to participate in the government funding

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 3

Page 3 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

system because of the penalties he has faced and would face under the Act for choosing to run with private funds. Id. at ¶ 4. 9. Plaintiff AZ Free Enterprise Club's Freedom Club PAC (the

"Freedom Club PAC") is a Candidate Support or Opposition Committee headquartered in the State of Arizona. Attachment 2 (Fife Symington Declaration) at ¶ 2. The Freedom Club PAC has been funded consistently since its establishment in 2006 and has received contributions for, and made contributions to, an Independent Expenditures PAC, Arizonans for a Sound Economy, to fund independent expenditures in the following 2006 state elections: (1) In Legislative District 1, during the primary election, in opposition to a sitting House Member, which triggered matching funds to the government-funded candidate the Freedom Club PAC opposed; (2) In Legislative District 1, during the primary election, in opposition to a sitting Senator, which did not trigger any matching funds; (3) In Legislative District 17, during the general election, in support of a House candidate that triggered matching funds to the government-funded candidate the Freedom Club PAC opposed; (4) In Legislative District 25, in the primary election, opposing two House Members that triggered matching funds to government-funded candidates opposed by the Freedom Club PAC; (5) In Legislative District 26, in both the House and Senate races in the general election, which did not trigger any matching funds. Id. at ¶¶ 4-13. The Freedom Club PAC has been a

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 4

Page 4 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

registered political committee under Arizona law, A.R.S. § 16-912, since 2006.

Id. at ¶ 4. The Freedom Club PAC is currently incorporated, currently
registered as a political committee, and currently makes independent expenditures regarding state elections. Id. at ¶ 4, 14. The Freedom Club PAC will remain a registered political committee under A.R.S. § 16-912 and will accept contributions and make expenditures regarding candidates in all upcoming state elections for the foreseeable future, including, but not limited to, the 2008, 2010, and future state election cycles. Id. at ¶ 14. 10. Plaintiff Arizona Taxpayer Action Committee ("Arizona Taxpayer")

is an Independent Expenditures Committee organized under the laws of the State of Arizona. Attachment 3 (Chad Kirkpatrick Declaration) at ¶ 2. Arizona Taxpayer has been funded consistently since its establishment in 2006 and received contributions for, and made independent expenditures in 2006 in Legislative District 8 and to advocate the defeat of two ballot measure propositions. Id. at ¶ 4, 6. It has been a registered political committee under Arizona law, A.R.S. § 16-912, since 2006. Id. at ¶ 4. Arizona Taxpayer is currently incorporated, currently registered as a political committee, and currently makes independent expenditures regarding state elections. Id. at ¶¶ 4, 7. Arizona Taxpayer will remain a registered political committee under A.R.S. § 16-912 and will accept contributions and make expenditures regarding

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 5

Page 5 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

candidates in all upcoming state elections for the foreseeable future, including, but not limited to the 2008, 2010, and future state election cycles. Id. at ¶ 7-8. 11. Defendant Jan Brewer is the Secretary of State of the State of

Arizona, and is sued in her official capacity. As Secretary of State, Brewer's office is the repository for all campaign-finance reports filed pursuant to the Arizona Citizens Clean Elections Act, and is responsible for setting campaign contribution and spending limits. A.R.S. §§ 16-924, 16-941(B), 16-958, and 16-959. 12. Defendants Gary Scarmazzo, Royann J. Parker, Jeffrey L. Fairman,

Donald Lindholm, and Marcia Busching, and any individuals subsequently appointed, are members of the Arizona Citizens Clean Elections Commission (the "Commission"), and are sued in their official capacity. The Commission is granted rulemaking and enforcement authority under the Act. A.R.S. §§16-95557. FACTUAL ALLEGATIONS 13. The Act, A.R.S. § 16-940 et. seq., was a ballot initiative written and

sponsored by special-interest groups and was approved by a slim majority of Arizona electors in the November 3, 1998 general election. On December 10, 1998, Governor Jane Dee Hull issued a proclamation declaring this measure to be law.

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 6

Page 6 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

14.

