We The People

Are Nonprofit Donor Disclosure Laws Constitutional?

April 22, 2021

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Next week, the Supreme Court will hear argument in a key consolidated case about the First Amendment and donor disclosure laws. Americans for Prosperity Foundation v. Rodriquez asks whether a policy of the California attorney general’s office that requires charities to disclose the names and addresses of their major donors violates the First Amendment. Cindy Lott, Associate Professor of Professional Practice at Columbia University and Academic Program Director for Nonprofit Management Program at the School of Professional Studies, and Brian Hauss, a staff attorney with the ACLU Speech, Privacy, and Technology Project, discuss this case and its potential implications for nonprofit organizations, campaign finance, free speech, and more.

FULL PODCAST

PARTICIPANTS

Cindy Lott is an Associate Professor of Professional Practice at Columbia University and also serves as Academic Program Director for Nonprofit Management Program at the School of Professional Studies. She previously served as Executive Director and Senior Counsel to the National State Attorneys General Program at Columbia Law School, and was the developer and lead counsel to the Charities Regulation and Oversight Project from 2006-2015. She joined a brief of law professors filed in the case in support of the respondent.  

Brian Hauss is a staff attorney with the ACLU Speech, Privacy, and Technology Project. Brian was previously a staff attorney with the ACLU Center for Liberty, where he focused on combating religious refusals to comply with anti-discrimination laws. He also spent two years as the ACLU’s William J. Brennan First Amendment Fellow. He co-authored an ACLU brief filed with a coalition of other organizations in the case in support of petitioner.

ADDITIONAL RESOURCES

This show was produced by Jackie McDermott, Lana Ulrich, and Diana Allen, and engineered by Kevin Kilbourne. Research was provided by Mac Taylor and Lana Ulrich.

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TRANSCRIPT

This transcript may not be in its final form, accuracy may vary, and it may be updated or revised in the future.

Jeffrey Rosen: [00:00:00] I'm Jeffrey Rosen, president and CEO of the National Constitution Center and welcome to We The People, a weekly show of constitutional debate. The National Constitution Center is a non-partisan, non-profit, chartered by Congress to increase awareness and understanding of the constitution among the American people. The Supreme court will hear arguments next week in an important case about the first amendment and donor disclosure laws, it's called Americans For Prosperity Foundation against Rodriguez. And the case asks whether a policy of the California attorney General's office that requires charities to disclose the names and addresses of their major donors violates the first amendment.

Joining us to discuss this case and its potential implications for the future of free speech are two of America's leading experts in the first amendment in non-profit law. Cindy Lott is an associate professor of professional practice at Columbia University and also serves as academic program director for non-profit management at The School of Professional Studies. She previously served as executive director and senior counsel to the National State Attorney's General Program at Columbia Law School and was the developer and lead counsel to the charities regulation and oversight project. She joined a brief of law professors filed in this case in support of the respondent. Cindy, it is wonderful to have you on the show.

Cindy Lott: [00:01:21] Thanks so much for having me Jeff.

Jeffrey Rosen: [00:01:23] And Brian Hauss is a staff attorney with the ACLU Speech Privacy and Technology Project. He was previously a staff attorney with the ACLU Center For Liberty, where he focused on combating religious refusals to comply with anti-discrimination laws. He also spent two years as the ACLU's William J. Brennan first amendment fellow, and he coauthored an ACLU brief filed in this case in support of the petitioner. Brian, thank you so much for joining.

Brian Hauss: [00:01:50] Pleasure to be here Jeff. Thanks for having me.

Jeffrey Rosen: [00:01:52] Cindy, let's begin by describing what this California donor disclosure law is. It's one of three active donor disclosure laws in the country, New York and Hawaii also have similar laws. What does this law say and why do you believe it is consistent with the first amount?

Cindy Lott: [00:02:08] So thanks again for having me, Jeff, it's a pleasure to be here with you and Brian. So this is an important case for those of us that have studied and worked within the non-profit sector for a long time. Otherwise known as the charitable sector, although they don't map exactly in those definitions. And that's actually becomes an important point in this case.

So California, not unlike New York and Hawaii as with all states that get some decision-making on what they want to do and require of charities that are doing business or doing soliciting, fundraising solicitation within their borders. In this instance out of almost efficiency, they have decided to ask for the Schedule B to the form 990. Form 990 is the tax return, if you will, and for tax information that is sent to the IRS, it's required, of charities that are exempt.

And so in this instance, these states have piggybacked on that requirement. And they're saying, if you filed it at the federal level, we're asking for you to file that as well at the state level. States do have some distinguishing marks, if you will, about how they can think about what they want to require. But in this instance, they're asking for the exact same form as the IRS.

Jeffrey Rosen: [00:03:18] Thank you so much for that. Brian, what can you add to Cindy's description of this law, which as she says, requires major donors to be disclosed to the state of California for purposes of efficiency she said. And why do you think it's not consistent with the first amendment?

Brian Hauss: [00:03:37] I think Professor Lott did a great job describing what the law does, but I think there is a particular set of facts at issue here that are unique to California and that separate the situation in this case from the similar laws at the federal level and the laws in New York and Hawaii. And that's the fact that for almost a decade, going back to 2012 California has had a history of inadvertently disclosing the Schedule B donor information to the public. Posting it, in fact on their public website.

