[00:00:11] Speaker 02:
Good morning, counsel.

[00:00:12] Speaker 04:
Good morning, your honors.

[00:00:13] Speaker 04:
Derek Schaefer here on behalf of Plaintiff's Appellants.

[00:00:16] Speaker 04:
We intend to reserve five minutes for rebuttal, and we'll keep track of our time.

[00:00:20] Speaker 02:
All right.

[00:00:21] Speaker 04:
Thank you, Judge Rawlinson.

[00:00:22] Speaker 04:
May it please the court.

[00:00:23] Speaker 04:
The law under challenge, your honors, Proposition 211, is an unprecedented outlier that treats traditional issue advocacy as electioneering and then plows throughout entire donor chains so as to out otherwise anonymous charitable donors.

[00:00:39] Speaker 04:
As noted by Amicus

[00:00:40] Speaker 04:
Institute for Free Speech, the law as a whole is exponentially more chilling than the sum of each over-broad part.

[00:00:48] Speaker 04:
Note first, Your Honors, how the uniquely broad definition of campaign media spending sweeps across traditional issue advocacy.

[00:00:56] Speaker 04:
Its triggers extend to expression about ballot measures, references to officeholders throughout most of the calendar, including vast chunks of legislative sessions, and ill-defined categories of partisan activity and supporting or opposing candidates subject to recall.

[00:01:12] Speaker 04:
From there, this law demands disclosure not only of direct donors, but also what it calls indirect donors, all those who gave to any organization anywhere upstream whose funds somehow found their way to what the law dubs campaign media spending.

[00:01:31] Speaker 04:
Consider, Your Honors, the church that gathers donations, more than $5,000 of which go to the NAACP or the synagogue that similarly donates to the Anti-Defamation League.

[00:01:41] Speaker 04:
If either the NAACP or ADL weighs in about a hot button issue at issue in Arizona, like abortion, higher education, voting rights, or potentially lowering the minimum wage, which was on the ballot last election cycle, then that can trip the wires for disclosure and other burdens.

[00:02:00] Speaker 04:
At that point, all donors who gave more than $5,000 to the church or synagogue over a span of two years will be disclosed as sponsoring what Arizona calls campaign media spending.

[00:02:12] Speaker 00:
So what do you think is the main burden at issue here?

[00:02:15] Speaker 04:
Judge Sanchez, it's tough to pick them apart, but I'd say this.

[00:02:19] Speaker 04:
The fact that you have such a wide range of expression and activity that is subject to being called campaign media spending then means that every covered person has to worry about all of their donations and all of the donations upstream from that.

[00:02:36] Speaker 00:
I mean, I think the district court took a more limited interpretation of the statute and we have a facial and as applied challenge.

[00:02:43] Speaker 00:
So, you know, we're mindful of that, but that it would be political activities related to

[00:02:49] Speaker 00:
electioneering.

[00:02:50] Speaker 00:
Why do you think it encompasses something more broadly than that?

[00:02:53] Speaker 04:
Let me take two observations about that, Judge Sanchez.

[00:02:56] Speaker 04:
First, I agree with you that the district court opined that the plain terms of the law don't mean what the plain terms of the law mean to me at least, but there was no narrowing construction put down.

[00:03:08] Speaker 04:
So the judge did not say the law must be read the way that Judge Silver was saying it would be read under plain English.

[00:03:15] Speaker 04:
But the second point, Judge Sanchez, is this law designably

[00:03:19] Speaker 04:
invites the most aggressive enforcement.

[00:03:21] Speaker 04:
It has a private enforcement provision.

[00:03:24] Speaker 04:
And when the private enforcer comes to court, any review of the position taken by the commission, the commission's regulations, it's de novo.

[00:03:32] Speaker 04:
It's explicitly de novo.

[00:03:34] Speaker 04:
It's de novo under Arizona law.

[00:03:36] Speaker 04:
And there's no regard for prosecutorial discretion, provided that the penalties could be at least $50,000, which is easily reached, because there's trouble there.

[00:03:43] Speaker 02:
Counsel, the private enforcement is not really enforcement against the

[00:03:49] Speaker 02:
the organization, the enforcement is against the commission.

[00:03:54] Speaker 02:
Is that correct?

[00:03:55] Speaker 04:
In the first instance, that is technically correct, Judge Rawlinson.

[00:03:58] Speaker 04:
But as a practical matter, any entity that is the subject of the private enforcers challenge against the commission knows that the result of that lawsuit may be that the commission needs to enforce against the ultimate target.

[00:04:12] Speaker 04:
And that means that they have to reasonably anticipate litigation, means they have to be hiring counsel.

[00:04:17] Speaker 04:
means they have to be maintaining a litigation hold, means they have to be monitoring that litigation with great fear that the outcome of that may be an enforcement action where these provisions... Council, can I ask how it works practically?

[00:04:29] Speaker 03:
So a covered person donates a certain amount of money to trigger the law.

[00:04:34] Speaker 03:
How is that covered personal source to figure out all the, you know, upstream donors?

[00:04:39] Speaker 03:
It could go infinitum, right, to the original source.

[00:04:41] Speaker 04:
Judge Boumete, it is infinite in its look-throughs.

[00:04:44] Speaker 04:
You're absolutely right about that.

[00:04:45] Speaker 04:
There's no precedent for that, and there's no meaningful guidance that's available.

[00:04:48] Speaker 02:
Well, don't organizations keep records?

[00:04:50] Speaker 02:
They have to keep records of their donors for tax purposes.

[00:04:54] Speaker 04:
Let me start with this, Judge Rawlinson.

[00:04:56] Speaker 04:
There is a suly, generous opt-out requirement in this law, which is being trumpeted as a virtue.

[00:05:01] Speaker 04:
But that opt out requires that any campaign media spender tell every single donor, that's the $5 donor, the $10 donor, the $100 donor, they have the ability to opt out of having their moneys used to what the law calls campaign media spending.

[00:05:18] Speaker 04:
And Judge Bume would say, I don't know how organizations are meant to predict what view will be taken of these very broad provisions of the law.

[00:05:28] Speaker 04:
that are meant to encompass a great range of activity that may be happening outside of Arizona as well.

[00:05:33] Speaker 04:
And so to answer Your Honor's question, the records that have to be kept are records that have to be kept for five years.

