STATE OF WASHINGTON, Respondent, v. GROCERY MANUFACTURERS ASSOCIATION Petitioner.
No. 99407-2
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
January 20, 2022
GONZÁLEZ, C.J.
Filed: January 20, 2022
GONZÁLEZ, C.J. -
Washington voters have the constitutional right to propose laws and, when the legislature does not enact their proposals, vote on final passage.
The FCPA compels disclosure and “compelled disclosure may encroach on First Amendment rights by infringing on the privacy of association and belief.” Voters Educ. Comm., 161 Wn.2d at 482 (citing Buckley v. Valeo, 424 U.S. 1, 64, 96 S. Ct. 612, 46 L. Ed. 2d 659 (1976)). To guard against infringing on these First Amendment rights, laws mandating disclosure “must survive ‘exacting scrutiny.‘” Id. (quoting Buckley, 424 U.S. at 64). FCPA‘s compelled registration and disclosure requirements have been upheld by state and federal courts many times over the years. See id. at 497-98; State v. Evergreen Freedom Found., 192 Wn.2d 782, 801, 432 P.3d 805 (2019); Human Life of Wash. Inc. v. Brumsickle, 624 F.3d 990, 994-95, 1005 (9th Cir. 2010) (rejecting an initiative-opponent‘s First Amendment challenge to FCPA under the exacting scrutiny standard of Citizens United v. FEC, 558 U.S. 310, 130 S. Ct. 876, 175 L. Ed. 2d 753 (2010);
We are not the only state where the voters have the power to propose and pass legislation. In 2012, Proposition 37 was presented to California voters. This proposition would have required some manufacturers to disclose whether packaged food contained genetically modified organisms (GMO). The Grocery Manufacturer‘s Association (GMA) and many of its member companies successfully campaigned against Proposition 37, and some received negative responses from the public for doing so.
In the wake of the Proposition 37 campaign, Washington sponsors filed Initiative 522. Like Proposition 37, this initiative would have required GMO labels on packaged food and like Proposition 37, GMA opposed it. GMA developed a campaign strategy to work against the initiative while shielding its member companies from the sort of negative public response that happened in California. As part of that campaign strategy, GMA created a segregated “Defense of Brands” strategic account that would hold and disburse contributions raised to oppose labeling requirements. GMA staffers explained that “‘state GMO related spending will be identified as coming from GMA which will provide anonymity and eliminate state filing requirements for contributing members.‘” Clerk‘s Papers (CP) at 4054 (quoting Ex. 15). Nothing in the record or briefing suggests GMA brought a declaratory judgment action under
GMA raised more than $14 million to oppose GMO labeling efforts. GMA in turn contributed $11 million to the “No on 522” campaign from the Defense of Brands strategic account. Despite its political activities in Washington, GMA did not register as a political committee with the Public Disclosure Commission (PDC) and did not make any PDC reports until after this lawsuit was filed. In response to the suit, GMA registered “under duress” but, аs of the time of trial, still had not filed all of the required reports.
After a bench trial, the trial court found that GMA had intentionally violated Washington‘s campaign finance laws. It found that GMA and its board intended to use the Defense of Brands account “to shield the contributions made from GMA members from public scrutiny” and to “eliminate the requirement and need to publicly disclose GMA members’ contributions on state campaign finance disclosure reports.” CP at 4059. It also concluded that GMA concealed the amount and source of contributions, registered 224 days late, and did not properly or timely filе at least 47 reports. The trial court specifically rejected testimony from GMA officers that they had not intended to violate the law, finding “it is not credible that GMA executives believed that shielding GMA‘s members as the true source of contributions to GMA‘s Defense of Brands Account was legal.” CP at 4068.
The State asked for a base penalty of $14,622,820 based largely on the amount of campaign funds that GMA had collected and concealed. Basing the penalty on the amount intentionally concealed is explicitly authorized in the FCPA.
The trial court rejected both approaches. It entered several relevant unchallenged findings of fact:
106. In exercising its discretion in determining an appropriate penalty in this case, the court should and did review the applicable statutes, administrative code provisions, case law and penalties imposed by other courts. Although the court would not allow testimony or argument on penalties in other cases, the court has reviewed all of the briefing submitted, including GMA‘s briefing and arguments regarding penalties imposed in other cases. The court has considered all of that in making its determination regarding a penalty.
107. Mitigating factors in this case include lack of any prior violations by GMA, that GMA is not a repeat violator and that GMA cooperated with the PDC once this case was filed. Those factors weigh in favor of a smaller penalty.
108. There are also factors that weigh in favor of the court imposing a more substantial penalty, including trebling of damages. Those factors include: violation of the public‘s right to know the identity of those contributing to campaigns for or against ballot title measures on issues of concern to the public, the sophistication and experience of GMA executives, the failure of GMA executives to provide complete information to their attorneys, the intent of GMA to withhold from the public the true source of its contributors against Initiative 522, the large amount of funds not reported, the large number of reports filed either late or not at all, and the lateness of the eventual reporting just shortly before the 2013 election.
