Campaign Integrity Watchdog v. Colorado Republican Committee

2017 COA 126, 2017 Colo. App. LEXIS 1259

• Court: Colorado Court of Appeals
• Decided: October 5, 2017
• Docket: 16CA1648
• Status: Published

Opinion

COLORADO COURT OF APPEALS 2017COA126

Court of Appeals No. 16CA1648 Office of Administrative Courts Case No. OS 2016-0009

Campaign Integrity Watchdog,

Petitioner-Appellee,

v.

Colorado Republican Committee,

Respondent-Appellant.

ORDER REVERSED

Division I Opinion by JUDGE TAUBMAN Lichtenstein and Carparelli*, JJ., concur

Announced October 5, 2017

Matthew Arnold, Authorized Representative of Campaign Integrity Watchdog

Brownstein Hyatt Farber Schreck, LLP, Christopher O. Murray, Denver, Colorado, for Respondent-Appellant

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24-51-1105, C.R.S. 2017. ¶1 In this campaign finance case, the Colorado Republican

Committee (CRC) appeals part of a final agency decision which

determined that it improperly failed to report three payments for

vendor tables at its 2016 Republican Party assembly and

convention.1 Because we conclude that these payments were not

political contributions, we reverse that part of the order imposing a

fine and sanctions against CRC for failing to report the payments.

We do not review, and thus issue no opinion on, that part of the

agency decision CRC does not appeal.

I. Background

¶2 In April 2016, CRC held its convention to nominate candidates

for state and federal offices and to elect at-large delegates and

alternates to the 2016 Republican National Convention. In

connection with the convention, CRC sold vendor tables for a

minimum of $350 each.2 Although the record is not clear, these

vendor tables apparently were used by individuals and

1 For ease of reference, we will refer to this simply as “the convention.” 2 Evidence was presented at the hearing indicating that the tables

could cost more than $350, depending on the size of the table and if the payor was an affiliated organization like a county division of the Republican Party, or if the payor was an outside group.

1 organizations to promote campaigns, advertise, and share

information. Those who purchased tables could decorate the tables

and provide literature to convention delegates and visitors. The

record also indicates that CRC sold some tables to commercial

vendors.

¶3 Three payments to CRC for these tables are at issue. The first

table was purchased by Jess Loban, a Republican candidate for the

state senate. CRC deposited his payment of $350 into its federal

operations account and reported it in its disclosures to the Federal

Election Commission (FEC). The second and third tables were

purchased by the Party of Choice, LLC. The record does not provide

any more information about the LLC. CRC deposited the Party of

Choice’s two payments totaling $700 into its state operations

account and disclosed them on its state report of contributions and

expenditures.

¶4 In May 2016, Campaign Integrity Watchdog (CIW), through

Matt Arnold, its authorized representative3, filed a complaint with

3 Although Matt Arnold is not an attorney, he may represent CIW in this case because he has established that he has met the requirements of section 13-1-127(2), C.R.S. 2017. See Campaign

2 the secretary of state. As relevant to this appeal, CIW argued that

CRC failed to report in its state report of contributions and

expenditures the payment from Loban as a contribution. It also

argued that, with respect to the payments from the Party of Choice,

CRC failed to follow all of the reporting requirements for a

contribution from an LLC, including failure to file what is known as

an LLC “affirmation” pursuant to section 1-45-103.7, C.R.S. 2017.4

¶5 An administrative law judge (ALJ) held a hearing on these and

other issues in August 2016. During the hearing, CRC argued that

the three payments were not reportable contributions under the

Fair Campaign Practices Act (FCPA), sections 1-45-101 to -118,

C.R.S. 2017. In his final order, the ALJ ruled that (1) the three

payments by Loban and the Party of Choice were all reportable

contributions under state law; (2) CRC did not properly disclose

these contributions; (3) CRC must pay a $4600 fine for failure to

Integrity Watchdog v. Coloradans for a Better Future, 2016 COA 51, ¶ 2 n.1, ___ P.3d ___, ___ n.1 (cert. granted Sept. 12, 2016). 4 When a political party receives a reportable state contribution

from an LLC, the LLC must prepare an affirmation containing the names of the LLC members and apportionment of the contribution, and the party must file the affirmation when it reports the contribution. See § 1-45-103.7(5)(d), C.R.S. 2017.