The Act creates a system of government campaign financing for

statewide and legislative elected offices within the State of Arizona, and creates the Commission, a bureau of unelected individuals granted broad enforcement and regulatory powers that extend not only to all candidates who choose to participate in the government campaign financing system, but even to all candidates who do not wish to run a government funded campaign. 15. Under the Act, candidates seeking government funding obtain a

predetermined number of $5 contributions from constituents in order to qualify for funding. These $5 contributions can be collected by individuals and, more likely, by special-interest groups and organizations. Once qualified, the government-funded candidate must follow strict contribution and spending limits, as well as reporting requirements, and participate in primary and general election debates. 16. The Act does little to prevent corruption. For instance, one of the

Act's stated purposes is to diminish the "influence of special-interest money" by removing the ability of such interests to make contributions to governmentfunded candidates. However, the Act still permits those same special-interest groups to garner the same type of influence over government-funded candidates by providing other services, such as collecting the requisite number of $5 contributions to qualify for government funding.

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 7

Page 7 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

17.

The Act is thus fatally under-inclusive: it acts to chill the speech

of privately funded candidates without preventing government-funded candidates from receiving assistance from large, organized interest groups, such as labor unions. Moreover, the Act permits this assistance without requiring disclosure of which special-interest groups helped gather the $5 contributions. Thus, government-funded candidates are not subject to the same disclosure requirements as privately funded candidates, creating the worst of all worlds. The Act permits government-funded candidates to be influenced by and beholden to special-interest groups, but without requiring public disclosure of such influence, and yet still be labeled as a "clean" candidate. In contrast, privately financed candidates must disclose all contributors, and yet suffer the implication of being "dirty" for refusing to accept government-funding. 18. Candidates who choose to fund their campaigns with private

donations and, correspondingly, receive no government funding, must nonetheless adhere to specified contribution limits and extensive reporting requirements. 19. The reporting requirements exist for the sole purpose of notifying

the Commission when to pay matching funds to government-funded candidates. The triggering of matching funds punishes traditionally financed candidates and results in privately funded candidates ceasing fundraising efforts, thus coercing privately supported candidates to abide by the Act's strict expenditure limits.

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 8

Page 8 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

20.

The Act punishes candidates for choosing not to accept

government funds and not agreeing to abide by the Act's spending limits. Examples of the punitive aspects of the Act include, but are not limited to: (1) The fact that the government spends hundreds of thousands dollars promoting the benefits of the government-funded elections scheme through billboard, radio, and television advertisements, thus making candidates labeled as "nonparticipating" appear to the general public to be "dirty," not as trustworthy and not as well-suited for office as candidates labeled "participating" in the "clean" elections system by the Commission; (2) The fact that privately financed candidates neither receive matching funds when their campaigns are targeted by opposing independent expenditures, nor do independent expenditures that support government-funded candidates count toward the government-funded candidate's expenditure limit under the Act; and (3) The fact that privately financed candidates receive only a 6% allowance for fundraising costs when matching funds are calculated (even though the costs of fundraising are easily identifiable and required to be disclosed in great detail under other state campaign finance laws) ensures that their government-funded opponents will always have more financial resources than privately financed candidates. 21. The Act has punished Martin in the past for refusing to accept

government subsidies and for refusing to promise to abide by the Act's

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 9

Page 9 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

expenditure limits. The Act will punish him in the future if he chooses to run a privately financed campaign, or it will coerce him to accept government funding and betray his principled stance in opposition to welfare for politicians. 22. Recently the Legislature significantly increased the initial lump sum

disbursements to government-funded candidates. Total government subsidies are capped at three times the predetermined spending limit for the office sought. For example, government-funded candidates for State Treasurer in the 2004 election had a spending limit of $47,770 in the primary election and $71,655 in the general election. In the upcoming 2010 cycle, those limits have been increased for State Treasurer to $82,680 in the primary election and $124,020 in the general election. Attach. 1 (Martin Dec.) at ¶ 10. By statute, these spending limits will be adjusted for inflation by the Secretary of State. 23. The Act subjects privately supported candidates to a series of

stringent and punitive measures that have the effect of coercing participation in the government funding scheme. The Act goes far beyond merely promoting the use of government funding. In operation, the Act impermissibly tilts the playing field sharply in favor of government-funded candidates by punishing their privately supported opponents (such as Plaintiff Dean Martin) for having refused government subsidies. 24. A.R.S. § 16-952(C) requires the payment of matching funds to

government-funded candidates whenever an independent campaign expenditure

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 10

Page 10 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

is made that either i) opposes a government-funded candidate with a privately funded opponent, or ii) supports a privately funded candidate with a government-funded opponent. By comparison, independent expenditures made on behalf of government-funded candidates are not restricted in any way, nor counted against the maximum amount of government funds that the government-funded candidate may receive. But when a privately supported candidate is the beneficiary of independent expenditures made to counter such unregulated independent expenditures, that independently and privately funded speech is immediately neutralized by the state in the form of government matching funds. 25. Thus, A.R.S. § 16-952(C) protects and insulates government-

funded candidates from independent expenditures, but provides no such protection or relief to privately financed candidates. In operation, this provision does not equalize the relative financial resources of candidates, as it declares, but rather it tilts the playing field sharply in favor of government-funded candidates. 26. A.R.S. § 16-952(C) punishes privately funded candidates for

receiving private support, improperly injects the state into the political process by increasing the financial resources of government-funded candidates based on the privately funded candidate's exercise of his or her speech rights, harms

