[bouldercouncilhotline] Hotline: Enforcement of the proposed provision requiring shareholder approval of corporate expenditures in City elections

[cmosupport at bouldercolorado.gov]

Sender: Cowles, Macon




The proposed new BRC Section 13-2-23 Contributions by a Corporation requiring the approval by vote of >50% of the shareholders of a corporation as a condition of the right of the corporation to contribute or spend money supporting
 or opposing candidates or ballot issues in City election is found on packet page 199 of the final packet released May 30, 2012.
 
If Council is going to adopt that proposed new section on corporate expenditures, there needs to be an adequate enforcement mechanism--one that does not exist at present. Presently, a violation of Chapter 13-2 potentially
 carries with it a maximum "criminal" penalty of $1,000, by operation of a provision of the BRC that is outside Chapter 13-2. That is a pitiful amount compared to what it might cost to defend the validity of the ordinance all the way to the Supreme Court.
 
There are civil remedies for violations of Chapter 13-2. I want to tell you what those are as back ground for what I suggest. I will quote below the entire civil remedies section of Chapter 13-2 for your convenience. Specifically, the Civil Remedies
 section is in BRC 13-2-22(b), which reads as follows: 



(b) Civil Remedies:
(1) For the purposes of this subsection, "this ordinance" means those provisions adopted by the
people in the 1999 regular municipal election as placed on the ballot in Ordinance No. 6097,
including, without limitation, any contract entered into pursuant to subsection 13-2-21(b), B.R.C.
1981.
(2) Any registered elector of the city may bring a civil action including, without limitation, an action for
injury, and may sue for injunctive relief to enjoin violations or to compel compliance with this
ordinance consistent with paragraph (b)(3) of this section, provided such person first files with the city
attorney a written request for the city attorney to commence action. The request shall include a
statement of grounds for believing a cause of action exists. The city attorney shall respond within ten
days after receipt of the request indicating whether the city attorney intends to file a civil action. If the
city attorney indicates in the affirmative and files suit within thirty days thereafter, no other civil action
for the same violation may be brought unless the action brought by the city attorney is dismissed
without prejudice.
(3) Any candidate or candidate committee who knowingly accepts a contribution in excess of $100.00
or exceeds the expenditure limit in violation of the contract with the city and this ordinance is liable in
a civil action initiated by the city attorney or by a registered elector of the city for an amount up to
$500.00 or three times the amount by which the contribution or expenditure limit is exceeded,
whichever is greater.
(4) In determining the amount of civil liability, the court may take into account the seriousness of the
violation and culpability of the defendant.
(5) The city attorney shall enforce all provisions of this ordinance.
(6) The city council is empowered to create an advisory committee and other enforcement procedures
as it deems appropriate to implement this ordinance.





 
  
 

 
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To summarize the above, there is a private right of action for a violation of the contribution limits of $100 per candidate or of the expenditure limits for a candidate who has accepted public financing. A private
 plaintiff can seek injunctive relief as well as other remedies. Subsection (3) above permits the City or a private plaintiff to seek to recover up to $500 or three times the amount of the transgression. The amount of the recovery is determined by the court,
 taking "into account the seriousness of the violation and culpability of the defendant."
 
I suggest we adopt parallel provisions to subsections (2) and (3) above that apply to lawsuits brought by the City or by a registered elector for a violation of what is being proposed as 13-2-23 Contributions by Corporations.
 In writing about this here, I will assume that the parallel provisions will be in new subsections (4) and (5), and that the rest of the subsections of 13-2-22(b) will be renumbered.
 
Subsection (4) would provide as follows:
 
"Any registered elector of the city may bring a civil action including, without limitation, an action for injury, and may sue for injunctive relief to enjoin violations or to compel compliance with this ordinance for violations
 of Section 13-2-23, provided such person first files with the city attorney a written request for the city attorney to commence action. The request shall include a statement of grounds for believing a cause of action exists. The city attorney shall respond
 within ten days after receipt of the request indicating whether the city attorney intends to file a civil action. If the city attorney indicates in the affirmative and files suit within thirty days thereafter, no other civil action for the same violation may
 be brought unless the action brought by the city attorney is dismissed without prejudice. If the City or a registered elector is the prevailing party in litigation to enforce the provisions of Section 13-2-23, the City or registered elector is entitled to
 recover reasonable attorneys fees and costs."
 
Subsection (5), then, on penalties might read something like this:
 
"If the City or registered elector, in an action brought under Subsection (4), proves an intentional, knowing or purposeful violation of Section 13-2-23, then the City or registered elector shall recover, in addition to
 any other remedy permitted by law, a civil penalty equal to three times the amount of money contributed or expended by the corporation in violation of Section 13-2-23."
 
Many have expressed the opinion that if the Council adopts 13-2-23 and a corporation ignores it--what does the City do then? Without adopting a properly framed civil remedies provision, the City might spend a great deal of
 time and effort defending 13-2-23 against a well heeled corporate adversary and be able to collect, when the City wins, only $1,000 as a penalty. With the new sections that I propose above as Subsections (4) and (5) of 13-2-23, the City could collect its fees
 and costs, plus an amount that is scaled to the severity of the violation.
 
I might point out that the new sections that I propose above as Subsections (4) and (5) of 13-2-23 also will cause a corporation to pause before acting in defiance of the ordinance. If they ignore the ordinance and it is
 upheld in court, then there will be a significant financial penalty attendant on that action.
 
Finally, the private right of action--in other contexts such as environmental, employment and civil rights this private right of action is referred to as a private attorney general action--enables the City to choose whether
 or not to spend the resources to seek an injunction or civil penalties against a wrongdoer. The City may choose to let a private litigant--a registered elector--who is represented by competent counsel carry the burden of the litigation in defending the validity
 of the ordinance. 



Macon Cowles
Boulder City Councilor