3 disclose these contributions; and (4) CRC must file amended reports

of contributions and expenditures and return those contributions.

Consequently, he assessed a fine and a sanction in the alternative

against CRC and ordered that CRC amend its reports of

contributions and return the contributions.

II. Interpretation of Section 1-45-103(6)(b) of the FCPA

¶6 CRC contends that the ALJ erred in determining that the three

payments for vendor tables at the convention were reportable

contributions under state law and not properly reported by CRC.

We agree.

¶7 At the hearing, Shana Kohn Banberger, the Executive Director

of CRC, testified that vendors purchase tables at the convention to

present a display to roughly 4000 delegates and around 2000 to

3000 alternates — an attendance of roughly 6000 to 7000 people.

Banberger also stated that vendor tables typically sell out.

¶8 Banberger further attested that CRC did not report these

payments for the vendor tables as contributions because the

payments were “a fee for a service. . . . It was a fee for the vendor

tables, as they stated on their check.”

4 A. Standard of Review

¶9 As a matter of statutory interpretation, we review de novo

whether payments to a political party are contributions under the

Colorado Constitution and state law. Campaign Integrity Watchdog

v. Coloradans for a Better Future, 2016 COA 51, ¶ 16, ___ P.3d ___,

___ (cert. granted Sept. 12, 2016). We also review de novo an

administrative agency’s conclusions of law. Id.

B. Applicable Law

¶ 10 As pertinent here, section 1-45-108(1)(a)(I), C.R.S. 2017,

requires political committees to report contributions of twenty

dollars or more that they receive. It also requires them to report

expenditures and obligations.

¶ 11 Under the definitions section of the FCPA, “contribution” has

“the same meaning as set forth in section 2(5) of article XXVIII of

the state constitution.” § 1-45-103(6)(a), C.R.S. 2017. The

Colorado Constitution defines “contribution” broadly as “[t]he

payment, loan, pledge, gift, or advance of money, or guarantee of a

loan, made to any candidate committee, issue committee, political

committee, small donor committee, or political party.” Colo. Const.

5 art. XXVIII, § 2(5)(a)(I). However, section 1-45-103(6)(b) adds the

following:

“Contribution” includes, with regard to a contribution for which the contributor receives compensation or consideration of less than equivalent value to such contribution, including, but not limited to, items of perishable or nonpermanent value, goods, supplies, services, or participation in a campaign-related event, an amount equal to the value in excess of such compensation or consideration as determined by the candidate committee.

§ 1-45-103(6)(b).

¶ 12 When interpreting a statute or a constitutional amendment,

we must first determine whether it has a plain and unambiguous

meaning. Campaign Integrity Watchdog, ¶ 17, ___ P.3d at ___. “The

plainness or ambiguity of statutory language is determined by

reference to the language itself, the specific context in which that

language is used, and the broader context of the statute as a

whole.” Id. at ¶ 18, ___ P.3d at ___ (quoting Robinson v. Shell Oil

Co., 519 U.S. 337, 340 (1997)). We read the statutory scheme as a

whole to give “consistent, harmonious, and sensible effect to all

parts of the statute.” Id. (quoting Salazar v. Indus. Claim Appeals

Office, 10 P.3d 666, 667 (Colo. App. 2000)); see also People v. Dist.

6 Court, 713 P.2d 918, 921 (Colo. 1986). We will not adopt a

statutory interpretation that leads to an illogical or absurd result or

is at odds with the legislative scheme. People v. Cross, 127 P.3d 71,

73 (Colo. 2006). We also reject interpretations that render words or

phrases superfluous. Id.

