CLEAN CAMPAIGN ACT: Requirement that political committees contemporaneously provide a candidate any campaign advertisement published within 10 days of an election if it refers to, but does not endorse, the candidate, does not pass constitutional muster… Molloy.

Montana Citizens for Right to Work challenges the “Fair Notice” provision of Montana’s Clean Campaign Act (MCA 13-35-402) on 1st Amendment and equal protection grounds.

Montana Citizens is registered as an incidental political committee. 6 days before the 11/20 election it sent 16,000 mailers to voters in 20 legislative districts with 3 components:

(1) 2020 candidate surveys with information on where local candidates stood on issues related to organized labor and union dues;

(2) letters elaborating on the candidate survey results and urging voters to express their views on right to work issues to the candidates;

(3) surveys to be returned that indicate whether the voter contacted the local candidates about right-to-work issues.

The “mailer would not qualify as a direct endorsement of any particular candidate/s, and none directly call for the election of any candidate/s or the defeat of other candidate/s.” (As a point of interest, in Bayless (9th Cir. 2003) — a suit challenging a similar statute in Arizona — the plaintiff complied with the law and only then challenged its constitutionality. Doing so did not prejudice the plaintiff’s standing but “demonstrated a commendable respect for the rule of law.”)

On 10/30/20 Trent Bolger of the Montana Democratic Party filed a complaint with CPP Mangan alleging that Montana Citizens violated the Fair Notice provision under §13-35-402 when it did not notify the candidates identified in the mailers. Mangan upheld Bolger’s complaint and offered to settle the controversy if Montana Citizens agreed to an $8,000 fine. Montana Citizens instead sued Mangan 9/13/21 and requested summary judgment. A hearing was held 11/30/21 following which the parties were ordered to file supplemental briefing on Bayless.

Montana Citizens first argues that the Fair Notice provision violates the 1st Amendment, insisting that because it is a content-based restriction that is not viewpoint neutral it must meet the requirements of strict scrutiny and fails to do so. Mangan argues that the lower standard of “exacting” scrutiny is the proper measure because the provision is merely a disclosure statute and, under this standard, it is constitutional. Alternatively, he takes the position that any offending part of the statute can be severed to meet the 1st Amendment’s strictures. Montana Citizens has the better argument on both points. When all is said and done, a statute is presumptively constitutional if it “applies to particular speech because of the topic discussed or the idea or message expressed. Reed (US 2010). Because the Fair Notice provision is content-based, strict scrutiny applies. (The fact that “exacting scrutiny” also requires that the law be “narrowly tailored,” Bonta (US 2021), diminishes the import of this conclusion. Thus the provision would fail under either standard.)

To survive strict scrutiny Mangan must show that §13-35-402 is narrowly tailored to achieve a compelling state interest. Victory Processing (9th Cir. 2019). The statute does not survive such scrutiny.

Mangan insists that the provision serves 3 compelling interests: “deterring corruption or the appearance of corruption,” “providing the electorate with information,” and “protecting candidates’ right to respond late in a campaign.” He presents no evidence that the disclosure of negative campaign ads to individual candidates combats corruption and fails to connect the provision to an informed electorate. That leaves only the State’s purported interest in giving candidates a right to respond to negative campaign ads on the eve of an election. In a perfect political place that makes sense. But last-minute negativity is a reality whether endorsed or not. Mangan has not shown that last-minute ads are more or less likely to contain “false” information than any other advertisement. His reliance on Alvarez (US 2012) to show that the right to respond is a compelling interest is misplaced. Although Alvarez stated that “the First Amendment itself ensures the right to respond to speech we do not like,” “it is key that the regulatory scheme in Alvarez dealt entirely, and only, with false speech.” 281 Care Comm. (8th Cir. 2014). And as explained in McIntyre (US 1995), a case challenging an Ohio law prohibiting anonymous campaign literature, the state “cannot seek to punish fraud indirectly by indiscriminately outlawing a category of speech, based on its content, with no necessary relationship to the danger sought to be prevented.” Based on the record in this case, the “right to respond” does not provide a compelling interest justifying the burdens that Montana has placed on “negative” campaign speech. Mangan “has simply decried ‘negative campaigning’ in general, and while the Court might agree that negative campaigning is distasteful, that is not a sufficient basis for interfering with core first amendment rights.” Shrink Missouri Gov’t PAC (ED Mo. 1995).

Moreover, even if the State’s identified interest was compelling, Mangan has not shown that the statute is narrowly tailored to achieve that interest. It requires disclosure in all contexts except endorsements. A mailer that merely outlined voting records of 2 candidates on an issue with no further commentary would be subject to disclosure. Thus the law is overbroad. It is also underinclusive. It only applies in the last 10 days of an election, an omission that is particularly problematic under Montana law as absentee ballots are mailed 25 days before an election. It also does not cover certain types of communication. Mangan provides no evidence that oral communication is inherently different from print. Disclosure is not required if a candidate or PAC went to a town hall meeting and disparaged an opponent, even falsely.

Mangan’s principal argument is premised on the unique interest a candidate has in responding to negative advertisements. He argued at oral argument that it was not underinclusive because it need not include endorsements to achieve the State’s interest. Thus extending the statute to include disclosure related to endorsements would frustrate the very purpose of the law. Therefore it cannot be made constitutional through severance.

Montana Citizens also challenges the Fair Notice on equal protection grounds. It alleges that 2 groups are not subject to the provision: speakers who are not candidates or political committees and mailers that endorse candidates. For purposes of the Fair Notice, political committees and candidates are not “similarly situated” to other individuals. Montana Citizens’ argument as to endorsing and non-endorsing political committees raises a closer question as they represent similarly situated groups that are classified based on their viewpoint on a candidate and that distinction is fundamental to the stated interest behind the provision. Mangan provides no argument to support a compelling interest in such viewpoint discrimination. Absent any argument or evidence as to how a compelling state interest is served in treating PACs espousing different messages incongruously, the law violates the Equal Protection Clause.

Many would agree that while Montana’s desire to promote discourse in response to negative campaign advertisements is laudable, but the 1st Amendment cannot be so easily overcome. “The First Amendment requires that politicians ‘tolerate insulting, even outrageous, speech in order to provide adequate breathing space to the freedoms protected by the First Amendment.’” Bayless (quoting Boos (US 1988)).

