Arizona Supreme Court upholds anti-'dark money' disclosure law

But the decision Monday wasn't a blanket win for supporters of the "Voters Right to Know Act,'' which was approved by more than 70% of the state's voters in the November 2022 election. Instead, the high court revived one claim made by the two groups that sued and ordered a trial court judge to consider it.

The Supreme Court, in a divided 4-3 opinion written by Chief Justice Ann Scott Timmer, rejected arguments that the law designed to stop so-called "dark money'' was unconstitutional on its face or that it infringed on the privacy rights contained in the state constitution. "Dark money'' refers to cash spent on campaigns where the source of the money is not revealed.

The law requires any organization that spends more than $50,000 on a statewide race or half that on other contests to publicly disclose anyone who has given at least $5,000. And it says those recipient groups have to trace the money back to the original source.

All claims, including the challenge revived by the court, had previously been rejected by a trial court judge and by the Arizona Court of Appeals.

The Center for Arizona Policy and the Arizona Free Enterprise Club brought the case, along with two unnamed donors.

They first argued that it was unconstitutional for the state to impose a blanket requirement for groups that seek to affect elections to publicly disclose what they are spending but also from where the money is coming. Timmer said that argument fails, citing provisions in the state's original constitution directing lawmakers to enact laws requiring disclosure of all campaign contributions.

But what remains is the question of whether the donor disclosure requirements contained in Proposition 211 infringe on the rights to free speech contained in the Arizona Constitution specifically for the two organizations because their donors could be deterred from contributing out of fear of harassment and retaliation.

A statement issued by the Goldwater Institute, whose lawyers argued the case, called the revival of the one challenge a victory for free speech rights. It said that the court recognized that nonprofit and donor plaintiffs do not surrender their privacy rights simply because they contribute money to causes they believe in.

"This is an important victory for every Arizonan who believes people should be free to support the causes they care about without fear of government-compelled disclosure,'' Goldwater senior attorney Scott Freeman said. "The Arizona Supreme Court recognized that our state constitution independently protects free speech and that citizens are entitled to prove that compelled donor disclosure violates those protections.''

But they'll now have to persuade a trial court judge that any effect disclosure might have on their donors isn't outweighed by the long-standing right of the citizenry to know who is trying to influence the outcome of an election.

That concept has been part of state law since before Arizona became a state in 1912, Timmer pointed out in a detailed 50-page opinion that delved into the history and reach of the constitution's "Speak Freely Clause," "Privacy Clause" and those laws requiring election funding disclosure in Arizona.

Those disclosure requirements included pre-statehood laws requiring political parties to disclose all funding and its sources within 30 days of an election and the constitution itself, approved by state voters in 1911, which contained directives about disclosure, she wrote in rejecting free speech claims generally in the context of disclosure laws.

"Arizonans at statehood also understood that the Arizona Constitution itself required the Legislature to enact certain laws, even when doing so might incidentally restrain or compel expression,'' Timmer wrote. "Most notably, the Constitution directs the Legislature to enact laws 'providing for a general publicity' of contributions to campaign committees and candidates, and 'to secure the purity of elections and guard against abuses of the elective franchise.' ''

In reviving the once-rejected challenge, Timmer wrote that funding campaigns is not a private matter as a matter of law. But she said that at this early stage of the litigation, the two groups and two unnamed donors who joined their lawsuit have a right to have those claims heard.

"Taken as true at this early stage, these allegations are minimally sufficient to make a threshold showing that the Act's disclosure provisions impose a concrete, non-speculative burden on CAP's and FEC's expressive activities,'' Timmer's opinion said.

Terry Goddard, the former Arizona attorney general who was one of the main backers of Proposition 211, said the high court rejected almost all of the challengers' constitutional arguments.

"Any kind of thought that this was somehow automatically unconstitutional is completely resolved in our favor,'' Goddard told Capitol Media Services. And he contends that the groups that sued will have a hard time proving that donors' speech will actually be affected by pressure from opponents, considering that a century of disclosure laws hadn't led to that result.