CP at 4069.
Based on these aggravating and mitigating factors, and based on former
Since the violation was intentional, the trial court imposed treble damages. See
GMA appealed both liability and damages, arguing, among other things, that it was not a political committee and that, even if it was, requiring it to register and disclose contributions and expenditures violated Washington‘s campaign financing laws and several constitutional provisions. State v. Grocery Mfrs. Ass‘n, 195 Wn.2d 442, 454, 461, 461 P.3d 334 (2020) (GMA II). The Court of Appeals affirmed the trial court‘s decision that GMA was a political committee subject to FCPA and that FCPA was constitutionally applied, but it found that treble damages were inappropriate under the act. State v. Grocery Mfrs. Ass‘n, 5 Wn. App. 2d 169, 176-77, 209, 425 P.3d 927 (2018) (GMA I) (citing former
This court largely affirmed the trial court, holding that Washington‘s campaign finance laws were constitutional as applied to GMA, that the trial court had applied the correct standard to determine whether GMA had intentionally violated the law, and that treble damages were permissible under the statute. GMA II, 195 Wn.2d at 448-49. We remanded the case to the Court of Appeals to consider whether the penalty was based on constitutionally permissible considerаtions and whether it violated the excessive fines clauses. Id. at 449. On remand, the Court of Appeals affirmed the constitutionality of the penalty. State v. Grocery Mfrs. Ass‘n, 15 Wn. App. 2d 290, 294, 475 P.3d 1062 (2020). We granted review. Order, No. 99407-2. Amici briefs in support of GMA have been filed by the Building Industry Association of Washington (joined by Enterprise Washington, Washington Farm Bureau, Washington Retail Association, National Electrical Contractors Association, and Washington Food Industry Association) (BIAW), the Institute for Free Speech, and the National Association of Manufacturers (joined by the Chamber of Commerce of the United States of America). Seven current and former Washington State legislators (CFWSL) have filed an amici brief urging the court to adopt additional factors when considering whether a penalty that has potential First Amendment implications violates the excessive fines clause and urging the court to consider the impact of recent legislation on this case.
ANALYSIS
A. EXCESSIVE FINES
Both the Eighth Amendment to the United States Constitution and article I, section 14 of the Washington Constitution prohibit excessive fines.2 This limitation on the government‘s power to punish arose from the backlash against the heavy fines levied by English kings and their judges to raise revenue and to punish the king‘s enemies for their political disagreements. Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 267, 109 S. Ct. 2909, 106 L. Ed. 2d 219 (1989) (citing LOIS G. SCHWOERER, THE DECLARATION OF RIGHTS, 1689, at 91-92 (1981)). The prohibition on excessive fines was part of the 1689 English Bill of Rights. Id. at 266-67. Under the excessive fines clauses, “[p]unitive fines should not be sought or imposed ‘to retaliate against or chill the speech of political enemies’ or as ‘a source of revenue.‘” GMA II, 195 Wn.2d at 476 (internal quotation marks omitted) (quoting Timbs v. Indiana, 586 U.S. 146, 139 S. Ct. 682, 689, 203 L. Ed. 2d 11 (2019)).
GMA argues that both the $6 million base penalty and the treble damages are unconstitutional excessive fines. It argues it should be fined, at most, $622,800
based on a per-day/per-violation theory. Suppl. Br. of Pet‘r GMA at 3 (citing
The United States Supreme Court has stressed two overarching principles in its articulation of the proper analytical test for whether a fine is excessive. “The first . . . is that judgments about the appropriate punishment for an offense belong in the first instance to the legislature.” United States v. Bajakajian, 524 U.S. 321, 336, 118 S. Ct. 2028, 141 L. Ed. 2d 314 (1998) (citing Solem v. Helm, 463 U.S. 277, 290, 103 S. Ct. 3001, 77 L. Ed. 2d 637 (1983)). The second principle is “that any judicial determination regarding the gravity of a particular criminal offense will be inherently imprecise.” Id. To show appropriate respect to both principles, the Court held that a fine is excessive “if it is grossly disproportional to the gravity of a defendant‘s offense.” Id. at 334.
Bajakajian identified four factors to determine whether a fine is grossly disproportional: “(1) the nature and extent of the crime, (2) whether the violation was related to other illegal activities, (3) the other penalties that may be imposed for the violation, and (4) the extent of the harm caused.” GMA II, 195 Wn.2d at 476 (quoting United States v. $100,348.00 in U.S. Currency, 354 F.3d 1110, 1122 (9th Cir. 2004)). We also consider the individual‘s ability to pay the fine. City of Seattle v. Long, 198 Wn.2d 136, 173, 493 P.3d 94 (2021).
Whether a penalty is grossly disproportional is reviewed de novo. Bajakajian, 524 U.S. at 336-37. Courts apply the Bajakajian analysis to punitive civil fines. See Long, 198 Wn.2d at 163.
