Citizens United et al v. Schneiderman

Filing 69

OPINION AND ORDER: re: 60 MOTION to Dismiss the First Amended Complaint filed by Eric Schneiderman. Defendant's motion to dismiss the Amended Complaint is granted in its entirety. The complaint states not a single plausible claim upon which relief can be granted. Court I of the First Amended Complaint is dismissed without prejudice. The due process claim embedded in Count III is dismissed for lack of subject matter jurisdiction, and the remainder of Count III is dismissed wit hout prejudice. Counts II and IV-the state law and federal preemption claims-are dismissed with prejudice. If plaintiffs chose to do so, they may seek leave to file a Second Amended Complaint fifteen days after the date of this Opinion & Order. SO ORDERED. (Signed by Judge Sidney H. Stein on 8/29/2016) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

USDCSDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: ---_____,,.---DATE FILED:

----------------------------------------------------------x
CITIZENS UNITED and CITIZENS
UNITED FOUNDATION,
Plaintiffs,

14-Cv-3703 (SHS)

-againstOPINION & ORDER
ERIC SCHNEIDERMAN, in his official
capacity as New York Attorney General,
Defendant.

----------------------------------------------------------x
SIDNEY H. STEIN, U.S. District Judge.
Plaintiffs Citizens United and Citizens United Foundation challenge the
New York Attorney General's policy of requiring charities to disclose to him
the names, addresses, and total contributions of their donors in order to be
permitted to solicit funds in the state. Last year, this Court denied plaintiffs'
motion for a preliminary injunction on the grounds that plaintiffs were not
likely to succeed on the merits of their claims. Plaintiffs subsequently
amended their complaint and Attorney General Eric Schneiderman has now
moved to dismiss it. For the reasons that follow, the attorney general's
motion is granted.
I.

BACKGROUND

Citizens United is a nonprofit corporation which has federal taxexernpt status as a "social welfare" organization, see 26 U.S.C. § 501(c)(4).
(First Arn. Cornpl. ("PAC") <j[ 3.) Citizens United Foundation has federal taxexernpt status pursuant to 26 U.S.C. § 501(c)(3). (PAC <j[ 4.) Both plaintiffs
pursue similar goals: they "seek[] to promote the traditional American
values of limited government, free enterprise, strong families, and national
sovereignty and security." (PAC <j[ 3; see also PAC <j[ 4.) The social welfare
entity-Citizens United -advocates these positions by producing "highirnpact documentaries on political themes." (PAC <j[ 11.) By contrast,
Citizens United Foundation, as a section 501(c)(3) organization, cannot

advocate but instead simply "inform[s]" and "educate[s]" the American
public about essentially identical issues and themes. (FAC <JI<JI 4, 12.)
Plaintiffs' ability to produce their advocacy documentaries (Citizens
United) and their educational materials (Citizens United Foundation)-and
to operate their organizations generally-is "entirely dependent on the
donations they are able to raise" from their supporters. (FAC <JI 15.)
Plaintiffs are well-known entities. Indeed, they allege that they "have
gained a special measure of notoriety in recent years" and have even "been
compared to al-Qaeda, described as an 'enemy of the people,' and worse."
(FAC <JI 35.) The amended complaint also alleges that plaintiffs' donors
"value their privacy and donate to plaintiffs with the understanding that
their names and other identifying information will not become public
information." (FAC <JI 15.) According to plaintiffs, their donors "reasonably
fear public backlash, financial harm, and worse, should their support of
politically contentious and controversial causes become known publicly."
(FAC <JI 17.)
This brings us to the subject of this action: New York requires every
"charitable organization" -whose definition includes both plaintiffs,
defendant says, (see FAC <JI 26)-to "file with the attorney general a
prescribed registration form" in order for that charity to be able to solicit
funds in New York. N.Y. Exec. Law § 172(1). The attorney general has
promulgated regulations to set the requirements of that form. See 13
N.Y.C.R.R. § 91.5. One regulation requires charitable organizations to
submit for the attorney general's review a copy of a form that plaintiffs file
annually with the Internal Revenue Service-Form 990 and its Schedule Bwhich lists each of plaintiffs' donors and amounts contributed. (F AC <JI<JI 20,
23, 26); 13 N.Y.C.R.R. § 91.5(c)(3)(i)(a). Charities must submit this Schedule
B-and thus reveal their donors' identities and amounts contributed-prior
to soliciting funds in New York. (FAC <JI<JI 23, 26.)
Both plaintiffs (together, "Citizens United") have submitted to the
attorney general their Schedule B forms "every year since 1995." (FAC <JI 25.)
Traditionally, however, they "filed only the first page of their Schedule B,
which does not include any donor information." (FAC <JI 30.) In 2012, they
filed the first pages of their Schedules B as usual but received deficiency
notices in response stating that they would need to file Schedules B that

