Free Motion to Amend/Correct - District Court of Arizona - Arizona

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INSTITUTE FOR JUSTICE ARIZONA CHAPTER
Clint Bolick (021684) Frank J. Conti Jr. (013188) Timothy D. Keller (019844) Jennifer M. Perkins (023087) 111 W. Monroe St., # 1107398 S. Mill Avenue, Suite 301 Phoenix, AZ 85003Tempe, AZ 85281 P: (602) 324-5440 / F: (602) 324-5441P: 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
ASSOCIATION OF AMERICAN PHYSICIANS AND SURGEONS, a nonprofit corporation; MATT SALMON, a citizen of the State of Arizona; DEAN MARTIN, a citizen of the State of Arizona; and LORI DANIELS, a citizen of the State of Arizona,AZ FREE ENTERPRISE CLUB'S FREEDOM CLUB PAC, a candidate support or opposition committee; and ARIZONA TAXPAYER ACTION COMMITTEE, an independent expenditures committee, Plaintiffs, Vv. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

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

FIRST AMENDED COMPLAINT (Declaratory and Injunctive Relief)

1

Admitted pro hac vice.

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JAN BREWER, in her official capacity ) as Secretary of State of the State of ) Arizona; DAVID PETERSEN, in his ) official capacity as Treasurer of the ) State of Arizona; TERRY GODDARD, ) in his official capacity as Attorney ) General of the State of Arizona; and ) LESLIE "GENE" LEMON, DAVID G. ) McKAY, KATHLEEN S. DETRICK, ) ERMILA JOLLEY,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, ) ) Defendants. ) ____________________________________) INTRODUCTION 1. This is a civil rights action seeking a declaratory judgment 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. There are two classes of Plaintiffs: Matt Salmon, Dean Martin, and Lori Daniels, individual citizens of the State of Arizona who desire to run for public office without participating in the public campaign financing system created by the Citizens Clean Elections Act, A.R.S. § 16-901 et. seq., and the Association of American Physicians and Surgeons, which desires to make independent expenditures in political campaigns in Arizona without fear of having its speech neutralized by the State through the operation

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of certain provisions of the Act. These state-law provisions are an unconstitutional infringement of Plaintiffs' right to engage in political free speech and free association under the First Amendment to the U.S. Constitution, and their right to enjoy the equal protection of laws guaranteed by the Fourteenth Amendment. 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 choose to not receive government funding under the Act and by penalizing independent groups wishing to participate in the political process.

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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 2.5. 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. 3.6. This Court has subject matter jurisdiction under 28 U.S.C. §§ 1331

and 1343(a)(3) and (4). 4.7. Venue properly lies with this Court under 28 U.S.C. § 1391(b). PARTIES 5. Plaintiff Association of American Physicians and Surgeons is a

nonprofit national professional organization founded in 1943 and headquartered in Tucson, Arizona, that has made independent campaign expenditures in the past, has established a political action committee for that purpose, and desires to make independent campaign expenditures in the upcoming 2004 statewide elections in Arizona. 6. Plaintiff Matt Salmon is a citizen of the United States, a resident of

the State of Arizona, a former three-term elected member of the United States Congress, and was the Republican candidate for Governor of Arizona in the 2002 statewide general election. Salmon did not participate in the "Clean

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Elections" public campaign funding system, and ran a traditional, privately supported gubernatorial campaign. 7.8. Plaintiff Dean Martin is a citizen of the United States, a resident of

the State of Arizona, the current Arizona State Treasurer, and a formersitting two-term elected member of the Arizona State Senate. Attachment 1 (Dean Martin Declaration) at ¶¶ 2-3. who 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 reelection to the Senate in 2004, and perhaps run for a statewide office in 2006. In either event, For his next campaign for state office, Martin desires and intends to run a traditional, privately supported campaign, and does not wish to but may be forced to participate in the state "Clean Elections" public campaign government funding system because of the penalties he has faced and would face under the Act for choosing to run with private funds. Id. at ¶ 4. But the law on its face seeks to equalize the relative financial resources of candidates, and in its operation punishes candidates for choosing not to participate in the system. Therefore, Martin fears that, in order to remain a competitive and viable candidate, the Clean Elections system as currently constituted will coerce his acceptance of government funding, or punish him for choosing not to do so.

