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Leach v. Reagan

Supreme Court of Arizona

December 6, 2018

VINCE LEACH, et al., Plaintiffs/Appellants/Cross-Appellees,
MICHELE REAGAN, in her official capacity as Arizona Secretary of State, et al., Defendants/Appellees, and CLEAN ENERGY FOR A HEALTHY ARIZONA COMMITTEE, an Arizona political action committee, Real Party in Interest/Appellee/Cross-Appellant. CLEAN ENERGY FOR A HEALTHY ARIZONA, and ALEJANDRA GOMEZ, Cross-Plaintiffs/Appellees/Cross-Appellants,
MICHELER EAGAN, Arizona Secretary of State, et al., Cross-Defendant/Appellant/Cross-Appellee, and JAVAN D. MESNARD, Speaker of the House; and STEVE YARBROUGH, President of the Senate, Cross-Claimant Intervenors/Appellants/Cross-Appellees.

          Appeal from the Superior Court in Maricopa County The Honorable Daniel J. Kiley, Judge Nos. CV2018-009919, CV2018-010116, CV2018-010651, CV2018-010658, CV2018-010807

          Brett W. Johnson, Jennifer Hadley Catero, Kelly Kszywienski, Colin P. Ahler, Andrew Sniegowski, Brianna L. Long, Lindsay Short, Snell & Wilmer L.L.P., Phoenix; Michael T. Liburdi, Nicole M. Goodwin, E. Jeffrey Walsh, Greenberg Traurig LLP, Phoenix, Attorneys for Vince Leach, Glenn Hamer, Justine Robles, John Kavanagh, Jenn Daniels, Jackie Meck, Ashley Ragan, John Giles

          Israel G. Torres, James E. Barton II, Saman J. Golestan, Torres Law Group, PLLC, Tempe, Attorneys for Clean Energy for a Healthy Arizona Committee, Alejandra Gomez

          Kory Langhofer, Thomas Basile, Statecraft PLLC, Phoenix, Attorneys for Speaker of the House J.D. Mesnard, Senate President Steve Yarbrough

          William G. Montgomery, Maricopa County Attorney, M. Colleen Connor, Talia J. Offord, Deputy County Attorneys, Maricopa County Attorney's Office, Attorneys for Maricopa County Defendants/Appellees

          Timothy Sandefur, Scharf-Norton Center for Constitutional Litigation, Phoenix, Attorneys for Amicus Curiae Goldwater Institute

          Robert G. Schaffer, Lewis Roca Rothgerber Christie LLP, Phoenix, Attorneys for Amicus Curiae Arizona Chamber of Commerce & Industry and the Greater Phoenix Chamber of Commerce

          Nicholas J. Enoch, Kaitlyn A. Redfield-Ortiz, Stanley Lubin, Lubin & Enoch P.C., Phoenix, Attorneys for Amicus Curiae International Brotherhood of Electrical Workers Local Union 387

          JUSTICE TIMMER authored the opinion of the Court, in which CHIEF JUSTICE BALES, VICE CHIEF JUSTICE BRUTINEL, and JUSTICE PELANDER joined.



         ¶1 These expedited election appeals and cross-appeals raise several issues concerning a political action committee's organizational formation, the adequacy of an initiative title, and whether the trial court erred in finding a sufficient number of valid petition signatures to support placement of the Proposition 127, Renewable Energy Standards Initiative on the November 2018 ballot. We previously issued orders affirming the trial court's rulings that the measure qualifies for the ballot. We now explain our reasoning for those orders. (At the election, the voters rejected the measure, but that does not affect our pre-election decisions.)


         ¶2 Clean Energy for a Healthy Arizona (the "Committee") is a political action committee ("PAC") that sought placement of an initiative measure on the November 2018 general election ballot. To that end, the Committee formed on February 9, 2018, by filing a "statement of organization" with the Secretary of State ("Secretary") on a form provided by her. See A.R.S. § 16-906(A). The statement identified and provided contact information for the Committee's chairperson, treasurer, and bank, as required by § 16-906(B). The statement did not identify a "sponsor." See § 16-906(B)(1)(b), (2) (requiring a statement of organization to list information about "any sponsor"). On receipt of the statement, the Secretary issued an identification number to the Committee, see § 16-906(D), which was then authorized to perform lawful activities, including applying for an initiative petition, see § 16-906(G).