2

were unredacted. (FAC <JI 26.) Plaintiffs have refused to comply. (FAC <JI 29.)
Consequently, they "face the loss of their registration, which would prohibit
them from soliciting funds, as well as civil penalties of up to $100 per day
for noncompliance." (FAC <JI 31 (citing N.Y. Exec. Law§ 177(2).)
After plaintiffs initiated this action they moved for a preliminary
injunction, which this Court denied, Citizens United v. Schneiderman, 115 F.
Supp. 3d 457 (S.D.N.Y. 2015). Plaintiffs subsequently amended their
complaint, and, as noted above, defendant has now moved to dismiss it in
its entirety. Fed. R. Civ. P. 12(b)(6).
II. DISCUSSION

A. Legal Standard
The standard of review governing this motion is well-established: the
Court must dismiss the complaint if it fails to allege facts that show
plaintiffs' claims are "plausible." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009);
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Neopharm Ltd. v. WyethAyerst Int'l LLC, _ F. Supp. 3d
2016 WL 1076931, at *2 (S.D.N.Y. Mar. 18,
2016). Plaintiffs, however, cite to the retired standard set forth in Conley v.
Gibson, 355 U.S. 41 (1957), which merely required a plaintiff's complaint to
give a defendant "fair notice of what the plaintiff's claim is." Id. at 47. Conley
no longer states the applicable law: The modem "plausibility" standard has
governed motions to dismiss pleadings in federal court since 2007. E.g.,
Iqbal, 556 U.S. at 670; Twombly, 550 U.S. at 570; E.E.O.C. v. Port Au th. Of N. Y.
& N.]., 768 F.3d 247, 253 (2d Cir. 2014).
___J

Not all allegations are created equal in assessing the plausibility of a
claim. Allegations that are conclusory or that simply parrot legal standards
need not be credited. See, e.g., Iqbal, 556 U.S. at 678; Port Auth., 768 F.3d at
253; Fisher v. JP Morgan Chase & Co., 703 F. Supp. 2d 374, 390 (S.D.N.Y. 2010).
And facts that are pleaded merely "upon information and belief" can only
be credited. when those facts are "peculiarly within the possession and
control of the defendant," or where plaintiffs' "information" or "belief" is
"based on factual information that makes" the sought inference "plausible."
Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010); Moffett v. Town
of Poughkeepsie, No. 11-cv-6243, 2012 WL 3740724, at *3, *5, *8 (S.D.N.Y. Aug.
29, 2012). Facts alleged properly, however, must be credited as true and

3

viewed in the "light most favorable to the plaintiff." Cruz v. FXDirectDealer,
LLC, 720 F.3d 115, 118 (2d Cir. 2013).

B. First Amendment.
Citizens United has brought three First Amendment claims; Attorney
General Schneiderman argues that none is plausible. The Court examines
each in tum.

1.

Prior Restraint.

Plaintiffs contend first that New York's charitable registration scheme
is an unconstitutional prior restraint on speech. At the outset, it is clear that
the regime is plausibly a prior restraint. See Citizens United, 115 F. Supp. 3d
at 469. Charitable organizations in New York are allegedly forbidden from
engaging in expressive action-soliciting donations, see, e.g., Vill. of
Schaumburg v. Citizens for a Better Env't, 444 U.S. 620, 632 (1980)-unless and
until they file forms required by the attorney general's implementing
regulations. See N.Y. Exec. Law§ 172; 13 N.Y.C.R.R. § 91.5(c). This includes
the attorney general's requirement that charities file unredacted versions of
their Schedules B that disclose to the attorney general the names and
contributions of Citizens United's donors. (FAC <JI 26.)
Prior restraints are generally disfavored but are not "'unconstitutional
per se."' Hobbs v. Cty. of Westchester, 397 F.3d 133, 148 (2d Cir. 2005) (quoting
Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 558 (1975)). In
particular, the First Amendment does not countenance a system of prior
restraint when it vests "unbridled discretion in a government official over
whether to permit or deny expressive activity." City of Lakewood v. Plain
Dealer Publ'g Co., 486 U.S. 750, 755 (1988); Field Day, LLC v. Cty. of Suffolk, 463
F.3d 167, 176 (2d Cir. 2006). However, if a system of prior restraint contains
"'narrow, objective, and definite standards to guide the licensing
authority'" it survives a First Amendment challenge. Forsyth Cty. v.
Nationalist Movement, 505 U.S. 123, 131 (1992) (quoting Shuttlesworth v. City
of Birmingham, 394 U.S. 147, 150-51 (1969)).
The analysis begins with the governing statutory and regulatory text.
See City of Lakewood, 486 U.S. at 769-70. The statute-the New York Executive
Law-requires all charities to "file with the attorney general an annual
written financial report, on forms prescribed by the attorney general." N.Y.