(1) NATURE AND EXTENT OF THE OFFENSE. The State contends GMA “perpetrated the largest campaign finance violation in Washington‘s history, intentionally concealing the true source of over $10 million in campaign spending” and directly violating the core principles of the FCPA. State‘s Suppl. Br. at 1. GMA contends it merely committed “a commonplace FCPA violation.” Suppl. Br. of Pet‘r GMA at 11. We agree with the State‘s characterization of the nature and extent of the offense.
Again, it is the public policy of the state of Washington:
(1) That political campaign and lobbying contributions and expenditures be fully disclosed to the public and that secrecy is to be avoided.
(10) That the public‘s right to know of the financing of political campaigns and lobbying and the financial affairs of elected officials and candidates far outweighs any right that these matters remain secret and private.
(11) That, mindful of the right of individuals to privacy and of the desirability of the efficient administration of government, full access to information concerning the conduct of government on every level must be assured as a fundamental and necessary precondition to the sound governance of a free society.
The provisions of this chapter shall be liberally construed to promote complete disclosure of all information respecting the financing of political campaigns.
In this case, the trial court‘s unchallenged findings of fact underscore the harm caused when campaign contributions are concealed. It found these factors that weighed in favor of a significant penalty:
violation of the public‘s right to know the identity of those contributing to campaigns for or against ballot title measures on issues of concern to the public, the sophistication and experience of GMA executives, the failure of GMA executives to provide complete information to their attorneys, the intent of GMA to withhold from the public the true source of its contributors against Initiative 522, the large amount of funds not reported, the large number of reports filed either late or not at all, and the lateness of the eventual reporting just shortly before the 2013 election.
CP at 4069. Since GMA did not challenge this finding, it is a verity on appeal. See Opening Br. of Appellant at 1-2 (Wash. Ct. App. No. 49768-9-II (2017)); In re Dependency of M.S.R., 174 Wn.2d 1, 9, 271 P.3d 234 (2012) (citing State v. Rankin, 151 Wn.2d 689, 709, 92 P.3d 202 (2004)). These factors show the nature of the offense was grave and the extent was broad.
GMA attempts to analogize the nature and extent of the offense here to the one before the Court in Bajakajian. We do not find the two offenses analogous. Bajakajian concerned the violation of federal statutes that require people to report if they are taking more than $10,000 in cash out of the country and required forfeiture of the cash as a penalty. 524 U.S. at 324 (citing
On a facile level, both the crime in Bajakajian and the violation of campaign laws could be described as reporting offenses. But GMA‘s decision to conceal the identities of its campaign contributors struck at the core of open and transparent elections. Under the FCPA, voters have the right to “know of the financing of political campaigns,”
(2) WHETHER THE VIOLATION WAS RELATED TO OTHER ILLEGAL ACTIVITIES. GMA characterizes itself as being punished for a unified course of conduct. Without specific citation to Bajakajian, GMA argues that ”Bajakajian requires examining whether the conduct in question relates to other illegal activity, not whether it violates multiple laws.” Suppl. Br. of Pet‘r GMA at 13. Since, GMA contends, it “spent lawfully acquired funds on core political speech, a lawful—indeed, a constitutionally protected—activity,” this factor weighs against a significant penalty. Id.
Bajakajian offers at best weak support for GMA‘s argument that its violations were not related to other illegal activity. Bajakajian pleaded guilty to failing to report as required by
GMA‘s conduct involved several illegal activities that together amounted to failing to register and intentionally concealing the true source of donations. That is exactly the conduct the FCPA was designed to prevent. The currency statutes that Bajakajian violated were not designed to catch people who were merely taking cash to pay a lawful debt. See id. at 337-38. While this factor does not weigh as strongly as the others, it supports a conclusion that the penalty is not grossly disproportional.5
(3) THE OTHER PENALTIES THAT MAY BE IMPOSED FOR THE VIOLATION. A base penalty of the amount concealed has always been a potential statutory penalty under FCPA. LAWS OF 1973, ch. 1, § 39(1)(e), currently codified as
GMA suggests that the fact the legislature authorized lesser penalties shows that this fine was grossly disproportionate. GMA stresses that if the trial judge had imposed the maximum per-violation/per-day penalties set forth in
(4) THE EXTENT OF THE HARM CAUSED. GMA argues that concealing its contributors caused minimal harm because voters knew that grocery manufacturers opposed the initiative. But the harm was substantial and struck at the heart of the principles embodied in the FCPA. See
GMA contends that “[t]o assume a one-to-one ratio between the amount of funds involved and resulting harm is to repeat the error of the district court in Bajakajian.” Suppl. Br. of Pet‘r GMA at 15. But it points to no error committed by the district court in Bajakajian. The federal district court rejected the government‘s attempt to seize the entire amount of currency Bajakajian attempted to take from the country without reporting. Bajakajian, 524 U.S. at 326. Both the Court of Appeals and the United States Supreme Court affirmed that judgment. Id. at 327, 344. Nothing in Bajakajian suggests that forfeiture would not have been constitutionally appropriate had the crime been more than a mere reporting violation.
