What to Know about SB 1439

Newly Expanded Pay-to-Play Law Requires Careful Consideration by Attorneys and Other Agents to Ensure Compliance

Sean Welch and Hilary Gibson

California Government Code section 84308 – a provision inserted into the Political Reform Act fortyyears ago and subsequently amended multiple times to address “pay-to-play” concerns principally inlocal government – restricts the ability of an officer of a state or local government agency, or acandidate for such office, to accept a contribution of more than $250 from certain contributors ifthe official makes or will make a decision regarding the contributor involving a “license, permit, orother entitlement for use.”

Prior to 2023, the law’s application was relatively narrow and restricted contributions to local elected officials only when they were acting in an appointed capacity in the types of proceedings specified in the statute. For example, under the prior iteration of section 84308, a contribution to a city council member was only covered if the member was appointed to a board or commission and participated in a covered proceeding in that particular capacity.

However, California’s SB 1439 (Glazer)— which was signed by Governor Gavin Newsom on September 29th, 2022, and went into effect January 1st, 2023—changed that. The most notable feature of SB 1439 was to remove the exception for “local government agencies whose members are directly elected by the voters,” thereby extending the provisions of Government Code section 84308 to all officers of local agencies, whether appointed or elected. This means, for example, that members of city councils and boards of supervisors are now subject to the restrictions of section 84308 when acting in their directly elected capacities, i.e. when voting on a matter as a member of the city council or board of supervisors.

Section 84308 is multi-faceted. The law includes an outright prohibition and a “lookback” period triggering disqualification. Covered officials are prohibited from accepting contributions of more than $250 from covered parties while a proceeding is pending before their agency and for 12 months following the date a final decision is rendered. Additionally, under a 12-month lookback provision, an official may be disqualified from participating in the decision-making process of the proceeding if the official willfully or knowingly received a contribution of more than $250 during the previous 12 months. The law provides a method of avoiding disqualification if the public official who received a contribution prior to the initiation of a proceeding returns the contribution within 30 days from the time the officer knows, or should have known, about the contribution and the new proceeding. It also allows a public official to cure a prohibited contribution, under certain specific circumstances, by returning the contribution within 14 days. In addition, the law also requires disclosure of contributions by recipients and contributors in covered proceedings, making it very important for lawyers and others to carefully track and disclose all contributions that might be relevant to a particular application for a permit, license, or other entitlement for use.

After the passage of SB 1439, one major question was whether the 12-month lookback period for contributions to newly covered elected officials of local agencies will be applied retroactively, i.e. whether it would apply to pre- 2023 contributions to local public officials such as candidates for city council and boards of supervisors who received contributions during the 2022 general election and as far back as January 2022, thereby potentially disqualifying such officials from participating in proceedings involving parties or participants who, directly or through their agents, made contributions of more than $250 at a time when there was no such restriction in the law.

After extensive advocacy from both the regulated community and organizations representing public agencies, the California Fair Political Practices Commission (“FPPC”) adopted an opinion indicating that SB 1439 restrictions would not apply to contributions made prior to the effective date. The FPPC subsequently proposed regulations—which are still pending as of the date of this article—that would codify this opinion, as well as clarify other aspects of SB 1439 and Government Code section 84308 generally.

Another important element of section 84308 is that it not only covers contributions by the party applying for the permit, license, or other entitlement for use but also covers—and requires aggregation for purposes of the $250 limit— contributions of those persons and entities associated with the party, participants in the proceedings, and their “agents.” Thus, one of the issues the FPPC’s proposed regulations seek to clarify is the concept of “agency,” which can be particularly thorny for attorneys who represent parties in a covered proceeding. A covered proceeding is broadly defined to include: business, professional, trade, and land use licenses and permits; building/development permits; project-specific zoning changes, general plan amendments, and specific plans; subdivision and parcel maps; development agreements; all contracts (other than not competitively bid, labor, or personal employment contracts); and all franchises.

Attorneys who represent clients in such proceedings may be considered an “agent” of a party or participant if the attorney “represents” that party or participant in connection with the proceeding. If an attorney qualifies as an “agent” for the purpose of section 84308, the attorney’s personal contributions are attributed to/ aggregated with the party/participants, and may therefore be prohibited or risk disqualifying the recipient official from participating in the proceeding. Further, if the attorney “agent” is part of a firm, both the firm and the individual attorney are considered “agents.”

The term “represents” is not defined by section 84308. Still, the proposed regulatory amendments provide that an agent “represents” a party or participant by appearing before or communicating with the agency in connection with the proceeding. Although this regulation (to the extent it is adopted in its current form) provides some helpful clarification, who qualifies as an “agent” that “represents” a party/participant in a proceeding remains factspecific and contextual, particularly in terms of how new regulations will be reconciled with prior FPPC guidance, how broadly the concept of “agency” extends within a particular covered firm and other related issues.

Against this regulatory background, the landscape related to the implementation of SB 1439 continues to shift, and uncertainty remains. The Attorney General has received a request from the author of SB 1439 to issue an opinion regarding the implementation of the bill, in particular, the question of retroactive application. In yet another proceeding, a coalition opposed to SB 1439 has filed a lawsuit seeking to invalidate the bill; it is anticipated the lawsuit will take many months or longer to resolve and, in the meantime, SB 1439 remains the law. Further, the proposed FPPC regulations are not yet final, and there will almost certainly be new guidance issued as both contributors and public officials seek to clarify the application of the expanded law.

Sean Welch and Hilary Gibson are partners in the San Rafael office of Nielsen Merksamer Parrinello Gross & Leoni LLP. For over 40 years, Nielsen Merksamer has specialized in government, political and initiative law, trial and appellate litigation, taxation, civil and constitutional rights, voting rights and redistricting, and regulatory agency law. The firm specializes in establishing and maintaining multi-state, multi-jurisdictional campaign, gift, and lobby legal compliance systems for organizations and executives with diverse activities and interests.