4

Exec. Law§ 172-b(l); accord N.Y. Exec. Law§ 172(1). That broad delegation
to defendant was cabined when he formally promulgated regulations that
limit the documents that charities need to file upon registering, including,
inter alia, "a copy of the complete IRS form 990... with schedules." 13
N.Y.C.R.R. § 91.5(c)(3)(i)(a). Those regulations set forth a "closed set" of
required documents which substantially fetter the attorney general's
discretion. Citizens United, 115 F. Supp. 3d at 469. See also Forsyth Cty, 505
U.S. at 131; City of Lakewood, 486 U.S. at 770. If a charity files the documents
the regulations require, the attorney general must grant that charity a
license to solicit donations in New York. If not, not. This the First
Amendment allows. See Children's First Found. v. Fiala, 790 F.3d 328, 347-48,
withdrawn in part by 611 F. App'x 741 (2d Cir. 2015).
The Amended Complaint alleges, however, that in practice the attorney
general exercises far more discretion over this licensing regime than the
First Amendment can tolerate. Specifically, according to plaintiffs, for
nearly two decades charities were allowed to file redacted versions of
Schedule B. (FAC <JI 25-27.) But in 2012, plaintiffs allege, defendant
unilaterally changed this practice. (FAC <JI<JI 26-27.) Plaintiffs contend that
the attorney general-even if he ultimately lacks discretion to grant or deny
charities the right to solicit in New York-has too much power to change
the overall registration requirements.
Not all types of discretion render a license regime such as New York's
unconstitutional. See Children's First Found., 790 F.3d at 347. Indeed, the
prohibition of such discretion is a "prophylactic" means of reducing the risk
of two First Amendment injuries. See id. at 342 (citation omitted). First,
prohibited discretion raises the specter of self-censorship insofar as
individuals who seek to engage in expressive activity may be deterred from
seeking a required speaking license if the requirements to gain that license
are insufficiently clear. City of Lakewood, 486 U.S. at 757-58; Children's First
Found., 790 F.3d at 342-43. Second, discretion risks discrimination "against
disfavored speech." City of Lakewood, 486 U.S. at 758. If officials can hide
behind broad, discretionary standards to deny licenses to speak, they can
surreptitiously silence the disfavored. Children's First Found., 790 F.3d at 347.
The attorney general's power to change which documents must be filed
to solicit in New York does not render intolerable any risk of self-censorship.
All licensing systems are changeable in theory, whether by legislative edict,

5

executive fiat, or judicial decree. But the First Amendment does not and
cannot prohibit all such regimes. Cf Children's First Found., 790 F.3d at 347;
Field Day, 463 F.3d at 181. The U.S. Constitution clearly tolerates a slight risk
that a speaker might be deterred from speaking because the government is
free to alter licensing requirements. This is especially true where changes
are infrequent. Here, for instance, the complaint only alleges one such
change-filing unredacted versus redacted Schedules B-and thus there is
no indication that the requirements of New York's charitable solicitation
regime are so slippery that the regime at large discourages a theoretical
speaker from even trying to use her voice.
Moreover, the discretion to change the charitable solicitation licensing
requirements does not engender a constitutionally intolerable risk of
discrimination. See Children's First Found., 790 F.3d at 347. When charities
seek to register in New York, they need to file certain documents. If the
charity fails to file those documents, the attorney general is empowered to
deny the charity permission to solicit donations in New York. Any such
denial would be based on a "'narrow, objective, and definite"' reason.
Forsyth Cty., 505 U.S. at 131 (quoting Shuttlesworth, 394 U.S. at 150-51). The
regime provides no cover for government officials to discriminate against
disfavored charities, so long as the regime is "uniformly applied," City of
Lakewood, 486 U.S. at 770 n.11, and any policy changes are justifiable in their
own right. See Part 11.B.2-3, infra.
Plaintiffs do, of course, contend that the policy has not been "uniformly
applied," but the allegations supporting that argument are ineffectual. The
relevant allegation is made "[o]n information and belief." (FAC <JI 28.) The
Amended Complaint fails to set forth what facts plaintiffs' information and
belief are based upon and similarly fails to even attempt to explain why any
such facts are "peculiarly within the possession and control of the
defendant." Arista Records, 604 F.3d at 120. The Court therefore cannot-and
does not-consider this allegation. Id. As a result, Citizens United has not
plausibly pleaded that the attorney general's Schedule B policy is not
"uniformly applied."
Plaintiffs' last argument to sustain their prior restraint claim is from a
bygone era. They contend that whether the policy is "well-established" and
"uniformly enforced" -i.e., whether it is excessively discretionaryrequires the development of a factual record through discovery. But merely

6

attempting to plead the existence of a prior restraint is not a sufficient basis
upon which to grant discovery.
Plaintiffs have failed to state a plausible claim that the alleged prior
restraint is applied in an unconstitutionally discretionary manner. The prior
restraint claim is therefore dismissed without prejudice.
2.

Facial Challenge.