"It's a fact that in Arizona, for 114 years, we've had disclosure requirements for people who make campaign contributions,'' Goddard said. "And in that 114 years, there hasn't been a single recorded incident of anybody being harassed or intimidated or somehow deferred in their action because of their contribution that was disclosed.''

In effect, Proposition 211 closes gaps that have opened in the past couple of decades when wealthy "dark money'' donors took advantage of disclosure loopholes to hide their backing of candidates or issues.

"Prop 211 is not new in the area of disclosure,'' he said.

"What it did do was it went after those very small group of very wealthy people who wanted to stay anonymous, wanted to hide their identity,'' Goddard said. "So I think we've made a big step here against giving them special privileges through this decision.''

Justice Kathryn King, writing in dissent and joined by Vice Chief Justice John Lopez and Justice Clint Bolick, said the majority opinion correctly points out that Right to Know Act implicated the Constitution's "Speak Freely Clause'' and that the clause "tolerates no censorship or restraint, major or minor, on the right to speech.''

"But the majority creates a new limitation on free speech rights, permitting censorship and restraint on speech in 'the state's proper exercise of its regulatory authority,' '' she wrote. "Most fundamentally, this police power justification departs from clear constitutional text that limits the scope and exercise of legislative authority, infringing on the right to speak freely to 'abuse of that right.' ''

King also pointed out that a donor could be unknowingly caught up in the Act's disclosure rules because it requires groups spending money to reveal the ultimate source of the money.

She used a lengthy hypothetical to lay out her case:

"A woman donates $5,100 to her church over the course of a year without designating her funds to be used in any way; the church then donates those funds to a social justice organization; the social justice organization then donates those funds to an immigrant relief organization; the immigrant relief organization then donates those funds to an organization that purchases campaign advertisements to advocate for a ballot measure seeking to prohibit local law enforcement agencies from partnering with U.S. Immigration and Customs Enforcement,'' King wrote. "Under the Act, the woman will be publicly identified as supporting 'anti-ICE' campaign media spending, even if she strongly supports ICE.''

Timmer responded to King's reasoning by noting the Act contains an "opt out'' and notice requirement. If someone donates enough money to trigger disclosure, they must be notified by the ultimate campaign funder and given the right to opt out of having their cash used for a campaign.

"The better interpretation is that opt-out status remains a condition of disclosure; it is not a protection that becomes meaningless once funds pass through intermediaries,'' Timmer wrote.

CAP President Peter Gentala said he was glad the Supreme Court will give his organization a chance to argue to a trial judge that the initiative, even if not facially unconstitutional, does infringe on free speech rights by forcing disclosure of donors.

"This is a critical step forward for every Arizonan who wants to support causes they believe in without fear of harassment, retaliation, cancellation, or personal safety,'' he said.

In addition to the case decided Monday, two other challenges to Proposition 211 or parts of it are ongoing in the courts.

One is a challenge brought by the Republican House Speaker Steve Montenegro and GOP Senate President Warren Petersen.

In February, Maricopa County Superior Court Judge Greg Como ruled that a provision of Proposition 211 that says the Legislature does not have the right to interfere with the Citizens Clean Election Commission's administration and enforcement of the Voters Right to Know Act was unconstitutional because it violated the separation of powers.

But Como rejected efforts by Petersen and Montenegro to get the whole law gutted because of that and said it remains in effect without that provision.

The second is a federal constitutional challenge brought by Americans for Prosperity, a libertarian leaning conservative group founded by the wealthy industrialists Charles and David Koch in 2004, that is heavily involved in finding conservative causes and candidates.

In that case, U.S. District Judge Roslyn Silver ruled that there's nothing inherently unconstitutional about requiring the disclosure of donors to groups that spend money to influence elections.

Silver rejected a series of arguments that the Voters Right to Know Act infringed on the group's and its donors' free speech rights and their freedom of association under the federal constitution.

Americans for Prosperity has appealed Silver's 2024 decision to the 9th U.S. Circuit Court of Appeals, which has not ruled on the case.