Case 1:16-cv-09592-RMB Document 34 Filed 01/11/17 Page 1 of 8----

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USDCSDNY
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

DOCUM.ENT
ELECTRONICALLY FILED

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DOC#: _ _~~...,.--

CITIZENS UNION OF THE CITY OF NEW

YORK, et al.,

DATE FILED:

I (\\l\7

Plaintiffs,
DECISION & ORDER

- v. 16 Civ. 9592 (RMB)

THE GOVERNOR OF THE STATE OF NEW
YORK, in his official capacity, et al.,

16 Civ. 9854 (RMB)

Defendants.

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AMERICAN CIVIL LIBERTIES UNION
FOUNDATION, INC., et al.,
Plaintiffs,
- v. -

SETH H. AGATA, in his official capacity as

Executive Director of the Joint Commission on
Public Ethics, et al.,
Defendants.

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Having reviewed the record herein, including without limitation, (i) Citizens Union of the
City of New York and Citizens Union Foundation, Inc. of the City of New York's complaint
seeking preliminary and permanent injunctions and a declaration that New York Executive Law
Sections 172-e and 172-f are unconstitutional as overbroad and a burden upon protected speech
(Comp!., filed Dec. 12, 2016, ifif 124, 129); (ii) American Civil Liberties Union Foundation, Inc.,
New York Civil Liberties Union Foundation, and New York Civil Liberties Union's complaint
also seeking preliminary and permanent injunctions and a declaration that Sections 172-e and
172-f are unconstitutional. (Comp!., filed Dec. 21, 2016, if 76.) "[T]he compelled disclosure rules
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[required under those Sections] infringe upon the rights of association and speech of Plaintiffs'
members and supporters" (id.) and "breach the associational privacy of supporters [of 501 (c)(3)
and 50l(c)(4) organizations] by publicly disclosing their identities" (ACLU Letter, dated Dec.
23, 2016, at 3); (iii) the Court's Order, dated December 26, 2016, among other things, directing
Plaintiffs to describe "why and how ... Sections 172-e and 172-fwere enacted" and submit a
"list of citations to all jurisdictions which have enacted the same or substantially similar
legislation and any related litigation," and directing Defendants New York Governor Andrew M.
Cuomo, New York Attorney General Eric Schneiderman, and the members of the New York
Joint Commission on Public Ethics ("JCOPE") each to submit a written "explanation of why and
how Sections 172-e and 172-fwere enacted," the "written legislative and executive branch
history of these two sections," and "a list of all jurisdictions which have enacted the same or
substantially similar legislation and any related litigation" (Order, dated Dec. 26, 2016, at 2); 1
(iv) the Attorney General Office's stipulations with Citizens Union, dated December 27, 2016,
and ACLU Foundation, dated January 3, 2017, respectively ("Stipulations"), in which the
Attorney General has agreed not to take any action to enforce, or direct the enforcement of,
Sections 172-e and 172-f in any respect pending this Court's review and determination of the
Plaintiffs' pending preliminary injunction application(s) (Stipulations at 2); (v) Citizens Union's
letter, stating, among other things, "Sections 172-e and 172-f ... are unlike other states'

On January 4, 2017, the Court so ordered a stipulation between Plaintiffs and the members of
JCOPE stating that "[t]he ... actions are hereby voluntarily dismissed without prejudice as
against the JCOPE Defendants," "[t]he JCOPE Defendants shall not take any action to enforce,
or direct the enforcement of, [Sections 172-e and 172-fJ in any respect during the pendency of
these actions," and "[t]he JCOPE Defendants will be bound, in their official capacity, by any
Order of the Court in these actions enjoining, temporarily or permanently, any portion of
[Sections 172-e and 172-fJ." (Stipulation and Order, filed Jan. 4, 2017, at 2.)
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disclosure provisions because they are not linked with electioneering conduct" (Letter to Court,
dated Dec. 30, 2016, at 1, 3); (vi) ACLU Foundation's letter, stating, among other things,
"Plaintiffs are not aware of any other jurisdiction that requires a 501(c)(4) entity to publicly
disclose donor information and to submit descriptions of its communications based solely on the
fact that it expends funds to engage in speech directed to the general public about a broad range
of political and policy-related issues," and "Plaintiffs are not aware of any other jurisdiction that
requires a 501(c)(3) to publicly disclose its donors based on the fact that the 50l(c)(3) makes a
general support contribution to a 501(c)(4) that files lobbying disclosures" (Letter to Court, dated
Dec. 30, 2017, at 5); (vii) the Governor's counsel's letter, stating, among other things, Sections
172-e and 172-f were adopted "after a great deal of negotiation between representatives of the
Governor and of the State Assembly and Senate," and that both Sections are consistent with the
First Amendment in that "Section 172-e addresses a specific issue of nondisclosure brought
about by a loophole in the law," and "Section 172-f[] ... was intended to shed sunlight on dark
money in politics" (Letter to Court, dated Dec. 30, 2016, at 2-3); (viii) the Attorney General's
counsel's two letters (both dated December 30, 2016), stating, among other things, he "is
unaware of any other jurisdiction that has enacted legislation similar to [Sections 172-e and
172-f]" (Letter to Court, dated Dec. 30, 2016, at 2), and "the availability of an exemption from
disclosure ... mitigates against a finding of irreparable harm" (Letter, dated Dec. 30, 2016, at
2). 2 Counsel also argues that Sections 172-e and 172-f"bear a substantial relation to the State's