Defendant next moves to dismiss plaintiffs' claim that the Schedule B
disclosure requirement facially violates the First Amendment, (see FAC
'lI 54.) Such facial challenges are "disfavored," Wash. State Grange v. Wash.
State Republican Party, 552 U.S. 442, 450 (2008), and can only survive if the
complaint plausibly alleges that '"no set of circumstances exists under
which the [policy] would be valid,"' id. at 449 (quoting United States v.
Salerno, 481 U.S. 739, 745 (1987)). Plaintiffs' facial challenge is only viable if
the First Amendment prohibits the attorney general from requiring any
charity-from the most popular and least controversial one to the least
popular and most controversial one-to disclose to New York State its
funding sources. See id. However, a facial challenge "must fail where the
[policy] has a 'plainly legitimate sweep."' Id. (quoting Washington v.
Glucksberg, 521 U.S. 702, 739-40 & n.7 (1997) (Stevens,]., concurring in the
judgment) (emphasis added).
It is well established that the Schedule B policy must satisfy "exacting
scrutiny," "[b]ecause the Schedule B policy is a disclosure requirement."
Citizens United, 115 F. Supp. 3d at 463. See, e.g., Doe v. Reed, 561U.S.186, 196
(2010); Citizens United v. Fed. Election Comm'n, 558 U.S. 310, 366 (2010); Ctr.
for Competitive Politics v. Harris, 784 F.3d 1307, 1312 (9th Cir. 2015); Ctr. for
Individual Freedom v. Madigan, 697 F.3d 464, 477 (7th Cir. 2012); Nat'l Org. for
Marriage v. McKee, 649 F.3d 34, 55 (1st Cir. 2011). The standard of exacting
scrutiny "requires a 'substantial relation' between the disclosure
requirement and a 'sufficiently important governmental interest." Doe, 561
U.S. at 196 (citations omitted). To withstand exacting scrutiny, '"the strength
of the governmental interest must reflect the seriousness of the actual
burden on First Amendment rights."' Id. (citation omitted). Disclosure laws
such as the one at issue here have long been considered "a less restrictive
alternative to more comprehensive regulations of speech," Citizens United,
558 U.S. at 369, and their facial validity has long seemed sure. See Riley v.

7

Nat'l Fed'n of the Blind of N.C., 487 U.S. 781, 795 (1988); Sec'y of State of Md. v.
Joseph H. Munson Co., 467 U.S. 947, 962 n.9, 967 n.16 (1984).

The attorney general contends that the Schedule B policy supports the
state's interests in "investigat[ing] potential violations of the charitable
solicitation laws, and ... protect[ing] New York residents from fraudulent
solicitations." (Mem. of Law in Supp. of Def.' s Mot. To Dismiss the First Am.
Compl. At 9, Dkt. No. 61 (citing Viguerie Co. v. Paterson, 94 A.D. 2d 672, 673
(1st Dep't 1983)).) These interests are unquestionably important. See, e.g.,
Watchtower Bible & Tract Soc'y of N. Y. v. Vill. Of Stratton, 536 U.S. 150, 164
(2002) (calling "the prevention of fraud" an "important interest[]."); Riley,
487 U.S. at 792 ("[T]he interest in protecting charities (and the public) from
fraud is, of course, a sufficiently substantial interest to justify a narrowly
tailored regulation."). States have strong interests in ensuring that charities
do not serve as fronts for fraud or crime. See Doe, 561 U.S. at 217 (Stevens, J.,
concurring in the judgment).
The complaint fails to set forth that requiring charities to disclose their
source of funds through filing unredacted Schedules B plausibly lacks a
substantial relation to these important governmental interests. Indeed, the
U.S. Supreme Court has noted that a state "may constitutionally require
fundraisers to disclose certain financial information to the State" in order to
help detect fraud. Riley, 487 U.S. at 795; see also Joseph H. Munson Co., 467
U.S. at 967 n.16. The Court has also described "recordkeeping, reporting,
and disclosure requirements" as "an essential means of gathering the data
necessary to detect violations" of relevant laws. Buckley v. Valeo, 424 U.S. 1,
67-68 (1976) (per curiam) (emphasis added). No facts alleged in the
complaint plausibly suggest that the attorney general's disclosure
requirement is unusually divorced from the state's important governmental
interests. His is a generic disclosure policy, one the First Amendment has
long considered acceptable. See Riley, 487 U.S. at 795; Joseph H. Munson Co.,
467 U.S. at 967 n.16. As such, "[m]andatory registration and disclosure ...
directly promote [New York's] substantial interest in fighting fraud." Am.
Target Advert., Inc. v. Ciani, 199 F.3d 1241, 1248 (10th Cir. 2000).
The strength of New York's substantial governmental interests must
also '"reflect the seriousness of the actual burden on First Amendment
rights."' Doe, 561 U.S. at 196 (citation omitted); Citizens United, 115 F. Supp.
3d at 463. Plaintiffs identify several alleged First Amendment injuries that

8

filing unredacted Schedules B will cause, including loss of the freedom of
association, (FAC ~ 51), and the "chill[ing]" of plaintiffs' speech due to lost
donations, (F AC ~~ 29, 51). See generally Ctr. for Competitive Politics, 784 F.3d
at 1312 (noting that "no case has ever held or implied that a disclosure
requirement in and of itself constitutes a First Amendment injury").
While disclosing the identity of a charity's donors may burden these
rights, see Madigan, 697 F.3d at 482, the allegations in the complaint do not
plausibly establish that the rights are substantially burdened as to all
charities seeking to solicit in New York State, as they must be to present a
viable facial challenge. Doe, 561 U.S. at 191. Indeed, the complaint's main
thrust is that the attorney general's disclosure requirements will excessively
burden plaintiffs, but they plead no facts to suggest that their alleged
experience is common to charities across this state. See id. at 200-01. Absent
facts pleaded to present a plausible case that the attorney general's policy is
inappropriately burdensome "in all of its applications," no facial challenge
can proceed. Wash. State Grange, 552 U.S. at 449.
The Supreme Court's decision in Doe v. Reed, 561U.S.186 (2010), makes
this plain. There, the plaintiffs mounted a facial challenge to a Washington
State law requiring disclosure of the names of individuals who signed
referendum petitions. Id. at 191. The plaintiffs asserted that the disclosure
violated the First Amendment and the Court applied exacting scrutiny. Id.
at 196. The Court rejected the plaintiffs' facial challenge, writing that:
The problem for plaintiffs is that their argument rests almost
entirely on the specific harm they say would attend disclosure of
the information on the [the specific petition plaintiffs had signed],
or on similarly controversial ones. But typical referendum petitions
"concern tax policy, revenue, budget, or other state law issues."
Voters care about such issues, some quite deeply-but there is no
reason to assume that any burdens imposed by disclosure of typical
referendum petitions would be remotely like the burdens plaintiffs
fear in this case.