GMA also suggests that the reporting requirements of the FCPA have less force in the context of initiatives because there is no risk of quid pro quo corruption. But both this court and the Ninth Circuit have found that the public‘s interest in disclosure of campaign contributions “apply equally for voter-decided ballot measures.” Evergreen Freedom Found., 192 Wn.2d at 799 (citing Human Life, 624 F.3d at 1006. Plаinly, the drafters of Initiative 276, which created the FCPA, were aware initiatives existed and could have imposed a lesser penalty for failing to properly report spending on initiative campaigns. Nonetheless, the initiative did not create a separate penalty structure.
Finally, GMA argues that the trial court assumed the harm caused by the failure to report was the same as the amount of donations it failed to report. But it is the judgment of the people that this penalty is appropriate in these type of cases. LAWS OF 1973, ch. 1, § 39(1)(e), currently codified as
Under the two principles and four factors identified in Bajakajian, this penalty is not grossly disproportional to GMA‘s conduct.
(5) ADDITIONAL ISSUES. GMA seems to suggest that the penalty is grossly disproportional because it is larger than the penalties imposed on other candidates and political committees. See Suppl. Br. of Pet‘r GMA at 5, App. A-1 (demonstrating graphically that it received a large finе in comparison to other
violators). But Bajakajian‘s test analyzes whether the penalty is grossly disproportional to the defendant‘s bad conduct. It does not analyze whether the penalty is disproportional to the one imposed in other (and in this case, starkly dissimilar) cases. Other legal doctrines, like equal protection of the law, constrain the State from treating similar cases differently based on impermissible characteristics. See United States v. Batchelder, 442 U.S. 114, 125 n.9, 99 S. Ct. 2198, 60 L. Ed. 2d 755 (1979) (“The Equal Protection Clause prohibits selective enforcement ‘based upon an unjustifiable standard such as race, religion, or other arbitrary classification.‘” (quoting Oyler v. Boles, 368 U.S. 448, 456, 82 S. Ct. 501, 7 L. Ed. 2d 446 (1962))). GMA has not raised an equal protection
GMA also suggests that it has been treated differently from other political committees and candidates who have violated Washington‘s fair campaign laws. It has not shown the factual predicate for this argument. GMA received a large penalty because it intentionally concealed the source of a large amount of contributions. It does not bring to our attention any other candidate or political committee that intentionally concealed a remotely similar amount of campaign contributions. The fact that other political campaigns and candidates received
smаller penalties for negligently concealing smaller amounts of money than GMA intentionally concealed does not make the penalty here disproportionate. GMA makes no meaningful effort to show its misconduct is comparable to the misconduct of those who received smaller penalties.
Several of the amici ask us to adopt additional factors to the Bajakajian analysis. Based on the arguments before the court, we decline to do so. Amici CFWSL argues that courts should either “rigorously analyz[e] evidence related to the violation at hand or . . . carefully compar[e] the violation in question to other, previously-adjudicated violations” before imposing a penalty. Br. of Amici Curiae CFWSL at 4. But while the penalty imposed in other cases might certainly be relevant to the trial court‘s determination of the appropriate penalty, the question here is whether the penalty imposed is grossly disproportional to the defendant‘s bad conduct, not whether the penalty is different from the one imposed in different cases—especially when, as here, the cases are starkly dissimilar. CFWSL also makes no attempt to show that analyzing these two factors would have led to a different result in this case.
Similarly, amici BIAW asks us to adopt a rule that trial courts must specifically consider the risk of chilling speech and the risk of selective prosecution in determining the proper penalty. But neither factor helps us determine whether this penalty is disproportional to this conduct.
Amici National Association of Manufacturers argue that this fine is grossly disproportional under Americans for Prosperity Foundation v. Bonta, 594 U.S. ___, 141 S. Ct. 2373, 210 L. Ed. 2d 716 (2021). Relatedly, amicus the Institute for Free Speech argues that the penalty itself, and not just the FCPA as a whole, must survive the exacting scrutiny test under Bonta. But Bonta concerned the constitutionality of a regulatory scheme, not the constitutionality of a penalty for violating a constitutional regulatory scheme. See Bonta, 141 S. Ct. at 2383. Neither amici suggests a principled way to apply exacting scrutiny to punishments.
We hold that the penalty imposed here was not grossly disproportional to the offense under the
B. FIRST AMENDMENT ARGUMENTS
GMA raises a number of First Amendment challenges to the penalty imposed here. We find none of them persuasive.
First, GMA asserts that the penalty here is the product of viewpoint discrimination because the State did not seek to prove Food Democracy Action! (Food Democracy) intentionally violated FCPA, which would have madе it potentially subject to treble damages. GMA does not, however, show that the State could have shown that Food Democracy intentionally violated the act or offer any evidence that the State was motivated by viewpoint discrimination. Accordingly, the factual predicate for its argument is not established.