         ¶3 On February 20, the Committee filed an application with the Secretary for an initiative measure that proposes a constitutional amendment to "require electricity providers to generate at least 50% of their annual sales of electricity from renewable energy sources" (the "Initiative"). See A.R.S. § 19-111(A) (setting forth initiative application requirements). The application was printed on a form issued by the Secretary, and it included the Committee's identification number where indicated. Upon receipt of the application, the Secretary assigned the Initiative petition a serial number, see § 19-111(B), which enabled the Committee to gather the 225, 963 valid signatures required to qualify the Initiative for the ballot.

         ¶4 Two days after the Committee filed its application with the Secretary, NextGen Climate Action ("NextGen"), a California-based entity, made the first of several substantial contributions to the Committee (totaling more than $4 million in the first and second quarters of 2018 alone) by paying FieldWorks, LLC, about $140, 000 to gather petition signatures for the Initiative. NextGen's contributions were publicly reported by the Committee in its mandatory campaign finance reports filed on April 17 and July 14. The Committee did not report receiving any contributions during the period before filing its application with the Secretary on February 20.

         ¶5 Clean Energy for a Healthy Arizona, LLC ("CEHA LLC") formed on February 27, and the Arizona Corporation Commission approved its articles of organization on March 22. According to the Committee, CEHA LLC formed to protect the Committee's officers from personal liability. The Committee amended its statement of organization on May 14 to identify CEHA LLC as its "sponsor." See § 16-906(C) (authorizing amendments to the statement of organization). The Committee's campaign finance reports for the first and second quarters of 2018 did not reflect any contributions from CEHA LLC. The Committee did not list NextGen as a sponsor in the amended statement of organization.

         ¶6 FieldWorks hired, registered, and paid more than 1500 circulators to collect signatures supporting placement of the Initiative on the ballot. On July 5, the Committee filed petition sheets containing 480, 707 signatures with the Secretary. The Secretary reviewed the sheets for statutory compliance pursuant to A.R.S. § 19-121.01(A) and determined that 454, 451 signatures were eligible for verification. She then randomly selected a five percent sample (22, 722 signatures) for verification by county recorders for the counties in which the signatories claimed to be qualified electors. See § 19-121.01(B).

         ¶7 Plaintiffs are qualified electors. On July 19, before completion of the signature verification process, they filed a complaint in the trial court against the Secretary, the Committee, all county recorders, and all members of county boards of supervisors, challenging the petition signatures on several bases and seeking to enjoin placement of the Initiative on the ballot. In an interlocutory judgment entered pursuant to Arizona Rule of Civil Procedure 54(b), the trial court dismissed Plaintiffs' claim alleging deficiencies in the Committee's statement of organization. The court also dismissed the claims against the county recorders and the board members as unripe. In addition, the court rejected the Committee's argument that Plaintiffs can only challenge petition signatures within the random five percent sample submitted to the county recorders for verification. On expedited appeal and cross-appeal, in an order filed August 20 (with an opinion to follow), this Court affirmed the trial court's interlocutory judgment.

         ¶8 Meanwhile, the county recorders completed their signature review of the five percent sample. After disqualifying some signatures and validating others, they established a 72.37% validity rate. The Secretary applied that rate to the 454, 451 signatures eligible for verification, see A.R.S. § 19-121.04(A)(3), and concluded that "the estimated total number of valid signatures is 328, 908, which exceeds the 225, 963 minimum" number of required signatures.

         ¶9 Plaintiffs filed new complaints against eleven county recorders, alleging they improperly accepted invalid signatures during their reviews. The trial court consolidated these cases with the initial case. Although Plaintiffs raised several challenges, the core issue before the court was whether the Committee had obtained the 225, 963 valid signatures required to place the Initiative on the ballot.

         ¶10 A five-day trial of extraordinary logistical complexity began on August 20. Approximately 5500 exhibits were admitted in evidence, some of which were thousands of pages in length, and more than fifty witnesses testified. Plaintiffs subpoenaed more than 1180 witnesses, most of whom were petition circulators. The trial court struck petition signatures gathered by more than 300 circulators because they either did not comply with their subpoenas, see A.R.S. § 19-118(C), or violated statutory requirements when gathering signatures, see A.R.S. §§ 19-112(A), -114(A). Ultimately, the court found that the Committee had gathered a sufficient number of valid signatures to place the Initiative on the ballot and therefore denied Plaintiffs' request for injunctive relief. On expedited appeal, we affirmed the trial court's judgment in an order filed August 29 (again, with an opinion to follow).

         ¶11 This Court has jurisdiction over this expedited election matter under article 6, section 5 of the Arizona Constitution and A.R.S. §§ 19-118, -122. As noted above, we previously issued orders affirming both the trial court's initial Rule 54(b) judgment and its final judgment with opinions to follow. We have consolidated the appeals and provide a single opinion to explain our reasoning.