Now there, I think there is no evidence or allegation that that was done intentionally, but the district court identified what it referred to as a pattern of inadvertent disclosure here. And that, that pattern continued actually up until the day before trial when the plaintiff's expert identified another 38 Schedule B forms that had been inadvertently posted on the website.

In addition to that, the plaintiff's expert identified a certain security flaws that enabled them to collect all the documents that California maintains with regards to Schedule B forms. I think it's something in the, you know, tens of thousands, simply by manipulating the URL. So there was a tremendous amount of evidence before the district court in this case that California had not done a good job of maintaining the confidentiality of these documents, even though California is required by law to maintain that confidentiality.

And I think that goes to the first amendment problem here, because one of the things courts have recognized is that when donor information, associational information becomes public, people are naturally going to be chilled from associating with dissident groups or, or potentially controversial groups. And so ultimately charities lose out on interactions with donors and civil society suffers from a less vibrant public sphere when you have these sorts of public disclosures.

Now in previous cases where the court has addressed this, the public disclosure has been done usually by law. So the state was clear that there was intending to disclose this information publicly. There are fewer cases looking at these sort of inadvertent disclosures we have here. But what we argued in our brief is that from the perspective of the charity, there's really no difference. If your donors are afraid that their information is going to become public, then they're going to be chilled from associating with you. And that creates a significant first amendment harms that need to be addressed.

Jeffrey Rosen: [00:05:41] Thanks so much for that. So Cindy, Brian lays out his first amendment objections that there is in California a record found by the district court of inadvertent disclosure of donor names. And that this might chill the willingness of donors to give to associational groups of violating principles recognized in cases like the NAACP case, which says that donor lists can remain anonymous because if they didn't, then people might not join the organizations in the first place. What is your response?

Cindy Lott: [00:06:16] Right. So, and I appreciate that. The associational rights afforded under the first amendment are absolute and they're a bulwark of democracy. So it's incredibly important. There's a major distinction here though. The inadvertent disclosure that may be historical, which unfortunately is also a part of some of technology in many sectors as we know, even the IRS has had data breaches, as we know, it's actually the law in California that this can not be disclosed. And there would be problems if they were going against that at this point.

The law, if I recall correctly, was actually enacted in 2016. And they have hewn to that ever since. There's a major distinction between the NAACP case very much needed at the time. There's even an Amicus brief in this case from legal historians distinguishing that case from what is happening here.

One of the overlays that we are seeing... In NAACP, it was literally public disclosure. It was disclosure of all donors of the NAACP to the state of Alabama. And it was intended to be made public that entire list. That is very distinguishable from what we're talking about here, where this is actually what has been called disclosure all the way through this entire briefing cycle. There needs to be a distinction that this is actually reporting to the government and only to the government.

That is the law in California, that is the law in New York and they adhere to that. So here we have reporting requirements, which we have in lots of different sectors, whether it's the financial sector, et cetera, and it is not intended to be "public disclosure." And it's one of the areas that has really gotten traction in this case and why I think there's a lot of attention paid is that this, of course, could implicate because there's an overlay here with the way people think about public disclosure in election law. And that directly implicates the first amendment.

So the associational rights are huge. They are fundamental. Our civic space and philanthropy is also fundamental to the United States. We are the largest philanthropic society in the world. Those two things can co-exist, charities regulation and the first amendment, it's a matter of striking a balance. And we believe under the exacting scrutiny standard here that California has actually struck that balance correctly through disclosure only to the government and not public, and only a very small cohort of substantial donors. And it's for uses for charitable oversight here as opposed to any malicious use.

Jeffrey Rosen: [00:08:43] Brian, Cindy notes two important distinctions between this and the NAACP case. First that that was mandatory public disclosure to all of them, this is to the government. And second, this is major donors and NAACP was the whole membership list. First of all, step back and tell us more about the NAACP case. Your brief is co-signed by Sherrilyn Ifill, president and director general of the NAACP, legal defense and education filed, the ACLU and NAACP, co-filed his brief. So tell us about NAACP, what was it's stake there and why you think that the principle of NAACP in fact covers this case?

Brian Hauss: [00:09:17] So in NAACP versus Alabama the attorney general of Alabama was seeking to enforce a state law against the NAACP, basically arguing that the NAACP was operating illegally in the state. And they immediately got, you know, a, a TRO basically saying that the N- NAACP had to cease operating. And the NAACP was trying to fight that immediate order that the, the state court had entered and said, you know, look, we're happy to comply with, you know, all of Alabama's requirements for operating within the state. We're going to provide you all the documentation for that et cetera. And the Alabama attorney general responded well, we also want all your membership lists.

And the NAACP, hey, wait a minute, there's no reason you need our membership lists for anything, we, we've already told you we're going to do everything we need to do to comply with the law. We're not going to be out of violation in any sort of way. And the membership lists are completely irrelevant to that inquiry. And the attorney general basically said, well, I want them anyways. And the district court found the NAACP in contempt for refusing to disclose its membership lists.