[00:05:39] Speaker 04:
They are donations that are at $2,500 level, not the $5,000 level that triggers the disclosure.

[00:05:45] Speaker 04:
And so that is a mass of records that have to be maintained solely for purposes of Proposition 211.

[00:05:51] Speaker 00:
Why would the notice have to be $5, $10 if the triggering amounts are $2,500 and $5,000?

[00:05:57] Speaker 04:
Judge Sanchez, because that's the opt-out.

[00:06:01] Speaker 04:
The opt-out provision is not subject to the same thresholds that are there elsewhere in the law.

[00:06:06] Speaker 04:
And I would point, Your Honor, to the opt-out mechanism itself.

[00:06:10] Speaker 04:
It's in 16, I believe, 972C.

[00:06:15] Speaker 04:
It just, it doesn't allow for any sort of an exception to the opt-out.

[00:06:22] Speaker 04:
Now, as to whether the consequent, and in fact the opt-out warns every donor,

[00:06:27] Speaker 04:
that they may be subject to disclosure if they don't opt out.

[00:06:30] Speaker 04:
So there's that chilling effect.

[00:06:31] Speaker 04:
There's that burden on the associational rights.

[00:06:34] Speaker 04:
But it does not specify that the trigger for the disclosure under the law would be at the $5,000 level.

[00:06:40] Speaker 04:
It just doesn't.

[00:06:41] Speaker 00:
So just to follow up, you know, the covered person is the one who's making the independent expenditure for political campaigning.

[00:06:48] Speaker 00:
Is that right?

[00:06:48] Speaker 00:
And the donor

[00:06:51] Speaker 00:
is donating to the covered person and they have to generate the record of this is my donation and antecedent donors to them, is that right?

[00:07:01] Speaker 04:
That's right, Judge Sanchez.

[00:07:02] Speaker 04:
The burden falls to them, but then they're making that request of all of the upstream donors and the law contemplates that the upstream donors will comply.

[00:07:10] Speaker 03:
What if the upstream donors don't comply?

[00:07:14] Speaker 04:
There's no specification.

[00:07:15] Speaker 04:
What the law does say is that the donor who is reporting can reasonably rely on the information if they don't understand it to be false.

[00:07:24] Speaker 04:
Nothing specifies what they are to do if they get blanked on the information.

[00:07:28] Speaker 04:
Presumably, it could be a problem.

[00:07:31] Speaker 04:
I think it would be a problem if they continue to accept donations from an upstream entity that refuses to make the required disclosure.

[00:07:37] Speaker 03:
So one of the problems I have is that the opt-out provision doesn't apply to indirect donors, is that correct?

[00:07:43] Speaker 03:
That's correct, it does not, quite anomalous.

[00:07:46] Speaker 03:
And to me that obviously raises speech issues and association issues because that donor didn't necessarily agree with that expenditure.

[00:07:56] Speaker 03:
Is that right?

[00:07:57] Speaker 03:
That is absolutely right.

[00:07:58] Speaker 03:
And then, so my one question for you though is, are you, do you have standing to assert that harm for that indirect owner?

[00:08:06] Speaker 04:
Well, first of all, we could be the indirect owner, Judge Bumate.

[00:08:09] Speaker 04:
We could be giving to an entity that then does, that then donates to what becomes campaign media spending.

[00:08:14] Speaker 04:
So we're subject to it.

[00:08:15] Speaker 04:
And in the First Amendment context, we do have, as long as we have Article 3 standing, which no one

[00:08:19] Speaker 04:
can question we do, we can invoke the First Amendment rights of others.

[00:08:23] Speaker 04:
And of course, it's a facial challenge.

[00:08:24] Speaker 04:
And so this court should be analyzing, I think, the repercussions all the way throughout donor chains, just as the Supreme Court did in Bonta.

[00:08:33] Speaker 00:
So can you – I'm sorry.

[00:08:35] Speaker 00:
Before you move on, can you explain – so square this with the Noan E case, because that is also about indirect donors and our

[00:08:44] Speaker 00:
court found that that was acceptable under Bonta.

[00:08:48] Speaker 00:
So what's the difference here?

[00:08:49] Speaker 04:
A two-judge panel did so hold, and we're not obviously challenging that holding before the panel.

[00:08:54] Speaker 04:
It was a vastly different case, Judge Sanchez.

[00:08:56] Speaker 04:
Number one, it was donations through political committees, committees that were defined as political committees and had the purposes of political committees.

[00:09:05] Speaker 04:
And even then it was a one-step look-through, not the infinite look-through that Judge Bumate and I were discussing.

[00:09:11] Speaker 00:
In addition, Judge Sanchez, it was a tough... So what is it about the infinite look-through that makes it different than a one-step look-through?

[00:09:20] Speaker 04:
These burdens ripple far throughout Arizona, far around the country and outside of Arizona.

[00:09:25] Speaker 04:
It goes to the church.

[00:09:27] Speaker 04:
And if the church has another church that is donating to it, then it is going to be

[00:09:32] Speaker 04:
caught up in this chain of disclosures and administrative burdens.

[00:09:36] Speaker 04:
And if a charity gives to another charity and gives to another charity because they're involved in the same issues, all of those charities are going to be swept in without distinction.

[00:09:45] Speaker 00:
As long as they donated more than $2,500.

[00:09:47] Speaker 04:
As more than $5,000, they'll be subject to disclosure more than $2,500, yes, than the administrative burdens that come with that.

[00:09:55] Speaker 04:
So part of it is the burdens.

[00:09:57] Speaker 04:
Part of it is the lack of tailoring.

[00:09:59] Speaker 04:
Part of it is it's antithetical to the claim purposes.

[00:10:02] Speaker 04:
Consider what Judge Bumate and I were just discussing.

[00:10:04] Speaker 04:
The indirect owner does not have the opt-out right.

[00:10:07] Speaker 04:
So they will be disclosed regardless of what the direct owner decides.

[00:10:11] Speaker 04:
The direct owner can say, I don't want to do what's being dubbed campaign media spending.

[00:10:16] Speaker 04:
But the indirect donor does not have that election.

[00:10:19] Speaker 04:
So every member of the church who gave more than $5,000, every member of the synagogue who gave more than $5,000, they're going to be disclosed as though they are supporters of campaign media spending in Arizona.

[00:10:31] Speaker 04:
They have no opt-out right.

