South Carolinians for Responsible Government v. Krawcheck et al
Filing
177
ORDER AND OPINION denying 147 MOTION to Dismiss; granting in part denying in part 123 MOTION for Summary Judgment filed by South Carolinians for Responsible Government. Signed by Chief Judge Margaret B Seymour on 2/23/2012. (asni, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
South Carolinians for Responsible
Government,
Plaintiff,
vs.
Kenneth C. Krawcheck, Edward E. Duryea,
Marvin D. Infinger, Susan P. McWilliams,
Priscilla L. Tanner, Johnnie M. Walters, all
in their official capacities as commissioners
of the South Carolina Ethics Commission,
and Herbert R. Hayden, in his capacity as
Executive Director of the South Carolina
Ethics Commission,
Defendants.
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Civil Action No. 3:06-cv-01640-MBS
OPINION AND ORDER
In the underlying matter, South Carolinians for Responsible Government (“Plaintiff”)
filed this suit for declaratory and injunctive relief against Kenneth C. Krawcheck, Edward E.
Duryea, Marvin D. Infinger, Susan P. McWilliams, Pricilla L. Tanner, and Johnnie M. Walters,
all in their official capacities as commissioners of the South Carolina Ethics Commission, and
against Herbert R. Hayden, in his capacity as Executive Director of the South Carolina Ethics
Commission (hereinafter collectively “Defendants”) alleging that certain sections of the South
Carolina Ethics, Government Accountability, and Campaign Reform Act of 1991, S.C. Code
Ann. §§ 8-13-1300, et seq., violates the First Amendment of the United States Constitution.
(ECF No. 1.) Specifically, Plaintiff asked the court to protect its First Amendment rights to
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freely speak, freely associate, and to petition the government, and its Fourteenth Amendment
right to be treated equally under the laws.
Pending before the court are two dispositive motions: (1) Defendants’ Motion to Dismiss,
(ECF No. 147), and (2) Plaintiff’s Motion for Summary Judgment. (ECF No. 123.) For the
reasons explained below, the court denies Defendants’ motion, grants Plaintiff’s motion in part,
and does not reach the remainder of Plaintiff’s motion.
FACTUAL BACKGROUND
Plaintiff is a nonprofit organization under Section 501(c)(4) of the Internal Revenue Code
with its principal place of business located in Richland County, South Carolina. (ECF No. 1 ¶ 1.)
Plaintiff asserts that its primary purpose is to engage in the promotion of social welfare by
educating and informing citizenry on important public issues of the day. (ECF No. 1 ¶ 4.)
Among the issues for which it advocates are limited government, reducing taxes, and “school
choice,” which is a term used to describe public policies and legislation that purportedly
empowers parents to choose where their children receive their primary and secondary-school
education. (ECF No. 1 ¶¶ 4 & 8.)
In May 2006, the South Carolina General Assembly was considering proposed legislation
that would implement school choice in South Carolina. (ECF No. 1 ¶ 11.) In an effort to alert
the public of this proposed legislation, Plaintiff funded a series of radio advertisements in
selected areas of South Carolina that supported the proposed legislation.
These radio
advertisements identified certain state legislators who Plaintiff believed could be influenced by
their constituents to vote for, or at least not impede, passage of this pending legislation, including
Representative William F. Cotty (“Representative Cotty”). (ECF No. 1 ¶15.) The total cost of
the advertisements exceeded $500.00. (ECF No. 1 ¶ 16.)
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The advertisements that ran stated as follows:
It’s a terrible fact. In South Carolina we have 125,000 children.
Trapped. Trapped in failing schools. It’s so bad, 50% of our
children just give up and drop out. What can parents do? There’s
a way to rescue our children. It’s called School Choice. If School
Choice passes the State Legislature, parents will be given a $1,000
tax credit to send their child to the school of their choice. Isn’t it
about time? If [name of local legislator] can give tax credits to
movie makers, hybrid car owners and out-of-state corporations,
can’t [he or she] give at least one tax credit to parents? Tell [name
of local legislator] to stand up for parents and kids—not the
special interests. Call [him or her] in Columbia at [legislator’s
telephone number]. That’s [legislator’s telephone number]. Urge
[him or her] to support School Choice. Paid for by South
Carolinians for Responsible Government.
(ECF No. 1 ¶ 17.)
Plaintiff’s advertisements aired on the day before and the day of the General Assembly’s
vote on the proposed legislation. (ECF No.1 ¶ 15.) Those days, however, fell within forty-five
days of a primary election.