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 11

Page 11 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

independent groups by drowning out and neutralizing their speech and placing a chilling effect on the future exercise thereof. 27. A.R.S. § 16-952(C) crowds out private donations to both privately

funded candidates and independent groups because donors are reluctant to support candidates or messages when their act of support will trigger government funds to candidates with messages with which they disagree. 28. The system created by the Act treats independent expenditures

differently depending on whether they favor government-funded candidates (in which case they are entirely free of regulation) or privately supported candidates (in which case they are matched without a negative effect on the government-funded candidate's spending limit). Privately supported candidates like Martin would be better off rebuffing such potential benefactors. Unfortunately for privately supported candidates this is not possible, because independent expenditures are by definition not coordinated or solicited by the candidate who benefits from them. Whenever privately supported candidates receive unsolicited and uncoordinated support that they do not control, the system showers their government-funded opponents with more taxpayer money

that their opponents do control.
29. A.R.S. § 16-952(B), as amended, requires the payment of matching

funds to government-funded candidates based on gross contributions to privately financed candidates during the general election cycle, minus 6%. This

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 12

Page 12 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

arbitrary cost allowance does not take into account the actual cost to privately financed candidates of raising private donations. Because campaign costs are itemized on campaign finance reports, the Act could take them into account when awarding matching funds. However, using a small, arbitrary percentage ensures that the government-funded candidate will have more funds to spend on getting his or her message out to the public than will the privately financed candidate. 30. A.R.S. § 16-952(B) goes beyond mere promotion of the government

funding scheme and punishes privately supported candidates. By failing to adequately account for the significant fundraising costs incurred by traditional, privately supported candidates in the determination of matching funds, the system places the government-funded opponent in the superior position of getting all of the benefits of the traditional candidate's fundraising efforts while absorbing almost none of the costs. In effect, this actively discourages the private fundraising that is vital to the success of privately funded candidates. 31. Further, the Act's reduction in the amount of permissible

contributions makes it even more difficult for unsubsidized candidates to raise the amount that subsidized candidates automatically receive. 32. A.R.S. § 16-952(A) is designed to increase the financial resources

of government-funded candidates when privately financed candidates speak, operates in a punitive and hence coercive manner against privately funded

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 13

Page 13 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

candidates, and will operate to penalize Martin in his forthcoming statewide campaigns, especially when coupled with the new, nearly doubled, initial lump sum disbursements. 33. In the next election cycle, Martin's only hope of ever having the

same amount of money as a government-funded candidate is to either accept government funds or to raise the enormous sum of $620,100, which is the sum of the primary and general election maximum expenditure limits for government-funded candidates. That enormous sum of money is more than any candidate has ever raised in Arizona's history for the office of State Treasurer. Failing that, a privately supported candidate will always be outspent by his or her government-funded opponent. 34. A.R. S. § 16-952, entitled "Equal funding of candidates," declares

on its face--and advances in operation--an improper state interest in equalizing the relative financial resources of candidates for public office in Arizona in violation of the First and Fourteenth Amendments to the U.S. Constitution. 35. A.R.S. §§ 16-941(B)(2), 16-941(C), and 16-958, and Commission

rules promulgated to implement and enforce these statutes coerce participation in the government financing scheme. While government-funded candidates are required to submit only three additional reports over and above the six regularly scheduled reports that all candidates for public office must file,

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 14

Page 14 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

privately supported candidates with government-funded opponents are subject to stringent daily campaign-finance reporting requirements. 36. These daily reports are required for the sole purpose of facilitating

the Commission's payment of additional government money to their government-funded opponents, and serve no purpose in combating corruption or the appearance thereof. Thus, this reporting regime seeks not to promote the use of government funding but rather to equalize the relative financial resources of candidates, an improper state purpose that cannot justify the deprivation of Plaintiffs' rights under the First and Fourteenth Amendments. The reporting requirements also operate in an impermissibly coercive fashion by punishing the acceptance of private funding. Thus, the Act places regulatory burdens on privately financed candidates for the sole benefit of governmentfunded candidates. 37. The Commission enjoys sweeping powers to enforce these

disproportionately burdensome reporting requirements. Because the filing requirements for privately funded candidates are so much more onerous than for candidates taking government subsidies, the filing requirements have a profoundly negative impact on the willingness of candidates to opt for private financing. Moreover, the Commission's boundless discretionary power, and its overt willingness to use it, creates a strong disincentive to the launching of privately funded campaigns.