[00:10:32] Speaker 04:
And when the public sees those disclosures, Judge Sanchez, what are they going to see?

[00:10:37] Speaker 04:
They're going to see that the electioneers in Arizona are members of a church, are members of a synagogue, are members of some charity far removed from Arizona

[00:10:45] Speaker 04:
And the direct owners, who are actually giving to the organization, they may have opted out.

[00:10:50] Speaker 04:
They may be nowhere on the list.

[00:10:53] Speaker 03:
Are you essentially arguing that the further away you get from the direct owner, the government's interest in informing the public is diminished?

[00:11:02] Speaker 04:
Absolutely.

[00:11:03] Speaker 04:
And the burdens are also exponentially compounding.

[00:11:06] Speaker 04:
Because now we are radiating far outside of the penumbra of an Arizona election.

[00:11:11] Speaker 04:
And we are reaching entities that over a span of two years may have given to some entity that may have given to some entity.

[00:11:17] Speaker 04:
So the interests are attenuated, but the burdens are extreme.

[00:11:20] Speaker 00:
Can I push back on it a little bit?

[00:11:21] Speaker 00:
I mean, the governmental interest is who, like in the Smith versus Helzer case, who are the true donors of this campaign?

[00:11:30] Speaker 00:
you know, and to try to avoid the obfuscation of a committee with a strange sounding name and hiding other people.

[00:11:38] Speaker 00:
Why does the government interest lessen if you have to follow the chain a few more steps along the way?

[00:11:43] Speaker 04:
To be clear, Judge Sanchez, we are not challenging a law that has some sort of an anti-circumvention aspect to it.

[00:11:49] Speaker 04:
There's an anti-circumvention aspect of this law.

[00:11:51] Speaker 04:
It's also there in Arizona law.

[00:11:53] Speaker 04:
So if you have donor chains that are giving upstream for the purpose of influencing an Arizona election,

[00:11:58] Speaker 04:
that is covered by other laws, it could be covered by this law that is categorically different from what this law is trying to do.

[00:12:05] Speaker 04:
It's trying to say, irrespective of any major purpose requirement for the organization, irrespective of any remarking.

[00:12:11] Speaker 00:
But the argument that you were making in response to Judge Bumonte was that the interest is diminished as you go further along, and I don't quite understand why that is.

[00:12:21] Speaker 04:
Let me be clear, Judge Sanchez.

[00:12:23] Speaker 04:
I'm not saying

[00:12:24] Speaker 04:
that if you have a chain of intentional donations that are meant to influence the Arizona election, I give to this person to give to that person to influence the election of candidate so and so in Arizona.

[00:12:38] Speaker 04:
I can be covered under existing law because that is an effort to circumvent the restrictions on contributions and campaign spending in Arizona and there's a federal law equivalent of that.

[00:12:49] Speaker 04:
This law is saying I am indifferent to that as the Arizona regulator.

[00:12:54] Speaker 04:
I am saying even if you had no contemplation that your money would wind up being used, by the way, not just for a candidate election, for a ballot measure.

[00:13:03] Speaker 04:
for a reference to a candidate who's likely an office holder throughout most of the calendar year and an even numbered election year, even if it's just for helping a political party.

[00:13:13] Speaker 04:
All of that is going to be covered just because that spending wound up happening in Arizona and everyone throughout a donor chain.

[00:13:20] Speaker 04:
all the way upstream is going to be swept into that.

[00:13:23] Speaker 04:
If you can do that, there's really no logical stopping point.

[00:13:26] Speaker 03:
So, Counsel, how do you actually do that narrowing to just the intended?

[00:13:30] Speaker 03:
Is that the earmarking rule from the Tenth Circuit?

[00:13:33] Speaker 04:
I think earmarking would do it, Judge Bumitay, but you could also do it with the major purpose requirement that was absolutely part of Buckley and with the definition of political committees, which again, that was there in No.

[00:13:42] Speaker 04:
1E.

[00:13:43] Speaker 04:
No.

[00:13:43] Speaker 04:
1E did have that sensitivity because the look-through provision

[00:13:46] Speaker 04:
operated only by looking through political committees.

[00:13:49] Speaker 04:
So, and the Court specifically noted, I believe it's at 810, 811 of the Noan E opinion, specifically noted that that was important to the Court's analysis, that the person who gives to such a committee, that then gives to such a committee really did have the, I'm sorry, it's 85F4, 510, 511.

[00:14:09] Speaker 04:
The Court specifically noted the person who's giving to the political committee is by definition

[00:14:15] Speaker 04:
giving to influence an election.

[00:14:16] Speaker 04:
That's part of how it found narrow tailoring.

[00:14:18] Speaker 04:
There's no such tailoring present in this law.

[00:14:21] Speaker 04:
But again, it's the one bit of over-breath atop the other part of over-breath atop the other part.

[00:14:26] Speaker 04:
It's the very broad triggers that you have in the law.

[00:14:29] Speaker 04:
It's the onerous record-keeping requirement.

[00:14:31] Speaker 04:
It's the way that the opt-out requirement operates.

[00:14:34] Speaker 04:
It's the absence of any earmarking or major purpose requirement.

[00:14:36] Speaker 03:
A quick question before we run out of time for rebuttal.

[00:14:39] Speaker 03:
Your under-inclusive argument, you say that the unions, the fact that unions are

[00:14:42] Speaker 03:
you know, exempt of five years per $50,000 per year.

[00:14:47] Speaker 03:
Why is it under inclusive?

[00:14:48] Speaker 04:
Well, I mean, I don't think it's a very controverted fact that unions have a lot to say about elections and may have a lot to say specifically about Arizona elections and have individual members who are donating in amounts

[00:15:01] Speaker 03:
But the amount is $5,000 for both, right?

[00:15:04] Speaker 03:
Isn't that the triggering amount for both?

[00:15:05] Speaker 04:
It is.

[00:15:06] Speaker 04:
I think that it excludes the dues, Judge Bumate, if it is dues to a corporate membership or to a union.

[00:15:13] Speaker 04:
And so the fact that there's special dispensation for unions in that, I just think is a practical matter.

[00:15:17] Speaker 04:
The same reasoning that's being applied to other donor chains just are not being applied to unions in the same way.

[00:15:23] Speaker 04:
And that, I think, is valid.

[00:15:24] Speaker 02:
Thank you, Counsel.

[00:15:24] Speaker 04:
Thank you, Your Honor.