Sections 172-e and 172-f contain so-called "exemption" provisions as follows: "the attorney
general, or his or her designee, may determine that disclosure of donations to the covered entity
shall not be made public if, based upon a review of the relevant facts presented by the covered
entity, such disclosure may cause harm, threats, harassment, or reprisals to the source of the
donation or to individuals or property affiliated with the source of the donation. The covered
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unquestionably imp01iant interests in promoting transparency for electioneering activities and

other aspects of the political process" (id. at 3); (ix) and the excellent oral presentations of the
pmiies' counsel at a conference before the Court on January 4, 2017 (see Hr'g Tr., dated Jan. 4,
2017), the Court orders and directs as follows:

!. According to Plaintiffs, on June 17, 2016, which was the last day of New York State's
spring legislative session, the Governor's Office released a statement describing a proposed "5
Point Ethics Reform Plan." (ACLU Letter, dated Dec. 30, 2016, Ex. 3.) The five points included:
(1) "the nation's strongest independent expenditure reforms to end coordination in political

campaigns"; (2) "pension forfeiture"; (3) "first[-]time disclosure requirements for political
consultations"; (4) "lobbying disclosure reforms"; and (5) "issue advocacy reforms." (Id.
(capitalization altered).)
The Plan does not describe Section 172-e or Section 172-f other than to say that New
York law should "[r]equire 501(c)(4) [nonprofit] organizations to disclose their sources of
funding if they engage in activities to influence electoral politics using 'issue advocacy.'" (Id.)
On the same date, Governor Cuomo introduced Progrmn Bill #39 into New York State's
Assembly and Senate which was designed, according to the Governor's Bill Memorandum, "to
provide New York State with comprehensive ethics lobbying, campaign finance, and public
officer's law reform." (Id. at 3, Ex. 5.)

entity may appeal the attorney general's determination and such appeal shall be heard by a
judicial hearing officer who is independent and not affiliated with or employed by the
department oflaw, pursuant to regulations promulgated by the depmiment oflaw. The covered
entity's sources of donations that are the subject of such appeal shall not be made public pending
final judgment on appeal." N.Y. Exec. Law l 72-e(3), 172-f(3).

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The Bill included provisions to "amend the election law, in relation to independent
expenditures during election campaigns (Part A); to amend the election law, in relation to monies
received and expenditures made by a party committee or constituted committee (Paii B); to
amend the election law, in relation to disposition of campaign funds (Part C); to amend the
legislative law, in relation to reports by lobbyists (Part D); to amend the legislative law, in
relation to contingent fees (Paii E); ... to amend the executive law, in relation to the registration
of certain service providers (Paii H); to amend the legislative law, in relation to communications
with professional journalists and newscasters; and in relation to repmiing of ce1iain funding by
lobbyists (Part I); to amend the executive law, in relation to investigations by the joint
commission on public ethics a11d to violations of the lobbying act (Part J); a11d to amend the
public officers law, in relation to financial disclosure forms (Part K)." 2016 N.Y. Sess. Laws ch.
286 1 (McKinney). None of these provisions is challenged by Plaintiffs in these actions, i.e.
apart from Sections 172-e and 172-f. (See, e.g., H'rg. Tr. at 15:8-9 (Citizens Union's counsel:
"[W]e have no problems with any other part of the statute.").) 3
On August 24, 2016, Governor Cuomo signed New York Sessions Law Chapter 286,
which "enact[ed] into law major components of legislation relating to campaign funds." 2016
N.Y. Sess. Laws ch. 286 I. This new law also called for amending New York Executive

Law by adding Sections 172-e and 172-f. Id.