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 15

Page 15 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

38.

A.R.S. § 16-941(B)(1) coerces candidates to accept public financing

by reducing by twenty percent the maximum individual contribution that a privately funded candidate may accept. These reduced limits diminish the pool of private resources available to candidates who choose to exercise their First Amendment right to fund campaign speech through private contributions. 39. These reduced limits are not aimed at reducing the possibility or

the appearance of corruption and serve no purpose other than to punish candidates who refuse to accept government funding of their political campaigns. 40. Plaintiff Dean Martin will run a statewide election in 2010 and will

suffer imminent and irreparable injury to his rights under the First and Fourteenth Amendments to the U.S. Constitution by virtue of the Act's aforementioned provisions. 41. In 2006, Arizona's government financing scheme operated to

ensure that Martin's government-funded opponent received significantly more funding than Martin. Martin's 2006 campaign was not funded by the government, but rather by individuals who supported his message. He was unopposed in his party's primary election. Martin's government-funded Democratic general election opponent was also unopposed in her party's primary. No other candidates sought the office of State Treasurer.

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 16

Page 16 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

42.

Martin's opponent received $47,700 for her unopposed primary,

which is equal to the Act's primary election expenditure limit for the office of Treasurer. Attach. 1 (Martin Dec.) at ¶ 6. Following her primary, Martin's opponent received an additional $71,655 for the general election, which is equal to the Act's general election expenditure limit. She thus received a total of $119,425 in lump sum disbursements for the entire 2006 election cycle, not including any matching funds. Id. 43. Under the Act, at least prior to the recent legislative amendment,

once the general election cycle began, every dollar Martin raised over the general election spending limit of $75,655, including the funds that Martin had raised and spent during the primary election, would have been matched to his opponent. Attach. 1 (Martin Dec.) at ¶ 7. As a result, Martin's governmentfunded opponent would always have a $47,770 funding advantage unless or until Martin could raise three times the general election spending limit of $214,965, plus the primary expenditure limit of $47,770, for a total of $262,735. Id. This perverse funding disparity was the result of Martin's opponent's unopposed primary. The only way to avoid being outspent on a grand scale by his opponent was for Martin to abide by the Act's expenditure limits and avoid triggering matching funds. Id. at ¶ 8. Martin was thus irreparably harmed by the Act because he had to forego raising and spending money that he would have used to engage in constitutionally protected political speech. Id. at ¶ 5.

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 17

Page 17 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

44.

Though it appears that this specific problem has been mitigated to

some extent by the recent legislative amendments to the Act, H.B. 2690, Ariz. Sess. Laws, Ch. 277, § 5 (amending A.R.S. § 16-952(C)(4)), the significantly increased lump sum disbursements coupled with the generous two-times matching funds will operate to ensure that any government-funded candidate for the Treasurer's office will have significantly more resources in 2010 than Martin will be able to raise as a privately financed candidate, thus forcing him to either abide by the Act's expenditure limits in order to avoid triggering matching funds or to run a government financed election. Attach. 1 (Martin Dec.) at ¶ 5, 8. 45. Plaintiffs Freedom Club PAC and Arizona Taxpayer have made

independent expenditures in Arizona political campaigns in the past, and will make independent expenditures in Arizona in the future, but this exercise of their fundamental rights under the First and Fourteenth Amendments to the U.S. Constitution will be severely and negatively affected by the Act's aforementioned provisions regarding the matching of independent expenditures. 46. The Act's matching funds provision has a chilling, neutralizing, and

punitive effect on the free speech rights of Plaintiffs and other individuals and groups that would like to speak independently in political campaigns. The Act's matching funds provision also crowds out private donations because donors are