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8.

Plaintiff Lori Daniels is a citizen of the United States, a resident of

the State of Arizona, a former four-term elected member of the Arizona State House of Representatives and one-term member of the Arizona State Senate, and intends to be a candidate for the office of State Representative in the 2004 or 2006 Republican primary election. Daniels desires and intends to run a traditional, privately supported campaign, and does not wish to participate in the state "Clean Elections" public campaign funding system. But the law on its face seeks to equalize the relative financial resources of candidates, and in its operation punishes candidates for choosing not to participate in the system. Therefore, Daniels fears that, in order to remain a competitive and viable candidate, the Clean Elections system as currently constituted will coerce her acceptance of government funding, or punish her for choosing not to do so. 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

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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 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

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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 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. 9.11. 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. 10. Defendant David Petersen is the Treasurer of the State of Arizona,

and is sued in his official capacity. As Treasurer, Petersen is responsible for administering the Citizens Clean Elections Fund. A.R.S. § 16-949.

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11.

Defendant Terry Goddard is the Attorney General of the State of

Arizona, and is sued in his official capacity. As Attorney General, Goddard is responsible for the enforcement of the state election laws. A.R.S. § 16-924. 12. Defendants Leslie "Gene" Lemon, David G. McKay, Kathleen S.

Detrick, Ermila Jolley,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 Arizona Citizens Clean Elections Act. A.R.S. §§16-955-57 et seq. FACTUAL ALLEGATIONS 13. The Arizona Citizens Clean Elections Act ("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. 14. The Act creates a system of government campaign financing for

statewide and legislative elected offices within the State of Arizona, and creates the Arizona Citizens Clean Elections Commission ("the Commission")Commission, a bureau of unelected individuals granted broad enforcement and regulatory powers which that extend not only to all candidates

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who choose to participate in the government campaign financing system, but even to all candidates who do not wish to run a taxpayergovernment- funded campaign. 15. Participating clean electionsUnder 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, they 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. 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

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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. 16.18. Nonparticipating candidatesCandidates who choose to fund their campaigns with private donations and, thereforecorrespondingly, receive no government funding. They, must nonetheless adhere to specified contribution limits and extensive reporting requirements. 19. The reporting requirements exist, for the sole purpose of allowing

the state to "level the playing field" by the payment of equalization payments ("notifying the Commission when to pay matching funds to government-funded candidates") based on the nonparticipating candidates' campaignfinance reports. 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. 20. The Act punishes candidates for choosing not to accept

government funds and not agreeing to abide by the Act's spending limits.

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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 expenditure limits. The Act will punish him in the future if he chooses to run a

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privately financed campaign, or it will coerce him to accept government funding and betray his principled stance in opposition to welfare for politicians. 17.22. Payments 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. : in 2002, for example, participating gubernatorial candidates had a spending limit of $409,000 in the primary election cycle, and $615,000 in the general election; legislative candidates had a choice of receiving either $10,790 or $16,180 for the primary, and then could only receive the other of those two amounts in the general election.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 are will be adjusted for inflation by the Secretary of State. 18.23. The Act subjects nonparticipating, privately supported candidates to a series of stringent and punitive measures that have the effect of coercing participation in the public campaigngovernment funding scheme. The Act goes far beyond merely promoting the use of public government funding and the permissible state interest in "opening up" the political process so that more

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voices can be heard. In operation, the Act impermissibly tilts the playing field sharply in favor of government-funded candidates by punishing their who are opposed by privately supported candidates opponents (such as Plaintiffs Plaintiff Matt Salmon, Dean Martin, and Lori Daniels,) punishing such privately supported candidates for having refused government subsidies. 19.24. A.R.S. § 16-952(C) requires the payment of dollar-for-dollar matching funds to government-funded candidates participating in the public funding scheme whenever an independent campaign expenditure is made that either i) opposes a participating government-funded candidate with a nonparticipating privately funded opponent, or ii) supports a nonparticipating privately funded candidate with a participating government-funded opponent. By comparison, independent expenditures made on behalf of participating government-funded candidates are not regulated restricted in any way, nor counted against the maximum amount of public government funds that can be received by the participating government-funded candidate may receive. But when a nonparticipating privately supported candidate is the beneficiary of independent expenditures made to counter such an unregulated independent expenditureexpenditures, that independently and privately funded speech is immediately neutralized by the state in the form of public government matching funds.