¶ 13 Likewise, when interpreting a constitutional amendment, we

must give effect to the electorate’s intent in enacting the

amendment. Campaign Integrity Watchdog, ¶ 19, ___ P.3d at ___.

We must give words their ordinary and popular meanings to

ascertain what the voters believed the amendment to mean when

they adopted it. Id. We also must interpret constitutional

amendments and statutory provisions together. See id. at ¶ 38, ___

P.3d at ___.5

C. Analysis

1. Interpretation of Section 1-45-103(6)(b)

¶ 14 The ALJ correctly noted that section 1-45-103(6)(b) “speaks

only of contributions valued by the ‘candidate committees,’” and

5CIW is not alleging that the FCPA is unconstitutional for improperly narrowing section 2(5) of article XXVIII of the Colorado Constitution.

7 posed the question of whether section 1-45-103(6)(b) applies to

political committees such as CRC. We conclude that section 1-45-

103(6)(b) applies to all contributions “for which the contributor

receives compensation or consideration.”

¶ 15 Section 1-45-103(6)(a) states that “‘contribution’ shall have the

same meaning as set forth in section 2(5) of article XXVIII of the

state constitution.” The statute begins by incorporating the

constitutional definitions of “contribution,” which applies, as

relevant here, to payments made to “candidate committee[s], issue

committee[s], political committee[s], small donor committee[s], or

political part[ies].” Colo. Const. art. XXVIII, § 2(5)(a)(I).

¶ 16 According to section (2)(13) Article XXVIII of the Colorado

Constitution, a “‘[p]olitical party’ includes affiliated party

organizations at the state, county, and election district levels, and

all such affiliates are considered to be a single entity for the

purposes of this article.” The CRC, as a state-level affiliated party

organization of the Republican Party, qualifies as a “political party”

to which this section of the Colorado Constitution and the related

statutes apply.

8 ¶ 17 Section 1-45-103(6)(b) pertains to the amount of a

contribution when “the contributor receives compensation or

consideration.” It provides that the amount of the contribution is

the value of the contributor’s payment in excess of the

compensation or consideration the contributor receives. For

example, it states that the compensation or consideration might be

“items of perishable or nonpermanent value, goods, supplies,

services, or participation in a campaign-related event.” Id. In this

regard, the statute permits a candidate committee — but not other

entities — to determine the value of such compensation or

consideration.

¶ 18 We conclude that interpreting section 1-45-103(6)(b) as

applying only to payments made to candidate committees that have

determined the value of the goods and services provided while

excluding, as relevant here, payments made to political parties

would lead to an absurd result. See Dist. Court, 713 P.2d at 921. It

is illogical that the General Assembly intended “contribution” to

9 enable only candidate committees to determine the value of goods

and services provided.6

¶ 19 Accordingly, we conclude that section 1-45-103(6)(b) applies to

the payments to CRC at issue here.

¶ 20 While the Colorado Constitution broadly defines a

“contribution,” the plain language of the statute addresses the

determination of the contribution amount when the contributor

receives something of value in the transaction. When a contributor

pays CRC for a good or service, and the amount paid is greater than

6 We have reviewed the legislative history of the FCPA and have found no explanation as to why section 1-45-103(6)(b), C.R.S. 2017, refers only to candidate committees. Specifically, we reviewed the legislative history of H.B. 1194, 62d Gen. Assemb., 2d Reg. Sess. (Mar. 15, 2000) (adding the definition of “contribution” now codified at section 1-45-103(6)(b)); H.B. 1132, 64th Gen. Assemb., 1st Reg. Sess. (June 3, 2003) (recreating and re-enacting the FCPA in response to the 2002 enactment of Article XXVIII by voter initiative); and H.B. 1074, 66th Gen. Assemb., 1st Reg. Sess. (July 1, 2007) (adding the definition of “contribution” codified at section 1-45- 103(6)(c)). Nothing in the legislative history we reviewed suggests that section 1-45-103(6)(b) applies only to candidate committees and, as explained above, we conclude that to read it that way would lead to an absurd result. See Burnett v. State Dep’t of Nat. Res., 2015 CO 19, ¶ 39, 346 P.3d 1005, 1012 (looking to legislative history before concluding that an interpretation of a statute proposed by a party would produce absurd results).