And so that's the ruling that ultimately way, made its way up to the Supreme Court. And the Supreme Court said that the NAACP could not be forced to disclose its membership list under those circumstances. And what the Supreme court recognized is that expression, political expression, depends on association and association depends on associational privacy. I want to recognized that if, if the NAACP disclosed its membership lists to the attorney general there's a very good chance that information was going to become public based on repeated instances of that happening in the past. And there was evidence that the NAACP members would be subject to threats, harassment, and reprisals in Alabama, if their identities and their associations with the NAACP were made public. And that because the attorney general had no real reason for requiring this information, the NAACP could not be required to disclose it under those circumstances.

Now, you know, I understand Professor Lott to be saying that, you know, one of the big distinctions between NAACP versus Alabama and this case is that there, you know, it was basically understood even if it was not technically in the, in the law anywhere that the NAACP membership information would become public. And here it's not certainly not required under California law, in fact, it's prohibited under California law to release the Schedule B donor information.

But I think there, we have to recognize that there's a distinction between what's written on the law and the books, and what's actually happened here, which is that tremendous amounts of sensitive donor information has been made public. And at this point, given the recency of those disclosures, I think donors would very reasonably, you know, say, well, I'm, I'm concerned that although the California attorney, attorney general says that they're not going to do this going forward, that those assurances are, are not enough to give me confidence that, that my confidential information will remain private.

And  uh, uh, you know, I think the attorney General's representative in the district court even testified that no employees had been disciplined for the inadvertent disclosure of this information, even though it's illegal under California law. So I think the court has to look at those practical realities which is that there has been a long history of inadvertent disclosure here. And until California gets its act together, it's reasonable for donors to be concerned that despite California officially prohibiting the release of this information that that's still gonna happen.

And, and I think that goes to one of the particular features of privacy harms, is that the bell can't be unrung, right? Once that information is disclosed, once it's become available to the public, there's no way to put the horse back in the barn, right? So under those circumstances I think it's reasonable for the court to say, if you're gonna continue re- to require charities to disclose this information knowing that it's going to chill their relationships with donors, you have to show that the information is basically necessary to completing your investigations.

And what the district court found here is that the attorney general had not submitted compelling evidence that Schedule B information was necessary for the charitable fraud investigations that the office was conducting. I think, you know, it had identified no case where the Schedule B information was pivotal. I think it identified somewhere between five and 10 cases. There's some dispute on this, between the parties where the attorney general reviewed Schedule B information in con- in conjunction with an investigation, over 540 investigations over the past 10 years, right? So in 10 years we have between five and 10 investigations where the attorney general was directly looking at this information that they could identify.

Now I don't dispute that the information is, even if they're not using it in particular investigations, it may still be, be very useful. But that's not the kind of showing of need that can overcome what's basically a public disclosure requirement at this point. And then maybe five to 10 years down the road, California's gotten its act together, a lower standard of scrutiny applies. And I, you know, I think under those circumstances, a disclosure requirement might be constitutional. That would be a very different case from the one we have here.

Jeffrey Rosen: [00:14:01] Cindy responses to Brian's argument that functionally this is the equivalent of its disclosure requirement because of the history of disclosure. And also say more about the district courts finding that this was not necessary to please charitable fraud. Only five times in a decade was the information consulted and it could have been available in other ways. And in particular, help me understand how the National Constitution Center would be regulated outside of California?

Some of our donors want to remain anonymous because they are patriotic philanthropists who don't want to disclose their names. If we were suspected of fraud in Pennsylvania, would Pennsylvania just issue a subpoena to get us to turn over our records, or how do things work in the majority of states that don't have these donor disclosure laws?

Cindy Lott: [00:14:52] So Brian has mentioned a number of factual findings here that the district court found. And of course this case went the other way on appeal. And I actually would refer you to the California brief, where they make very clear about some of the issues that they had with the way some of the questions were asked and what evidence they were actually told that they could submit based on the questions they were asked about how many cases they had used Schedule B, et cetera.

I want to step back here for a moment and talk a little bit about why this matters to states, particularly, which is a different type of interest. And you can definitely tell that when you look at the US solicitor General's Amicus brief here. What the different reasons are and the basis for the substantial and compelling government interest here.

So states actually have the bulk of jurisdiction over charities in this country. Many, many people have the mistaken belief that it's the IRS because congressional authority through the IRS gives tax exempt status at the federal level, right? But you also get exempt status at the state level and it's at the state level that the bulk of all governance is overseen. This is also where basic run of the mill bread and butter fraud, misrepresentation, abuse of form, et cetera, all takes place is at the state level.

And one of the reasons that I got involved in doing research in this space is that I, as an attorney, I was looking at this and as a person who teaches in these areas, I was concerned that we didn't actually have a full understanding of what goes on at the state level. And we have much better understanding of what happens at the federal level.

People keep up with the audit rates, they look, you know, the GAO looks deeply looking at different aspects, for example, of what is happening at the federal level across all charities across states. What we didn't really understand is the differences among the states and also how states often now particularly start working together on multi-state actions, which is very common within the attorney general world on consumer protection and other kinds of sectors. So in looking at this, you will see that states get to decide how best to think about given the policies of their states, given the resources of their states, given the different demographic makeup of the charitable activity that goes on in their states. But what we do know is that a lot of this law actually comes from common law. This exists, I mean, there's a reason term charitable trust exists in common law.