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 18

Page 18 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

reluctant to give to independent groups when they know that the Commission will provide government funds to candidates whom they oppose. 47. While the Freedom Club PAC will make independent expenditures

in the future, its ability to fully exercise the fundamental right to engage in political advocacy is severely undermined by the operation of the Act, which negates the Freedom Club PAC's speech and promotes political campaigns with which its members and donors disagree, based solely on the Freedom Club PAC's exercise of its free speech and free association rights. The Act also makes it more difficult to raise funds with which to voice its opinions because donors do not like to give money when their contributions trigger government funds being given to candidates whom they oppose. 48. While Arizona Taxpayer will continue to make independent

expenditures, its ability to fully exercise the fundamental right to engage in political advocacy will be severely undermined by the operation of the Act if it spends money to speak out against government-funded candidates because the Act's matching funds provision will negate Arizona Taxpayer's speech and promote political campaigns with which it and its donors disagree based solely on Arizona Taxpayer's exercise of its free speech and free association rights. Morever, Arizona Taxpayer's donors have already expressed concern about donating to Arizona Taxpayer if the contributed funds will ultimately trigger government subsidies being paid to candidates whom Arizona Taxpayer and its

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 19

Page 19 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

donors desire to see defeated based on Arizona Taxpayer's speech. Attach. 2 (Kirkpatrick Dec.) at ¶ 10. 49. By driving private dollars out of the political arena, the Act limits

the amount of speech independent groups can engage in and limits the amount of speech citizens hear during elections. 50. The foregoing provisions, individually and cumulatively, are

designed to advance the improper state purpose of equalizing the relative financial resources of candidates, operate in a punitive and hence coercive manner against privately supported candidates by ensuring their governmentfunded opponents always have more funds, and will chill future political participation by unsubsidized candidates and independent groups. COUNT I (FIRST AMENDMENT-INDEPENDENT EXPENDITURES) 51. Plaintiffs incorporate and reallege each and every allegation

contained in paragraphs 1-50 of this Complaint as if set forth fully herein. 52. Under the First Amendment to the U.S. Constitution, Buckley v.

Valeo, 424 U.S. 1 (1976), and its progeny, including Randall v. Sorrell, 126 S.
Ct. 2470 (2006), and Federal Election Commission v. Wisconsin Right to Life,

Inc., 127 S. Ct. 2652 (2007), a state cannot place involuntary limits on
independent expenditures made in the course of political campaigns, and cannot

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 20

Page 20 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

regulate or otherwise chill individuals or groups from exercising their right to freely speak. 53. A.R.S. § 16-952(C) provides a direct public subsidy to

government-funded candidates whenever an independent expenditure is made that either i) opposes a government-funded candidate with a privately funded opponent, or ii) supports a privately funded candidate with a governmentfunded opponent. Therefore, this statute amounts to an unconstitutional content-based regulation of political speech, in that it treats speech differently depending on whether it opposes or favors a government-funded candidate. 54. Freedom Club PAC and Arizona Taxpayer face imminent injury to

their First Amendment rights to free political speech and free association as a direct result of this statutory scheme. The state's payment of matching funds-- which, unlike an independent expenditure, is directly controlled by the government-funded candidate--neutralizes independent speakers' voices and punishes the making of independent expenditures. The knowledge that making an independent expenditure opposing a government-funded candidate will directly result in that candidate receiving a matching government subsidy creates a chilling effect on the Plaintiffs' exercise of protected speech, and imposes a climate of self-censorship that is inimical to our American heritage of unfettered political discourse. The statute also violates the Plaintiffs' right

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 21

Page 21 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

to freedom of association by encroaching upon the ability of like-minded persons to pool their resources in furtherance of common political goals. 55. These provisions of the Act are not narrowly tailored to serve a

substantial, significant, or compelling legitimate governmental interest; are substantially overbroad because they discourage far more speech than is necessary to advance any governmental interest; penalize and, thereby, chill political speech; and constitute a content-based regulation of the fundamental rights of free speech and association. COUNT II (FIRST AMENDMENT-CANDIDATE COERCION/EQUALIZATION) 56. Plaintiffs incorporate and reallege each and every allegation

contained in Paragraphs 1-55 of this Complaint as if set forth fully herein. 57. Under the First Amendment to the U.S. Constitution, Buckley v.