         I. The defective statement of organization claim

         ¶12 Plaintiffs argue the Committee filed a defective statement of organization on February 9 by naming CEHA LLC as a sponsor before it existed, failing to name NextGen as a sponsor, and failing to incorporate "NextGen" into the Committee's name.[1] Consequently, Plaintiffs assert, the Committee never properly formed, and the Initiative application was a nullity under § 19-111(A) because a valid statement of organization was not filed with the application. Because § 19-114(B) provides that signatures on initiative petitions "are void and shall not be counted" if collected by a PAC "prior to the filing of the committee's statement of organization," Plaintiffs claim that none of the petition signatures here are valid and the Initiative fails to qualify for the ballot. See Pacion v. Thomas, 225 Ariz. 168, 170 ¶ 12 (2010) (recognizing that § 19-114(B) disqualifies signatures on initiative petitions collected before formation of a PAC).

         ¶13 The trial court dismissed this claim without deciding whether the statement of organization was defective, ruling that Plaintiffs did not have a private right of action to make this challenge. Alternately, the court found that Plaintiffs' claim was barred by laches. Reviewing the dismissal of Plaintiffs' claim de novo as an issue of law, see Coleman v. City of Mesa, 230 Ariz. 352, 355-56 ¶ 7 (2012), for the reasons below we affirm the trial court's ruling on the first ground and therefore do not address laches.

         ¶14 Any person may "contest[] the validity of an initiative or referendum measure based on the actions of the secretary of state or compliance with [chapter one of Title 19]." § 19-122(C). The issue here is whether the Plaintiffs' challenge based on the statement of organization identifies grounds for invalidating the initiative measure. The Committee argues, and the trial court agreed, that Plaintiffs' claim can only be asserted under Title 16, which sets forth the required contents for a statement of organization and provides remedies for non-compliance. See A.R.S. §§ 16-906(B), -938, -1021. Plaintiffs counter that their claim arises under § 19-122(C) because it challenges both (1) the Secretary's act in accepting a defective application package and issuing an official serial number in violation of § 19-111(A) and (B), and (2) the Committee's failure to file a valid statement of organization with its application as required by § 19-111(A).

         ¶15 Before resolving this issue, it is useful to consider the interplay between Titles 16 and 19 concerning a statement of organization. An entity wishing to form as a PAC to support or oppose an initiative measure must file a statement of organization in compliance with § 16-906(B). That statute directs how a committee must be named and requires the statement of organization to list other information, including "[t]he name, mailing address, e-mail address, website, if any, and telephone number of any sponsor." § 16-906(B)(2).

         ¶16 The statement of organization must be filed with a "filing officer," § 16-906(A), who is either the Secretary, for a statewide ballot measure, or a county, city, or town officer, for a local ballot measure, A.R.S. §§ 16-901(27), -928(A). "On filing a statement of organization, the filing officer shall issue an identification number to the committee," § 16-906(D), which implicitly evidences the statement's compliance with § 16-906(B) and authorizes the now-formed committee to "perform any lawful activity," including making expenditures and advocating for an issue, § 16-906(G). The committee must amend its statement of organization within ten days of any change in committee information. § 16-906(C). Importantly here, nothing in Title 16 provides that if a facially valid statement contains errors or omissions, it is a nullity and voids the PACs lawful authority.

         ¶17 Title 16 also provides remedies if a PACs statement of organization fails to comply with § 16-906(B). On receipt of a complaint by a third party, the filing officer who accepted the statement of organization is authorized to investigate a violation of § 16-906 and refer any violation to an "enforcement officer" for further investigation and proceedings. §§ 16-901(21), -938(A), (C), (E). (Depending on the identity of the filing officer, the "enforcement officer" is either the Attorney General, a county attorney, or a city or town attorney. §§ 16-901(21), -938(C).) "The enforcement officer has the sole and exclusive authority to initiate any applicable administrative or judicial proceedings to enforce an alleged violation of [§ 16-906]." § 16-938(F). If a violation is found, the committee is permitted to avoid any penalty by taking corrective action within twenty days after issuance of a notice of violation. § 16-938(G). The enforcement officer may also initiate civil or criminal proceedings to enforce provisions of Title 16, including § 16-906. See § 16-1021.

         ¶18 A PAC that proposes a statewide or local initiative measure must apply for an official petition serial number by filing an application with the Secretary on a form provided by her. § 19-111(A). The application must provide identifying information, the text of the proposed initiative, and a 100-word summary of the initiative's principal provisions. Id.