[00:15:41] Speaker 05:
May it please the court, I'm David Kolker, representing Voters' Right to Know, and along with Eric Frazier, we'll be arguing on behalf of the defendants and interveners.

[00:15:50] Speaker 05:
Prop 211's plainly legitimate sweep closes the loophole that has arisen with the explosive growth of dark money campaign spending.

[00:15:59] Speaker 05:
While the law's requirement to disclose the original sources may be somewhat new, the constitutional issues at stake are not.

[00:16:06] Speaker 05:
The disclosure of campaign donors has been required and upheld

[00:16:10] Speaker 05:
for more than 50 years, and in many ways this law is actually more narrowly tailored than other laws.

[00:16:16] Speaker 05:
Going back to the McConnell decision from the Supreme Court, we have been aware of the fact, and the Court has recognized, that some sophisticated spenders will use, quote, dubious and misleading names by setting up a front group to make campaign expenditures, hiding the real source of the money.

[00:16:34] Speaker 05:
One example from the Supreme Court decision was Citizens for Better Medicare, which was actually a group funded by the pharmaceutical industry.

[00:16:42] Speaker 05:
Prop 211 prevents this kind of abuse.

[00:16:46] Speaker 03:
In Citizens United... But it's pretty broadly doing that because it's making everyone disclose ad infinitum to the original source.

[00:16:53] Speaker 03:
Why couldn't it just have a more narrowly tailored earmarking mandate or major purpose test to get to the same result?

[00:17:00] Speaker 05:
The problem, Your Honor, with earmarking is that it's so incredibly easy to evade.

[00:17:05] Speaker 05:
The Supreme Court, especially in the McConnell decision, has recognized over the years that laws are passed and people evade them.

[00:17:12] Speaker 03:
And earmarking in the Colorado Republican... Is that in the record somewhere that earmarking is easy to evade?

[00:17:19] Speaker 05:
Yes.

[00:17:20] Speaker 05:
We have a quote from the second Colorado Republican decision where the court says that's sort of the most clumsy, easy way to evade.

[00:17:29] Speaker 05:
It just doesn't do very much.

[00:17:31] Speaker 05:
And when people can give a million dollars,

[00:17:33] Speaker 05:
to an organization and say, you know, I'd really hope that we get good pro market people or good pro Medicare people elected and not specify who it should go to or which candidates it would support.

[00:17:47] Speaker 05:
But people have these wink and nod understandings, and the money gets passed on, and the real source is the million dollars.

[00:17:54] Speaker 05:
And you can do that very easily without earmarks.

[00:17:57] Speaker 03:
But the problem is that it's just, you know, the sweep of this law is so broad, it's not targeted just towards that, it's targeted towards, you know, an example of the Catholic nun donating to the firearms person who then donates to a pro-choice group.

[00:18:13] Speaker 03:
It's used to add the person in too.

[00:18:14] Speaker 05:
Well, my opponent oversimplified how this works, okay?

[00:18:18] Speaker 05:
The last donor to the spender is the one who gets to choose whose money it's passing on.

[00:18:24] Speaker 05:
So if you're sitting on $100,000 and you're only going to pass on $10,000, you get to choose whose money you're going to pass on.

[00:18:32] Speaker 05:
So if a church is going to pass on donations from the people who gave it, it gets to decide whose money is being passed on.

[00:18:41] Speaker 05:
So this law does not exist in a vacuum.

[00:18:45] Speaker 05:
People talk to each other, upstream and downstream.

[00:18:49] Speaker 03:
And somebody... How is the church supposed to know if the donor to the church got that money from another donor?

[00:18:56] Speaker 05:
Well, if that church... So the last donor is responsible for telling the spender of the original sources.

[00:19:04] Speaker 05:
That's how the statute is.

[00:19:04] Speaker 03:
Wait, sorry, say that again?

[00:19:06] Speaker 05:
It's the direct donor to the spender

[00:19:10] Speaker 05:
who has to reveal to the spender what the original source is of the money that the donor is giving.

[00:19:16] Speaker 03:
How are you supposed to figure out the original source?

[00:19:19] Speaker 05:
Well, the law sort of divides up the burdens.

[00:19:23] Speaker 05:
The last donor has to figure that out, and if it can't, then it can't pass on that money without opting out.

[00:19:29] Speaker 05:
That's all that it is.

[00:19:31] Speaker 03:
So that this law enhances... So the church would have to find out who the donor got the money from?

[00:19:41] Speaker 05:
If the donor to the church is just an individual, then it's their personal money, and that's the end of the traceback.

[00:19:47] Speaker 03:
But does the church have to ask that person, is this your money, or did you get this from someone else?

[00:19:51] Speaker 05:
The law doesn't specify how the donor, it's free to the donor to decide how to figure that out.

[00:19:56] Speaker 05:
The other thing to remember is, if you're sitting on $100,000, but you only got $1,000 from each person to give you that $100,000, then you don't have to reveal anybody's name, because it's below the thresholds.

[00:20:11] Speaker 05:
So I think the examples are very unrealistic.

[00:20:14] Speaker 03:
You can see these burdens are pretty high, right, on the donors there.

[00:20:19] Speaker 05:
Well, look, the donor has an option.

[00:20:22] Speaker 05:
The way this law enhances donors' freedom and First Amendment rights is they get to choose how they associate with the spender.

[00:20:30] Speaker 05:
If they want to support, if I want to support the Sierra Club or the NRA, and I want to give them a million dollars, but I, you know, I want to support their gun program.

[00:20:38] Speaker 03:
But you agree that the opt-out doesn't apply to the original source, correct?

[00:20:41] Speaker 03:
If it's an indirect original source?

[00:20:44] Speaker 03:
Correct.

[00:20:45] Speaker 03:
So then how is that person's rights protected?

[00:20:49] Speaker 05:
Because this law doesn't exist in a vacuum.

[00:20:52] Speaker 05:
Non-profit, for example, 501CC organizations make grants all the time.

[00:20:58] Speaker 05:
But when they make grants, none of that money can be used for electoral politics.

[00:21:02] Speaker 05:
They simply restrict the donation.

[00:21:04] Speaker 03:
So it's just the good nature of the organizations that protects donors' rights, essentially?

[00:21:11] Speaker 05:
No.