Valeo, 424 U.S. 1 (1976), and its progeny, including Randall v. Sorrell, 126 S.
Ct. 2479 (2006), and Federal Election Commission v. Wisconsin Right to Life,

Inc., 127 S. Ct. 2652 (2007), a government campaign financing scheme violates
the right to free political speech where it goes beyond mere promotion of the voluntary use of public funding, and improperly injects the state into the political process by increasing the financial resources of government-funded candidates based on the expenditures and contributions of privately financed candidates. Under these cases, the state may not coerce involuntary

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 22

Page 22 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

participation in a government campaign financing scheme by punishing those candidates who choose to run traditional, privately supported political campaigns rather than accept taxpayer subsidies and abide by the Act's arbitrary expenditure limits. Nor may the state coerce privately financed candidates to abide by such a scheme's expenditure limits for fear of being vastly outspent by their government-funded opponent or opponents. 58. A.R.S. § 16-952(C) expressly provides for the "equal funding of

candidates," and requires the payment of matching funds to government-funded candidates whenever an independent campaign expenditure is made that either i) opposes a government-funded candidate with a privately financed opponent, or ii) supports a privately financed candidate with a government-funded opponent. 59. A.R.S. § 16-952(B) expressly provides for the "equal funding of

candidates" in general elections, and requires the state to pay matching funds to government-funded candidates based on the gross amount of contributions received by their privately supported opponents after the primary election period, but does not make adequate adjustments for fundraising or other expenses incurred by the privately supported candidate. This provision is designed for the sole purpose of equalizing the relative financial resources of candidates, an improper state interest under Buckley v. Valeo, 424 U.S. 1 (1976). Moreover, this provision in its operation forces privately funded

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 23

Page 23 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

candidates to abide by the Act's expenditure limits by ensuring that government-subsidized candidates who receive matching funds will be able to vastly outspend the privately financed candidate. In operation, this provision guarantees that candidates who accept taxpayer funding receive more money than their privately financed opponents. 60. A.R.S. § 16-952(A) expressly provides for the "equal funding of

candidates" in primary elections, requiring the Commission to pay matching funds to government-funded candidates based on expenditures made by their privately supported opponents. On its face, this section declares an improper state interest in equalizing the relative financial resources of candidates for public office in Arizona. In its operation, it coerces participation in government funding of political campaigns and forces privately funded candidates to abide by the Act's expenditure limits for fear of being vastly outspent by their government-funded opponent or opponents. Such bureaucratic intermeddling in the political process violates the First Amendment to the U.S. Constitution, and is contrary to the U.S. Supreme Court's decision in Buckley v. Valeo, 424 U.S. 1 (1976), and its progeny, including Randall v. Sorrell, 126 S. Ct. 2479 (2006), and

Federal Election Commission v. Wisconsin Right to Life, Inc., 127 S. Ct. 2652
(2007). 61. A.R.S. §§ 16-941(B)(2), 16-941(C), and 16-958, and Commission

rules promulgated to implement and enforce these statutes coerce participation

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 24

Page 24 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

in the government financing scheme and forces candidates to abide by the Act's strict expenditure limits by punishing privately supported candidates through the enforcement of stringent daily campaign finance reporting requirements. These reports are required for the sole purpose of facilitating the state's payment of additional taxpayer money to the government-funded opponents of privately funded candidates, and serve no purpose in combating corruption or the appearance thereof. This improper purpose is demonstrated by the Legislature's recent amendment to the Act, which eliminated any requirement to disclose details concerning the contributions or expenditures to be matched, instead requiring only that the dollar amount to be matched be disclosed. This improper purpose is further demonstrated by the amendment exempting privately financed candidates without a government-funded opponent from the additional reporting requirements. See H.B. 2690, Ariz. Sess. Laws, Ch. 277, § 9 (amending A.R.S. § 16-958) and § 2 (amending A.R.S. § 16-941(B)(2)). By comparison, government-funded candidates are required to submit only three additional reports over and above the six regularly scheduled reports that all candidates for public office must file. This reporting regime seeks to equalize the relative financial resources of candidates, an improper state purpose that cannot justify the deprivation of Plaintiffs' rights under the First and Fourteenth Amendments. The reporting requirements operate in an impermissibly coercive fashion by ensuring government-funded candidates will receive more funding

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 25

Page 25 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

than privately financed candidates, thus punishing the acceptance of private funding and forcing privately funded candidates to abide by the Act's strict expenditure limits. 62. A.R.S. § 16-941(B)(1) coerces candidates to accept public financing

by reducing by twenty percent the maximum individual contribution a privately funded candidate may accept. The reduced limits do not combat corruption or the appearance of corruption, but exist only to reduce the viability of running a traditional campaign. These reduced limits do nothing but diminish the pool of private resources available to candidates who choose to exercise their First Amendment right to fund campaign speech through private contributions. 63. The foregoing provisions, individually and cumulatively, are

designed to equalize the relative financial resources of candidates, operate in a punitive and coercive manner against privately funded candidates, and will chill future political participation by unsubsidized candidates and independent groups. The Act creates an involuntary government campaign financing system that stacks the deck against privately funded candidates by increasing the financial resources of government-funded candidates, thus sharply skewing the balance in favor of government-funded candidates (see, e.g., § 16-952(B)'s near-gross contribution matching after the primary). The Act coerces rather than promotes participation by actively and directly punishing privately funded