§13-35-402 is facially unconstitutional and its provisions cannot be severed.

Montana Citizens for Right to Work v. CPP Mangan, 44 MFR 268, 1/18/22.

Matthew Monforton (Monforton Law Offices), and Quentin Rhoades (Rhoades, Siefert & Erickson), Missoula, for Montana Citizens; Jaime MacNaughton (Office of CPP) and John Morrison & Anne Sherwood (Morrison, Sherwood, Wilson & Deola), Helena, for Mangan.

PERSONAL JURISDICTION declined over Idaho wolf advocates’ alleged infringement of Montana wolf advocates’ website and “relistwolves” trademark in a video… Christensen.

(For purposes of this motion the Court takes as true the “uncontroverted allegations in the complaint” but does not “assume the truth of allegations which are contradicted by affidavit.” Mavrix Photo (9th Cir. 2011). Any factual disputes are resolved in WOTR’s favor. Id.)

Wolves of the Rockies complains that Suzanne Stone and the International Wildlife Coexistence Network are infringing on its trademarks in violation of Montana and federal law. WOTR is a Montana corporation; IWCN is an Idaho corporation; Stone resides in Idaho and is IWCN’s executive director.

Without a doubt the parties share a passion for the conservation of wild wolves in western America, but, unsurprisingly, they do not always agree on how to accomplish their shared objectives. The record reflects a history of conflict between WOTR and Stone. An affidavit by WOTR Pres. Marc Cooke recounts an incident from 2010 when he ran into her at a hearing in the Federal Courthouse in Missoula. Their conversation was “very short and ended rudely” with Stone “curtly turning her back” after he revealed his affiliation with WOTR. An affidavit from WOTR VP Kim Bean recounts an incident at Chico Hot Springs in 3/13 during a wolf preservation event organized by Stone. Stone asked Bean “who I was and my affiliation.” When Bean said she was with WOTR, Stone said she was not welcome and had to leave. She complied.

Stone contacted WOTR “out of the blue” in 3/21 stating that she was interested in collaborating to protect “wolves in Montana and the Northern Rockies.” WOTR was preparing to launch a “wolf protection campaign” in response to Montana legislative efforts to authorize wolf hunting. The campaign included the phrase #RelistWolves and a video designed to “educate the public about the plight of wolves in North America.” The parties began chatting about WOTR’s “objectives and plans over the next year” including the #RelistWolves campaign and video. Stone transmitted a variety of plans to WOTR and suggested that it bring in a public relations firm named Resolve. In one proposal WOTR would have paid Resolve $167,000 for 6 months of services. WOTR rejected this proposal because it was uncertain where the money would be going.

Stone followed up with another proposal in 5/21 whereby WOTR would have paid $184,250. WOTR discovered that $86,250 would go directly to IWCN. WOTR then began to believe that Stone was suddenly eager to work with them because she and IWCN could monetarily benefit. No deal was struck but Stone continued to submit project proposals to WOTR.

On 10/19/21 WOTR participated in a National Wolf Call hosted by the Endangered Species Coalition. It appears to be a recurring call involving “about 50 participants or organizations that work on wolf preservation matters.” During this call WOTR was supposed to occupy a “prominent position in the agenda” to lay out its #RelistWolves strategy” but Stone apparently hijacked this time to show a video she had created which related to “the same subject matter” that WOTR previously discussed with her and used, without WOTR’s permission, its website relistwolves.org. Many people in Montana attended this call.

WOTR confronted Stone about her video’s use of its relistwolves.org. She removed it from her video but registered her own website, relistwolvesnow.org. This common use of “relistwolves” in their websites created confusion among wolf advocates, and Cooke received inquiries about whether WOTR, Stone, and IWCN were associated.

Stone continued using the “RelistWolves” trademark that WOTR claims to possess, including on her own and IWCN’s website and social media pages. WOTR asked her to stop using it but she refused. On 11/16/21 WOTR sued Stone and IWCN complaining that they are infringing on its trademarks and engaging in unfair competition in violation of Montana and federal law. (The crux of these claims is Defendants’ alleged misappropriation of WOTR’s intellectual property: the ostensible trademarks “RELISTWOLVES” and “#RELISTWOLVES.”) WOTR sought preliminary injunctive relief and the Court set a hearing for 1/26/22. Defendants moved to dismiss and submitted an affidavit from Stone establishing that she does not have an office or residence in Montana and does not “own, use, possess, or rent any property in Montana” and she has never “acted as a director, manager, trustee, or other officer of a Montana corporation or other entity with its principal place of business in Montana” or been a personal representative for a Montana estate or insured anything within the state. IWCN’s contacts with Montana appear to be similarly sparse. Stone’s affidavit provides that IWCN is not affiliated with any Montana corporation, “has not offered, sold, or distributed any merchandise, printed materials, or other goods in Montana,” and does not insure “any person, property, or risk located within Montana.” It does appear that IWCN maintains a website but it is accessible to anyone in the world.

Defendants move to dismiss for lack of personal jurisdiction and improper venue. The Court need only address personal jurisdiction. WOTR bears the burden of establishing personal jurisdiction over Defendants but because the Court has not held an evidentiary hearing it “need only make a prima facie showing of jurisdictional facts.” Schwarzenegger (9th Cir. 2004). Jurisdictional facts are derived largely from the complaint unless controverted by a declaration of affidavit. Id. Applying this standard, the Court must grant Defendants’ motion.

The Court finds no basis for the exercise of general personal jurisdiction over Defendants. They are not at home in Montana; they are at home in Idaho. Stone resides in Idaho, IWCN is organized there and maintains its principal place of business there. WOTR appears to recognize this and instead argues that general personal jurisdiction exists because this is the sort of exceptional case contemplated by the 19th footnote in Daimler (US 2014). The crux of this argument is that Defendants have regularly solicited business in Montana and otherwise routinely entered Montana in furtherance of their “wolf-related activities.” Defendants respond that “a handful of discrete Montana-related contacts that supposedly occurred over the past eleven years” are insufficient to render them “at home” in Montana. The Court agrees. (Defendants also argue that because WOTR did not plead general personal jurisdiction in its complaint, just specific, it cannot level that argument now. The Court disagrees. The personal jurisdiction analysis may, and indeed must, extend beyond the complaint. Data Disc (9th Cir. 1977); Schwarzenegger (a plaintiff “cannot simply rest on the bare allegations of” the complaint).