[00:21:12] Speaker 05:
It's that people giving away large amounts of money but concerned about showing up

[00:21:21] Speaker 05:
in a disclosure report, or having their money used for electioneering in Arizona.

[00:21:26] Speaker 03:
Just take the example of the nun who donates to the firearm group and then donates to the pro-choice organization.

[00:21:34] Speaker 03:
How is the nun's right protected if she doesn't want to be associated with pro-choice activism?

[00:21:41] Speaker 05:
Well, I'm forgetting who she gives to.

[00:21:44] Speaker 05:
When she gives away her money to the firearms group, when she gives away her money, she can say, don't pass it on.

[00:21:50] Speaker 05:
to somebody who doesn't support something they don't believe in.

[00:21:53] Speaker 05:
Okay, and then if the firearms group doesn't honor that... Well, but that's not the law's fault.

[00:21:57] Speaker 05:
That's a failure of communication between the nun and the group.

[00:22:01] Speaker 03:
I mean, this law's like... But it's also a violation of her First Amendment rights, right?

[00:22:05] Speaker 03:
Then she's involuntarily being associated with pro-choice activism.

[00:22:10] Speaker 02:
Well, the law... Counsel, is that a violation of our First Amendment right?

[00:22:13] Speaker 05:
No, I don't believe it is.

[00:22:15] Speaker 05:
Really?

[00:22:15] Speaker 05:
The law assumes... Our nation assumes that people understand what the law is.

[00:22:20] Speaker 05:
Now, Congress, for example, often has six-month waiting periods before a law goes into effect, because people need to learn the new tax code or whatever.

[00:22:30] Speaker 05:
So we just can't assume that they'll remain ignorant and not protect themselves.

[00:22:35] Speaker 05:
When people give away money, they're making a choice.

[00:22:39] Speaker 05:
And if they don't trust the person they're giving it to, they can put a restriction on it.

[00:22:43] Speaker 05:
This law tries not to micromanage the relationship down the chain of donations.

[00:22:48] Speaker 05:
It gives people choices about how they associate.

[00:22:52] Speaker 00:
So you don't see a, do you agree with opposing counsel's distinctions about no on e or do you think it's more supportive of your position than?

[00:23:01] Speaker 05:
I think no on e is a constant, the law at issue there is constitutional.

[00:23:05] Speaker 05:
I think this law is easier to defend because I think no on e did not have an opt out provision.

[00:23:11] Speaker 05:
This does.

[00:23:12] Speaker 05:
So this narrowly tailors the law and gives donors much more choice in how they associate.

[00:23:19] Speaker 05:
The other thing about no on e is that

[00:23:22] Speaker 05:
Although this may sound counterintuitive, this law obviously requires more information to be reported because it goes back to the original source.

[00:23:31] Speaker 05:
But we believe that makes it... That's the problem.

[00:23:32] Speaker 03:
Is that a huge distinction with no one e where no one e just goes back one level, I believe.

[00:23:36] Speaker 05:
Yes, but that makes... But this could go infinitum, right, to the original source.

[00:23:40] Speaker 05:
That is correct.

[00:23:40] Speaker 05:
But that makes this law more narrowly tailored, Your Honor, because

[00:23:44] Speaker 05:
Well, one of the dissents in the en banc opinion pointed out that no one, the law there, could be viewed as underinclusive because, again, the lessons of campaign finance, which the Supreme Court has routinely recognized, people will go three steps back to avoid the San Francisco law.

[00:24:04] Speaker 05:
This law is more narrowly tailored at getting at the original source, the information people really want to have.

[00:24:13] Speaker 03:
Would you agree, though, that the further you go back, the government's interest in knowing who's been informing, who's been spending money on political activity is diminished?

[00:24:26] Speaker 03:
Because the example of the nun to the firearm to the pro-choice group, I mean, what's the public's interest in knowing that a nun donated to a firearm group that then donated to a pro-choice?

[00:24:41] Speaker 05:
Your Honor, the important thing is to go to the original source.

[00:24:45] Speaker 05:
Right.

[00:24:46] Speaker 03:
Why in that example?

[00:24:49] Speaker 03:
Why is that important?

[00:24:51] Speaker 05:
Well, it's easy to make an example where money gets passed on and the original source seems to have a distant relationship.

[00:24:59] Speaker 05:
Correct.

[00:25:00] Speaker 05:
But there's also no harm in that.

[00:25:02] Speaker 03:
Well, the nun is being harmed because she's being associated with the poor choice group.

[00:25:07] Speaker 05:
Well, again, she has free will.

[00:25:09] Speaker 05:
She can decide how she gives away her money.

[00:25:11] Speaker 05:
The important thing is that the disclosure of original sources can simply be easily evaded by going one step further back.

[00:25:19] Speaker 03:
I agree.

[00:25:19] Speaker 03:
That's a concern.

[00:25:20] Speaker 03:
But you would also have to agree that the interest can also be diminished the further you get away from the actual spending.

[00:25:29] Speaker 05:
The Supreme Court has ruled in the Washington State Grange case that they rejected a paternalistic argument, right?

[00:25:37] Speaker 05:
These strings of donations, if they occur, will be in the reports.

[00:25:42] Speaker 05:
We trust the people to look at that information.

[00:25:45] Speaker 05:
Just because a nun is listed doesn't mean that she'll be badly associated with somebody.

[00:25:52] Speaker 05:
People will look at the disclosure records, see how many steps back it's gone,

[00:25:57] Speaker 05:
see how diluted it is.

[00:25:58] Speaker 05:
For example, Your Honor, let's say somebody gives away a million dollars and that ends up being 80 percent of the money that the spender has, even though it was passed on five times.

[00:26:07] Speaker 05:
Well, that's critical information because they're really the bankroller.

[00:26:11] Speaker 05:
In another case, it may be that there

[00:26:13] Speaker 05:
20 people who each gave $50,000, and the spender ended up with a million dollars.

[00:26:18] Speaker 05:
Well, we have faith in people to look at the record and say, well, you know what?

[00:26:22] Speaker 05:
They gave $50,000.

[00:26:23] Speaker 05:
They were a bunch of steps back.

[00:26:25] Speaker 05:
Maybe they're really not in sync with everything the spender does.

[00:26:29] Speaker 05:
We trusted people to look at the information, understand what the law requires, and draw appropriate conclusions.

[00:26:35] Speaker 00:
I take it your argument then is,

[00:26:40] Speaker 00:
under a common sense way of thinking about it.