It is literally based on trust that when someone is giving resources, whether that's in kind, cash, whatever it is, to a person, an organization that is representing that it will do something with that for a mission, right? When that money is put into what I call the donate of stream, it is the attorney General's office in every single state in DC and the territories that has primary jurisdiction to make sure that those resources stay in that stream.

And that is where we get into how they decide to do that. So in this instance, the state has decided that it is going to utilize Schedule B because it is very efficient to use what the IRS has already collected from these organizations. That US solicitor General's office says that they're covered because there is a government subsidy given through tax exemption and therefore they can ask for this type of information. Notably, California actually doesn't have that in their brief.

And part of the reason is, you don't have to have a formal tax exemption in any states for this because common [inaudible 00:18:58], this charitable trust law kicks in as soon as somebody has donated to a mission-driven organization that says it is going to use those resources for something bigger than itself. That's the difference between for profit law and not for profit law, right? It's going to be used for a mission-based entity or a purpose.

And once that happens, you now have a trust and you've invoked these attorney General's jurisdiction. And at that point, that's where the states get to decide how they want to do this. You'll also note in this case that there's Amicus brief from other state attorneys general that don't believe that this is necessary for oversight, and they're allowed to think that. They don't have to use it for oversight if they don't want. I'm working on research right now around a regulatory breadth index that shows just how different states are in many of the ways that they deal with charitable oversight. And this is just one example.

Jeffrey Rosen: [00:19:16] Thank you so much for that. Brian, you heard Cindy give a very thoughtful argument for why, especially at the state level these donor disclosure requirements might make sense to ensure that the organizations are fulfilling their mission and using the funds as they're meant to. What's the argument on the other side? The, the plaintiffs in these cases involve two organizations, The American For Prosperity Foundation closely associated with the Koch Brothers and the Thomas Moore Law Center, a conservative law firm that promotes the Judaeo-Christian heritage is the argument here that some donors might not give to those organizations if they feared that their names would be inadvertently disclosed?

Brian Hauss: [00:19:53] Well to your first point, Jeff, I agree with Professor Lott completely, actually that the, you know, the review of Schedule B information can be very useful for enforcing charitable trust laws. And, and so that's why, you know, we suggested in our brief that at the lower end of exacting scrutiny, if California had not had a history of inadvertently disclosing this information, if California was more like New York or more like the IRS, the collection of this information might very well survive the lower end of exacting scrutiny. But a more stringent scrutiny applies here because California has this history of inadvertent disclosure.

At the higher end of exacting scrutiny, the state has to present a more compelling showing than it would otherwise. And I think the fact that the, the vast majority of, of the state attorneys general are able to execute their duties without collecting the Schedule B information suggests that it's not absolutely necessary.

It might be very, very useful. And I think, you know, California and New York might very well be within their rights to say that it's actually, you know, whatever minimal chill occurs when somebody discloses information on a confidential basis to the government is justified by the utility of the government's access to this information. I think that could be a very persuasive argument. I don't think that the, the showing here has been sufficient to justify the collection of this information without adequate safeguards.

And so the bottom line here really is that if you want to collect this information, you have to keep it confidential. And that ensures that, you know, California can't externalize the, the costs of its privacy failures, right? When, when California fails to protect the privacy of non-profits donors, it's the non-profits and the donors and civil society that suffers, not necessarily the Attorney General's office.

And so by saying to the attorney general if you collect this information, you're going to have to keep it confidential, or you're going to lose that power, it incentivizes the state to enact and implement consistently adequate privacy protections to make sure that this information doesn't leak. And then with regard to your second point about, you know, the, the nature of the groups in this case is true that, you know, the, both of the groups in this case are identified as, as conservative or libertarian the Americans For Prosperity Foundation, you know, put, I think a significant amount of evidence in the record that their members and donors and employees have been subject to threats, harassment and reprisals because of their affiliation with the Americans For Prosperity Foundation.

Obviously there are many people who disagree strongly with the Koch brothers political philosophy. I happen to be one of those people. And unfortunately some people, you know, take their disagreements to a personal place. And that's the kind of thing that can shell people from associating in the future.

Now that's not just a problem for groups on the right, right? That's a problem for groups across the political spectrum. It's historically been a problem for the ACLU historically, it's certainly been a problem for the NAACP. And so that's why, even though we disagree very strongly often with groups like the Americans For Prosperity Foundation or the Thomas Moore Law Center we felt it was important to file in this case because at the end of the day first amendment rights are indivisible. the government can take them away from one group, they can inevitably take them away from everybody else.

Jeffrey Rosen: [00:22:49] Cindy, what is your response to that powerful statement, first amendment rights are indivisible and more broadly to the concern about harassment and retaliation? We see that voiced not only in NAACP, but in cases like do versus read where a majority of the court upheld a disclosure requirement for a Washington state referendum, which required that everyone who signs a petition to put something on the ballot in Washington state provides their names and addresses. Although the court upheld that requirement, Justice Thomas filed a powerful dissent talking about the dangers of retaliation and the idea that when you give to an unpopular organization or a controversial one, or, or sign an controversial or unpopular petition, you may be subject to retaliation and be chilled. What's your response?