Id. at 200-01 (citations omitted). Although Doe's posture is different from
this action's-there the Court reviewed the denial of a preliminary
injunction-the legal conclusion is applicable here. The plaintiffs in Doe
offered "scant evidence or argument beyond the burdens they assert
disclosure would impose" on them or "the signers of other similarly

9

controversial petitions." Id. at 201. To adapt the same language: plaintiffs in
this action have provided "scant [allegations] or argument beyond the
burdens they assert disclosure would impose" on them or similarly
"controversial" charities seeking to solicit in New York.
Citizens United' s arguments to the contrary are unavailing. They assert
that they are entitled to discovery to "test" the various interests
undergirding the attorney general's policy, the policy's relationship with
those interests, and the balance between the interests and individual rights
burdened. But plaintiffs do not cite-nor has the Court found-any case
authority supporting the proposition that merely pleading the existence of
a disclosure requirement such as the attorney general's entitles the plaintiff
and subjects the state to discovery, especially where the policy has a "plainly
legitimate sweep." See Wash State Grange, 552 U.S. at 449 (citations and
internal quotation marks omitted).
This Court concludes that the complaint fails to plead that the attorney
general's policy of requiring charities to file unredacted versions of
Schedule B before soliciting funds in New York is facially unconstitutional.
There is "a substantial relation between the disclosure requirement and a
sufficiently important governmental interest." Doe, 561 U.S. at 196 (quoting
Citizens United, 558 U.S. at 366-67 (quoting Buckley, 424 U.S. at 64)) (internal
quotation marks omitted). The strength of the state's interest reflects the
"seriousness of the actual burden on First Amendment rights," especially
because plaintiffs have failed to allege that the disclosure substantially
burdens any charity's rights besides their own. Id. at 196, 200-01. Plaintiff is
obligated to allege facts showing that '"no set of circumstances exists under
which [the Schedule B policy] would be valid."' Wash. State Grange, 552 U.S.
at 449 (quoting Salerno, 481 U.S. at 745). The complaint sets forth no such
plausible case and the facial challenge is therefore dismissed without
prejudice.
3.

As-Applied Challenge.

Defendants next move to dismiss the complaint's claim that the
Schedule B disclosure requirement is unconstitutional as applied to Citizens
United. An as-applied challenge is viable if plaintiffs plausibly allege that
there is "a reasonable probability that" their donors "would face threats,
harassment, or reprisals if their names were disclosed." Citizens United, 558

10

U.S. at 370. It is "rare," however, that disclosure will result in such "serious
and widespread harassment." Doe, 561 U.S. at 215 (Sotomayor, ].,
concurring) .1
The Supreme Court's seminal decision in NAACP v. Alabama, 357 U.S.
449 (1958), sets the benchmark. See Nat'l Ass'n of Mfrs. v. Taylor, 582 F.3d l,
22 (D.C. Cir. 2009). There, the National Association for the Advancement of
Colored People challenged Alabama's attempt to force the organization to
disclose its members. NAACP, 357 U.S. at 460-61. The NAACP's challenge
succeeded because the organization "made an uncontroverted showing that

Plaintiffs also appear to assert an as-applied challenge by claiming that the disclosure
policy will unduly burden them because their donors in particular "value their
privacy," and "if individuals know that their names could be divulged to the public,
they often will refuse to donate." (FAC 'lI'lI 15-16.) However, the desire for privacy and
loss of donations alone does not render viable an as-applied challenge to a disclosure
regime. See Buckley, 424 U.S. at 71-72; Ctr. for Individual Freedom, 697 F.3d at 498-99. And
even if such a challenge were viable, the complaint fails to properly allege that it is
plausible that the attorney general will disclose plaintiffs' donors' identities to the
public. Although the attorney general has allegedly instituted a new policy to "obtain
and publicize the identities of donors to certain non-profit organizations," (FAC 'JI 33
(emphasis in original)), the underlying source quoted in this allegation makes clear that
the alleged new policy does not plausibly apply to plaintiffs. Press Release, Att'y Gen.
Schneiderman Adopts New Disclosure Requirements for Nonprofits that Engage in
Electioneering (June 5, 2013), available at http://www.ag.ny.gov/press-release/agschneiderman-adopts-new-disclosure-requirements-nonprofits-engage-electioneering.
See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002); Tavares, 2015 WL
158863, at *3. Furthermore, plaintiffs misrepresent the content of that source in an
attempt to overstate the dangers they face. While the complaint suggests that the
attorney general has sharpened a special pitchfork for plaintiffs, the attorney general
did not "identif[y] Citizens United by name," (FAC 'JI 34), in his press release but only
mentions the Citizens United v. FEC decision. See Press Release dated June 5, 2013, supra;
accord Press Release, Att'y Gen. Schneiderman Announces New Disclosure
Requirements for Nonprofits that Engage in Electioneering (Dec. 12, 2012), available at,
http://www.ag.ny.gov/press-release/ag-schneiderman-announces-new-disclosurerequirements-nonprofits-engage-electioneering. Any remaining allegations to suggest
that public disclosure is possible are ineffectively pleaded "[u]pon information and
belief," (FAC 'JI 32). See, e.g., Barrett v. Forest Labs., Inc., 39 F. Supp. 3d 407, 431-32
(S.D.N.Y. 2014).