Briefly, Food Democracy solicited and received almost $300,000 in donations from 7,000 people to support Initiative 522. State ex rel. Pub. Disclosure Comm‘n v. Food Democracy Action!, 5 Wn. App. 2d 542, 544, 427 P.3d 699 (2018). It donated $200,000 to the “Yes on Initiative 522” campaign under its own name. Id. at 545. Food Democracy did not register with the PDC until the PDC opened an investigation. Id. at 544. It did not appear for trial. Id. at 547. The trial proceeded without it, and the State presented its case that Food Democracy had violated the act, but the State did not seek to prove the violation was intentional. Id. The trial court found that Food Democracy had violated the FCPA and penalized Food Democracy the amount it had failed to disclose plus $1,000
Nothing in the Food Democracy opinion, briefing, or record called to our attention suggests the State could have established Food Democracy designed a campaign strategy that intentionally violated the FCPA. The briefing describes the Food Democracy as “a two-employee, Iowa-based organization with no prior experience in Washington politics.” Opening Br. of Appellant Food Democracy Action at 1 (Wash. Ct. App. No. 49932-1-II (2017)). Food Democracy admitted the violation but consistently denied it was intentional. There is nothing in the record that suggests Food Democracy intentionally designed its campaign strategy around shielding its 7,000 small donors. At most, the Food Democracy opinion shows that by two weeks before the election, Food Democracy knew it would have to disclose information about campaign contributors and asked contributors to include that information with their donations. 5 Wn. App. 2d at 545 (quoting from a copy of a fundraising e-mail sent by Food Democracy). This is simply not comparable to the misconduct in the case before us.
There is also nothing in the State‘s penalty arguments in the two cases that suggests viewpoint discrimination. The State proposed the same statutory formula for damages in both cases. See CP at 3453-54; Br. of Resp‘t State of Wash. at 14 (Wash. Ct. App. No. 49932-1-II (2017)). The result was different because the base amount concealed was different and because the State proved GMA intentionally violatеd the FCPA.8
Second, GMA argues that “[t]he fine imposed in this case violates freedom of speech and freedom of association” because “[p]unishing speakers more severely for speaking more and for opting to speak collectively through a trade association is antithetical to First Amendment values.” Suppl. Br. of Pet‘r GMA at 18. It has not established the factual predicates for its argument. It has not attempted to show that had each of its members who individually donated to the Defense of Brands strategic account intentionally attempted to conceal its contribution, they each would not have received a similar penalty. Nor has it shown it is being punished for “speaking more.” Instead, it is being punished for intentionally violating Washington‘s fair campaign act. It was free to speak as much as it wished, so long as it complied with the registration and reporting requirements of the act so that Washington voters knew the source of the speech.
Third, GMA contends it cannot be subject to punitive damages under Gertz v. Robert Welch, Inc., 418 U.S. 323, 349, 94 S. Ct. 2997, 41 L. Ed. 2d 789 (1974). Suppl. Br. of Pet‘r GMA at 20. We do not find this case helpful. Briefly, after Chicago police shot and killed a young man, his family hired an attorney, Gertz, to represent them in a civil suit. Gertz, 418 U.S. at 325. After a magazine falsely claimed that Gertz was part of a communist “War On Police,” among many other things, Gertz sued for defamation. Id. at 326-27 (quoting record). The magazine argued that it was entitled to the “actual malice” standard of New York Times Co. v. Sullivan, 376 U.S. 254, 84 S. Ct. 710, 11 L. Ed. 2d 686 (1964), which would have required Gertz to prove the magazine published defamatory falsehoods either knowing they were false or with reckless disregard of the truth. Id. at 327-28 (citing N.Y. Times, 376 U.S. at 279-80). The United States Supreme Court declined to extend New York Times to publishers or broadcasters who defame private citizens. Id. at 345-46. It did, however, limit damages to actual damages “at least when liability is not based on a showing of knowledge of falsity or reckless disregard for the truth.” Id. at 349.
The factual predicate for GMA‘s reliance on Gertz is absent since the trial court not only found GMA intentionally violated the law, it found that “it is not credible that GMA executives believed that shielding GMA‘s members as the true source of contributions to GMA‘s Defense of Brands Account was legal.” CP at 4068.9 That is analogous to a “showing of knowledge of falsity or reckless disregard for the truth.” Gertz, 418 U.S. at 349. Gertz does not suggest a punitive sanction is inappropriate under these facts.
We find none of these challenges availing.
C. REMAINING ISSUES
GMA complains that the trial court did not explain why it imposed a $6 million dollar base penalty rather than the $14 million sought by the State or some other amount. But while the trial court did not offer a mathematical explanation, it did enter a 24-page findings of fact and conclusions of law that listed the aggravating and mitigating factors. GMA does not point to any authоrity that would require the trial court to do more.
