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O'Connor v. City of Phila. Bd. of Ethics

Supreme Court of Pennsylvania

December 15, 2014


Argued September 10, 2014

Appeal from the Order of the Commonwealth Court entered on June 18, 2013 at No. 1744 CD 2012 affirming the Order entered July 24, 2012 in the Court of Common Pleas, Civil Division, Philadelphia County at No. 0711, March Term 2008. Appeal allowed January 6, 2014 at 376 EAL 2013. Trial Court Judge: Leon W. Tucker, Judge. Intermediate Court Judge: Bonnie Brigance Leadbetter, Kevin P. Brobson, JJ. Rochelle S. Friedman, Senior Judge.

For Cozen O'Connor, APPELLANT: Jared Dimock Bayer, Esq. Cozen O'Connor; Adam Craig Bonin, Esq.; Stephen A. Cozen, Esq. Cozen O'Connor

For City of Philadelphia Board of Ethics, APPELLEE: Stephen D. Brown, Esq. Dechert LLP

For City of Philadelphia, APPELLEE: Richard Gerson Feder, Esq. City of Philadelphia Law Department

For City of Philadelphia Board of Ethics, APPELLEE: Elisa Talora Wiygul, Esq. Dechert LLP

For Robert A. Brady, APPELLEE: Mr. Robert A. Brady

For Friends of Bob Brady, APPELLEE: Friends of Sob Brady

BEFORE: MR. JUSTICE BAER. CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, STEVENS, JJ. Madame Justice Todd and former Justice McCaffery did not participate in the consideration or decision of this case. Mr. Chief Justice Castille and Messrs. Justice Saylor, Eakin and Stevens join the opinion.


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The primary issue in this appeal is whether a law firm's post-election forgiveness of a political campaign committee's unpaid legal fees, which were incurred due to the firm's representation of a candidate in a ballot challenge, is subject to the contribution limitations established in the Philadelphia Campaign Finance Law, Philadelphia Code Chapter 20-1000, et seq. (" Code" ), as applicable in 2007. The Commonwealth Court held that the post-election forgiveness of debt would constitute a " contribution" to the candidate's political campaign under Section 1001(6) of the Code, and, thus, was subject to the $10,000 per year contribution limitation set forth in Section 1001(2). For the reasons set forth herein, we hold that the law firm's forgiveness of debt would not constitute a contribution to the candidate's political campaign as the debt at issue was not incurred " for use in . . . influencing the election of the candidate." Id. § 1001(6). Accordingly, we reverse the order of the Commonwealth Court.

I. Background

The record establishes that Robert Brady, a member of the United States House of Representatives from the First Congressional District, was a democratic candidate in the May 2007 primary election for Mayor of Philadelphia. Prior to the election, Thomas Knox, who was also a

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democratic mayoral candidate, filed a challenge to Brady's nomination petition, alleging defects in his statement of financial interests. The political campaign committee, " the Friends of Bob Brady Campaign Committee" (" Committee" ), hired Cozen O'Conner (" the Firm" ) to represent Brady in the litigation. There is no evidence suggesting that the Firm agreed to provide representation pro bono or at a discounted rate. The Firm successfully litigated the ballot challenge, keeping Brady on the ballot. Brady, however, lost his bid for the nomination.

After the election, the Committee had debt of $593,555.42, of which $448,468.09 constituted legal fees owed to the Firm for its representation of Brady in defending the ballot challenge. To determine how it could retire the outstanding debt after the election, the Committee requested an advisory opinion from the Ethics Board regarding whether contributions it received after the election for purposes of retiring campaign debt were subject to the campaign contribution limits set forth in Sections 1002(1) and (2) of the Code, as they existed in 2007.[1]

The Ethics Board subsequently issued its formal opinion, concluding that post-election contributions made to a political campaign to retire campaign debt, which had been incurred for use in advocating or influencing the election of the candidate, were subject to the Code's limits on contributions. In making this determination, the Ethics Board compared the Code's definition of " contribution" to the definitions of the same term in both state and federal campaign finance laws. Significantly, Section 1001(6) of the Code defines a " contribution" as " [m]oney, gifts, forgiveness of debts, loans, or things having a monetary value incurred or received by a candidate or his/her agent for use in advocating or influencing the election of the candidate." [2] Phila. Code § 1001(6).

The Ethics Board acknowledged that the Code's definition of " contribution," was not as explicit as the state election law's definition of " contribution," which encompasses, inter alia, " payments" or " forbearance" to a political committee " for the purpose of influencing any election in this Commonwealth or for paying debts incurred by or for a candidate or committee before or after any election." [3] Nevertheless,

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it did not believe that the Code's use of a less explicit definition of the term was indicative of City Council's intent to exclude post-election payments from the definition.

Rather, the Ethics Board found that the Code language at issue was more akin to the definition of " contribution" set forth in the federal campaign finance law, which, like the Code, specifically limited the amount of a contribution that may be given to a candidate, but was not explicit about whether the limit applied to a candidate's postelection fundraising. Ethics Board Advisory Opinion at 2-3.[4] It relied on the Federal Election Commission's interpretation of the federal statute as prohibiting post-election fundraising that exceeds contribution limits based on the policy that, otherwise, candidates could evade contribution restrictions by running their campaigns at a deficit, and later collecting contributions in excess of the Federal Election Code's limits after the election. Id. (citing United States v. Sun-Diamond Growers of California, 941 F.Supp. 1277, 1280 (D.D.C. 1996)). Thus, the Ethics Board concluded that City Council's use of language similar to that appearing in the federal statute suggested that the ordinance be interpreted consistently with it, i.e., that post-election contributions to retire campaign debt remain subject to the contribution limitations.