Cases in which a defendant who does not live in Montana, is not organized here, and does not maintain a principal place of business here, and has such substantial contacts with Montana to be subject to general personal jurisdiction are exceedingly rare. That Stone, on behalf of IWCN, may have traveled to Montana in furtherance of their organizational activities periodically in years past and otherwise offered her services to Montana organizations is not sufficient to render her or IWCN at home here. Martinez (9th Cir. 2014) (a French corporation having contracts in California worth “$225 to $450 million” and routinely advertising and soliciting business in California is not the “exceptional case” to which the Daimler exception applies). In short, general personal jurisdiction does not exist.

“Specific jurisdiction is different: It covers defendants less intimately connected with a State, but only as to a narrower class of claims.” Ford. The exercise of specific personal jurisdiction generally turns on whether the defendant has had some contact with the forum state and the suit stems from that contact. Id. Proper exercise of specific personal jurisdiction is a matter of both state law and the Constitution. Caddy (9th Cir. 2006).

Defendants contend that none of the circumstances in MRCivP 4(b)(1)(B) applies and even if they did the exercise of personal jurisdiction would offend due process. WOTR contends that its claims arise from Defendants’ “intentional acts” of trademark infringement and misappropriation of intellectual property directed into Montana.

Because any exercise of personal jurisdiction under Montana law must comport with due process the Court begins (and ultimately ends) its inquiry there. King (9th Cir. 2011). Turning to the 1st factor — purposeful availment — because this case involves intellectual property torts and the “allegedly tortious conduct took place outside the forum” but apparently had “effects inside the forum,” the Court applies an “effects test” established in Calder (US 1984) under which “a defendant purposefully directs its activities toward the forum when the defendant has (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.” Ayla (9th Cir. 2021).

Conduct is not expressly aimed at the forum state just because the defendant knows the plaintiff resides there. Id. (“the plaintiff cannot be the only link between the defendant and the forum”). There must be evidence that the defendant directly targeted its conduct into the forum. Id. Because this is a trademark infringement case arising largely in “the context of cyberspace,” Cybersell (9th Circ. 1997) is instructive. It addressed whether use of an “allegedly infringing service mark” on a passive website “suffices for personal jurisdiction in the state where the holder of the mark has its principal place of business.” It concluded that it did not, holding that the operation of “an essentially passive home page on the web” using an allegedly infringing mark, alone, cannot establish “purposeful availment” for specific personal jurisdiction, emphasizing that the noncommercial nature of the website lacked any deliberate direction toward the forum state.

Subsequent cases are consistent. In Boschetto (9th Cir. 2008), a California plaintiff bought a car on eBay from defendants in Wisconsin. The plaintiff had it shipped to California and it was not what he expected. He sued the defendants in Federal Court in California, but the Court dismissed for lack of personal jurisdiction. The 9th Circuit affirmed, finding that the “one-time contract for the sale of a good [through eBay] that involved the forum state only because that is where the purchaser happened to reside” was insufficient to subject the defendants to the jurisdiction of the Federal Court in California. It recognized the Supreme Court’s “note of caution that traditional jurisdictional analyses are not upended simply because a case involves technological developments that make it easier for parties to reach across state lines.”

Ayla is particularly informative. A California “beauty and wellness brand” sued an “Australian skincare company” for trademark infringement and other violations of the Lanham Act, focusing on the defendant’s online activities including selling and shipping products worldwide through its website. Less than 2% of its sales were to California and it never directed itself primarily to Californians. The 9th Circuit focused on whether the defendant was subject to nationwide personal jurisdiction under Rule 4(k)(2). An indispensable basis for nationwide personal jurisdiction is that the defendant not already be subject to personal jurisdiction in any state. The District Court’s holding went unchallenged on appeal and the 9th Circuit recognized that nationwide personal jurisdiction is reserved for the “unusual” circumstance where “a defendant has the requisite contacts with the United States but not with any one state.”

With this authority in mind, the Court finds that WOTR’s theory of specific personal jurisdiction hits a snag almost right away. To the extent that its claims rest on Defendants’ operation of the relistwolvesnow.org website, exercise of specific personal jurisdiction is foreclosed by the Cybersell line of cases. The website is passive, noncommercial, and broadly advocates for protection of wolves in North America and, more particularly, the West. Nothing in the record establishes that it is directed at Montana or even particularly frequented by Montanans.

Montana is one of many states that is the focus of wolf conservation but the website allegedly bearing an infringing mark is directed at the world at large, or more narrowly, North America, with the hopes of raising awareness about wolf conservation activities. Some of these activities may involve issues in Montana or be of interest to Montanans, but this is not enough to fairly say the website is purposefully directed to Montana. To the extent that WOTR’s theory of specific personal jurisdiction rests on Defendants’ allegedly infringing website, Defendants have not purposefully availed themselves to jurisdiction in Montana so as to satisfy due process.

WOTR’s theory of personal jurisdiction as to Defendants’ alleged use of its “relistwolves” trademarks in a video is similarly unavailing. The infringement allegedly occurred during a phone call between persons and organizations “that work on wolf preservation matters,” with some, but not all, from Montana. Indeed, it appears that the call is focused on nationwide (and even international) wolf conservation activities. This is not enough to find purposeful availment in Montana for specific personal jurisdiction. The Court does not find that the actions of Defendants of which WOTR complains were purposefully directed at Montana. The exercise of personal jurisdiction would not offend due process.

Dismissed for lack of personal jurisdiction. The Court does not reach the issue of venue.

Wolves of the Rockies v. Stone and International Wildlife Coexistence Network, 44 MFR 267, 1/13/22.

Gregory McDonnell (Orr McDonnell Law), Missoula, and Theodore Sabety (Sabety & Associates), NYC, for WOTR; John Kauffman (Kasting Kauffman & Mersen), Bozeman, and Alexander Reid (White & Case), NYC, for Stone and IWCN.

PSC REDISTRICTING: Preliminary injunction granted enjoining SOS from certifying candidates for Districts 1 & 5 pending final disposition of malapportionment claim… Molloy, Watford, Morris.