GMA complains that the trial court “disregarded GMA‘s reference in its trial brief to the standard of gross disproportionality [and] denied summarily GMA‘s post-trial motion to conform the judgment to the
A civil penalty also must be “supported by the record,” “cogent,” and—to avoid an
Eighth Amendment violation—cannot be “grossly disproportional to the gravity of the defendant‘s offense.” State v. WWJ Corp., 88 Wn. App. 167, 175, 941 P.2d 717 (1997), modified and affirmed on other grounds, 138 Wash. 2d 595, 603-604 (1999). See alsoWn. Const., art. I, § 14 ; State v. Witherspoon, 171 Wn. App. 271, 301, 980 P.2d 1257 (2012) [(plurality opinion)], aff‘d, 180 Wn.2d 875, 329 P.3d 888 (2014), as corrected (Aug. 11, 2014) (describing the Washington Constitution‘s limits on “grossly disproportionate” penalties); Wahleithner v. Thompson, 134 Wn. App. 931, 936, 143 P.3d 321 (2006) (same).
CP at 3475 n.7. That footnote is not sufficient to prompt the trial court to do a separate
Amici CFWSL call our attention to an act that passed while this case has been pending,
CONCLUSION
GMA has not shown that the trial court erred in imposing a punitive sanction under the FCPA based on the amount intentionally concealed. We affirm the courts below and remand for any further proceedings necessary and consistent with this opinion. The State‘s motion for attorney fees is granted.
González, C.J.
WE CONCUR:
Yu, J.
Owens, J.
Montoya-Lewis, J.
Whitener, J.
No. 99407-2
GORDON McCLOUD, J. (dissenting)—The majority begins with the important observation that both this court and the federal courts have upheld the “compelled registration and disclosure requirements” of Washington‘s Fair Campaign Practices Act (FCPA),
But the majority concludes that that substantial penalty also complies with the
The most recent, controlling United States Supreme Court precedent on precisely this point—that is, the
The $18 million statutory penalty in this case therefore violates the
ANALYSIS
I. Bajakajian holds that when the unlawful conduct is a failure to report, the Eighth Amendment bars the trial court from imposing a penalty that is grossly disproportionate to the failure to report—not to some other unadjudicated conduct
(a) Except as provided in subsection (c) of this section, a person... shall file a report under subsection (b) of this section when the person, agent, or bailee knowingly—
(1) transports, is about to transport, or has transported, monetary instruments of more than $10,000 at one time—
(A) from a place in the United States to or through a place outside the United States . . . .
Hosep Bajakajian attempted to board a plane leaving the United States. A customs inspector approached him and his wife and told them that they were required to report
The government charged Bajakajian with three felonies: “willfully” failing to report that he was transporting more than $10,000 outside the United States in violation of
The statute in this case is the same type of reporting statute as the statute at issue in Bajakajian. GMA violated the FCPA.4 Specifically, the trial court ruled— and this Court affirmed—that GMA violated the mandatory reporting provision of the FCPA:
(1) In addition to the information required under
RCW 42.17A.205 and42.17A.210 , on the day the treasurer is designated, each candidate or political committee must file with the commission a report of all contributions received and expenditures made prior to that date, if any.
Former
The statute in this case also carries the same kind of severe penalties for intentional failures to report that the statutes in Bajakajian carried for willful failures to report. Former
This result stands in direct conflict with the result in Bajakajian. Bajakajian was criminally charged, and the United States Supreme Court held that forfeiture of the entire amount that he did not report would have been excessive under the
II. The majority improperly weighs the Bajakajian factors by declining to treat the FCPA violation at issue as a reporting violation
The Bajakajian Court noted that the main inquiry in an
Thus, the first question for an
In this case, the impermissible conduct was GMA‘s failure to file a report.7 This is the conduct that GMA should be fined for, not the amount of money that GMA otherwise lawfully received and spent on campaign speech.
A. First factor: the nature and extent of the crime
To determine the nature and extent of the crime, we start as the United States Supreme Court did: with the elements of the statute that the entity violated. Bajakajian, 524 U.S. at 337. Bajakajian was convicted of “willfully” and “knowingly” failing to file a currency transportation report
But those statutes did not make the currency transported illegal—they punished only the failure to report. That was critical to the Bajakajian Court‘s decision. Id. (“It was permissible to transport the currency out of the country so long as he reported it.“). The dissent accurately recited the legislative history and purpose of that currency reporting and forfeiture statutes: it was undisputed that the purpose of those statutes was to prevent money laundering, tax evasion, and drug trafficking, serious criminal problems that garnered national, federal concern.8 But the reporting statute did not punish those crimes—separate criminal statutes did. So the Bajakajian majority ruled that the failure-to-report crime was the one to which the forfeiture must be compared, not the money laundering, tax evasion, and drug trafficking that the failure-to-report crime was designed to combat. Id. at 338.