Thereafter, on March 3, 2008, the Firm filed a declaratory judgment action on its own behalf naming the Ethics Board and the City as defendants, seeking a declaration that post-election debt forgiveness to a political campaign was not a " contribution" under Section 1001(6) of the Code. The Firm also sought a declaration that legal expenses incurred by the Committee were not " expenditures," and, therefore, funds raised by a campaign to defray such expenses were not subject to the contribution limits of the Code.[5]

The Ethics Board and the City filed preliminary objections to the Firm's complaint on April 14, 2008, arguing that the Firm lacked standing to seek the declaratory judgment. On June 10, 2008, the trial court sustained the preliminary objections, and dismissed the Firm's complaint. It held that the Firm did not have a direct interest in the litigation as its relationship with the Committee regarding the debt was too tenuous, and that an advisory opinion, such as that of the Ethics Board, is not a final adjudication subject to review by the court.

On appeal to the Commonwealth Court, the Firm contended that it had standing to pursue a declaratory judgment action because it could not collect, within a reasonable amount of time, the $448,468.09 the Committee owed in legal fees. It also

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contended that the Board's interpretation of the Code frustrated the Committee's efforts to raise funds to retire campaign debt. The Commonwealth Court affirmed the trial court's grant of preliminary objections, holding that the Firm, as a mere unpaid creditor, lacked standing to seek a declaratory judgment because it did not have a direct, immediate and substantial interest in the outcome of the appeal. Cozen O'Connor v. City of Philadelphia, Bd. of Ethics, 970 A.2d 504 (Pa. Cmwlth. 2009).

The Firm subsequently filed a petition for allowance of appeal with this Court, which we granted on December 29, 2009, limited to the issue of whether the Firm had standing to obtain a declaratory judgment to determine whether it could forgive the outstanding debt of the Committee at one time and in toto, without violating Philadelphia's campaign contribution limitations set forth in the Code. Cozen O'Connor v. City of Philadelphia, Bd. of Ethics, 605 Pa. 129, 987 A.2d 715 (Pa. 2009). This Court denied allocatur as to all remaining issues. Id.

In 2010, prior to this Court's resolution of the appeal on the standing issue, the Philadelphia Campaign Finance Law was amended in two pertinent respects. First, on June 16, 2010, Philadelphia Mayor Michael Nutter signed into law Bill No. 100122, which specifically limited post-election contributions. The Bill added a new term, " post-candidacy contribution" that expressly includes: " forgiveness of debts . . . received by a former candidate or his/her agent for use in retiring debt that was incurred to influence the outcome of a covered election . . . ." Phila. Code § 20-1001(14). The bill also provided an annual dollar limit of $10,600 on post-election contributions made by corporations. Id. § 20-1002(5).

Second, the Ethics Board promulgated a new Regulation No. 1, which expanded upon existing campaign finance regulations and took effect on September 27, 2010. See Philadelphia Board of Ethics Regulation No. 1. Section 1.28 added a provision permitting a campaign creditor to forgive a former candidate's debt without being bound by contribution limitations if enumerated requisites were satisfied.[6] Notably, Regulation No. 1 also provided a new means for candidates to handle legal defense costs, authorizing the establishment

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of a " litigation fund committee," Regulation No. 1, Subpart A, 1.1(n), which can receive enumerated contributions " that do not count toward contribution limits." Id., Subpart B, 1.11(a),(b).

Subsequently, this Court entered a decision on February 23, 2011, reversing the Commonwealth Court's finding of lack of standing, and remanding for further proceedings. Cozen O'Connor v. City of Philadelphia, Bd. of Ethics, 608 Pa. 570, 13 A.3d 464 (Pa. 2011) (" Cozen I" ). We held that the Firm " sufficiently pled as a basis for relief in its declaratory judgment action its own inability to forgive the total outstanding debt without potentially violating the Ethics Board's interpretation of the campaign contribution limitations of the Code. . . ." Id. at 472. We went on to conclude that the Firm:

possesses standing in this regard in that it has a substantial, direct, and immediate interest in knowing whether it may, in its own right, forgive the total outstanding debt owed to it by the Committee without running afoul of the Code's campaign contribution limitations, as interpreted by the Ethics Board, and thereby face significant fines and sanctions for such violations.


On remand, the parties filed cross motions for judgment on the pleadings. In the Firm's motion, it reiterated its request for a declaration that, under the Code as it existed in 2007, contribution limits did not apply to post-election campaign fundraising and/or the Firm's forgiveness of debt because the legal fees owed by the Committee did not constitute " expenditures" or " contributions." Following oral argument, the trial court entered an order denying the Firm's motion for judgment on the pleadings, and granted, in part, the Board's counterpart motion. It ruled that the case was controlled by the Code as it existed prior to the 2010 amendments, as those amendments were not retroactive.

In its Pa.R.A.P 1925(b) statement of errors complained of on appeal, the Firm contended that: (1) under the Code applicable in 2007, the legal fees incurred to defend Brady in the ballot challenge were not incurred " for the purpose of influencing a covered election," and, thus, were not subject to regulation as covered " expenditures; " (2) the Firm's forgiveness of legal fee debt at one time and in toto would not constitute a " contribution" subject to limitation under the Code; and (3) the trial court erred in declining to address ...

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