1

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on past occasions revelation of the identity of its rank-and-file members has
exposed these members to economic reprisal, loss of employment, threat of
physical coercion, and other manifestations of public hostility." NAACP, 357
U.S. at 462.
Plaintiffs offer a single scant allegation to demonstrate why their donors
face similar persecution. Allegedly, plaintiffs' donors "reasonably fear
public backlash, financial harm, and worse, should their support of
politically contentious and controversial causes become known publicly.
That is so because of the controversial nature of both Plaintiffs themselves
and the issues on which they speak." (FAC <jJ: 17 (citation omitted).) "On
information and belief," plaintiffs allege that their "donors' fears are well
grounded and evidentiary support will be adduced for them." (FAC <jJ: 17.)
These allegations fail to approach either the requisite specificity or
severity. See Nat'l Ass'n of Mfrs., 582 F.3d at 22. Plaintiffs provide no factual
background or support for their conclusory assertions. And their pledge to
"adduce[]" "evidentiary support" in the future to substantiate the alleged
"fears" of their donors is useless in the plausibility-pleading era. See
Twombly, 550 U.S. at 570. The Supreme Court noted some six years ago that
"Citizens United has been disclosing its donors for years and has identified
no instance of harassment or retaliation." Citizens United, 558 U.S. at 370.
The complaint in this action suffers from the same flaw: it fails to allege that
any donor has suffered in the past due to donating, and it fails to allege any
fact that could render future negative consequences plausible.
Plaintiffs mount no response to any of these arguments. The complaint
fails to state a plausible as-applied challenge, and that challenge is
dismissed without prejudice.
C. Due Process

Plaintiffs base their next claim upon the Supreme Court's decision in
Federal Communications Commission v. Fox Televisions Stations, Inc., 132 S. Ct.
2307 (2012). There, television broadcasters challenged an FCC order that
had fined them for airing a "fleeting expletive" and a "brief shot of nudity"
on their stations. Id. at 2318. Previously, the FCC had long held that such
isolated instances of indecent conduct would not result in a fine. Id. But the
FCC changed its policy without telling the broadcasters of the change,

12

publicly held that the broadcasters had aired actionably indecent conduct,
and imposed a $1.24 million fine on one broadcaster. Id. at 2314, 2319.
Ultimately, the Supreme Court held that the FCC violated due process by
sanctioning the broadcasters for conduct that they could not have known
was punishable. Id. at 2318.
Plaintiffs attempt to fit their due process claim into the Fox Television
mold. They allege that for nearly 20 years the New York attorney general
permitted charities to file redacted versions of their Schedules B but that he
unilaterally changed that policy without providing notice. (FAC <j[ 25.) They
go on to allege that they "face serious consequences" if they do not comply
with the new policy: loss of their registration plus civil penalties of up to
$100 per day. (FAC <j[ 31 (citing N.Y. Exec. Law§ 177(2).)
Before the Court can address the merits of this claim, it must assuage
any doubts about its own jurisdiction. The Court has concluded that this
claim is not ripe for adjudication and the Court therefore lacks jurisdiction
over it.
A federal court may not constitutionally take jurisdiction over an action
which is not yet ripe. Marchi v. Bd. of Coop. Educ. Servs. of Albany, 173 F.3d
469, 478 (2d Cir. 1999). Ripeness "'is peculiarly a question of timing"' and
'"prevent[s] the courts, through avoidance of premature adjudication, from
entangling themselves in abstract disagreements.'" Nat'l Org. for Marriage,
Inc. v. Walsh, 714 F.3d 682, 687 (2d Cir. 2013) (citations omitted). Ripeness
has both constitutional and prudential dimensions, and courts have a duty
to address them both, even if sua sponte. See, e.g., Thomas v. City of New York,
143 F.3d 31, 34 (2d Cir. 1998). At this initial phase of the litigation, plaintiffs
have the burden of pleading facts that plausibly show the existence of a due
process claim that is ripe for adjudication. Marchi, 173 F.3d at 478; Greenlight
Reinsurance, Ltd. v. Appalachian Underwriters, Inc., 958 F. Supp. 2d 507, 518
(S.D.N.Y. 2013).
Plaintiffs have not alleged that the attorney general has stripped them
of any rights or imposed any penalty as a consequence of their failure to
provide unredacted Schedules B. See Thomas, 143 F.3d at 35 & n.6; Valentine
Props. Assocs., L.P. v. U.S. Dep't of Haus. & Urban Dev., No. 05-cv-2033, 2007
WL 3146698, at *10-11 (S.D.N.Y. Oct. 12, 2007). Even when plaintiffs filed
this amended complaint-almost three years after they initially received the
deficiency notices-plaintiffs have not alleged that any consequence had yet