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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. 20.26. A.R.S. § 16-952(C) punishes the nonparticipating privately funded candidate candidates for receiving private support, improperly injects the state into the political process by attempting to equalizeincreasing the relative financial resources of government-funded candidates based on the privately funded candidate's exercise of his or her speech rights, and harms the independent expender groups by drowning out its voice, and neutralizing its freetheir 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. 21.28. In the 2002 general election Janet Napolitano, Salmon's government-funded Democratic opponent, was the beneficiary of an independent expenditure of approximately $1 million from the Democratic Party. Under the law, this expenditure was not counted against the maximum

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total public disbursement to be received by Napolitano, and was entirely unregulated. But when Salmon's party responded with its own independent expenditure of approximately $330,000, it directly resulted in that same amount being paid to Napolitano. 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 deleterious effect on the recipient) or privately supported candidates (in which case they are matched dollar-for-dollar without a negative effect on the governmentfunded candidate's' spending limit). Privately supported candidates like Matt SalmonMartin 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. A purely neutral treatment of these unsolicited independent expenditures, whereby no effect is felt by the recipient, would not only promote participation (because that amount would not be counted against the maximum total disbursement for the government-funded candidate) but would also avoid punishing privately supported candidates. Whenever privately supported candidates receive unsolicited and uncoordinated support that they do not control, they must suffer the system showering showers their government-funded opponents with more taxpayer money that

such their opponents do control.

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22.29. A.R.S. § 16-952(B), as amended, requires the payment of matching funds to participating government-funded candidates based on gross contributions to nonparticipating privately financed candidates during the general election cycle, minus 6%. This 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)This goes beyond mere promotion of the

publicfunding 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 irretrievably 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 provides government-funded candidates with much greater than a dollar-for-dollar match, and actively discourages the private fundraising that is vital to the success of a nonparticipating candidateprivately funded candidates.

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31.

The 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. 23.32. A.R.S. § 16-952(A) is designed to equalize the relativeincrease the financial resources of government-funded candidates when privately financed candidates speak, operates in a punitive and hence coercive manner against nonparticipating privately funded candidates, operated in such a coercive manner against Matt Salmon in Arizona's 2002 primary election, and will operate to penalize future unsubsidized candidates like Dean 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 opponentand Lori Daniels. 34. A.R. S. § 16-952, is entitled "Equal funding of candidates," which

declares on its face declares--and advances in operation advances--an

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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. 24.35. 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 public 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, by punishing nonparticipating privately supported candidates with governmentfunded opponents are subject to through the enforcement of stringent daily campaign financial-finance reporting requirements. In the current election cycle, privately supported, nonparticipating candidates must expend great effort, time, and resources to prepare and file a series of special "trigger" reports beginning January 1, 2004--with 37 reports being mandated between July 1 and Election Day, November 3, 2004. 36. These daily reports are required for the sole purpose of facilitating

the State's Commission's payment of additional taxpayer monies government money to their government-funded opponents, and serve no purpose in combating corruption or the appearance thereof. By comparison, governmentfunded candidates are required to submit only three additional reports over and above the six regularly scheduled reports that all candidates for public office

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must file. Thus, this reporting regime seeks not to promote the use of public 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, and provide government-funded candidates an additional tactical advantage by forcing their privately supported opponents to disclose valuable strategic information early and often. Thus, the Act places regulatory burdens on privately financed candidates for the sole benefit of government-funded candidates. 25.37. The Commission enjoys sweeping powers which have resulted in aggressive enforcement ofto enforce these disproportionately burdensome reporting requirements. The public announcement of alleged reporting improprieties--even if ultimately unsubstantiated--have had a profoundly negative impact on the perception of nonparticipating candidates, as occurred with Plaintiff Salmon and others. 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