Cindy Lott: [00:23:43] So I have two responses to what Brian was saying, and I really appreciate his comments. It allows me actually to give a moment. The briefing of AFP in this case is not landing nearly as much as Brian is saying at this point, in terms of, you know, the California could have gotten it right if they only did it like New York, this might be okay. They're very much saying just on its face, this is facially unconstitutional.

And that is really the issue that is before the court here. It is not about past inadvertent disclosures, nor is it necessarily even about the now codified law in California that this is not to be disclosed or even the immediate past practice. It's not about that. It's about the actual legal question before the, the court is around whether or not this infringes upon the very fundamental agreed with both of you fundamental associational rights afforded by the first amendment.

And in this case, the question, because, this is why the standard of review has been noted so much in the briefs is that we've got to make sure we get that part right and that the court is really on board with the exacting scrutiny because that's sliding scale as we're talking about is what really is one of the major questions here, has California done it correctly?

I would submit that they have, they could actually do many different things as I mentioned. And the fact that they have actually utilized the same form as the IRS is notable, not only for efficiency, b- because they are actually trying to clearer and volt that standard by saying, look, we're asking for the exact same thing, even though we may be utilizing it differently in terms of what our jurisdiction is for oversight, right?

Where you're getting into the questions you're talking about now with public disclosure in election law, and this is really one of the main reasons as we've noted that this case is getting so much traction. I have only half jokingly said that I have been working in the charities regulation space for many, many years. And I can assure you that I've never gotten as many press calls [laughs] as I have around this case. And that's because it's not really only about charities regulation. This is where some of what I call the murkiness of dealing with non-profit law and what is first law, particularly as seen through the vehicle of election law comes in.

I have done political wearing. I was, I came up through the age of McCain-Feingold and I understand the distinctions and the relationship among many of these. And I think this case, if there's a silver lining to the fact that it's even happening across a large landscape of substantive issues, is that it's really highlighting what I consider almost a collision course that we have been headed on between some of non-profit law and charities oversight with election law, because there has been murkiness and the corporate form that is a non-profit is not the same exactly as charitable, substantive law.

Charities can invoke jurisdiction of states even without having a tax exemption, without even having a particular corporate form. And this is where we're getting into the issues around Citizens United, because within that decision, which was based on a C4, 501[c][4]s, are non-profits just like 501[C][3]s. The court was using non-profit to mean that issue, but at that particular entity, but for the charitable sector, we've been concerned about this a long time, because it really helped make even murkier the distinctions of what we do in non-profit law and what's considered "disclosure" to the government or to the public, depending on what aspect we're dealing with versus election law disclosure, which is generally understood to mean to the public.

And of course, that's where you get into what could be associational harms, et cetera. Absolutely agreed that those can be major and that's what the court has undertaken in election law. We're now asking if that may be addressed. We don't know yet if the Supreme court is going to address that in this case as well.

Jeffrey Rosen: [00:27:41] Many thanks for that. And thank you for flagging the Citizens United case. Brian, we've been playing Hamlet without the prince, as they say, or bearing lead by waiting until this point to mention Citizens United. But in Citizens United, although five justices struck down parts of campaign finance laws, eight justices upheld disclosure laws. They said government has brought authority to require advocacy groups to disclose their major funders and Justice Kennedy said disclosure requirements should be upheld as long as there's a substantial relation between the disclosure requirement and the sufficiently important government interest. So how could the court invalidates the donor disclosure laws here while continuing to uphold political disclosure requirements in the Citizens United context?

Brian Hauss: [00:28:27] Well, Jeff, I'm, I'm afraid this might not be that interesting of a debate for your listeners because I, I happen to agree [laughs] with Professor Lott on, on just about everything she just said. The, first point is, is that you know, the groups that signed our brief, they sell you brief part ways with Americans For Prosperity Foundation and the Thomas Moore Law Center. And that we believe that as applied relief is the relief that should be granted here. And that, and that facial relief is un- inappropriate.

That's partly because as we've already discussed, you know, California has this relatively unique situation of inadvertent disclosures. I'm going back several years that other states in the federal government don't have. And it's also because, you know, a large number of groups are not going to be chilled, frankly by the disclosure of their donor information. And so, you know, we think the best path forward is basically for groups that are likely to be chilled by the disclosure of this information or the threatened disclosure of this information to seek as applied exemptions from California's regime, but to leave the law facially in place.

That also allows the court to, you know, adjust the ruling if several years go by and, and California hasn't had any inadvertent disclosures for a long time. At that point, it might be perfectly constitutional for California to collect this information from everybody. So we think that the relief in this case needs to be very carefully tailored to the specific harm, which is this history of inadvertent disclosure.

Turning to how this case intersects with campaign finance law. We also argued in our brief and we, we thought it was very important to remind the court that it has previously found in numerous cases, including Citizens United, that the public disclosure of donor information in the campaign finance context serves a compelling governmental interest and is the least restrictive means for achieving that interest because it is necessary for the public to know what interest groups are weighing in in the political process. You know, especially when they're engaging in express advocacy on behalf of, or in opposition to candidates or, or when they're engaging in the election year in communications in the period immediately before an election, the public has a compelling interest in knowing where that money is coming from.