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befallen them. Cf Fox Television, 132 S. Ct. at 2318-19 (noting that the FCC
had already publicly held the broadcasters in violation of the FCC' s
regulation, resulting in some broadcasters suffering reputational injuries
and another suffering the imposition of a significant fine). They allege
merely only that they "face the loss of their registration ... as well as civil
penalties." (FAC <JI 31 (emphasis added).)
Further, whether the attorney general will strip plaintiffs of their
licenses or impose a fine depends upon "contingent future events that may
not occur as anticipated, or indeed may not occur at all." Thomas, 143 F.3d
at 34. (citations and quotation marks omitted). And contingencies abound.
Will plaintiffs continue to violate the attorney general's policy after this
Court upholds its constitutionality? Will the attorney general impose fines
on plaintiffs stemming from their now two-year refusal to comply? Only
pure speculation can supply the answers to these questions. The statute
authorizing penalties is discretionary and there is nothing in the complaint
that plausibly alleges how the attorney general typically exercises that
discretion. See N.Y. Exec. Law § 177(2) (noting that "the attorney general
may" impose penalties (emphasis added)). As such-absent any allegation
that the attorney general has fined non-compliant charities or stripped them
of their licenses in the past-it is entirely unclear whether plaintiffs' conduct
will ever lead to any actionable consequence. See Thomas, 143 F.3d at 34-35,
35 n.6; Brezler v. Mills, 86 F. Supp. 3d 208, 218 (E.D.N.Y. 2015). Nor will the
parties suffer any undue hardship if plaintiffs' due process claim remains,
for the moment, undecided. Thomas, 143 F.3d at 35.
It is, therefore, "premature" for this Court to decide whether the
attorney general will contravene due process if he ultimately bars plaintiffs
from soliciting funds or imposes a fine. Id. at 34-35. Thus, the complaint fails

to allege that plaintiffs have "suffered any harm to their procedural due
process rights," and the action is neither constitutionally nor prudentially
ripe. Id. at 35 & n.6. The Court sua sponte dismisses this claim for lack of
subject matter jurisdiction.

D. Preemption
We come next to plaintiffs' last federal claim: that federal law preempts
New York's Schedule B policy. A claim of preemption is only viable if "the
challenged state law 'stands as an obstacle to the accomplishment and

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execution of the full purposes and objectives of Congress."' Arizona v. United
States, 132 S. Ct. 2492, 2500 (2012) (quoting Hines v. Davidowitz, 312 U.S. 52,
67 (1941)). Further, courts "should assume that 'the historic police powers
of the States' are not superseded 'unless that was the clear and manifest
purpose of Congress."' Id. (quoting Rice v. Santa Fe Elevator Corp., 331 U.S.
218, 230 (1947)); see also Citizens United, 115 F. Supp. 3d at 472 (citing Steel
Inst. of N. Y. v. City of N. Y., 716 F.3d 31, 36 (2d Cir. 2013)).
Citizens United contends that the Internal Revenue Code establishes
both "a general rule of non-disclosure of tax information" and "an extensive
regulatory regime to govern and protect the release of tax information."
(FAC <_[ 57.) According to plaintiffs, the attorney general's attempt to access
that same information without engaging the IRS's process "circumvent[s],"
Citizens United, 115 F. Supp. 3d at 472, the federal disclosure process, and is
therefore preempted. (FAC <_[<_[ 56-59.)
But this Court has already determined in this action that nothing in the
Internal Revenue Code or its legislative history demonstrates the '"clear and
manifest purpose of Congress,"' Arizona, 132 S. Ct. at 2501 (quoting Rice, 331
U.S. at 230), to prohibit states from requiring tax-exempt organizations to
disclose to the state portions of their federal tax filings. Citizens United, 115
F. Supp. 3d at 472-73. There is no reason to depart from that legal conclusion
here. The Internal Revenue Code states:
"Upon written request by an appropriate State officer, the Secretary
may make available for inspection or disclosure returns and return
information of any organization described in section 501(c) ... for
the purpose of, and only to the extent necessary in, the
administration of State laws regulating the solicitation or
administration of the charitable funds or charitable assets of such
organizations."
26 U.S.C. § 6104(c)(3).
At most, however, this language establishes that "'Congress sought to
regulate the disclosures that the IRS may make."' Citizens United, 115 F.
Supp. 3d at 472. (quoting Ctr. for Competitive Politics, 784 F.3d at 1319).
Neither the statutory text-nor its legislative history-suggest that
Congress meant to "broadly prohibit other government entities from
seeking [tax] information directly from the organization" that originally
filed it. Ctr. for Competitive Politics, 784 F.3d at 1319. States may therefore

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require tax-exempt organizations to disclose Schedules B to state authorities
without circumventing federal law.
Plaintiffs offer no new arguments to rebut this legal conclusion except
the contention-asserted repeatedly without support-that they are
entitled to further "factual development" to aid their claim. (Mem. in Opp.
at 21.) But preemption is a purely legal question concerning Congress'
intent. See Arizona, 132 S. Ct. at 2501. No factual development is needed. This
claim is dismissed with prejudice.