Representative Cotty requested the South Carolina Ethics
Commission1 address the question of whether an organization with an Internal Revenue Code
designation of 501(c)(4) that uses its financial resources to influence the outcome of an election
within the final forty-five day window of an election is a “committee” within the definition of
S.C. Code Ann. § 8-13-1300(6)2 and is thus required to disclose its financial receipts and
expenditures. (ECF No. 1 ¶ 18.)
1
The South Carolina State Ethics Commission is the state agency responsible for enforcing the State Ethics Code.
See S.C. Code Ann. §§ 8-13-310 to 320.
2
S.C. Code Ann. § 8-13-1300(6) provides:
“Committee” means an association, a club, an organization, or a group of persons which, to influence the outcome
of an elective office, receives contributions or makes expenditures in excess of five hundred dollars in the aggregate
during an election cycle. It also means a person who, to influence the outcome of an elective office, makes:
(a) contributions aggregating at least twenty-five thousand dollars during an election cycle to or at the request of a
candidate or a committee, or a combination of them; or
(b) independent expenditures aggregating five hundred dollars or more during an election cycle for the election or
defeat of a candidate.
“Committee” includes a party committee, a legislative caucus committee, a noncandidate committee, or a committee
that is not a campaign committee for a candidate but that is organized for the purpose of influencing an election.
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Because of the timing and content of Plaintiff’s advertisements, the South Carolina State
Ethics Commission, under the signature of its Executive Director, sent Plaintiff a letter that
ordered Plaintiff to register with the government as a “committee” and to file certain disclosure
reports within eleven days from the letter’s date. The letter began with a declaration that
Defendants believed Plaintiff had “attempted to influence the outcome of an election in Richland
County.” (ECF No. 1-1.) The letter further stated that “South Carolinians for Responsible
Government must register with the Commission as a committee and file disclosure reports.”
(ECF No. 1-1.) It concluded by stating: “You must file both forms no later than May 30, 2006
to avoid enforcement action.” Id.
Plaintiff filed this action on May 30, 2006, which was the deadline for Plaintiff to file its
disclosure reports. On July 31, 2006, Defendants moved for dismissal pursuant to Rules 12(b)(1)
and 12(b)(6) of the Federal Rules of Civil Procedure. The Honorable Matthew J. Perry, Jr.
granted Defendants’ motion and dismissed this case.3 (ECF No. 27.) Thereafter, on December
12, 2006, Plaintiff sought clarification and reconsideration. (ECF No. 31.) On March 25, 2009,
Judge Perry granted Plaintiff’s motion for clarification and reconsideration. (ECF No. 85.)
On April 15, 2010, Plaintiff moved for summary judgment on several different grounds,
seeking the following declaratory relief:
(1) that the South Carolina Ethics Code’s definition of “committee”—S.C. Code Ann.
§ 8-13-1300(6)—is unconstitutionally overbroad on its face;
(2) that the definition of “committee” is unconstitutional as applied to Plaintiff;
3
This matter was originally assigned to the Honorable Matthew J. Perry, Jr. (“Judge Perry”). The case was
reassigned to the Honorable Margaret B. Seymour (“Judge Seymour”) on August 12, 2011, following the death of
Judge Perry.
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(3) that the South Carolina Ethics Code’s definition of “influence the outcome of an
elective office”—S.C. Code Ann. § 8-13-1300(31)(c)—is unconstitutionally
overbroad on its face; and
(4) that the definition of “influence the outcome of an elective office” is unconstitutional
as applied to Plaintiffs’ radio advertisements.
On September 24, 2010, Defendants moved to dismiss on grounds that this case has been
rendered moot by a ruling from the Honorable Terry L. Wooten (“Judge Wooten”) in South
Carolina Citizens for Life, Inc. v. Krawcheck, No. 4:06-cv-2773-TLW, 2010 U.S. Dist. LEXIS
96187 (D.S.C. Sept. 13, 2010).
On November 19, 2010, Judge Perry held a motions hearing.
Judge Perry denied
Defendants’ motion to dismiss and granted Plaintiff’s motion for summary judgment in part and
denied the motion in part. (ECF No. 165 pp. 64 & 65.) In orally giving his decision, Judge
Perry stated:
I’ve considered your arguments and I’m of the view that this court does not take
issue with and is prepared to join the decision that Judge Wooten made with
respect to the issue that he decided. That is to say, that the statutory provision
establishing and describing committee is overbroad and therefore in violation of
the constitution of the United States. So this court on principles of collateral
estoppel will associate itself with that portion of Judge Wooten’s order.