And so under those circumstances, public disclosure requirements are constitutional. The court has consistently recognized that, and we don't think that it should use this case as an opportunity to erode the precedent is already built up in that area.

Jeffrey Rosen: [00:30:35] Thank you for that. Cindy, I hear Brian saying that you both agree that Citizens United's upholding of disclosure requirements should be maintained in the electioneering context because as the Citizens United court suggests there is a compelling interest in people knowing about political donors to avoid corruption, but you're disagreeing here about whether or not there's a similarly compelling interest in enforcing the laws against fraud. What's your response?

Cindy Lott: [00:31:04] So a couple of things, and I agree with Brian that it may be somewhat boring because it's not only he and I, that agree on this, actually, any number of folks on either side of this case agree that they would not like this expanded to the election scenario, right? [laughs] the real issue is how it's being applied, or the very fact that it exists in the charities regulation space, whether it's the facial challenge or the as applied challenge.

So in looking at this, the state believes and I think this is, be true for any state that wanted to adopt using the Schedule B. And again, that's just one example of what is being utilized. If you go to this larger issue of whether or not states can ask for this type of information, only to be reported to the state, not publicly disclosed, I can't stress that enough, inadvertent aside and what Brian and ACLU have very much landed on, the legal issue here is whether or not the state asking for this information to be reported actually infringes on the associational rights afforded by the first amendment.

In this case, it is a substantial government interest. I'll give you another reason why. It's not just fraud, this is one of the main ways that financial information is checked, right? In addition, over the years, the states have actually started communicating much, much more across states because with technology, we have many different forms of solicitation happening now that were never envisioned when we first started looking at this law and having these laws come around 500, 600 years ago. That's how old we're dealing with some of the, the charitable trust law.

So the state believes that they are, and I agree, narrowly tailoring what it is that they are asking for here, just so they can do all sorts of checks. As with all law enforcement we have all sorts of sectors that do this, that require regulatory reporting requirements, this is just one more of them.

None of this is to be publicly disclosed, which is the main distinction with election law. And that has been really where we have gotten into a Citizens United adjacent situation, if you will, with many, many people interested in this. And in our, you know, we don't know exactly what why the Supreme Court took [inaudible 00:34:30] on this case. We don't know if they're going to have a very narrow ruling that affects only California to Brian's point that would only affect how California goes about doing its particular oversight within that state.

But also they could take it and go much broader, which is what happened in Citizens United, right? And really took that to make a much larger statement about the first amendment and about what is considered speech vis-a-vis donations, disclosure, et cetera. And so we will see we know that it may have a huge impact on how we think about charitable regulation and what states can actually require.

We actually also, as a scholars brief, disagreed with US solicitor General's brief that said that if this is struck down for California, that it has no impact on the IRS utilizing Schedule B. The reality is that the fed and the state regulatory regimes have as what I call it's an interlocking framework, but they can't be completely dependent on each other because they have very different reasons at times for their oversight and what they're supposed to be doing in their oversight.

So there, if we're both, those regimes are using Schedule B it would be hard to imagine how only California would be impacted by this. Not just the feds, but also other states in thinking about how they want to do this. And I also just mentioned that there's a very substantial reason why New York and California have, as we have found empirically, have some of the the highest robustness, if you will, on a regulatory breadth index. And that's because they have the most non-profits.

Every state gets to decide how they want to do regulation oversight of businesses or corporate entities or charitable trust that do act- that have activity in their state, whether they're incorporated there or not. And for California and New York, they have a huge number of non-profits as a percentage across the United States.

Jeffrey Rosen: [00:35:12] Brian, one test of whether the court goes now or abroad will be the standard of scrutiny that it adopts. Do we, the people listeners, there are not a lot of standards of scrutiny in constitutional law, but the standard for strict scrutiny and, and here's the jargon, is that the law in question has to be necessary to achieve a compelling governmental interest. But in this case, and in Citizens United, the court applied something called exacting scrutiny. The difference between strict and exacting is the test and the test for exacting scrutiny demands a substantial relation between the requirement and the sufficiently important governmental interest.

Note the difference necessary to achieve a compelling governmental interest or substantially related to an important governmental interest. Brian, what hangs in this pretty technical sounding distinction and might the Supreme court, and why did the ninth circuit adopt this slightly lower standard in evaluating this law? And might the Supreme court ratchet up to standard and actually apply strict scrutiny?

Brian Hauss: [00:36:08] So I think the difference is important because, you know, as people have often recognized, strict scrutiny is strict in theory and often fatal in fact. It is a very, very unforgiving standard. And when laws are subject to strict scrutiny, they're almost always struck down as unconstitutional. The government has to show in, in making the least restrictive means showing the government has to demonstrate that no other less restrictive means exists that could possibly vindicate the government's interests. If, if the plaintiff can identify one, the government automatically loses.