E.

Ultra Vires

Finally, the complaint asserts that plaintiff Citizens United-but not
plaintiff Citizens United Foundation-cannot be regulated as a "charitable
organization," N.Y. Exec. Law§ 172; 13 N.Y.C.R.R. § 90.2(a)(4), because it is
a "social welfare" group. 26 U.S.C. § 501(c)(4). The Court agrees with the
attorney general that this claim is meritless.
New York law delegates to the state attorney general the authority to
regulate "charitable organizations" within New York. N.Y. Exec. Law§ 172.
This delegation allows him "'to fill in the interstices in the legislative
product."' Allstate Ins. Co. v. Rivera, 12 N.Y.3d 602, 608 (2009) (citations
omitted). The attorney general is therefore free to define "charitable
organization" in a manner "that go[ es] beyond the text of that legislation,"
as long as his definition is "not inconsistent with the statutory language or
its underlying purpose," Gen. Elec. Capital Corp. v. N. Y. State Div. of Tax
Appeals, 2 N.Y.3d 249, 254 (2004).
State law defines "charitable organization" in relevant part as "[a]ny
benevolent, philanthropic, patriotic, or eleemosynary person." N.Y. Exec.
Law§ 171-a(l). Citizens United contends these are "very traditional terms
of art" that cannot be expanded to encompass organizations "operated
exclusively for the promotion of social welfare," 26 U.S.C. § 501(c)(4). (Plfs.'
Opp. to Def.'s Mot. to Dismiss at 22, Dkt. No. 63.) Although Citizens
United's narrow interpretation of section 171-a(l) is a possible one it is by
no means the only reasonable one. As such the attorney general may use his
delegated authority to apply section 172 to social welfare groups. Doing so
is not "'inconsistent"' with the broad '"statutory language or its underlying
purpose,"' Allstate Ins. Co., 12 N.Y.3d at 608 (quoting Gen. Elec. Capital Corp.,
2 N.Y.3d at 254).

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Citizens United next urges that the attorney general's own regulations
defining "charitable organization" clearly exempt social welfare
organizations from the charitable solicitation regime. The regulations state
that: "The term charitable organization includes ... without limitation: ...
organizations exempt from Federal income taxation pursuant to [an Internal
Revenue Code section other than § 501(c)(3)] that are organized and/or
operated for charitable purposes." 13 N.Y.C.R.R. § 90.2(a)(4) (emphasis in
original). According to Citizens United, social welfare groups organized
pursuant to section 501(c)(4) are not "operated for charitable purposes" and
thus do not fall within the attorney general's own definition of "charitable
organization," 13 N.Y.C.R.R. § 90.2(a)(4), and cannot be regulated.
Contrary to Citizens United's contentions, social welfare organizations
may well be "organized and/or operated for charitable purposes." 13
N.Y.C.R.R. § 90.2(a)(4). State regulations clearly recognize that "promoting
social welfare" may indeed be "charitable." 13 N.Y.C.R.R. § 90.l(a). Federal
regulations concur: The term "charitable" includes the "promotion of social
welfare." 26 C.F.R. §§ 1.501(c)(3)-l(d)(2), 1.501(c)(4)-l(a)(2).
Further, Citizens United itself is sufficiently "charitable" so as to fall
under the purview of the attorney general's regulations. 13 N.Y.C.R.R.
§ 90.2(a)(4). Charitable purposes include those that are "educational,"
"cultural," and "for a public benefit." 13 N.Y.C.R.R. § 90.l(a)-(b). New York
regulations even state that "promoting social welfare" can be itself a
"charitable purpose." Id. As the complaint alleges, "[t]hrough a combination
of education, advocacy, and grassroots programs, Citizens United seeks to
promote traditional American values of limited government, free
enterprise, strong families, and national sovereignty and security." (FAC
<j[ 3.) The complaint thus makes clear that Citizens United engages in
activities designed for "educational" purposes and for "public benefit" and
falls smack dab within the attorney general's own definition of "charitable
organization."
Citizens United- along with vast numbers of other social welfare
groups-is properly regulated as a "charitable organization." The
complaint's sole state law claim is therefore dismissed with prejudice.

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Ill.

CONCLUSION

Defendant's motion to dismiss the Amended Complaint is granted in
its entirety. The complaint states not a single plausible claim upon which
relief can be granted.
Court I of the First Amended Complaint is dismissed without
prejudice. The due process claim embedded in Count III is dismissed for
lack of subject matter jurisdiction, and the remainder of Count III is
dismissed without prejudice. Counts II and IV-the state law and federal
preemption claims-are dismissed with prejudice. If plaintiffs chose to do
so, they may seek leave to file a Second Amended Complaint fifteen days
after the date of this Opinion & Order.
Dated: New York, New York
August 29, 2016

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