Conservatives dissent as 9th Circuit declines rehearing on state’s nonprofit donor disclosure law

Conservative nonprofits seeking to strike down as unconstitutional California disclosure laws requiring them to give the state's attorney general the names of large donors suffered a major blow Friday when the 9th U.S. Circuit Court of Appeals said it would not reconsider a decision upholding the requirements.

The San Francisco-based federal appeals court said it would let stand a September decision by a three-judge panel concluding the disclosure requirements were not unduly burdensome under the First Amendment, an announcement that came with a critique from a number of Republican-appointed judges.

The five conservative jurists who objected said the decision puts donors who hold controversial views at risk of serious harassment if their names are revealed and ignores binding high court precedent.

"The Supreme Court has long recognized this danger and held that such compelled disclosures can violate the First Amendment right to association," wrote Judge Sandra S. Ikuta, who cited landmark decisions protecting the NAACP's right to keep its donors private in the 1950s and 1960s.

"In short, the panel's conclusion is contrary to the reasoning and spirit of decades of Supreme Court jurisprudence," she continued.

Ikuta -- who was joined by Judges Consuelo M. Callahan, Carlos T. Bea, Mark J. Bennett and Ryan D. Nelson -- said the original 9th Circuit panel incorrectly applied case law concerning groups that participate in elections.

The challengers in this case, she said, operated more like charities that do not participate directly in election efforts.

California law requires tax-exempt organizations to disclose privately to the state their Schedule B IRS 990 forms, which include the names and addresses of their biggest donors: those who give more than $5,000 or contribute more than 2 % of the group's annual budget.

The state attorney general's office says it uses the information to investigate charitable fraud and only releases donor information publicly in rare circumstances.

But the Americans for Prosperity Foundation, a libertarian political advocacy group founded by Republican mega donors David H. and Charles Koch, and a conservative religious liberty legal nonprofit, the Thomas More Law Center, say the disclosure requirements are unconstitutional.

They challenged the California disclosure laws separately in federal court after former California Attorney General Kamala D. Harris requested the information from a number of nonprofits in a sweep she said was aimed at discovering charity fraud.

Senior U.S. District Judge Manuel L. Real sided with the conservative organizations in 2016, granting them injunctions in the two cases. He reasoned the California laws were unconstitutional because the state's servers that held the information were susceptible to hackers.

During a bench trial, Americans for Prosperity presented evidence of nearly 1,800 donor lists that had been made available to the public online due to staff errors.

The 9th Circuit reversed Real in September when the cases were consolidated on appeal. Senior Circuit Judge Raymond C. Fisher wrote for the majority.

On Friday, Fisher and Judges Richard A. Paez and Jacqueline H. Nguyen defended their original decision. Americans for Prosperity v. Becerra, 2018 DJDAR 9121 (9th Cir. Sept. 11, 2018).

"The information is provided to regulators, who use it to prevent charitable fraud, but it is not made public," the judges wrote, calling the decision not to rehear the case "sensible."

They pointed to a ruling from the 2nd U.S. Circuit Court of Appeals last year that upheld a similar disclosure process from New York.

"Requiring the nonpublic disclosure of Schedule B information comports with the freedom of association protected by the First Amendment because it allows state and federal regulators to protect the public from fraud without exposing contributors to the threats, harassment or reprisals that might follow public disclosure," Fisher, Paez and Nguyen continued.

Dave Abrams, a spokesperson for Americans for Prosperity, said Friday his organization was still considering its next steps in the litigation.

"We appreciate the dissent's recognition of why this case is so important," he said. "We're committed to championing First Amendment liberties for all Americans and speaking out against measures that risk chilling diverse public discourse."

Thomas More Law Foundation president Richard Thompson told the Daily Journal his group would ask for Supreme Court review.

"It's an important First Amendment right to freedom of association and the right of people to feel free to contribute to organizations they like without fear of having their names revealed by an attorney general who may be politically opposed to them," Thompson said in a phone interview.

The press office for the state attorney general did not respond to a request for comment by press time.