[00:26:42] Speaker 00:
If an original source donor gives a million dollars and somehow that person ends up in the top three of an ad, it's unlikely that their money would have just gone in ways that were completely unintended to what they were thinking.

[00:26:58] Speaker 05:
That is what experience has told us, Your Honor.

[00:27:00] Speaker 02:
I was going to ask you if no one says that the

[00:27:05] Speaker 02:
modest burden on the First Amendment right does not outweigh the government's interest in providing voters with information.

[00:27:13] Speaker 02:
So we're looking at the weighing of those two prospectively.

[00:27:18] Speaker 05:
And what I wanted to emphasize, Your Honor, is the Citizens United decision, that when that decision opened up the door to corporate spending, it relied on the fact, an integral part of its reasoning,

[00:27:29] Speaker 05:
was that though there would be more campaign money coming in from corporations, the people would know that there would be effective disclosure in the court's words.

[00:27:38] Speaker 05:
Well, that has not happened.

[00:27:40] Speaker 05:
And part of the reason it hasn't happened is that Citizens United also opened the door to using corporate front groups and intermediaries.

[00:27:47] Speaker 05:
So we now have the specter of limited liability corporations and nonprofit corporations, which previously couldn't make

[00:27:53] Speaker 05:
campaign expenditures used in a series of chains to evade the law.

[00:27:59] Speaker 05:
And it is contrary to Citizens United to say that the government is powerless to step in to bring the kind of effective disclosure that the court assumed.

[00:28:07] Speaker 05:
The court basically said to us, don't worry.

[00:28:10] Speaker 05:
There'll be a lot of corporate spending, but democracy will survive because we'll know where the money's coming from.

[00:28:14] Speaker 03:
Do you agree that people have the right to use speech and associate anonymously?

[00:28:22] Speaker 05:
In certain aspects, yes, but not in the campaign finance area.

[00:28:25] Speaker 05:
That's been a long time.

[00:28:25] Speaker 03:
Oh, really?

[00:28:26] Speaker 03:
So just categorically in the political sphere that people do not have the right to donate?

[00:28:33] Speaker 05:
It depends where in the campaign finance area.

[00:28:35] Speaker 03:
Historically, from going back to the founding, our political actors always used synonyms and things of that nature to hide their true identity.

[00:28:43] Speaker 05:
Well, starting in Buckley 50 years ago, the court made it clear that anonymous donations are not part of

[00:28:49] Speaker 03:
So we're not allowed to take the interest in anonymous political activity to balance that against any of the other interests that we've recognized in informing the public about who's involved in political activism?

[00:29:02] Speaker 05:
Well, the court has told us that disclosure is the least restrictive way to curb election ignorance and to curb corruption.

[00:29:11] Speaker 05:
So in this area, the court has said that the government interests are so strong and so much less intrusive than contribution limits or spending limits.

[00:29:19] Speaker 05:
that we will tolerate that modest burden because it's the best way to have an informed democracy and it's the best way to shine light on these money transactions so that we can hold our office so it lose accountable once they're in office.

[00:29:53] Speaker 01:
Good morning, Your Honors.

[00:29:54] Speaker 01:
May it please the Court?

[00:29:54] Speaker 01:
My name is Eric Frazier.

[00:29:56] Speaker 01:
I represent the Arizona Citizens Clean Elections Commission.

[00:29:59] Speaker 01:
I'll jump right to this concept of donor ignorance because AFP's whole argument relies on a level of donor ignorance that is unalleged, unargued, and implausible because this is a facial challenge.

[00:30:13] Speaker 01:
This is not a case about a nun who gave $5,000.

[00:30:16] Speaker 01:
This is a group that wants to block this law

[00:30:18] Speaker 01:
for everyone and everything, which means that they have a high burden of showing that the super ignorant donors who don't know where their money is going and don't know how to control how their money is used are a substantial number of the law's applications.

[00:30:34] Speaker 01:
But that is unargued and unalleged.

[00:30:36] Speaker 01:
AFP says that donors don't know where their money is going and that they may end up disclosed in connection with ads or causes that they don't know about and don't necessarily agree with.

[00:30:45] Speaker 01:
That's this concept of the none that we're talking about.

[00:30:48] Speaker 01:
There are three fundamental problems with that argument.

[00:30:50] Speaker 03:
So do you concede then the none who donates to the gun control groups and then donates to a pro-choice group that her First Amendment rights are being violated by being associated with the pro-choice movement?

[00:31:04] Speaker 01:
I don't, Your Honor, because there is no forced association.

[00:31:06] Speaker 01:
The law merely provides factual information about funding flows that have, in fact, occurred.

[00:31:12] Speaker 01:
And those funding flows occurred voluntarily.

[00:31:15] Speaker 01:
Reasonable voters understand the differences between funding an organization and endorsing every message the organization speaks with.

[00:31:23] Speaker 01:
That's what no one e-held.

[00:31:24] Speaker 03:
Well, doesn't that count against you, though?

[00:31:26] Speaker 03:
That's the whole point of this law, is that the implication that if you donate to this group, that you agree with everything that the group is doing.

[00:31:34] Speaker 01:
That's not the implication, Your Honor.

[00:31:36] Speaker 01:
The core principle behind this law is that voters want to know where the money is coming from.

[00:31:41] Speaker 03:
In some cases... Right, but then how is it helpful if, you know, everyone understands that it doesn't... Because in some cases that may be very, very informative.

[00:31:50] Speaker 01:
And for some donors, it may be less informative.

[00:31:53] Speaker 01:
But that's why this can't survive a facial challenge.

[00:31:56] Speaker 01:
where they would have to demonstrate that those less informative cases are a substantial number of applications.

[00:32:01] Speaker 01:
And this court rejected that exact argument, Your Honor, in no on e, where it said that the Constitution does not require the law to ensure that every donor agrees with every aspect of the message.

[00:32:12] Speaker 01:
That was the rejection of the same associational argument that's being made here.

[00:32:17] Speaker 03:
Would you agree the further you go down the, you know, the Danish chain though, the more likely is that the donor doesn't agree with the overall, the political activity?

[00:32:28] Speaker 01:
I don't agree with that, particularly on a facial challenge.

[00:32:31] Speaker 01:
Because there are plenty of situations where someone is giving away millions of dollars through 10, 15 intermediaries, however many it takes to try to hide.