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use it, creates a strong disincentive to the launching of privately funded campaigns. 26.38. A.R.S. § 16-941(B)(1) seeks to coerces candidates to accept public financing by reducing by twenty percent the maximum individual contribution that can be accepted by a nonparticipating a privately funded candidate may accept by 20 (twenty) percent. It does not promote the acceptance of public funding, as it has no effect whatsoever on participating candidates. Rather, theseThese reduced limits diminish the available pool of private resources available to a candidatecandidates who chooses choose to exercise his or hertheir First Amendment right to bring hisfund campaign speech to voters by not participating in the public funding schemethrough 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. 27. Plaintiff Matt Salmon was the privately supported Republican

candidate for governor of Arizona in the 2002 elections, and suffered injury to his rights under the First and Fourteenth Amendments to the U.S. Constitution by virtue of the Act's aforementioned provisions. Although the election is over, the unconstitutional nature of the Act creates a situation that is capable of repetition, yet evading review.

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28.40. Plaintiff Dean Martin intends to run for reelection to the Arizona State Senate in 2004, and perhaps run for statewide office in 2006, and fearswill 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. 29. Plaintiff Lori Daniels intends to be a candidate for legislative office

in Arizona in the upcoming 2004 or 2006 election cycle, and fears imminent and irreparable injury to her 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. 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

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$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. 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

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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. 30.45. Plaintiff Association of American Physicians and Surgeons wouldPlaintiffs Freedom Club PAC and Arizona Taxpayer have made independent expenditures in Arizona political campaigns in the past, and intends towill make independent expenditures in Arizona in the future, but fears that thethis exercise of its their fundamental rights under the First and Fourteenth Amendments to the U.S. Constitution will be deprived severely and negatively affected by virtue of the Act's aforementioned provisions regarding the dollarfor-dollar matching of independent expenditures. 46. The Act's matching funds provision has a chilling, and 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 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

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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 donors desire to see defeated based on Arizona Taxpayer's speech. Attach. 2 (Kirkpatrick Dec.) at ¶ 10.

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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. 31.50. The foregoing provisions, individually and cumulatively, are designed to advance the improper state purpose of equalize equalizing the relative financial resources of candidates, operate in a punitive and hence coercive manner against nonparticipating privately supported candidates by ensuring their government-funded opponents always have more funds, operated in such a coercive manner against Matt Salmon in Arizona's 2002 primary and general elections, and will operate to penalize futurechill future political participation by unsubsidized candidates like Dean Martin and Lori Danielsand independent groups. COUNT I (FIRST AMENDMENT-INDEPENDENT EXPENDITURES) 32.51. Plaintiffs incorporate and reallege each and every allegation contained in paragraphs 1-31 50 of this Complaint as if set forth fully herein. 33.52. Under the First Amendment to the U.S. Constitution and, 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

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regulate or otherwise place a chilling effect on the exercise of the right of an individual or groupchill individuals or groups from exercising their right to freely speak. 34.53. A.R.S. § 16-952(C) provides a direct, dollar-for-dollar public subsidy to participating government-funded candidates whenever an independent expenditure is made that either i) opposes a participating government-funded candidate with a nonparticipating privately funded opponent, or ii) supports a nonparticipating privately funded candidate with a participating government-funded opponent. Therefore, this statute amounts to an unconstitutional content-based regulation of political free speech, in that it treats speech differently depending on whether it opposes or favors a government-funded candidate. 35.54. The Association of American Physicians and Surgeons facesFreedom Club PAC and Arizona Taxpayer face imminent injury to its 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 participating government-funded candidate--neutralizes independent speakers' voices and punishes the independent expender's voice when it makes an the making of independent expenditureexpenditures. The knowledge that making an independent expenditure that opposesopposing a government-funded candidate

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will directly result in that candidate receiving a dollar-for-dollar matching public government subsidy (with no effect on that candidate's spending limit) creates a chilling effect on the Association's Plaintiffs' free exercise of protected speech, and imposes a climate of self-censorship that is inimical to our American heritage of unfettered political discourse. In so doing, theThe statute also violates the Plaintiffs' right to freedom of association by encroaches encroaching upon the ability of like-minded persons to pool their resources in furtherance of common political goals in violation of the physicians' and surgeons' right to freedom of association. 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) 36.56. Plaintiffs incorporate and reallege each and every allegation contained in Paragraphs 1-35 55 of this Complaint as if set forth fully herein. 37.57. Under the First Amendment to the U.S. Constitution and, Buckley v.