Here, the majority takes a different approach. It looks to the “declaration of policy” in the FCPA to find that GMA‘s offense “was grave and the extent was broad.” Majority at 11-13. But the majority in Bajakajian did not look to the policy provisions of
This court, of course, is bound by the Bajakajian majority. I therefore conclude that the nature and extent of the crime in this case was a failure to report, just like in Bajakajian.9 This tends to show that the finе imposed in this case—which related primarily to the amount of money that GMA failed to report rather than to the failure to report itself—was excessive.
B. Second factor: whether the violation was related to other illegal activities
A federal grand jury indicted Bajakajian on three counts, including making false statements to a customs officer. Bajakajian, 524 U.S. at 325. In exchange for his guilty plea to failure to report, the government dismissed the false statements charge. Bajakajian, 84 F.3d at 335. The forfeiture count was then tried to the court. Id. at 336-37. So Bajakajian‘s crimes of conviction (failure to report and criminal forfeiture) could be said to have been related to the false statements charge that the government dismissed. They could even be said to have been related to the problem of drug trafficking
But the majority of the Supreme Court did not say that. Instead, the majority said that there were really no other crimes directly related to the crime of conviction because it “was permissible to transport the currency out of the country so long as he reported it.” Bajakajian, 524 U.S. at 337. “Thus, the essence of respondent‘s crime is a willful failure to report the removal of currency from the United States.” Id. The clear lesson of that decision is that courts risk
Here, GMA violated only the civil FCPA. Similar to Bajakajian, if GMA had filled out the reports, then all of its transactions and campaign activities would have been permissible. Additionally, the trial court found that GMA had no prior violations of the FCPA, that GMA is not a repeat violator, and that GMA cooperated with the Public Disclosure Commission. Majority at 6 (citing CP at 4069).
The relationship to other related criminal activities in this case seems far more questionable than the relationship to related criminal activities in Bajakajian—especially since GMA‘s campaign receipts, campaign expenditures, and campaign speech, like Bajakajian‘s transport of currency, was otherwise totally lawful. This also tends to show that the fine imposed in this case was excessive.
C. Third factor: the other penalties that may be imposed for the violation
Our next question asks, What other penalties that might be imposed for the violation? That question is designed as another possible indicator of rough proportionality.
Under the FCPA, the other penalties that might have been imposed on GMA are all tethered to the actual conduct of failing to report. Former
To be sure, subsection (e) provides that “[a] person who fails to report a contribution or expenditure as required by this chapter may be subject to a civil penalty equivalent to the amount not reported as required.” Former
Lower federal courts applying the Bajakajian decision have noted the proportionality benefits that such definite statutory calculations produce. For example, the D.C. Circuit court held that Bajakajian “was primarily concerned that the potential penalty for illegal export of currency would bе indefinite and unlimited—and disproportionate to the offense—if the government could seize whatever amount of currency the unwitting ‘exporter’ happened to be carrying when caught.” Grid Radio v. Fed. Commc‘ns Comm‘n, 349 U.S. App. D.C. 365, 278 F.3d 1314, 1322 (2002). That problem is eliminated when a statute fixes fines and “incorporates statutorily required factors for computation of fines.” Combat Veterans for Cong. Political Action Comm. v. Fed. Election Comm‘n, 983 F. Supp. 2d 1, 18-19 (D.D.C. 2013), aff‘d, 795 F.3d 151 (D.C. Cir. 2015).
Here, the legislature provided a more definite fine that calculates the penalty based on the conduct itself, not just the amount that a violator failed to report. For example, if the trial court had instead used the “ten dollars per day for each violation” scheme, GMA would have received a $622,820 base fine that would be trebled to about $1.87 million. Suppl. Br. of Pet‘r GMA at 14 (citing
In other words, the other penalties that might be imposed for the nonreporting violations in this case are far less than $18 million. In fact, they are far less than $6 million. Once again, this tends to show that the fine imposed in this case was excessive.
D. Factor four: the extent of the harm caused
The majority asserts that the “harm was substantial and struck at the heart of the principles embodied in the FCPA.” Majority at 16 (citing
But that is not what GMA was adjudicated to have done. The government alleged, and the trial court ruled, that GMA failed to report campaign contributions. Failure to report campaign contributions can certainly cause harm. But failure to report currency transport can also cause harm: the currency reporting statutes were enacted for the purpose of deterring and catching drug dealers and profiteers. But Bajakajian was not charged or convicted of money laundering or drug trafficking, and so Bajakajian could not be fined for those offenses. Bajakajian, 524 U.S. at 339, 353-55 (Kennedy, J., dissenting). Similarly, GMA was not found to have violated a law that punishes the undermining of democracy, so it cannot be fined for this alleged conduct.
A reporting offense is a reporting offense. That means that the extent of the harm caused by the failure to report in this case is comparable to the extent of the harm caused by the failure to report in Bajakajian: depriving the government, and in this case the people, of information. If that harm did not meet the $357,144 threshold sought by the government in Bajakajian, it certainly does not meet the $18 million threshold imposed by the trial court here.