(ECF No. 165 p. 64.)
Judge Perry denied the remaining portions of Plaintiff’s motion for summary judgment.
In denying the remaining portions of Plaintiff’s motion, Judge Perry stated:
Now with respect to the other issues pending before this court I note that the
action challenged by the plaintiff occurred in 2006 and represents the matter as it
existed at that time. I do note that the commission at that time described plaintiff
as a committee and directed the plaintiff to comply with the statutory provisions
requiring reports, et cetera.
In that the plaintiff is not now described as a “committee” the assertion made by
the defendant’s executive director is no longer of any consequence. And so I deny
the plaintiff’s motion for summary judgment with respect to that issue . . . .
(ECF No. 165 pp. 64-45.)
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The court did not enter a written order.
On January 18, 2012, the Honorable Margaret B. Seymour reheard Plaintiff’s motion for
summary judgment and Defendants’ motion to dismiss.
STANDARD OF REVIEW FOR SUMMARY JUDGMENT
Summary judgment shall be granted “if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to any material fact
and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). Where the
record taken as a whole could not lead a rational trier of fact to find for the non-moving party,
there is no “genuine issue for trial. Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986) (1986) (citing First Nat’l of Ariz. v. Cities Service Co., 391 U.S. 253, 289
(1968)). In ruling on a motion for summary judgment, a court must view the evidence in the
light most favorable to the non-moving party. Perini Corp. v. Perini Constr., Inc., 915 F.2d 121,
123–24 (4th Cir. 1990). The non-moving party may not oppose a motion for summary judgment
with mere allegations or denials of the movant's pleading, but instead must “set forth specific
facts” demonstrating a genuine issue for trial. Fed. R. Civ. P. 56(e); see Celotex Corp. v. Catrett,
477 U.S. 317, 324 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
DISCUSSION
I.
Defendants’ Motion to Dismiss
Defendants assert that the complaint should be dismissed.
Defendants contend the
controversy has been rendered moot by a decision of Judge Wooten. In his September 13, 2010
order, South Carolina Citizens for Life, Judge Wooten found that the definition of “committee”
located at S.C. Code Ann. § 8-13-1300(6) is facially invalid on the ground that the definition is
unconstitutionally overbroad.
According to Defendants, there no longer exists a case or
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controversy in this case because the issue of whether § 8-13-1300(6) is unconstitutional has been
decided by Judge Wooten.
Judge Wooten’s order is not that of a controlling court―such as the United State
Supreme Court or the Fourth Circuit Court of Appeals—but instead from a peer judge within this
District. Accordingly, it is not necessarily binding on this court. See, e.g., Gregg v. GI Apparel,
Inc., No. 3:05-2399-MBS, 2006 U.S. Dist. LEXIS 7464, at *5 n.3 (D.S.C. Feb. 13, 2006)
(“[S]ince the intra-court comity doctrine is discretionary, the court views the decisions of its
fellow judges as persuasive but is not bound by their decisions.”); Atl. Floor Servs., Inc. v. WalMart Stores, Inc., 334 F. Supp. 2d 875, 879 n.1 (D.S.C. 2004) (reminding that “[t]his Court is not
bound to follow the reasoning” of a different judge within the same district). Since, this court is
not bound by the decision of Judge Wooten, the court declines to find there is no actual case or
controversy presented by Plaintiff’s complaint. Defendants’ motion to dismiss on the grounds of
mootness is DENIED.
II.
Plaintiff’s Motion for Summary Judgment
In Plaintiff’s motion for summary judgment, Plaintiff seeks declaratory relief with respect
to four issues. Plaintiff challenges the constitutionality of the South Carolina Ethics Code’s
definition of “committee,” S.C. Code Ann. § 8-13-1300(6), both on its face and as applied to
Plaintiff.
Plaintiff also challenges the constitutionality of the Ethics Code’s definition of
“influence the outcome of an elective office,” id., § 8-13-1300(31)(c), both on its face and as
applied to Plaintiff’s radio advertisement.
A.
South Carolina Ethics Code’s Definition of “Committee,” S.C. Code Ann.
§ 8-13-1300(6)
1.