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 26

Page 26 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

candidates for having exercised their right under the First Amendment to engage in political speech through a traditional, privately supported campaign. 64. These provisions of the Act are not narrowly tailored to serve a

substantial, significant, or compelling legitimate governmental interest; are substantially overbroad because they discourage far more speech than is necessary to advance any governmental interest; penalize and, thereby, chill political speech; and constitute a content-based regulation of the fundamental rights of free speech and association. COUNT III (EQUAL PROTECTION-INDEPENDENT EXPENDITURES) 65. Plaintiffs incorporate and reallege each and every allegation

contained in Paragraphs 1-64 of this Complaint as if set forth fully herein. 66. Under the Fourteenth Amendment to the U.S. Constitution,

Plaintiffs Freedom Club PAC and Arizona Taxpayer--and their contributors-- have the right to enjoy the equal protection of laws. 67. A.R.S. § 16-952 (C) sets up three classifications of independent

expenditures: (1) those statements brought forward to the voting public against a government-funded candidate or in favor of the privately funded opponent of a government-funded candidate; (2) those statements that favor a governmentfunded candidate; and (3) those statements that oppose a privately funded

candidate. These three types of political messages receive radically different

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 27

Page 27 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

treatment under the Act. Political messages in the first category, independent expenditures against a government-funded candidate or in favor of the

privately funded opponent of a government-funded candidate, are treated as
expenditures of the opponent during the primary election, and contributions to the opponent during the general election. (This is because, under § 16-952(B), contributions are matched without regard for expenditures made during the general election.) In either the primary or general election period, then, expenditures made against a government-funded candidate or in favor of a

privately funded opponent are matched by the state. This state action
neutralizes the exercise of fundamental rights of free speech of the independent speaker who disfavors the government-funded candidate, and has a chilling effect on the future exercise thereof. Political messages in the second category, statements that favor a government-funded candidate, will only be matched or neutralized when that candidate has a government-funded opponent. But the third category of political messages, those brought forward by independent speakers who oppose a privately funded candidate, are not regulated, matched, neutralized, or limited in any way. 68. Moreover, in the event that supporters of the privately funded

candidate wish to exercise their First Amendment rights by responding to such an attack, they will face two difficulties. First, they cannot coordinate their activity with the privately funded candidate they support, because Arizona law

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 28

Page 28 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

treats coordinated expenditures as contributions subject to limit. Second, their speech will trigger the release of matching funds directly to the governmentfunded candidate they oppose, who, unlike his privately funded counterpart, is then free to control how that money is spent. This threatened harm has a chilling effect on the fundamental free speech and free association rights of independent speakers who favor privately funded candidates with governmentfunded opponents. 69. The right of independent groups like Freedom Club PAC and

Arizona Taxpayer to speak during political campaigns is a fundamental right under the First Amendment to the U.S. Constitution. Any regulation such as A.R.S. § 16-952(C) that singles out their political speech for disparate treatment must withstand strict scrutiny and the Act does not. COUNT IV (EQUAL PROTECTION-CANDIDATES) 70. Plaintiffs incorporate and reallege each and every allegation

contained in Paragraphs 1-69 of this Complaint as if set forth fully herein. 71. Under the Fourteenth Amendment to the U.S. Constitution, Plaintiff

Martin has the right to enjoy the equal protection of laws. 72. A.R.S. § 16-952 et seq. creates two classifications of candidates

for public office in Arizona: those who participate in the Clean Elections system by accepting government financing, and those who do not participate in the

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 29

Page 29 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

system, choosing instead to run privately supported campaigns. These provisions then treat candidates differently with respect to independent expenditures or contributions made on their behalf, based solely on their status as a government-funded or privately funded candidate. 73. A.R.S. § 16-941 et seq., § 16-958, and any and all Commission

rules promulgated in furtherance thereof, create two classifications of candidates for public office in Arizona: those who participate in the Clean Elections system by accepting government financing, and those who do not participate in the system, choosing instead to run a privately supported campaign. These provisions then treat these candidates differently with respect to contribution limits and campaign finance reporting requirements, based solely on their status as a government funded or privately funded candidate. Moreover, the Commission's substantial expenditure of government funds to promote the Clean Elections system, even during election years, creates the perception that government-funded candidates are better suited to elected office and more trustworthy than candidates who run privately financed campaigns. 74. The right of privately supported candidates for public office like