         ¶19 The committee must also simultaneously file "its statement of organization" with the Secretary, and if it fails to do so, she is prohibited from accepting the application. Id. If a committee files an application with an accompanying statement of organization, the Secretary "shall assign an official serial number to the petition," which is affixed to all petition sheets circulated for signatures. § 19-111(B); see also § 19-112 (addressing petition signatures). Signatures collected on initiative petition sheets by a PAC or its agents "prior to the filing of the committee's statement of organization are void and shall not be counted in determining the legal sufficiency of the petition." § 19-114(B).

         ¶20 We agree with the trial court that § 19-122(C) does not authorize Plaintiffs to either challenge the Secretary's actions or contest the validity of the Initiative based on the statement of organization's alleged non-compliance with § 16-906(B). Those claims do not arise under Title 19.

         ¶21 First, § 19-111 is not the statutory vehicle for validating a statement of organization. Instead, that statute requires an initiative applicant to file an existing statement of organization, presumably to demonstrate its lawful authority to file an application. There is no requirement in § 19-111 to disclose an existing sponsor, as the dissent repeatedly states. Because a PAC is not formed and cannot perform lawful activities until its statement of organization is filed with the appropriate filing officer under Title 16, § 19-111(A) necessarily contemplates that the statement of organization has previously been filed and an identification number issued under Title 16. See § 19-111(A) (requiring the applicant to file "its statement of organization"). Here, for example, the Committee's application included the statement of organization identification number issued under Title 16.

         ¶22 Second, an applicant satisfies § 19-111(A) by filing its existing statement of organization, even if the statement contains an error or omission. Plaintiffs contend that § 19-111(A) must require a valid statement of organization or applicants could bypass legislative intent by simply jotting "statement of organization" on a paper and filing it. We agree that § 19-111(A) requires an applicant to file a facially valid statement of organization; a bare scribbling would not suffice. But a statement of organization bearing an identification number issued by the appropriate filing officer demonstrates compliance with § 16-906. See supra ¶ 16. The PAC is formed and may engage in lawful activity, such as filing an initiative application. See §§ 16-906(G), 19-111(A). In short, a statement of organization filed under § 16-906 and accepted by the filing officer, as evidenced by issuance of an identification number, is valid for purposes of § 19-111(A), even if it contains errors or omissions.

         ¶23 Third, the Secretary is statutorily required to assign an official serial number upon the applicant's filing of an application and a statement of organization. See § 19-111(B) ("On receipt of the application [with the accompanying statement of organization], the secretary of state shall assign an official serial number to the petition . . . ."). Nothing in § 19-111, or any other provision in Title 19, authorizes the Secretary to investigate a statement of organization's compliance with § 16-906(B) or to reject an application if a statement is found lacking. Relatedly, nothing in Title 19 authorizes or requires the Secretary to disqualify petition sheets or signatures if the statement of organization, or any amendments to it, did not comply with § 16-906. In contrast, elsewhere in Title 19, the legislature has explicitly stated the Secretary's obligation to investigate the accuracy of initiative-related filings. See, e.g., § 19-121.01(A)(1)(h) (requiring the Secretary to remove filed initiative petition sheets if the circulator was not properly registered at the time of circulation).

         ¶24 Fourth, and finally, Title 16 establishes exclusive procedures for challenging a statement of organization. As previously explained, a third party can challenge compliance with § 16-906(B) by filing a complaint with the filing officer, who can then investigate and refer any violations to an enforcement officer. See §§ 16-901(21), -938(A), (C), (E). "The enforcement officer has the sole and exclusive authority to initiate any applicable administrative or judicial proceedings to enforce an alleged violation" of the statement of organization requirements. See § 16-938(F). And if a violation is found, the committee is permitted an opportunity to take corrective action before suffering a penalty. § 16-938(G). Interpreting § 19-122(C) as authorizing a plaintiff to file a lawsuit to challenge an initiative measure due to an allegedly defective statement of organization would nullify these Title 16 provisions. Cf. Butler Law Firm, PLC v. Higgins, 243 Ariz. 456, 459 ¶ 7 (2018) ("Statutes relating to the same subject or general purpose should be considered to guide construction and to give effect to all the provisions involved.").