10 its value, only the amount paid in excess of the value is considered

a “contribution.”

¶ 21 The ALJ rejected CRC’s interpretation and instead relied on

the broader definition of “contribution” found in article XXVIII and

adopted by section 1-45-103(6)(a). However, to ignore the plain

language of section 1-45-103(6)(b) would render it superfluous. See

Cross, 127 P.3d at 73; see also Dist. Court, 713 P.2d at 921 (“If

separate clauses within a statute may be reconciled by one

construction but would conflict under a different interpretation, the

construction which results in harmony rather than inconsistency

should be adopted.”); Campaign Integrity Watchdog, ¶ 18, ___ P.3d

at ___.

¶ 22 Section 1-45-103(6)(a) supports our conclusion because it

states that the FCPA defines “contribution” the same as article

XXVIII, in addition to identifying an exception for payments that

exceed the value of those goods and services. See § 1-45-103(6)(a),

(b). Further, basic rules of statutory construction dictate that a

more specific provision prevails over a general provision. § 2-4-205,

C.R.S. 2017; see also Campaign Integrity Watchdog, ¶ 38, ___ P.3d

11 ¶ 23 CIW asserts that the federal and state definitions of

“contribution” are indistinguishable. We disagree. The federal

definition broadly considers all “payments” as contributions, while

the state definition indicates that parts of some payments are not

included in the definition of “contribution” found in the Colorado

Constitution.

¶ 24 Thus, we conclude that the difference between the federal and

state definitions of “contribution” indicates that only the state

definition excludes the amounts paid equal to the value of goods

and services. In contrast, the Federal Election Campaign Act

provides only two broad definitions of “contribution”:

(i) any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office; or

(ii) the payment by any person of compensation for the personal services of another person which are rendered to a political committee without charge for any purpose.

52 U.S.C. § 30101(8)(A) (2012). The federal definition does not

mention anything related to contributions for which the contributor

receives compensation or consideration. However, section 1-45-

12 103(6)(b) explains that the amount of a contribution is the

difference between the payment made by the contributor and the

value the contributor received. Unlike the federal law, the state

statute thus addresses situations in which a contributor receives

something of value as compensation or consideration.

¶ 25 Federal case law may be instructive in interpreting state law

when the state law is modeled after a federal law. See Flood v.

Mercantile Adjustment Bureau, LLC, 176 P.3d 769, 772 (Colo. 2008).

However, the corollary is that where state and federal laws differ, we

are not required to follow federal law in construing the state

statutory scheme. See Nicholas v. N. Colo. Med. Ctr., Inc., 902 P.2d

462 (Colo. App. 1995).

¶ 26 Thus, contrary to CIW’s assertion that the definitions in the

state and federal laws are indistinguishable, we conclude that the

General Assembly intended to differentiate between those payments

for services that equal the value of those goods or services, which

are not “contributions,” and those made in excess, which are.7

7 Based on the different federal and state definitions of “contribution,” CRC reported the payments for the Loban vendor table at issue to the FEC, but not to the state.

13 ¶ 27 Finally, the Colorado Secretary of State’s Campaign and

Political Finance Manual reinforces our conclusion regarding the

interpretation of section 1-45-103(6)(b). The manual states that

[a]ny amount paid for a ticket to a fundraising event in excess of the value of a meal or other amenities provided (which is typically stated) constitutes a contribution to the organization benefitting from the event. For example, if a ticket to an event is $100 and the meal costs $25, the ticket purchaser makes a contribution of $75 to the entity hosting the event.

Colorado Secretary of State, Colorado Campaign and Political

Finance Manual 33 (October 2016), https://perma.cc/9CYW-

C9HU. The manual, while not binding authority, demonstrates that

any payment made in excess of the value of a good or service is

considered a “contribution.” See Bd. of Cty. Comm’rs v. Colo. Pub.