CONCLUSION
The majority concludes its review of the history of the FCPA by summarizing, “This suggests the legislature as a whole still approves of a penalty based on the amount of funds that were concealed in violation of the act.” Majority at 29. The majority is likely correct.
But the question presented in this case is not whether the $18 million penalty complied with the FCPA. The question is whether that penalty violated the
I therefore respectfully dissent.
Gordon McCloud, J.
Johnson, J.
Madsen, J.
Stephens, J.
Notes
in violation ofa. Failing to timely register with the Public Disclosure Commission as a political committee in violation of
RCW 42.17A.205 ;
b. Failing to timely identify a treasurer and [bank] account in violation ofRCW 42.17A.205 ;
c. Failing to timely and regularly disclose contributions it received from its members in the Defense of Brands Account in violation ofRCW 42.17A.235 ;
d. Failing to timely and regularly disclose expenditures it made from the Defense of Brands Account in violation ofRCW 42.17A.240 ; and
e. Concealing the true sources of the contributions it received and expenditures it made in opposing Initiative 522[]
Clerk‘s Papers at 4072.1. Defendant Grocery Manufacturers Association shall pay the amount of $6,000,000.00 as a civil penalty for multiple violations of the state campaign finance disclosure law, RCW 42.17A[,] specifically for
• concealing the amount accumulated in the Defense of Brands Account;
• concealing the source of contributions to the Defense of Brands Account;
• the 60 disclosure reports that were not timely or properly filed identifying the finance activity of the Defense of Brands Account; and
• the number of days required reports were filed late.
524 U.S. at 351 (Kennedy, J., dissenting). Additionally, the dissent noted that because money laundering and drug smuggling are so difficult to prove, and “[o]ne of the few reliable warning signs of some serious crimes is the use of large sums of cash,” Congress made a strategic decision to punish all cash smuggling or nonreporting with heavy fines, so long as the conduct was “willful.” Id. at 353-54.smuggling or failing to report cash is more serious than the Court is willing to acknowledge. The drug trаde, money laundering, and tax evasion all depend in part on smuggled and unreported cash. Congress enacted the reporting requirement because secret exports of money were being used in organized crime, drug trafficking, money laundering, and other crimes. See H. R. Rep. No. 91-975, pp. 12-13 (1970). Likewise, tax evaders were using cash exports to dodge hundreds of millions of dollars in taxes owed to the Government.
CP at 4071. This is the one conclusion of law GMA did not challenge on appeal. Opening Br. of Appellant at 2 (Wash. Ct. App. No. 49768-9-II (2017)). This further illustrates that GMA is not substantially similar to the publisher in Gertz. As the Supreme Court explained in Bajakajian, 524 U.S. at 334, under theGMA either intentionally failed to provide full and accurate information to counsel when asking for advice on the legality of the Defense of Brands Account under Washington law or, alternatively, created the Account without receiving any advice that such an account was legal under Washington law. In either case, GMA does not make the required showing that it is entitled to this defense, if it even is available at all under Washington law.
(d) When assessing a civil penalty, the court may consider the nature of the violation and any relevant circumstances, including the following factors:
(i) The respondent‘s compliance history, including whether the noncompliance was isolated or limited in nature, indicative of systematic or ongoing problems, or part of a pattern of violations by the respondent, resulted from a knowing or intentional effort to conceal, deceive or mislead, or from collusive behavior, or in the case of a political committee or other entity, part of a pattern of violations by the respondent‘s officers, staff, principal decision makers, consultants, or sponsoring organization;
(ii) The impact on the public, including whether the noncompliance deprived the public of timely or accurate information during a time-sensitive period or otherwise had a significant or material impact on the public;
(iii) Experience with campaign finance law and procedures or the financing, staffing, or size of the respondent‘s campaign or organization;
(iv) The amount of financial activity by the respondent during the statement period or election cycle;
(v) Whether the late or unreported activity was within three times the contribution limit per election, including in proportion to the total amount of expenditures by the respondent in the campaign or statement period;
(vi) Whether the respondent or any person benefited politically or economically from the noncompliance;
(vii) Whether there was a personal emergency or illness of the respondent or member of the respondent‘s immediate family;
(viii) Whether other emergencies such as fire, flood, or utility failure prevented filing;
(ix) Whether there was commission staff or equipment error, including technical problems at the commission that prevented or delayed electronic filing;
(x) The respondent‘s demonstrated good-faith uncertainty concerning commission staff guidance or instructions;
(xi) Whether the respondent is a first-time filer;
(xii) Good faith efforts to comply, including consultation with commission staff prior to initiation of enforcement action and cooperation with commission staff during enforcement action and a demonstrated wish to acknowledge and take responsibility for the violation;
(xiii) Penalties imposed in factually similar cases; and
(xiv) Other factors relevant to the particular case.