Martin to speak during political campaigns without having involuntary limitations placed on their expenditures, without being coerced into participating in public campaign financing, and without fear of being penalized for having refused

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 30

Page 30 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

government subsidies, is a fundamental right under the First Amendment to the U.S. Constitution. Any regulation such as A.R.S. § 16-952 et seq., § 16-941 et

seq., § 16-958, or any administrative rules promulgated in furtherance thereof
that singles out privately funded candidates for disparate treatment must withstand strict scrutiny and the Act does not. COUNT V (ENTITLEMENT TO DECLARATORY RELIEF) 75. Plaintiffs incorporate and reallege each and every allegation

contained in Paragraphs 1-74 of this Complaint as if set forth fully herein. 76. For reasons including but not limited to those stated in this

Complaint, an actual dispute exists between Plaintiffs and Defendants, which parties have genuine and opposing interests, which interests are direct and substantial, and of which a judicial determination will be final and conclusive. 77. Plaintiffs are therefore entitled to a declaratory judgment that

Defendants' actions are unconstitutional, as well as such other and further relief as may follow from entry of such a declaratory judgment. COUNT VI (ENTITLEMENT TO INJUNCTIVE RELIEF) 78. Plaintiffs incorporate and reallege each and every allegation

contained in Paragraphs 1-77 of this Complaint as if set forth fully herein. 79. For reasons including but not limited to those stated in this

Complaint, as a direct and proximate result of Defendants' actions against

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 31

Page 31 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Plaintiffs, Plaintiffs have no adequate legal, administrative, or other remedy by which to prevent or minimize the continuing irreparable harm to their constitutional rights. 80. Plaintiffs are, therefore, entitled to a preliminary and permanent

injunction prohibiting Defendants from committing the above-described violations of their constitutional rights, as well as such other and further relief as may follow from entry of such injunctive relief. REQUEST FOR RELIEF Plaintiffs pray for judgment and ask this Court for the following: A. A declaration that §§ 16-941(B)(1) and (2), § 16-941(C), §§ 16-

952(A), (B) and (C), and § 16-958 of the Arizona Citizens Clean Elections Act, and any Commission rules promulgated in furtherance thereof, violate the First Amendment to the United States Constitution; B. A declaration that §§ 16-941(B)(1) and (2), § 16-941(C), § 16-

952(A), (B) and (C), and § 16-958 of the Arizona Citizens Clean Elections Act, and any Commission rules promulgated in furtherance thereof, violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution; C. A declaration that the Act as a whole is void and of no effect

should the remaining provisions be deemed unable to remain legally operational absent the unconstitutional provisions;

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 32

Page 32 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
2

D.

An Order that preliminarily and permanently enjoins Defendants

from further implementing and performing their duties in administering and enforcing the above-referenced provisions; E. An award for Plaintiffs' reasonable attorneys' fees and costs

pursuant to 42 U.S.C. § 1988; and F. Such further relief as this Court deems equitable, just, and proper.

RESPECTFULLY SUBMITTED this 27th day of November, 2007. INSTITUTE FOR JUSTICE

s/Timothy D. Keller Timothy D. Keller (019844) Jennifer M. Perkins (023087) 398 S. Mill Avenue, Suite 301 Tempe, AZ 85281 P: 480-557-8300/F: 480-557-8305 INSTITUTE FOR JUSTICE William R. Maurer (WSBA #25451) 2 811 First Avenue, Suite 625 Seattle, WA 98104 P: 206-341-9300/F: 206-341-8311

Admitted pro hac vice.

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 33

Page 33 of 34

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Deborah Goldberg New York University School of Law Brennan Center for Justice 161 Ave of the Americas 12th Floor New York, NY 10013 s/Timothy D. Keller Certificate of Service I hereby certify that on November 27, 2007, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Craig William Soland [email protected], [email protected] Joy E Herr-Cardillo [email protected] Mary Ruth O'Grady [email protected] Timothy Michael Hogan [email protected], [email protected], [email protected] Diana Leticia Varela [email protected] Timothy David Keller [email protected], [email protected] Diana L Varela [email protected] William R Maurer [email protected], [email protected] I hereby certify that on November 27, 2007, I serviced the attached document by US mail to the following, who is not a registered participant of the CM/ECF System:

Case 2:04-cv-00200-EHC

Document 78-2

Filed 05/05/2008 34

Page 34 of 34