Bob Brown, Hailey Sinoff, and Donald Seifert bring this action against SOS Jacobsen alleging that the Montana Public Service Commission’s 5 districts are malapportioned in violation of the 14th Amendment in that they do not reflect the realities of Montana’s population distributions and these distortions run afoul of the 1 person 1 vote principle. They sought appointment of a 3-judge panel pursuant to 28 USC 2284(a). The 9th Circuit Chief Judge appointed a panel composed of District Judges Molloy and Morris and 9th Circuit Judge Watford. Plaintiffs then moved for a TRO and/or preliminary injunction to enjoin the candidate certification process in Districts 1 & 5 which are scheduled to hold elections in 2022. The TRO was granted and a preliminary injunction hearing was set for 1/7/22. Between issuance of the TRO and the 1/7 hearing Jacobsen responded in opposition to a preliminary injunction. Plaintiffs noted that she did not file an answer or other responsive pleading as required by Rule 12. At the hearing the parties acknowledged that they had agreed to construe Jacobsen’s response in opposition as a free-standing motion to dismiss or stay. Following oral argument the Court entered an order clarifying that the TRO would continue to 1/18 or until an order issued on the request for a preliminary injunction. Plaintiffs’ request for a preliminary injunction is granted. A final determination on the merits and any remedy is yet to be resolved.

Jacobsen argues that Plaintiffs’ claim is unripe because the Legislature has not had an opportunity to respond to the 2020 Census data as it was only released in 8/21. She points to “ample evidence that current legislators and holdover legislators will address this issue through the 2021-22 interim and in the 2023 regular session. This evidence consists of a letter from Rep. Zolnikov and an email from Sen. Hertz submitted after this case was filed, appearing to demonstrate interest in addressing reapportionment of the districts in the 2023 session.

“In determining whether a dispute is ripe, the court looks to the situation as of the time suit was filed. Watada (D.Haw. 2002). Events that occur after a suit is filed may moot the action, but the doctrine of ripeness is not affected by such subsequent events. Id. While the communications from Zolnikov and Hertz — or any like action from other legislators — may be the impetus for future events that have the potential to render Plaintiffs’ action moot, those communications and the Legislators’ purported intent have no effect on ripeness of this action. Moreover, ripeness is contingent on whether the facts demonstrate that there is yet any need for the court to act. Narouz (9th Cir. 2010). The communications from legislators support the proposition that some action is necessary to redistrict the PSC’s map, and the essential issue is whether the redrawn 5-district map should derive from the Legislature or the Federal Judiciary in advance of the 2022 election cycle. That question goes beyond the ripeness inquiry and strikes at the merits of the case. This case is ripe for adjudication.

Plaintiffs “must establish that they are likely to succeed on the merits, that they are likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in their favor, and that an injunction is in the public interest.” Winter (US 2008).

Plaintiffs make the case that the districts are unconstitutional because they deny every voter his “constitutional right to have his vote counted with substantially the same weight as that of any other voter.” Hadley (US 1970). The Supreme Court’s emphasis that “states must draw congressional districts with populations as close to perfect equality as possible,” Evenwel (US 2016), means that when a state

decides to select persons by popular election to perform governmental functions, the Equal Protection Clause of the Fourteenth Amendment requires that each qualified voter must be given an equal opportunity to participate in that election, and when members of an elected body are chosen from separate districts, each district must be established on a basis that will insure, as far as is practicable, that equal numbers of voters can vote for proportionally equal numbers of officials. Hadley.

“Where the maximum population deviation between the largest and smallest district is less than 10% a state or local legislative map presumptively complies with the one-person, one-vote rule.” Evenwel. Where the difference exceeds 10% the map may only be constitutional if the state shows that the districts accommodate for some type of “traditional districting objective” such as “preserving the integrity of political subdivisions, maintaining communities of interest, and creating geographic compactness.” Id.

Considering the 2020 Census, the ideal population for each district would be 216,845. The population of the smallest district, District 1, deviates downwardly 14% from the ideal population while that of the largest, District 3, deviates upwardly 10%. Under the Evenwel formula, the maximum deviation is 24%. Jacobsen concedes that the 2020 Census indicates a shift in Montana’s population that “results in large deviations across representative political districts.” However, she argued at the hearing that the 2020 Census data is inapposite to the current challenge because, despite the 2022 election cycle, the Legislature will not have an opportunity to respond to the 2020 data until 2023, and thus Plaintiffs’ claims are essentially time-barred by Benisek (US 2018), which emphasized that “a party requesting a preliminary injunction must generally show reasonable diligence.” Accordingly, she argues that any viable challenge to the 2022 election cycle must be premised on the 2010 Census and such a challenge would fail because of the time lapse to the present action. She also argues that Plaintiffs are unlikely to succeed on the merits because the law requires that the Legislature take the first run at redistricting. Neither argument is persuasive at this point.

The argument that Plaintiffs’ challenge is time-barred is unpersuasive for several reasons. First, it is measured by data from the 2020 Census and seeks to compel redistricting of all districts. Thus assuming arguendo that Jacobsen’s time bar argument holds water it would be inapplicable to Plaintiffs’ challenge. They protest the boundaries of all districts, and 3 of the 5 will be subject to the 2024 election cycle in which the parties agree that the 2020 Census will be relevant. Notably, they agree that the current districts exhibit significant deviations based on the 2020 Census. Thus the breadth of Plaintiffs’ challenge and the parties’ agreement that the current district do not reflect the realities of Montana’s population distributions means they are likely to succeed on the merits. While the parties disagree about the remedy, that dispute is independent of any time-bar argument.

Second, the emphasis on diligence in Benisek does not preclude Plaintiffs’ challenge. The Benisek plaintiffs challenged an allegedly politically gerrymandered map and sought a preliminary injunction 6 years — 3 general election cycles — after it was adopted. The Supreme Court characterized this as an “unnecessary, years-long delay” that weighed against the preliminary injunction. Such a characterization does not give rise to an in essentia statute of limitations. Even if it did, the difference between alleged constitutional injuries between Benisek and this case casts doubt on the applicability of the Benisek reasoning. Unlike in Benisek, Plaintiffs’ challenge is not rooted in the release of a map that created unconstitutional districts based on malapportioned political groupings; they challenge a stale map on the basis that new data demonstrates that the districts which were once presumptively constitutional are no longer so.