Facial Challenge
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Defendants’ enforcement efforts against Plaintiff stem from the designation of Plaintiff as
a “committee.” Under the State Ethics Code, if a group is deemed to be a “committee,” it is
subject to the following regulations, among others:
It must register with the Ethics Commission and file a statement of organization that
discloses (a) the group’s address and telephone number; (b) a summary of the group’s
purpose; (c) any company that sponsors the group; (d) the “trade, profession, or
primary interests of contributors to the committee”; (e) the names, addresses,
telephone numbers, occupations, and principal places of business for the group’s
chairman, treasurer, and records custodian; and (f) the group’s banking information,
including account numbers, S.C. Code Ann. § 8-13-1306(A);
It must periodically file a “certified campaign report detailing campaign contributions
and expenditures,” which must contain “the name and address of each person making
a contribution of more than one hundred dollars and the amount and date of receipt of
each contribution,” among other information, id. § 8-13-1308(F);
It is prohibited from accepting anonymous contributions, id. § 8-13-1324;
It must abide by certain restrictions related to bank accounts, id. § 8-13-1312;
It may only accept contributions totaling $3500 or less from any person or group per
calendar year, id. § 8-13-1322;
Upon dissolution, it must disburse any remaining monies only to statutorilyprescribed groups, including “the state’s general fund”; id. § 8-13-1370(C);
It is subject to civil penalties of at least five thousand dollars if it fails to comply with
the statutory restrictions above, and this penalty can go up to “five hundred percent of
the amount of contributions or anything of value that should have been reported,” id.
§ 8-13-1520(B); and
It is subject to criminal sanctions of up to one year in jail if it does not comply with
the requirements of the Ethics Code, id. §§ 8-13-1520(A), (B).
Thus, it is essential that the definition of “committee” be narrowly confined so that organizations
are not wrongly swept into the current of these “burdensome consequences.” N.C. Right to Life,
Inc. v. Leake, 525 F.3d 274, 286 (4th Cir. 2008).
The Supreme Court holds laws aimed at regulating political speech to be permissible only
in the limited situation where the speech is “unambiguously related to the campaign of a
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particular . . . candidate.” Buckley v. Valeo, 424 U.S. 1, 80 (1976). An organization can be
subjected to speech regulations like those found in the South Carolina Ethics Code only if it is
“under the control of a candidate or the major purpose of which is the nomination or election of a
candidate.” Buckley, 424 U.S. at 79.
Since Buckley, courts have confirmed that only groups having “the major purpose” of
electioneering can be constitutionally subject to political speech regulations. See, e.g., FEC v.
Mass. Citizens for Life, Inc., 479 U.S. 238, 262 (1986) (reiterating that a group could be subject
to speech restrictions only if “the organization’s major purpose may be regarded as campaign
activity”); Leake, 525 F.3d at 288 (“The Supreme Court has thus not relaxed the requirement that
an organization have ‘the major purpose’ of supporting or opposing a candidate to be considered
a political committee.”). The Fourth Circuit recently summarized the law on this point by
concluding:
Thus, we are convinced that the Court in Buckley did indeed mean
exactly what it said when it held that an entity must have “the
major purpose” of supporting or opposing a candidate to be
designated a political committee. Narrowly construing the
definition of political committee in that way ensures that the
burdens of political committee designation only fall on entities
whose primary, or only, activities are within the “core” of
Congress’s power to regulate elections. Permitting the regulation
of organizations as political committees when the goal of
influencing elections is merely one of multiple “major purposes”
threatens the regulation of too much ordinary political speech to be
constitutional.
Leake, 525 F.3d at 288–89 (emphasis supplied by the Leake court and internal citations omitted).
Laws that restrict political speech must be narrowly tailored so that they only regulate
groups that are organized for “the major purpose” of electioneering. Additionally, states cannot
use a gross dollar amount—e.g., campaign-related expenditures totaling $500—as a proxy for an
organization’s “major purpose,” as such expenditures could amount to a de minimis portion of
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the organization’s total expenditures. See, e.g., N.M. Youth Organized v. Herrera, 611 F.3d 669,
679 (10th Cir. 2010) (“To automatically classify such organizations [that spend $500 on electionrelated speech] as political committees contradicts the Supreme Court’s repeated admonition that
only organizations that have ‘the major purpose’ of electing or defeating a candidate may be
forced to register as political organizations.”).
Measured against these standards, the South Carolina Ethics Code’s definition of
“committee” is more expansive than that which is constitutionally permitted under Buckley,
Leake, and related decisions. The State Ethics Code defines a “committee” as:
“Committee” means an association, a club, an organization, or a group of persons
which, to influence the outcome of an elective office, receives contributions or
makes expenditures in excess of five hundred dollars in the aggregate during an
election cycle. It also means a person who, to influence the outcome of an
elective office, makes:
(a) contributions aggregating at least twenty-five thousand dollars during an
election cycle to or at the request of a candidate or a committee, or a
combination of them; or
(b) independent expenditures aggregating five hundred dollars or more during an
election cycle for the election or defeat of a candidate.