[00:32:39] Speaker 01:
And that is very informative.

[00:32:41] Speaker 01:
That is what the voters want to know about.

[00:32:43] Speaker 03:
And why couldn't earmarking or the major purpose tests find that?

[00:32:48] Speaker 01:
For the exact same reason that Mr. Kolker explained, that those things are trivially easy to avoid.

[00:32:52] Speaker 01:
They're not constitutionally required.

[00:32:55] Speaker 04:
How are they easy to avoid?

[00:32:57] Speaker 01:
Why are they easy to avoid?

[00:32:59] Speaker 01:
Because again, you can donate a million dollars and because of your past relationships, everyone knows where you expect that money to go.

[00:33:08] Speaker 01:
But I think the key thing here is that no court has ever held that earmarking is constitutionally required.

[00:33:15] Speaker 01:
Correct.

[00:33:15] Speaker 01:
And so again,

[00:33:17] Speaker 01:
You can make some of the same arguments with the existing disclosure laws that only go to the donor that actually spent the money, because someone might support a candidate for his position on taxes, but not his position on immigration.

[00:33:31] Speaker 01:
If that person donates money to the candidate,

[00:33:33] Speaker 01:
can be spent on an ad on immigration that the donor doesn't agree with, it's going to get disclosed under existing law, and you have the exact same argument.

[00:33:42] Speaker 00:
But I guess the difference, as Noon-E pointed out, is that they're donating to something that is going to use it for political campaigning as opposed to something further back.

[00:33:53] Speaker 01:
Sure, but here, I mean, again, this law only applies to major donors and major spenders.

[00:33:59] Speaker 01:
And so the high dollar thresholds

[00:34:01] Speaker 01:
I think provide a substantial level of protection to donors.

[00:34:05] Speaker 01:
This is not about somebody who gives $200 to a church.

[00:34:09] Speaker 01:
These are people who are giving $5,000.

[00:34:11] Speaker 01:
The spenders are spending $50,000.

[00:34:14] Speaker 01:
These are really high thresholds.

[00:34:16] Speaker 01:
These people

[00:34:17] Speaker 01:
are major donors.

[00:34:19] Speaker 01:
They're sophisticated players.

[00:34:20] Speaker 01:
They know how this works.

[00:34:22] Speaker 01:
They often know where their money is going.

[00:34:24] Speaker 01:
And more importantly, they know how to control where their money is going.

[00:34:27] Speaker 01:
People who give major gifts of that size know exactly how to control how their money is spent.

[00:34:33] Speaker 00:
Can I ask you about the as applied claim and whether

[00:34:40] Speaker 00:
plaintiffs made sufficient allegations on an as applied basis for potential retribution if their identities were discovered, even if they didn't want to have that happen.

[00:34:53] Speaker 01:
They did not make sufficient allegations.

[00:34:55] Speaker 01:
They had an opportunity to amend, as you know.

[00:34:57] Speaker 01:
But these are just general allegations about boycotts, character attacks, personal threats to their supporters.

[00:35:05] Speaker 01:
But there are no allegations that those things occurred because of any donations with the organization or even because of the affiliation with the organization.

[00:35:15] Speaker 01:
The word supporters, it could mean a political office holder who has already been elected, supports AFP's ideas, and is being attacked because of things he's done as an elected official.

[00:35:27] Speaker 01:
There's nothing in the complaint that suggests that those things occurred

[00:35:30] Speaker 01:
because of disclosure or even because of donations to AFP.

[00:35:34] Speaker 01:
So those do not reach the level that you would need for an as-applied challenge, which requires a reasonable probability that the group's members would face those threats if their names were disclosed, rather than because of other activities that they are doing in the real world.

[00:35:49] Speaker 03:
Kelsa, can I ask, so the Arizona Supreme Court has accepted discretionary review of this law.

[00:35:54] Speaker 03:
Is there any reason why we should not hold this case in abeyance and wait for the Arizona Supreme Court to rule on it first?

[00:36:00] Speaker 01:
You should not hold the case in abeyance.

[00:36:01] Speaker 01:
No one has asked you to do that.

[00:36:03] Speaker 01:
And the grant of review in the Arizona case is based solely on the Arizona Constitution.

[00:36:08] Speaker 03:
Sure.

[00:36:08] Speaker 03:
But, you know, for reasons, prudential reasons, constitutional avoidance reasons, why wouldn't we want to wait for them to rule?

[00:36:15] Speaker 03:
It's state law.

[00:36:17] Speaker 03:
There's the Supreme Court of the state.

[00:36:20] Speaker 03:
Why not defer to them?

[00:36:21] Speaker 01:
Well, again, because the issues that they'll be resolving arise under the state constitution, the issues in this case are right.

[00:36:28] Speaker 02:
It wouldn't affect our ruling on the federal constitution, which is the first amendment.

[00:36:32] Speaker 01:
That's correct.

[00:36:33] Speaker 01:
The issues in this case are right.

[00:36:35] Speaker 03:
Although, if they were to strike it down under the state constitution, there would be nothing for us to rule on, correct?

[00:36:42] Speaker 01:
So there are different dispositions that could affect whether there is a live case, but there are other dispositions where this court still would have to resolve the case.

[00:36:52] Speaker 03:
So why not hold out in an abeyance and wait for that to figure that out?

[00:36:55] Speaker 01:
That's, of course, up to your discretion, but I think the better course here is to resolve the case now.

[00:37:00] Speaker 01:
I don't think either side has asked you to hold the case in abeyance.

[00:37:05] Speaker 01:
This is a facial challenge, and so I think the key message here is that AFP cannot block the law by showing that there could be odd maximalist interpretations of the statute that might lead to odd results.

[00:37:16] Speaker 01:
It has to show that a substantial number of those applications would be unconstitutional.

[00:37:19] Speaker 01:
Thank you, counsel.

[00:37:20] Speaker 01:
Any questions?

[00:37:22] Speaker 01:
Thank you.

[00:37:26] Speaker 04:
Thank you, Your Honors.

[00:37:27] Speaker 04:
Let me start with the legal framework, if I may.

[00:37:29] Speaker 04:
There's no question as to what the prevailing rule is from the U.S.

[00:37:32] Speaker 04:
Supreme Court in the Bonte case, that you do have donor anonymity, just as you asked, Judge Vumite, and that extends into the political context, too.