Additionally, there is no statutory or constitutional requirement that the Legislature act at certain intervals to redistrict the PSC’s districts. (The Montana Constitution requires that legislative districts be reapportioned in the 3rd year after a decennial census but there is no authority stating an analogous timeline for reapportionment of the PSC districts.) Consequently, it is difficult to reconcile how, under Jacobsen’s theory, Plaintiffs have acted both prematurely and belatedly in bringing this challenge because there is no requirement that the Legislature consider or change the PSC’s districts on a specific timeline. At this stage, Plaintiffs have shown a likelihood of success on the merits.

According to Plaintiffs, the 2020 Census indicates that the 5 districts are constitutionally malapportioned, which will necessarily result in a violation of 1 person 1 vote if not corrected before the 2022 election cycle. Jacobsen argues that there is at least a colorable dispute of fact as to whether the deviations based on 2010 data are unconstitutional. At this stage Plaintiffs have the more persuasive argument. Viewing the issue as they frame it, there is a presumption of unconstitutionality because the maximum deviation is above 10%. If the 2022 election cycle proceeds on the current districts the 2020 Census shows that the voters will be precluded from exercising their 14th Amendment right to have their votes counted with substantially the same degree of weight as other votes. That such a violation might be limited to the districts up for election in 2022 does not eliminate the presently occurring harm because even temporally limited constitutional deprivations represent irreparable harm. Otter (9th Cir. 2012).

Jacobsen may yet show that the deviations of the current map based on the 2020 Census accommodate a recognized interest such as maintaining integrity of political subdivisions. Mahan (US 1973). But at this stage the presumption of unconstitutionality that attaches at this point gives rise to the likelihood of irreparable harm because the malapportionment appears to improperly distribute the weight carried by each vote in the districts. The concern is Jacobsen’s timing argument regarding the challenge, but Plaintiffs note that it is the stale mapping when measured by the 2020 Census that proves the point.

Even if the issue is viewed as Jacobsen frames it, Plaintiffs still show a likelihood of irreparable harm. At the hearing she noted that there may be fact issues as to whether the current districts under the 2010 Census are unconstitutional because the deviation hews somewhat closely to the 16% maximum that was found permissible in Mahan. However, in Mahan the State succeeded in rebutting the presumption of unconstitutionality by pointing to permissible legislative intent in preserving political subdivisions. Plaintiffs show that the State could have drawn a map in 2010 that preserved county boundaries while reducing the maximum deviation below 3%. Therefore at this juncture the presumption of unconstitutionality exists as to the existing map, even based on the 2010 Census.

In balancing the equities, both parties invoke confusion by voters and candidates and comity. As a threshold matter, the concern that any change to the maps will significantly disrupt and add confusion to the 2022 election cycle may be somewhat mitigated by expeditious resolution of this case. Thus the case will be set on an expedited trial or summary judgment briefing schedule so the merits may be resolved prior to the 3/14/22 filing deadline.

Jacobsen also argues that Plaintiffs’ requested relief is “unprecedented” and would likely exacerbate voter confusion. While the remedy if Plaintiffs succeed on the merits is reasonably subject to dispute, Jacobsen’s concerns about the appropriateness of the requested remedy do not tip the scales in her favor. The preliminary injunction is narrower than the relief Plaintiffs request on their overall challenge, and Jacobsen’s concerns that some voters might be shuffled throughout districts is speculative and does not diminish the reality that at this stage they have established a likelihood that a constitutional injury is occurring. Highlighting the possibility that confusion or other challenges may arise in connection with remedying the presumed injury does not obviate the injury.

As to comity, Jacobsen’s argument that the Legislature should have the opportunity to respond to the 2020 Census has merit. But at the same time the limited record shows that it has consistently failed to remedy malapportioned districts. Importantly, there is no timeline governing redistricting of the PSC districts. Left unresolved, there are likely significant violations of 1 person 1 vote. Plaintiffs’ showing of a likelihood of irreparable harm, which falls in the shadow of the Legislature’s inaction, and the lack of a constitutional impetus to guarantee a legislative remedy diminishes the persuasiveness of Jacobsen’s argument that deference to the Legislature is appropriate at the preliminary injunction stage. This factor tips in Plaintiffs’ favor.

The public has an interest in “fair and effective representation,” Evenwel; the public has an interest in “orderly elections” that may be furthered by temporarily restraining the candidate certification process while the PSC’s districts are under review, Benisek; and the public has an interest in “equal voting strength for each voter,” Hadley. Jacobsen does not dispute that the public possesses these interests but emphasizes that “the public interest inquiry primarily addresses impact on non-parties rather than parties.” (Bernhardt (9th Cir. 2003). Consequently, she argues that the Legislature’s interest in maintaining control over the redistricting process is owed deference until the “Legislature fails to timely act after having an adequate opportunity to do so.” Id. However, the Legislature has had opportunities to act and has failed to do so. Although the 2020 Census data was released in 8/21 it has not acted since 2003 to redistrict the PSC despite legislative bills to address the concern. The current data confirms what the 2010 data seems to show: the current districts are malapportioned. Thus, the public’s interest in effective representation and equal voting strength outweighs the Legislature’s interest in involvement in the process right now. And it is not precluded from acting in advance of the 2024 elections — or even the 2022 elections if a special session is called.

Jacobsen’s focus on the Legislature as a harmed non-party also emphasizes the need for public input and comment in the process during the next session. However, to allow the candidate certification to proceed based on a presumptively unconstitutional map and despite Plaintiffs’ showing that irreparable harm is likely occurring for the sake of legislative public comment without assured action would teeter close to elevating form over substance. The opportunity for public input is a mechanism that helps advance public interests in fair & effective representation; asking the public to endure a present injury to those interests so that it may have an opportunity to weigh in during a prospective legislative undertaking ignores the ubiquitous nature of 1 person 1 vote under the 14th Amendment.

Plaintiffs’ motion for a preliminary injunction is granted. Jacobsen is preliminarily enjoined from certifying candidates for PSC in Districts 1 & 5 pending a final disposition on the merits.

 

 

– – – 

 

Candidate filing in Districts 1 & 5 would ordinarily begin 1/13/22 and close 3/14/22. An expedited scheduling order with requirements for pretrial proceedings, with the final pretrial conference and bench trial or hearing on dispositive motions set for 3/4/21, is issued so that this action is resolved prior to the 3/14/22 filing deadline.

Brown, Sinoff, and Seifert v. SOS Jacobsen, 44 MFR 266, 1/13/22.