Valeo, 424 U.S. 1 (1976), and its progeny, including Randall v. Sorrell, 126 S.

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Ct. 2479 (2006), and Federal Election Commission v. Wisconsin Right to Life,

Inc., 127 S. Ct. 2652 (2007), a state publicgovernment 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 attempting to equalize the relativeincreasing the financial resources of government-funded candidates based on the expenditures and contributions of privately financed candidates,. Under these cases, the state may not coerceand coercing involuntary participation in public a government campaign financing scheme by punishing those candidates like Plaintiff Matt Salmon, who in 2002 chose choose not to participate in taxpayer subsidies and instead ran ato run traditional, privately supported political campaigncampaigns 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. 38.58. A.R.S. § 16-952(C) expressly provides for the "equal funding of candidates," and requires the payment of dollar-for-dollar matching funds to government-funded candidates participating in the public funding scheme whenever an independent campaign expenditure is made that either i) opposes a participating government-funded candidate with a nonparticipating privately

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financed opponent, or ii) supports a nonparticipating privately financed candidate with a participating government-funded opponent. 39.59. A.R.S. § 16-952(B) expressly provides for the "equal funding of candidates" in general elections, and requires the State state to pay equalization matching funds to government-funded (participating) candidates based on the gross amount of contributions received by their privately supported (nonparticipating) opponents after the primary election period, without regard but does not make adequate adjustments for fundraising or other expenses incurred by the privately supported candidate. This provision is expressly 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 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 But it actually guarantees that candidates who participate inaccept taxpayer funding receive more money than their nonparticipating privately financed opponents. 40.60. A.R.S. § 16-952(A) expressly provides for the "equal funding of candidates" in primary elections, requiring the State Commission to pay equalization matching funds to participating government-funded candidates

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based on expenditures made by their nonparticipating privately supported opponents. This On its face, this section on its face declares an improper state interest in equalizing the relative financial resources of candidates for public office in Arizona. , and inIn 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 is in violation ofviolates 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).
41.61. 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 in the public government financing scheme and forces candidates to abide by the Act's strict expenditure limits by punishing nonparticipating privately supported candidates through the enforcement of stringent daily campaign financial finance reporting requirements. In the current election cycle, privately supported, nonparticipating candidates must expend great effort, time, and resources to prepare and file a series of special "trigger" reports beginning January 1, 2004--with 37 reports being mandated between July 1 and Election

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Day, November 3, 2004. These reports are required for the sole purpose of facilitating the state's payment of additional taxpayer monies money to their 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 not to promote the use of public 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 operate in an impermissibly coercive fashion by ensuring government-funded candidates will receive more funding than privately financed candidates, thus punishing the acceptance of private funding and

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forcing privately funded candidates to abide by the Act's strict expenditure limits. This is especially so in light of the Commission's aggressive and highly publicized enforcement of reporting infractions against nonparticipating candidates during the election cycle. In addition, these reporting requirements place nonparticipating candidates at a disadvantage, by requiring them to publicly report their donations and expenditures early and often, thus alerting their government-funded opponents of their campaign strategies, strengths and weaknesses. Participating candidates are not required to post their donations and expenditures as often, allowing them a significant advantage in terms of campaign timing and strategy. 42.62. A.R.S. § 16-941(B)(1) seeks to coerces candidates to accept public financing by reducing by twenty percent the maximum individual contribution that can be accepted by a nonparticipating a privately funded candidate by 20 (twenty) percentmay 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.It does nothing to promote the acceptance of public funding, as it has no effect whatsoever on participating candidates. 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. Rather, these reduced limits do nothing but diminish the available pool of private resources available to

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candidates who choose to exercise their First Amendment right to bring their campaign speech to voters by not participating in the public funding scheme. 43.63. The foregoing provisions, individually and cumulatively, are designed to equalize the relative financial resources of candidates, operate in a punitive and coercive manner against nonparticipating privately funded candidates, operated in such a coercive manner against Matt Salmon in Arizona's 2002 primary and general elections, and will operate to penalize future unsubsidized candidates like Dean Martin and Lori Danielsand will chill future political participation by unsubsidized candidates and independent groups. The Act creates an involuntary public government campaign financing system that stacks the deck against nonparticipating privately funded candidates by increasingequalizing the financial resources of governmentfunded candidates--or in some instances, (e.g., § 16-952(B)'s gross contribution matching after the primary) 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 nonparticipating privately funded candidates for having exercised their right under the First Amendment to engage in political speech through a traditional, privately supported campaign.