[00:37:40] Speaker 04:
Traditional issue advocacy, the Court has made clear time and time again, is not subject to campaign finance regulation, and you also have McIntyre that stands for the proposition that, just as Your Honor said,

[00:37:50] Speaker 04:
From the founding era and forward, we have a tradition of anonymity in the political space.

[00:37:54] Speaker 04:
Now, we are not challenging the premise that when we're talking about traditional regulation of traditional electioneering, there are special interests in that narrowly defined context that can win the day under exacting scrutiny.

[00:38:07] Speaker 04:
But it is not, with all due respect, Judge Rawlinson, an abstract informational interest.

[00:38:12] Speaker 04:
The government could not say we want medical records, we want tax information.

[00:38:16] Speaker 04:
Well, that's not what this law does.

[00:38:17] Speaker 04:
Well, but I think Judge Rawlinson, it gets perilously close to that.

[00:38:21] Speaker 04:
And with all due respect for my friends for the other side, they have no principled outer limit.

[00:38:25] Speaker 04:
They say they want to know the source of the original monies.

[00:38:28] Speaker 04:
That could be the bank account.

[00:38:30] Speaker 04:
That could be the counterparty.

[00:38:31] Speaker 04:
That could be the employer.

[00:38:33] Speaker 04:
That could be the parent who passed away.

[00:38:34] Speaker 00:
Those are original monies.

[00:38:37] Speaker 00:
tells us repeatedly that we shouldn't engage in hypotheticals that are not tethered to the plain language of the statute.

[00:38:43] Speaker 00:
Isn't that what you're conjuring up a little bit right now?

[00:38:45] Speaker 04:
Judge Sanchez, I don't think so.

[00:38:46] Speaker 04:
My arguments are from the plain text of the statute, and I think it speaks volumes to your honors that regulations have been passed that change the plain terms of the statute, not in any binding way, not in any way that would receive deference from Arizona courts, but just for the sake of doing the tailoring that is not there on the face of the statute.

[00:39:06] Speaker 04:
Those are smoking gun evidence that the regulators had to change the law in order to dress it up for judicial review.

[00:39:14] Speaker 04:
the proper facial review, and that's not the design of the law, which says the private enforcer can come into court without regard for those regulations and say that the commission has not been faithful to what the plain terms say.

[00:39:26] Speaker 04:
All of my arguments are from the plain terms, Your Honors.

[00:39:29] Speaker 04:
And my friends from the other side say that this is closing the loophole and that existing law is incredibly easy to evade.

[00:39:37] Speaker 04:
Let me please take the example that they have in the voter right to no brief, where there was Arizona Public Service that, as they describe it, gave some inordinate amount of money, $20 million or something like that, or $13 million to influence the 2014 election and it came to light years later.

[00:39:54] Speaker 04:
They evidently did that through a shell company that then gave to the campaign media spenders, the ones who actually spent to influence elections for the commission.

[00:40:04] Speaker 04:
As I understand their description of the law and how the opt-out works, and they went through this very clearly, if you are that direct donor to the campaign media spender, that would be the shell company, you can opt out and say, we are not going to have certain monies upstream used for this purpose.

[00:40:21] Speaker 04:
So if the intermediaries had had

[00:40:24] Speaker 04:
say $20 million in their coffers, they could have said, we're opting out of reporting $10 million in donations that came from Arizona Public Service.

[00:40:35] Speaker 04:
Arizona Public Service would not wind up disclosed, because it would have opted out.

[00:40:39] Speaker 04:
They'd take their monies out of the chain.

[00:40:42] Speaker 04:
They would not be reported at all.

[00:40:44] Speaker 04:
And it's the upstream donors, upstream of them, who get reported.

[00:40:46] Speaker 04:
They have no ability to take themselves out of that chain.

[00:40:51] Speaker 04:
They don't have the same sophistication.

[00:40:53] Speaker 04:
They're not thinking in terms of campaign media spending and the idiosyncratic, at best, way that Arizona has defined campaign media spending that goes far beyond traditional electioneering.

[00:41:05] Speaker 04:
And so this idea that every donor nationwide, all of whom could be caught up in this infinite look-through chain, that they're all going to be thinking about Arizona's definition of campaign media spending,

[00:41:16] Speaker 04:
And they're going to be able to anticipate what Sheriff Joe may be doing or what issues may be coming up with immigration or voter integrity or the minimum wage in Arizona.

[00:41:28] Speaker 04:
They're not going to know that.

[00:41:29] Speaker 04:
They're just going to have given money that was then given and someone's going to care about these issues and speak to these issues.

[00:41:34] Speaker 04:
And then the proponents of this law will say,

[00:41:36] Speaker 04:
They're all subject to the same disclosure that would be associated with donors to a political committee.

[00:41:42] Speaker 03:
Do you have a position on whether or not we should hold this case in abeyance pending the Arizona Supreme Court's review of this case?

[00:41:48] Speaker 04:
We don't, Judge Bumate.

[00:41:49] Speaker 04:
We think you can speak just as well to the constitutional issues.

[00:41:52] Speaker 04:
I also think for the sake of judicial efficiency, you may wait.

[00:41:55] Speaker 04:
I think it's a totally fair question for the court.

[00:41:57] Speaker 04:
We just don't have a position on it.

[00:41:59] Speaker 04:
And I think the notion that I want to speak to, that the public will know from these disclosures the difference between the none and the traditional donor.

[00:42:09] Speaker 04:
No, they won't.

[00:42:10] Speaker 04:
If you read the provisions, they do not distinguish at all in the reporting for the direct versus indirect donors.

[00:42:15] Speaker 04:
The whole design of the law is all you care about is original monies.

[00:42:19] Speaker 04:
And the reporting is of every intermediary

[00:42:22] Speaker 04:
and every transfer without distinction.

[00:42:25] Speaker 04:
There is nothing in the law that says the voter is going to know this is the none versus this is the multi-million dollar donor who gave to influence an election.

[00:42:34] Speaker 02:
All right.

[00:42:34] Speaker 02:
Thank you, counsel.

[00:42:37] Speaker 02:
Thank you to all counsel for your helpful arguments.

[00:42:39] Speaker 02:
The case just argued is submitted for decision by the court.

[00:42:42] Speaker 02:
That completes our calendar for the day and for the week.

[00:42:45] Speaker 02:
We are adjourned.