Constance Van Kley & Rylee Sommers-Flanagan (Upper Seven Law), Helena, and Joel Krautter (Netzer Law Office), Sidney, for Plaintiffs; Brent Mead (AG’s Office).

INSURANCE: Third Amended Complaint fails to save previously rejected challenges to GEICO’s subrogation practices, no further amendment allowed… Molloy.

While the facts & claims of this case become less clear with each amended pleading, they are reconstructed from prior pleadings:

James Lee was in an MVA caused by another driver 8/5/19. He was injured and his and his wife Tracy’s vehicle was totaled. They were personally insured by GEICO and James Lee Construction had a commercial policy with Government Employees Ins. Lees received $25,000 policy limits from the at-fault driver’s bodily injury coverage and $5,798.64 from the at-fault driver’s property coverage. GEICO and GEICO General subrogated $14,194 from the at-fault driver’s insurer, which Lees claimed would prevent them from fully recovering. GEICO paid Lees $13,567 for their property damage prior to seeking subrogation and, following its subrogation recovery, reimbursed their $500 deductible.

On 4/3/20 Lees sued in State Court on behalf of themselves and a putative class challenging subrogation practices of GEICO, GEICO General, and other GEICO entities with which they do not hold policies. The case was removed to this Court 5/12/20. There have been 3 previous rounds of significant briefing.

In 6/20 GEICO sought to dismiss the original complaint for lack of standing, lack of personal jurisdiction, and failure to state a claim. The Court dismissed the non-contracting entities for lack of personal jurisdiction and dismissed Plaintiffs’ conversion claim as preempted by Montana’s UTPA. On 12/18/20 Plaintiffs filed their Second Amended Complaint which reintroduced the non-contracting entities on the basis that they, along with GEICO and GEICO General, jointly operate a subrogation unit in Montana, the “Property Recovery Unit.”

In 1/21 GEICO again sought dismissal. Based on Plaintiffs’ slightly altered theory and an intervening US Supreme Court decision, the Court found that it had personal jurisdiction over the non-contracting entities that operate the PRU, and that Plaintiffs had standing and adequately pled their claims.

GEICO subsequently sought judgment on the pleadings as to Plaintiffs’ claim for declaratory relief on the grounds that it was preempted by the UTPA. Following argument its motion was granted. Because Plaintiffs’ subrogation claim — the basis of their class action — sounded in claims handling, it was barred by the UTPA. §33-18-242(3). However, the UTPA does not preempt claims for breach of contract and Plaintiffs were given an additional opportunity to amend.

On 9/23/21 Plaintiffs filed the Third Amended Complaint in which they pursue their claims for breach of contract and conversion on behalf of themselves and a putative class. They attempt to avoid the UTPA bar on the ground that this action “arises out of the intersection between a contractual subrogation right, a made whole rule to such contractual right, and the timing of the made whole determination and any attendant duties.”

GEICO seeks to dismiss the Third Amended Complaint on the grounds that it alleges the same preempted claims for conversion and for declaratory and injunctive relief and fails to plead a breach of contract claim. Both arguments have merit.

GEICO is correct that the Third Amended Complaint “consists mostly of Plaintiffs’ argument” and “alleges few facts and relies on past pleadings and filings to establish the predicate factual background for Plaintiffs’ claims.” For example, it does not identify the parties or contain a jurisdictional statement. While incorporation by reference across pleadings can be acceptable, Rule 10(c), “the general rule is that an amended complaint supercedes the original complaint and renders it without legal effect,” Lacey (9th Cir. 2012). Plaintiffs make no attempt to incorporate any previously alleged facts as they do not reference the relevant parts of their previous pleading. But even assuming that their Third Amended Complaint meets this basic standard — which it does not — their claims fail as a matter of law.

§33-18-242(3) states:

An insured who has suffered damages as a result of the handling of an insurance claim may bring an action against the insurer for breach of the insurance contract, for fraud, or pursuant to this section, but not under any other theory or cause of action.

Accordingly, the Court previously determined that Plaintiffs’ claims for conversion and declaratory relief were preempted by the UTPA. Plaintiffs claim to have overcome that bar in their Third Amended Complaint which alleges:

This action eliminates any claim based on the adjustment of the insureds’ insurance claim and, instead, seeks relief in routes recognized as available by the Montana Supreme Court:

A-1. declaration of the meaning of the contractual right to subrogate as constrained by the “made-whole” rule, and declaration that the contract has been breached and corresponding supplemental relief for the contract breach (a Ferguson-type claim); or, alternatively

A-2 judgment for damages for breach of the contract in the amount of the wrongful subrogation (without prejudice to any proper, timely and equitable assertion of subrogation by GEICO);

AND

B-1 A declaration of the meaning and application of the equitable made-whole rule to conduct wholly apart from the adjustment of the settled insured’s first party claim (a Thomas-type action); or, alternatively,

B-2 A declaration of when the made-whole determination duty attaches (a Safeco of Ill.-type action);

ALTERNATIVELY, in the event that, declaratory and equitable enforcement of the equitable made whole rule is denied,

C. An adjudication of the Lee’s and class members’ exclusive legal rights to their automobile tort claims and proceeds of those claims, and damages for wrongful conversion of those claims and the proceeds thereof.

But, as argued by GEICO, “the substance and nature of Plaintiffs’ claims, and the relief sought for such claims, has not changed.” Dressing up Plaintiffs’ unsuccessful arguments as pleadings does not make them tenable claims under Montana law. While Plaintiffs disagree, this Court determined that subrogation was preempted claims handling activity. That determination stands.

Ultimately, as summarized by GEICO:

Plaintiffs cannot “draft” their way out of this fundamental problem with their claims. No matter how many words Plaintiffs bold, underline, or italicize, or what new, perplexing word salad Plaintiffs use to argue the point, the fact remains that the wrongful subrogation at issue “qualifies as claims handling.”

For this reason and those previously stated, Plaintiffs’ claims for declaratory relief and conversion are dismissed anew.

Consistent with the Court’s previous order, Plaintiffs’ Third Amended Complaint alleges breach of contract on the premise that GEICO breached the implied covenant of good faith by subrogating prior to Plaintiffs being made whole. That claim also fails.