Exacting scrutiny on the other hand, and that exacting scrutiny is the test that the court has traditionally applied to the compelled disclosure of associational information. What the ninth circuit recognized here is that exactly screening is a much more flexible standard. And as we argued in our brief, it's actually a sliding scale standard.

And so when the privacy harm, the likely chill to first amendment association and expression interest is low exacting scrutiny is a relatively forgiving standard, it might be closer to intermediate scrutiny where the Supreme court often upholds regulations on speech or association. However, where the chill to first amendment interest is significant, exacting scrutiny ratches up and gets much closer to strict scrutiny and practice.

And what we argued here is that, when the government has enacted public disclosure laws, that in a form of exacting scrutiny closer to strict scrutiny applies, because of the court recognizes that when sensitive associational information is disclosed to the public, the risk of threats, harassments and reprisals is so great that chill is much more likely to occur. So people are much less likely to associate with controversial or dissident groups, if they're afraid that their information is going to become public.

And so here where you have a history of inadvertent public disclosure, we argue that a stringent form of exacting scrutiny is appropriate and that the government has to show not only that it has a very, very significant interest but also that alternative means of achieving that interest or close to unworkable or very unsatisfactory in practice.

So some of the alternatives that the plant's identified here, for example individualized subpoenas to groups that the government is investigating the government would have to show that a subpoena process is totally ineffective at achieving its interests. And here, I think the district court found that the government had not made that showing, it had not shown that resort to individualized measures when it's investigating particular charities would be an effective at enabling the government to fulfill its police powers.

Jeffrey Rosen: [00:38:33] Cindy, is there a possibility that the US Supreme Court might choose to apply strict scrutiny rather than exacting scrutiny to these disclosure requirements given the new justices who have joined the court since Citizens United was decided? And if so, would that call into question disclosure requirements, not only here, but also under Citizens United?

Cindy Lott: [00:38:52] Well, I can't... The court could do anything. Certainly this court understands federalism and the ability of states to do different things and the federal government does. But I would say that Brian's argument, I would actually use as mine as well, which is the very fact that this exacting scrutiny, even if you are to take it, it's on the high end of the sliding scale per Brian's comment.

In an election situation, electioneering where it is literally public disclosure, you are letting the public know. The transparency there is actually the thing that you're going for. And that's why that level of scrutiny in this instance, it's not public. It is only to the government and it's using the exact same document that the federal government is asking for as well. So if anything, that would lower, I mean, because there's less risk here, they're not asking for public disclosure of all of these names to the general public.

I'll note that there is actually an Amicus brief, we're in good company here that the Floyd Abrams Clinic at Yale Law School came in on you know, said either the way, but their belief is, yeah, we'll go with exact scrutiny, but here we actually think the California this is workable. Let me make another point about why this may be unworkable to the point of talking about subpoenas, et cetera, after the fact.

And this gets a little bit back to your question, Jeff every state can do it differently. So I don't want to ask, answer the very specific question about how Pennsylvania, for example, might handle this. But there's a major underlying legal rationale behind some of this that a lot of escapes, a lot of folks, even lawyers in this space that don't function specifically within non-profit law. Unlike in consumer protection and/or other forms  other sectors, other forms of law, in charitable law, only the attorney general for the most part with very few exceptions has standing to bring a suit.

This goes back many hundreds of years under the normal parents, patriot doctrine that in a charitable trust situation, only the AG can actually bring suit and straighten out these types of issues. Your average person on the street can't bring a lawsuit after they've donated $20 to a mission-driven organization once it's been represented that their $20 is going to go, for example, save the greyhounds, is the example I give my students.

Unlike in a consumer protection case where I go buy a blender for $20 and it doesn't work or harms me, I have a right of action. And if enough people have broken blenders or it doesn't, or it harms them, they can get a class action together. We don't do that in the charitable sector. The attorneys general, Attorney General's office, is it. So when you talk about whether something is workable, if they don't have the information on the front end to even be able to look and see whether there is something potentially a miss, now we have a very different circumstance.

In addition, my own research has shown and we've got data on this in a 2016 study that I did through Urban Institute. And that is that much of the enforcement that goes on in this arena is what I call quiet enforcement. They're not trying to kill off the charity, they're trying to figure out what went wrong, so that they can still make sure that they direct the charitable assets to the mission that was represented.

That's often a distinction as well. It's very quiet. You don't find as many lawsuits in this area, straight up from  a state against a particular organization, unless it's a complete sham, right? In which the FTC's jurisdiction would be invoked. So these are differences that make for reality check on whether something is workable to simply try to have a state figure out what's going on and then ask for subpoenas. They have the right to, to ask subpoena, et cetera, but first they just need basic regulatory filing information and that's all this is, not unlike other sectors. The question is what is done with it, it's only utilized at the government level and that lessens the possibility of associational harm dramatically.

Jeffrey Rosen: [00:42:57] Brian one last intervention and then we'll have closing arguments. Four of the eight justices who voted for disclosure requirements and Citizens United have left the court and three have been replaced by more conservative justices. Is there a possibility that this court might be inclined to apply strict scrutiny to all disclosure requirements and to strike them down in the election as well as the non-profit context? And what would a broad ruling in this case look like?