         ¶25 The dissent passionately argues that third parties must be entitled to challenge initiative petition signatures based on a PAC's failure to disclose a sponsor in its statement of organization so that citizens signing petitions are not misled. But the dissent fails to explain why this public protection goal cannot be achieved through Title 16. Here, for example, Plaintiffs could have filed a complaint with the Secretary as early as February and at least by mid-April (after the Committee filed its first required campaign finance report revealing NextGen as a substantial donor) alleging that the Committee's statement of organization was false because it failed to list NextGen as a sponsor. The Secretary could have investigated and referred any violation to the Attorney General, and the Committee could have taken corrective action by disclosing NextGen as a sponsor (if required) or faced an enforcement action that may have nullified its statement of organization and thus its ability to continue to act. The benefit of pursuing the Title 16 remedy early is obvious: waiting until hundreds of thousands of signatures are gathered to address the issue, as the dissent contends should occur, risks disenfranchising citizens who signed petitions because they supported the Initiative.

         ¶26 In sum, even though the Committee was required to file its statement of organization with the initiative application, see § 19-111(A), the statement's contents are not governed by chapter one of Title 19. Further, nothing in Title 19 authorizes the Secretary to reject a facially valid statement that did not, in fact, comply with § 16-906(B). Thus, even if the Committee's statement of organization failed to meet § 16-906(B)'s requirements, that deficiency neither nullified the initiative application under § 19-111(A) nor voided the later-collected signatures pursuant to § 19-114(B). To the extent the court of appeals suggested otherwise in Israel v. Town of Cave Creek, 196 Ariz. 150, 155 ¶ 24 n.7 (App. 1999), we disapprove it. Plaintiffs' claim did not establish grounds for invalidating the Initiative under § 19-122(C), and the trial court properly dismissed this claim.

         II. Legally sufficient title

         ¶27 The Initiative's title declares that the measure amends the constitution "to require electricity providers to generate at least 50% of their annual sales of electricity from renewable energy sources." Plaintiffs argue this is false and misleading because the Initiative applies only to electricity providers that are also "public service corporations" and not others, most notably Salt River Agricultural Improvement and Power District. We review this issue de novo as a mixed question of fact and law. See Wilmot v. Wilmot, 203 Ariz. 565, 568-59 ¶ 10 (2002).

         ¶28 A "full and correct copy of the Title and text of the measure" must be attached to all petition sheets. Ariz. Const. art. 4, pt. 1, § 1(9); see also §§ 19-112(B), -121(A)(3) (both to same effect). All that is constitutionally and statutorily required is "some title and some text." Arizona Chamber of Commerce & Indus. v. Kiley, 242 Ariz. 533, 541 ¶ 31 (2017). Nevertheless, in Kromko v. Superior Court, this Court criticized using extraneous "short titles" in petition sheets that "contain[] either untrue representations designed to defraud potential signatories, or highly inflammatory language calculated to incite partisan rage." 168 Ariz. 51, 59 (1991).

         ¶29 The Initiative's title is not deceptive. It accurately states that the measure affects "electricity providers." Although the title does not mention that the Initiative applies only to "public service corporations" that provide electricity, such detail is neither required nor necessary to avoid misleading voters. Cf id. at 60 (noting the initiative title was misleading "if at all" because it was incomplete and concluding that "[w]e cannot say that a title's failure to describe every aspect of a proposed measure always creates the degree of fraud, confusion, and unfairness sufficient to invalidate the petition upon which the title rests"). Importantly, an initiative's title gives notice of the measure's subject matter-no more, no less. See Dennis v. Jordan, 71 Ariz. 430, 439 (1951) (stating "it is not necessary that the title be a synopsis or a complete index of the legislation that is to follow" but suffices if it "indicate[s], in a general way at least, what is to follow in the way of legislation" and "put[s] anyone having an interest in the subject matter on inquiry" (emphasis removed) (internal quotations omitted)). The Initiative's title served this purpose by notifying interested parties that the measure imposes renewable-energy-source requirements on "electricity providers." Interested voters are placed on notice to read the Initiative's text for details, which include that the measure applies only to "public service corporations." The trial court correctly rejected Plaintiffs' challenge.

         III. Sufficient number of valid signatures

         ¶30 The Committee submitted 480, 707 signatures to the Secretary, which, if valid, far exceeded the 225, 963 signatures required to place the Initiative on the ballot. The trial court invalidated 79, 252 signatures for various reasons not at issue here, leaving 401, 455 potentially valid signatures. To disqualify the Initiative from the ballot, therefore, Plaintiffs were required to prove by clear and convincing evidence that at least another 175, 493 signatures were invalid (401, 455 - 175, 493 = 225, 962). Cf. McClung v. Bennett, 225 Ariz. 154, 156 ¶ 7 (2010) (stating burden for challenging signatures to candidate nominating petitions).

         A. Improper ...

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