First, GEICO argues that Plaintiffs’ breach of contract claim based on its subrogation conduct — to the extent there is one — is limited to the policy between James Lee Construction and Government Employees Ins. That argument is persuasive. There is no contract between Plaintiffs and GEICO Indemnity or GEICO Casualty Ins. Moreover, the subrogation dispute is based on the commercial policy between James Lee Construction & Government Employees, not Lees’ personal policy with GEICO General. Plaintiffs’ breach of contract claim is dismissed as to all defendants but Government Employees for lack of privity.

Second, GEICO argues that Plaintiffs fail to cite any specific provision of the commercial policy that GEICO breached, emphasizing that they stipulated that it specifically authorizes subrogation. Plaintiffs respond that the Third Amended Complaint

clearly identifies (a) GEICO’s exercise of contractual provisions addressed to subrogation, (b) the law which constrains the meaning of those contract provisions, and (c) the implied covenants and equitable rules that require GEICO to follow the law of Montana when exercising those contract rights.

GEICO is correct that a plaintiff must identify “the violation of a specific contractual provision” to pursue a breach of contract claim. Tin Cup (Mont. 2008). However, Plaintiffs are also correct that “breach of the implied covenant of good faith does not require or depend on the breach of an express contract term.” House (Mont. 2021). Rather, “proof of an alleged breach of the implied covenant of good faith and fair dealing requires proof that the offending party acted under the contract terms in a manner that was a dishonest or unreasonable deviation from prevailing commercial standards of reasonableness in trade, thereby denying the non-breaching party the benefit of the bargain.” Id. Plaintiffs allege that GEICO failed to comply with Montana law in execution of the policy’s subrogation provision, denying them “the benefit of their contract bargain.” Thus their claim is sufficiently specific. Nonetheless, it fails for 2 reasons.

First, a breach of the implied covenant claim cannot be based on “prohibiting a party from doing that which is expressly permitted by an agreement.” Tvedt (Mont. 2004). The policy expressly allows subrogation, as does Montana law. Van Orden (Mont. 2014). Second, a claim for breach of the implied covenant is “generally compensable only in contract by contract damages.” House. It is undisputed that Plaintiffs were fully compensated for damages “covered” by the GEICO policy — what was owed under the contract. Absent contract damages, Plaintiffs have failed to plead a viable breach of contract claim.

Finally, GEICO argues that Plaintiffs were in fact “made whole.” Although the Court need not reach this argument in light of the above, it is another nail in the coffin. Plaintiffs’ made whole claim is premised on the allegation that they were not paid for losses not covered by their GEICO policy before GEICO pursued subrogation. GEICO persuasively disagrees on legal grounds pursuant to Van Orden, which held that when “damages are discrete, readily-ascertainable, and completely covered under a separate policy or portion of the policy for which a separate premium has been paid, subrogation may proceed as to that element of the loss only.” But even assuming that Plaintiffs’ conceptualization of covered and non-covered losses is correct, they received $20,000 in property damages, which exceeds their alleged property damage. And even if that were not the case, they fail to allege facts that plausibly show that GEICO’s subrogation conduct reduced the amount by which they would or could ultimately recover from the tortfeasor. Plaintiffs themselves argue that they could not recover attorney fees from the tortfeasor and therefore GEICO did not “take any money out of [Plaintiffs’] pockets. Van Orden. The facts simply do not support Plaintiffs’ subrogation challenge.

Plaintiffs fail to state a plausible claim, making dismissal appropriate. While leave to amend should generally be granted, the complaint “could not be saved by any amendment.” Mueller (9th Cir. 2012). Plaintiffs have been given multiple opportunities to amend and the most recent complaint shows that recovery is not possible based on the facts. Dismissed with prejudice.

James Lee Const. and James & Tracy Lee v. Government Employees Ins. et al, 44 MFR 265, 1/3/22.

Alan Lerner (Lerner Law Firm), Kalispell, Allan McGarvey & Jinnifer Mariman (McGarvey Law), Kalispell, Brian Joos & Judah Gersh (Viscomi, Gersh, Simpson & Joos), Whitefish, and Evan Danno (Danno Law Firm), Kalispell, for Plaintiffs; Ian McIntosh & William Morris (Crowley Fleck), Bozeman, Courtney Henson (Snell & Wilmer – Tucson), and Sheila Carmody (Snell & Wilmer – Phoenix), for Defendants.

SSI/SSD: ALJ failed to comply with new regulations for evaluating medical opinions in denying benefits… Hallie Larsen reversed… Johnston.

Wayne Wells, 63, Great Falls, has a high school education and experience as a construction worker. He applied for SSD and SSI 1/22/18 alleging that he became disabled 9/1/17 due to a torn ACL in his left knee, a torn rotator cuff in his right shoulder, chronic low back pain, and DDD.

ALJ Hallie Larsen determined following a hearing that Wells had the following severe impairments: osteoarthritis and degenerative joint disease of the shoulders, hands, and right knee, and DDD of the cervical and lumbar spine. She determined that he was not disabled because he had the RFC to perform jobs that existed in significant numbers such as press operator, hand packager, and production assembler. The Appeals Council denied review. He seeks judicial review, arguing that Larsen failed to provide sufficient reasons for discounting the opinions of treating physician Charles Marler MD and consultative examiner Jamal Balouch DO.

Wells filed his applications after 3/27/17. Larsen was therefore required to apply the new regulations when evaluating medical opinion evidence. They eliminate the hierarchy that gave opinions of treating sources more weight than non-treating sources, and gave the opinions of examining sources more weight than non-examining sources. Under the new regulations the ALJ must consider and evaluate the persuasiveness of all medical opinions based on some or all of the following factors:

1. Supportability of the opinion;

2. consistency of the opinion;

3. the medical source’s relationship with the claimant including length of treatment, frequency of examinations, purpose of the treatment, extent of the treatment, and existence of examinations;

4. the medical source’s specialization;

5. the medical source’s familiarity with other evidence in the record;

6. the medical source’s familiarity with SSD program requirements.

20 CFR 404.1520c(c)(1)-(5), 416.920c(a), (b)(2).

The factors that an ALJ must address depends on whether the medical opinion is contradicted or uncontradicted. §404.1520c(a)-(b). If it is uncontradicted the ALJ need only address the supportability and consistency factors. §§ 404.1520c(b)(2), 416.920c(b)(2).

The supportability factor looks inward at the medical evidence presented in support of the medical opinion. A medical opinion that is supported by significant relevant medical evidence is more persuasive. A medical opinion that is not supported by relevant medical evidence is less persuasive. §404.1520c(c)(1).