Utils. Comm’n, 157 P.3d 1083, 1088 (Colo. 2007) (“We may consider

and defer to an agency’s interpretation of its own enabling statute

and regulations the agency has promulgated.”).

¶ 28 Accordingly, we conclude that, under the plain language of

section 1-45-103(6)(b), political parties are required to report only

that portion of payments for services that exceeds the value of the

services rendered.

14 2. Application of Section 1-45-103(6)(b)

¶ 29 Based on the plain meaning of section 1-45-103(6)(b), and

applying it to political parties, including CRC, we conclude that the

ALJ erred in limiting his analysis to the definition of “contribution”

found in article XXVIII and determining that the payments by

Loban and the Party of Choice for vendor tables were reportable

contributions.

¶ 30 Here, CRC asserted that the value of the vendor tables, $350,

was reasonable because the value the contributor received was

participation in the convention that afforded an opportunity to

display information to 6000 to 7000 convention attendees and

because tables often sold out. The ALJ disregarded this argument

and concluded that regardless of any potential difference between

the amount paid and the actual value, any payments of this nature

must be reportable contributions to prevent organizations from

“shield[ing] all such exchanges from view.” However, the ALJ’s

interpretation “relied on one part of the constitutional definition of

contribution while ignoring the [statutory] definition.” Campaign

Integrity Watchdog, ¶ 38, ___ P.3d at ___. This was error.

15 ¶ 31 The amount of a “contribution” includes only payments made

in excess of the value received by the contributor. CIW, as the

complainant seeking an order of violation, had the burden to show

that the three payments at issue were reportable contributions

under the statute. It thus had to provide evidence — pursuant to

section 1-45-103(6)(b) — that the value of the vendor tables was

actually less than the $350 CRC charged. See Colo. Const. art.

XXVIII, § 2(5)(a)(III); § 24-4-105(7), C.R.S. 2017 (“[T]he proponent of

an order shall have the burden of proof.”). Because CIW presented

no evidence contrary to CRC’s assertion, no basis exists to conclude

that the payments by Loban and the Party of Choice are reportable

contributions under section 1-45-103.

¶ 32 CIW nevertheless contends that the payments were otherwise

reportable. We address and reject its contentions.

¶ 33 Relying on the Internal Revenue Code and Colorado law, CIW

first contends that CRC, as a tax-exempt entity, cannot engage in

the commercial sale of goods or services because financial

transactions with political entities “are defined strictly in terms of

‘contributions’ and ‘expenditures.’” See 26 U.S.C. § 527 (2012).

However, this section actually states that political parties are

16 “organized and operated primarily for the purpose of directly or

indirectly accepting contributions or making expenditures, or

both . . . .” 26 U.S.C. § 527(e)(1) (emphasis added). It does not say

that political parties are organized exclusively to accept

contributions and to make expenditures.

¶ 34 CIW next contends that these payments could not have been

payment for “services” as CRC contends, because Loban and the

Party of Choice were not paying for the tables, but rather for access

to the convention, an entirely political function, and not a “service”

activity. However, the exchange between the payors and CRC was

still a “service.” Paying for a vendor table was an opportunity to

display information in front of approximately 6000 to 7000 people.

By paying CRC, Loban and the Party of Choice benefited; there was

an exchange of value between the payors and CRC. See Black’s

Law Dictionary 1576 (10th ed. 2014) (“Service” is “[l]abor performed

in the interest or under the direction of others; specif., the

performance of some useful act or series of acts for the benefit of

another, usu. for a fee.”).

¶ 35 As stated above, the relevant inquiry was then whether the

value of the service (the opportunity to display information at a

17 vendor table at the convention) was less than the $350 payment for

it, because only those services that are worth less than the amount

paid are reportable contributions. Because CIW presented no

evidence on this issue, it cannot prevail. See Colo. Const. art.

XXVIII, § 2(5)(a)(III); § 24-4-105(7).