Brian Hauss: [00:43:27] I, I would frankly be surprised if the Supreme Court were to overrule decades of precedent from, you know, both liberal and conservative courts. Holding that exacting scrutiny is the relative, relevant standard in this context, and, and to apply a whole new strict scrutiny standard to a regime where that has never applied before.

You know, I understand this court, you know, is, is revising its holdings in certain areas of the law but I have not seen any appetite to revise the level of judicial scrutiny that's applied to disclosure requirements and I, and I don't think it's necessary to reach the right and just result in this case. And in fact, I think it would be very counterproductive. It would throw the doctrine into chaos and it would potentially implicate as Professor Lott suggested, you know, laws across the country in all 50 states at the federal government level. And, and I don't see the court looking to create that kind of turbulence here.

The, the exacting scrutiny standard has been a workable standard for half a century and I don't think there's any need to revisit that standard now. And, and one of the things one of the reasons the exacting scrutiny standard has succeeded for so long is precisely because it is flexible. It allows the court to take into account different circumstances and adjust the level of scrutiny that's applied accordingly. And I think this case is a perfect example of that and an example of why the exacting scrutiny standard should continue to apply to all compelled disclosure requirements.

Jeffrey Rosen: [00:44:44] Well, it is time for closing arguments in this fascinating discussion. And Cindy, the, the first one is to you, why is the Americans For Prosperity against Rodriguez case important? And why should our listeners care about it?

Cindy Lott: [00:44:59] Well, I appreciate the opportunity again. I, it's an important case if you only had it up on the charitable regulatory piece of this. If that were the only aspect, it's still important in order to make sure that we are clear on what states are allowed to do in the charitable regulatory arena. As it happens, it has also raised these other issues that we've talked about today. And I suppose, as I said, if there's a silver lining here to this case going up, it's that there might actually be a moment where some of the murkiness that has now crept in from some of election issues, election law, the C3, C4, split, et cetera, some of that murkiness in, it, it is possible that the court could address something some aspect of that here that might actually move along how we think about non-profits sometimes being utilized their non-profit form for things that are not really mission-based.

There, we have seen that. And so that's not squarely an issue here. We could have a very narrow tailoring. Under the exacting scrutiny standards, California has met it. This is not a public disclosure. This is only to the state. They are using the same form. And they're abiding by their own law in how they are doing that.

Other states could follow suit, or we could have others drop-off from using this, but they could be utilizing other forms of regulatory reporting requirements. And this decision actually could impact those as well, not just the Schedule B. So it's important for our sector that way. But again, if they go broad on the ruling here, it could implicate other things and either make it more murky for us as a sector, as a charitable sector, or it could actually elucidate some things and give some guidance that we've been seeking ever since Citizens United in particular came around.

Jeffrey Rosen: [00:46:47] Brian, the last word is to you. Why is the Americans For Prosperity case important and why should our listeners care about it?

Brian Hauss: [00:46:54] So I think this is an important case, a narrow case, and it's important that it be a narrow case. So first to the importance of the case, this case is important because associational rights are important and associational privacy is necessary to protect associational freedoms. When the government is going to require charitable organizations to disclose sensitive associational information, the government has a reciprocal obligation to keep that information confidential itself. Where the government fails in that duty as California has failed here, it should lose the power, at least temporarily to continue requiring organizations to disclose their donors. If the government doesn't have that sort of accountability we're going to continue to see inadvertent disclosures of sensitive information, non-profits will lose the support of their donors and civil society as a whole is ultimately going to suffer.

Now, all that said, we're up here on a very specific factual situation that seems to be unique to California right now. And so I don't think the court needs to go beyond the particular circumstances presented here, which are highly relevant to the application of the exacting scrutiny standard to decide this case correctly and uphold the first amendment rights of non-profits and their donors.

If the court were to go beyond those bounds and to opine on the disclosure of donor information in the campaign finance context, for example, or the government's power to collect non-profits on sensitive information, even when the government promises to keep it confidential, it risks disrupting other areas of the law that have remained settled for decades. And, and the court should not take this case as an opportunity to do that.

Jeffrey Rosen: [00:48:31] Thank you so much Cindy Lott and Brian Hauss for a civil rich and really illuminating discussion of the important first amendment issues raised by Americans For our Prosperity against Rodriguez and its companion case Thomas Moore Society versus Rodriguez. Cindy, Brian, thank you so much for joining.

Cindy Lott: [00:48:55] Thank you.

Brian Hauss: [00:48:56] Thanks, Jeff.

Jeffrey Rosen: [00:48:58] Today's show was engineered by Kevin Kilbourne and produced by Jackie McDermott and Lana Ulrich. Research was provided by Mac Taylor and Lana Ulrich. Please rate, review and subscribe to We The People on Apple podcasts and recommend the show to friends, colleagues, or anyone anywhere who's hungry for a weekly dose of constitutional debate. And always remember The National Constitution Center is a private non-profit. We rely on the generosity of people from across the country who were inspired by our non-partisan mission of constitutional education and debate.

You can support the mission by becoming a member at constitutionalcenter.org/membership, or give a donation of any amount to support our work including this podcast at constitutioncenter.org/donate. On behalf of The National Constitution Center, I'm Jeffrey Rosen.

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