The consistency factor looks outward. It compares the medical opinion to other medical and non-medical evidence in the record. A medical opinion that is consistent with the other medical and non-medical evidence is more persuasive. §404.1520c(c)(2). A medical opinion that is not consistent with the other medical and non-medical evidence is less persuasive. Id.

If the ALJ must decide between differing but equally persuasive medical opinions on the same issue, the ALJ must consider all of the referenced factors including the medical source’s relationship with the claimant, the medical source’s specialization, the medical source’s familiarity with other evidence in the record, and the medical source’s familiarity with SSD program requirements. §§ 404.1520c(b)(2)-(3), 416.920c(b)(2)-(3).

Under current 9th Circuit law an ALJ must provide “clear and convincing” reasons to reject an uncontradicted opinion from a treating or examining doctor and provide “specific and legitimate” reasons to reject a contradicted opinion from a treating or examining doctor. Lester (9th Cir. 1995). The 9th Circuit has not addressed whether the new regulations alter these standards. Nevertheless, they require the ALJ to explain her reasoning for discounting a medical opinion from a treating or examining physician. §§ 404.1520c(a), 416.920c(a). She must explain “how persuasive” she found the medical opinion based on the applicable factors and her reasoning must be supported by substantial evidence. Machelle (D.Idaho 2021).

Balouch is an examining physician. He examined Wells 5/13/18. He took a history and reviewed Wells’s medical records. Wells reported a torn left ACL, a torn right rotator cuff, knee pain, chronic low back pain, and hand pain. Balouch had x-rays taken of his lower spine, left knee, and hands. They showed multilevel severe disk space narrowing in the lumbar spine, severe left osteoarthritis in the left knee and moderate osteoarthritis in the right knee, and mild diffuse osteoarthritis in the hands. Balouch conducted a physical examination which revealed knee swelling and arthritic changes in the joints of Wells’s hands. He opined that Wells’s medical conditions would limit his ability to:

1. push, pull, and lift over 10 lbs;

2. ambulate over 1,000 feet without rest breaks;

3. stand for prolonged periods;

4. bend forward and kneel;

5. engage in activities with high falls risks;

6. climb ladders and stairs.

Balouch further opined that Wells “would only be able to tolerate light duties given the extent of his arthritis and work duties in the seated position a majority of the time.”

Larsen found that Balouch’s opinions were “not persuasive” because:

1. Dr. Balouch’s opinions were “inconsistent” with Wells’s “work activities;” and

2. Dr. Balouch’s “own exam findings were normal (e.g., normal strength, full ranges of motion) except for arthritic changes in his hands and bilateral knee swelling.”

Charles Marler was one of Wells’s treating physicians. He first saw Wells 9/5/18. Wells complained of shoulder, knee, neck, and back pain. He was tender to palpation of the neck. Marler noted that his cervical range of motion was severely reduced. He had tenderness and mild pain with motion of the lumbar spine. He had severely reduced range of motion and tenderness in both shoulders. He had tenderness and mild pain with motion of both knees. Marler ordered x-rays and referred Wells for PT.

Marler saw Wells again 9/25/18. He evaluated him for COPD. Wells reported shortness of breath on exertion. He had mild pain with motion of his arms and legs and edema in his extremities.

Marler saw Wells 1/30/19 for a disability evaluation. He noted that Wells had a history of degenerative joint disease in both shoulders and knees and rotator cuff problems and could not lift above his shoulders. Wells reported that he could only work 60% of the day, could not lift much above 10-15 lbs, and usually had to rest at lunch hours. Marler conducted a physical exam. Well’s lumbar and cervical spine were tender. He experienced mild pain with motion. His left shoulder was tender and he experienced moderate pain with motion. His right shoulder was tender and had severely reduced range of motion. He had edema in the extremities.

Marler completed a Medical Source Statement that described Wells’s physical impairments and limitations. His impairments included a rotator cuff injury, osteoarthritis of the knees, COPD, coronary artery disease, and osteoarthritis of the lumbar and cervical spine. As to his limitations, Marler checked boxes indicating:

1. Wells would miss work 4 times/mo due to his medical conditions;

2. he could sit frequently, stand occasionally, walk & stoop infrequently, and never climb;

3. he could lift 5 lbs frequently, 10 lbs occasionally, and 20 lbs or more infrequently;

4. he could perform fine & gross manipulation with his hands frequently and raise his arms over his shoulders infrequently;

5. his pain level was “moderately severe;”

6. he would be off task 60% of an 8-hr workday due to pain;

7. he would not need to lie down due to pain;

8. he would need to take breaks during an 8-hr workday beyond the normal 15-minute breaks and normal lunch break;

9. he would not need an assistive device to ambulate.

Larsen found that Marler’s opinions in the MSS were “not persuasive” because:

1. It appears that Marler simply restated what Wells told him rather than relying on the objective medical findings;

2. Marler did not explain and the treatment notes do not demonstrate why Wells would need to be off-task 60% of a normal workday;

3. Marler’s opinion that Wells could only walk “infrequently” was inconsistent with his other findings that Wells did not need an assistive device to ambulate, that he had only mid-level pain, and that he did not need to lie down due to his symptoms.

Larsen did not comply with the new regulations when she addressed persuasiveness of Balouch’s and Marler’s opinions. She was required to “clearly articulate how she applied the consistency and supportability factors” and support her reasoning with substantial evidence. Eric JG (D.Mont. 2021); Carmen Claudia S. (CDCal. 2021). She did not support her reasoning with substantial evidence. She did not explain why Balouch’s opinions were inconsistent with Wells’s work activities. She did not explain why Balouch’s exam findings did not support his opinions as to Wells’s limitations. She did not explain why Marler’s treatment notes did not support his opinion that Wells would be off-task 60% of a normal workday. She did not explain why Marler’s opinion that Wells could only walk infrequently was inconsistent with his other findings that Wells did not need an assistive device to ambulate, that he had only mid-level pain, and that he did not need to lie down due to his symptoms. Her failure to support her reasoning with substantial evidence was legal error.

SSA’s decision to deny Wells’s claim is reversed and remanded for further proceedings consistent with this memorandum and order.

Wells v. SSA, 44 MFR 264, 12/28/21.

Eric Rasmusson (Rasmusson Law Offices), Missoula, and Olinsky Law Group for Wells; Special AUSA Michael Mullen.