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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) 44.65. Plaintiffs incorporate and reallege each and every allegation contained in Paragraphs 1-43 64 of this Complaint as if set forth fully herein. 45.66. Under the Fourteenth Amendment to the U.S. Constitution, PlaintiffPlaintiffs Association of American Physicians and SurgeonsFreedom Club PAC and Arizona Taxpayer--and its members their contributors--have the right to enjoy the equal protection of laws. 46.67. A.R.S. § 16-952 (C) sets up three classifications of independent expenditures: (1) those statements brought forward to the voting populace public against a participating government-funded candidate or in favor of the

nonparticipating privately funded opponent of a participating governmentfunded candidate; (2) those statements that favor a participating governmentfunded candidate; and (3) those statements that oppose a nonparticipating

privately funded candidate. These three different types of speech political

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messages receive radically different treatmentare treated much differently under the Act. The first type of speechPolitical messages in the first category, independent expenditures against a participating government-funded candidate or in favor of the nonparticipating privately funded opponent of a participating 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

participating government-funded candidate or in favor of a nonparticipating privately funded opponent are matched by the Statestate, dollar-for-dollar.
This state action neutralizes the exercise of fundamental rights of free speech of the independent expender speaker who disfavors the government-funded candidate, and has a chilling effect on the future exercise thereof. The second type of speechPolitical messages in the second category, statements that favor

a participating government-funded candidate, will only be matched or
neutralized when that candidate has a participating government-funded opponent. But the third type of speech,category of political messages, those brought forward by independent expenders speakers who oppose a

nonparticipating privately funded candidate, is are not regulated, matched,
neutralized, or limited in any way. In fact, independent expenditures opposing a

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nonparticipating candidate serve to funnel additional taxpayer monies to the intended government-funded beneficiary. 68. Moreover, In in the event that supporters of the nonparticipating

privately funded candidate wish to exercise their First Amendment rights by responding to the such an attack--which as an independent expenditure is, by definition, not coordinated or controlled by the nonparticipating candidate--this nonetheless, they will face two difficulties. First, they cannot coordinate their activity with the privately funded candidate they support, because Arizona law treats coordinated expenditures as contributions subject to limit. Second, their speech will trigger the release of triggers dollar-for-dollar matching funds directly to the participating government-funded opponentcandidate they oppose, who, unlike his nonparticipating 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 expenders speakers who favor nonparticipating, privatelysupported funded candidates with participating, government-funded opponents. 47.69. The right of independent expenders groups like the Association of American Physicians and SurgeonsFreedom 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)

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that singles out the Association'stheir political speech for disparate treatment must withstand strict scrutiny and the Act does not. COUNT IV (EQUAL PROTECTION-CANDIDATES) 48.70. Plaintiffs incorporate and reallege each and every allegation contained in Paragraphs 1-47 69 of this Complaint as if set forth fully herein. 49.71. Under the Fourteenth Amendment to the U.S. Constitution, Plaintiffs Matt Salmon, Dean Martin, and Lori Daniels have has the right to enjoy the equal protection of laws. 50.72. 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 public government financing; , and those who do not participate in the system, choosing instead to run a privately supported campaigncampaigns. These provisions then treat candidates differently with respect to independent expenditures or contributions made on their behalf, based solely on their status as a "participating"government-funded or "nonparticipating"privately funded candidate. 51.73. 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 public government financing; , and those who do

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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 "participating"government funded or "nonparticipating"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 governmentfunded candidates are better suited to elected office and more trustworthy than candidates who run privately financed campaigns. 52.74. The right of privately supported candidates for public office like Matt Salmon, Dean Martin, and Lori Daniels 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 punished or penalized for having chosen to run as a privately supported candidaterefused 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 nonparticipating privately funded candidates for disparate treatment must withstand strict scrutiny and the Act does not. COUNT V

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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 80. 78. 75.

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

injunction prohibiting Defendants from committing the above-described

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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 clauseEqual Protection Clause of the Fourteenth Amendment to the United States Constitution; C. A declaration