“Committee” includes a party committee, a legislative caucus committee, a
noncandidate committee, or a committee that is not a campaign committee for a
candidate but that is organized for the purpose of influencing an election.
S.C. Code Ann. § 8-13-1300(6).
On its face, this definition does not relate to an organization’s “major purpose,” nor does
it tie the Ethics Code’s regulations to an organization’s main goal, conduct, or functions.
Instead, it potentially subjects a group to the statutory burdens of a “committee” based on a
single $500 transaction, regardless of whether (a) the transaction was relevant to the
organization’s “major purpose,” or (b) the $500 expenditure constituted a meaningful portion of
the group’s disbursements. The definition of “committee” is therefore overbroad and facially
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unconstitutional.4 As such, the court reaches the same conclusion as Judge Wooten as to this
issue.
The doctrine of collateral estoppel provides an alternative basis for this court’s
determination that the definition of “committee” is overbroad and facially unconstitutional.5
The doctrine of collateral estoppel, “forecloses the relitigation of issues of fact or law that
are identical to issues which have been actually determined and necessarily decided in prior
litigation in which the party against whom [collateral estoppel] is asserted had a full and fair
opportunity to litigate.” In re Microsoft Corp. Antitrust Litigation, 355 F.3d 322, 326 (4th Cir.
2004). For collateral estoppel to apply to an issue or fact, it must be demonstrated that “(1) the
issue or fact is identical to the one previously litigated; (2) the issue or fact was actually resolved
in the prior proceeding; (3) the issue or fact was critical and necessary to the judgment in the
prior proceeding; (4) the judgment in the prior proceeding is final and valid; and (5) the party to
be foreclosed by the prior resolution of the issue or fact had a full and fair opportunity to litigate
the issue or fact in the prior proceeding.” Id.
In the case before this court and in South Carolina Right to Life, the case before Judge
Wooten, plaintiffs seek a declaration that that the definition of “committee” found in S.C. Code
Ann. § 8-13-1300(6) is unconstitutional. In South Carolina Right to Life, Judge Wooten found
the definition of “committee” as set forth in S.C. Code Ann. § 8-13-1300(6) overbroad and
unconstitutional. That determination was “critical and necessary” in Judge Wooten’s case.
4
In opposing Plaintiff’s summary judgment motion, Defendants did not present this Court with any argument in
support of the constitutionality of the definition of “committee,” nor did they suggest any type of limiting
construction that could be applicable to the definition. Instead, Defendants only argued that Plaintiff cannot rely on
Buckley’s “the major purpose” test as a basis for summary judgment because this test was not stated in Plaintiff’s
Verified Complaint. The Court disagrees with Defendants’ assessment of the pleadings. The Verified Complaint
referenced Buckley and its principles. Moreover, Defendants recognized the primary role that Buckley’s “the major
purpose” test played in this litigation, as they referenced that test in two different places in their Answer.
Additionally, subsequent filings from the parties relied on or incorporated Buckley’s “the major purpose” test.
5
Judge Perry and Judge Seymour raised the issue of collateral estoppel in their respective hearings. Defendants’
counsel asserted in the November 2010 hearing before Judge Perry, that he was seeking summary judgment on two
grounds, “one on collateral estoppel basis, but secondly independently. “ (ECF No. 165 p. 25.)
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Defendants in South Carolina Right to Life did not appeal Judge Wooten’s decision, thus the
judgment is final and valid. Additionally, Defendants in South Carolina Right to Life had a full
and fair opportunity to litigate the constitutionality of this statute in the proceedings before Judge
Wooten. In the case before this court, Defendants are the same Defendants that appeared before
Judge Wooten in South Carolina Right to Life.
Therefore, the court finds that all the
requirements for collateral estoppel have been met.
CONCLUSION
For the reasons set forth herein, the court DENIES Defendants’ Motion to Dismiss. The
court GRANTS Plaintiff’s Motion for Summary Judgment with respect to its request for a
declaration that, on its face, the South Carolina Ethics Code’s definition of “committee” found
in South Carolina Code § 8-13-1300(6) is overbroad and facially unconstitutional. Based on this
relief, the Court finds that it does not need to address any of the remaining issues in Plaintiff’s
motion.
IT IS ORDERED.
/s/ Margaret B. Seymour
Chief United States District Judge
February 23, 2012
Columbia, South Carolina
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