According to Plaintiffs, the Senate passed the Bill at around 3:00 a.m. on June 18, 2016
with "no debate and less than 15 minutes of discussion." (ACLU Letter at 3.) The State
Assembly passed the Bill at 5:09 a.m. "after less tha11 lO minutes of discussion." (Id. at 4.) One
Senator reportedly stated: "I have a summary, but I'm not sure any of us could actually tell you
what exactly is in this bill. It became available I believe at 1:45 am. It's now 10 to 3:00 in the
morning. Many of us have been up for 24 hours at least." (Id., Ex. 7 at 4851:2-7.)
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2. It appears that the provisions of Sections 172-e and 172-f are unique to New York
State and that this is, therefore, a case of first impression. (See H'rg Tr. at 3:11-14 ("I don't think
either the plaintiffs or the defendants have located any other U.S. jurisdictions that have
disclosure requirements that are either the same or even substantially similar to these.").) No

other jurisdictiou has disclosure requirements similar to Sections 172-e and 172-f which,
among other things, purport to regulate a wide range of advocacy (speech), including,
according to Plaintiffs, "pure issue-based political advocacy that does not qualify as
lobbying or election-related speech." (ACLU

Comp!.~

5.)

Section 172-e requires a 50l(c)(3) organization that makes an in-kind donation in excess
of two thousand five hundred dollars to a 501(c)(4) lobbying organization to disclose "any
donation in excess of two thousand five hundred dollars to the covered entity during the relevant
reporting period including the identity of the donor of any such donation." 172-e(2). Section
172-f requires a 501 (c)(4) organization that spends more than $10,000 on communications that
"refer[] to and advocate[] for or against a clearly identified elected official or the position of any
elected official or administrative or legislative body relating to the outcome of any vote or
substance of any legislation, potential legislation, pending legislation, rule, regulation, hearing,
or decision by any legislative, executive or administrative body" to disclose "the name and
address of any individual, corporation, association, or group that made a donation of one
thousand dollars or more to the covered entity and the date of such donation." 172-f(l ), (2).
3. The Attorney General's counsel has confirmed that the first reporting period under
Sections 172-e and 172-f"is the period that ends June 30, 2017, because that is the first sixmonth period that follows the implementation of both of these provisions." (Hr'g Tr. at 28.) He

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also stated that the Attorney General's Charities Bureau is in the process of developing and
promulgating (implementing) regulations, which are anticipated to "be published for public
comment ... in February [2017]." (Id. at 29.) "[T]he [New York] State Administrative
Procedures Act[] requires that [the proposed] regulations be published for public comment by the
[P]laintiffs here and other (c)(3) and (c)(4) organizations." (Id. at 29:3-5.)
4. Plaintiffs are encouraged by the Comi actively to participate in the notice-andcomment process: to futiher explain their legal concerns and to help clarify the meaning and
proposed implementation of the laws, and to help develop appropriate regulations which the
Charities Bureau will ultimately promulgate. Some or all of the issues in this litigation may,
through this rulemaking process, be narrowed and/or resolved in a manner agreeable to Plaintiffs
and Defendants. To this end, the Court also encourages the parties fotihwith to meet and confer
(again) regarding the issues in this litigation.
5. The Comi considers Plaintiffs' application(s) for a preliminary injunction to remain
pending at this time and it will allow limited expedited discovery in connection with those
applications. See, e.g., Ceglia v. Zuckerberg, 600 F. App'x 34, 37 n.4 (2d Cir. 2015), cert.
denied, 136 S. Ct. 823, 193 L. Ed. 2d 717 (2016); Gold Fields Ltd. v. Harmony Gold Mining
Co., 2004 WL 2710030, at *I (S.D.N.Y. Nov. 23, 2004). 4 The Court will also establish a further
briefing schedule for Plaintiffs' application(s) for a preliminary injunction and any other
appropriate motions at a future conference.
6. Additional patiies may be added to these cases by February 14, 2017.

If the parties are unable to agree upon a discovery schedule, they should take the matter up
with S.D.N.Y. Magistrate Judge Sarah Netburn.
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7. The Comi hereby schedules a status conference with regard to the above-described
issues for March 14, 2017 at 10:00 a.m. in Courtroom 17B of the Daniel Patrick Moynihan
Comthouse at 500 Pearl Street, New York, New York 10007.

Dated: New York, New York

January 11, 2017

RICHARD M. BERMAN, U.S.D.J.