¶ 36 CIW argues in response that the value of such vendor tables

was incalculable; however, the practice of selling vendor tables at

state assemblies and conventions is not limited to the CRC. CIW

could have presented evidence of the typical rates charged for such

display tables at other political conventions or other events to

determine if such a price was its actual value. However, CIW did

not do so.

¶ 37 CIW next contends that the “central holding” of another

division of this court in Campaign Integrity Watchdog, ¶ 38, ___ P.3d

at ___, is that any payment received by a political party is a

contribution, irrespective of the purpose behind the payment.

However, the holding in that case was narrower than CIW argues.

Instead, the division held that a political organization is required to

report as a contribution the value of legal services it received, even

if such services were gifts, services (where less than equivalent

18 value was received), or pro bono services. Campaign Integrity

Watchdog, ¶¶ 40-41, ___ P.3d at ___. This was so even if the legal

services were not given to promote a candidate’s nomination or

election. Id. That decision is not analogous to the issues here,

because there, the political organization paid contributors for their

services whereas, here, the contributor paid a political organization

(CRC) for the service it provided.

¶ 38 Moreover, Campaign Integrity Watchdog did not hold that

payments that lack an element of gratuity are contributions.

Whether a contribution needs an element of gratuity was not before

the division, because the division concluded that the “payments” at

issue were gratuitous in nature. Thus, the analysis of Campaign

Integrity Watchdog is consistent with our interpretation in this case.

For example, if a political organization received pro bono legal

services valued at $2000, it would have to report that contribution

as the value received.

¶ 39 Last, CIW contends that CRC was required to report these

payments as “other income.” See Dep’t of State Reg. 10.14, 8 Code

Colo. Regs. 1505–6. However, the issue of whether the payments

are “other income” in the regulations was not alleged by CIW, was

19 not addressed by the parties or the ALJ at the hearing or in the

ALJ’s final decision, and did not form the basis for this appeal.

¶ 40 Unless a hearing officer has no authority to address it, an

issue not raised before a hearing officer is waived. Chostner v. Colo.

Water Quality Control Comm’n, 2013 COA 111, ¶ 39, 327 P.3d 290,

298. Because the ALJ had the authority to address this contention,

no exceptions apply here. Thus, CIW has waived this argument;

therefore, we will not consider it.

¶ 41 Because CIW’s arguments are unavailing, we conclude that

the ALJ erred in finding that the payments at issue are reportable

contributions under state law.

III. ALJ’s Order

¶ 42 CRC contends that the ALJ erred in imposing a $4600 fine for

its failure to report Loban’s payment and in ordering it to amend its

report of contributions and expenditures to include an LLC

affirmation for the payments by the Party of Choice, or otherwise to

return the payment from the Party of Choice. We agree. Because

this part of the ALJ’s order was premised on the Party of Choice’s

payments being contributions — a premise we have rejected — that

part of the ALJ’s order must be reversed.

20 ¶ 43 CRC also contends that because private enforcement of

Colorado’s campaign finance laws is unconstitutional, CIW cannot

file a private lawsuit against CRC and thus the ALJ had no power to

impose fines and sanctions upon CRC.

¶ 44 Because we have concluded that the ALJ erred in determining

that the payments by Loban and the Party of Choice were

contributions under Colorado law and reverse the order, we need

not address whether private enforcement of Colorado’s campaign

finance laws is unconstitutional.

IV. Request for Costs

¶ 45 CIW requested recovery of its costs incurred “due to

Respondent-Appellant CRC’s substantially frivolous and groundless

appeal.” However, because we conclude that CRC prevails on its

claims, CIW is not entitled to an award of costs. See Valentine v.

Mountain States Mut. Cas. Co., 252 P.3d 1182, 1188 (Colo. App.

2011).

V. Conclusion

¶ 46 Accordingly, the part of the order imposing a fine and

sanctions against CRC for failing to disclose the relevant payments

is reversed.

21 JUDGE LICHTENSTEIN and JUDGE CARPARELLI concur.