California Apartment Association’s Abuse of the Ballot Initiative Process

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The integrity of the California voter initiative process is under attack. The California Apartment Association is attempting to add to the ballot an unconstitutional initiative designed to silence a single outspoken proponent of rent control–the AIDS Healthcare Foundation (AHF).

When such a patently unconstitutional initiative is at issue, the Attorney General has the power to commence legal action to relieve himself of the legal duty to prepare a circulating title and summary, based on a judicial determination that the measure is invalid. (Schmitz v. Younger (1978) 21 Cal.3d 90, 92–94; Widders v. Furchtenicht (2008) 167 Cal.App.4th 769, 780.) The Attorney General’s Office has exercised this authority at least as recently as 2015, when it sought declaratory relief from the courts in regard to the blatantly unconstitutional “Sodomy Suppression Act.” (See Harris v. McLaughlin, No. 34-2015-00176996 (Cal. Super. Ct. 2015), 2015 WL 3877283.)

Consumer Watchdog today submitted a letter to the Attorney General’s office explaining why the initiative is unconstitutional for the reasons below, and that it should not be circulated to the voters. Read the letter here.

Under the guise of protecting patients, the “Protect Patients Now Act of 2024” ostensibly prevents participants of the federal 340B Discount Drug Program from using funds gained through that program on certain activities unrelated to direct patient care. In reality, while the Initiative is worded in such a way as to never explicitly name the AHF, it is obviously designed to target just one organization. Of the 850 entities in California that participate in the federal 340B Discount Drug Program, only one meets the Initiative’s criteria, including (1) during any 10–calendar year period in the entity’s existence, it spent “more than one hundred million dollars” on “purposes that do not qualify as direct patient care”; (2) the entity is, or was at one time, an owner or operator of “highly dangerous properties,” defined as multifamily dwellings; and (3) the entity must also either have, or have had, a license to operate as a health care service plan, pharmacy, or clinic; contract as a primary care case management organization; or contract as a Medicare provider under a Medicare special needs plan. (Section 14124.48(l)(1–4).) This unique set of criteria applies only to AHF, which engages in housing-related campaigns and issues that the California Apartment Association opposes. No other individuals or corporations meet the definitions contained in the Initiative.

As written, the Initiative violates our state and federal constitutions. Perhaps most glaringly, the Initiative violates the United States and California Constitutions as an illegal Bill of Attainder. The Bill of Attainder Clause of the United States Constitution prohibits any “law that legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial.” (Selective Serv. Sys. v. Minn. Pub. Interest Research Grp. (1984) 468 U.S. 841, 846–47.) This applies to corporate entities as well as individuals. (See Con. Edison Co. of N.Y., Inc. v. Pataki (2d Cir. 2002) 292 F.3d 338, 349.) The Initiative reflects one of the hallmarks of a Bill of Attainder—its retrospective focus—by defining past conduct as wrongdoing and then imposing punishment on that past conduct. (Con. Edison Co. of N.Y., Inc., supra, 292 F.3d at 349 [citing Nixon v. Admin. of General Servs. (1977) 433 U.S. 425].) Further, whether a statute is “punitive” is determined by three factors: “(1) whether the challenged statute falls within the historical meaning of legislative punishment; (2) whether the statute, viewed in terms of the type and severity of burdens imposed, reasonably can be said to further nonpunitive legislative purposes; and (3) whether the legislative record evinces a [legislative] intent to punish.” (Selective Serv. Sys., supra, 468 U.S. at p. 852 [internal citations omitted].)

The Initiative readily meets these criteria. First, as noted above, the Initiative identifies just one nonprofit organization, the AIDS Health Foundation. The Initiative then imposes draconian punishments: loss of the ability to collect and spend revenues as it is entitled to do under the federal 340B Discount Drug Program, permanent revocation of “any and all pharmacy licenses, health care service plan licenses, or clinic licenses,” and the prohibition of AHF and its owners, officers, and directors from applying for pharmacy and other related health care service licenses for a 20-year period. The law is clear that such punitive measures are unconstitutional, demonstrated by the “grave imbalance . . . between the burden and the purported nonpunitive purpose” of the Initiative. (See ACORN v. U.S. (2010) 618 F.3d 125, 138.) Singling out just one organization for these clearly punitive consequences, when many other organizations use 340B funds in similar ways unrelated to housing, makes clear the Initiative’s true intentions. Moreover, the proponents admit the Initiative is intended to punish the AIDS Healthcare Foundation for its past advocacy efforts. (See California proposal would sideline a prolific ballot measure player, Politico, Aug. 30, 2023)

Additionally, the Initiative violates the California Constitution. Article II, Section 12 provides that “No amendment to the Constitution, and no statute proposed to the electors by the Legislature or by initiative, that . . . names or identifies any private corporation to perform any function or to have any power or duty, may be submitted to the electors or have any effect.” (Emphasis added.) The Initiative plainly identifies a single non-profit corporation to perform specific duties, defining a so-called “prescription drug price manipulator” so narrowly, and with such specific criteria (some of which are entirely unrelated to the provision of prescription drugs), as to apply only to AHF. The Initiative then requires this “identified” organization to perform specific duties, including (1) compliance with the obligation or duty to spend 98 percent of its revenues generated in California from the 340B program on what the Initiative terms “direct patient care,” (2) compliance with the obligation or duty to sell pharmaceuticals at a specific price, and (3) compliance with the duty to submit annual reports to four separate state agencies, detailing its statewide and nationwide revenues and expenditures relating to the 340B program.

The Initiative is not saved by its thinly veiled attempts to avoid explicitly naming the AIDS Healthcare Foundation. Caselaw is clear that whether or not an entity is named explicitly, the fact that, on its face, it could onlyapply to the AIDS Healthcare Foundation is enough to render the Initiative in violation of the California Constitution. (Compare Pala Band of Mission Indians v. Bd. of Supervisors (1997) 54 Cal.App.4th 565 with Hernandez v. Town of Apple Valley (2017) 7 Cal.App.5th 194.) The Constitution prevents this kind of improper initiative from ever being submitted to the voters. 

Finally, the Initiative also violates the Equal Protection clause of the U.S. and California Constitutions. (U.S. Const. amend. XIV, § 1; Cal. Const., art. I, § 7.) Equal Protection requires that a law’s classification “not be arbitrary but predicated on a real and substantial difference having a reasonable relation to the subject of the legislation.” (California Assn. of Retail Tobacconists v. State of California (2003) 109 Cal.App.4th 792, 841.) An Equal Protection violation lies where a party alleges that it has been “intentionally treated differently from others similarly situated” and there is “no rational basis for the difference in treatment.” (Village of Willowbrook v. Olech (2000) 528 U.S. 562, 564–65.) That the Initiative clearly identifies a “class of one” is plainly arbitrary and violates this fundamental constitutional protection.

The Initiative is an abuse of the initiative process and serves only as a blueprint for corporate interests wishing to punish non-profit organizations for their speech and advocacy. It should never make it to the ballot.

Ben Powell
Ben Powell
Benjamin Powell is a staff attorney on Consumer Watchdog’s Litigation Team. While his primary focus is in the area of health insurance litigation, he also provides litigation support in other areas. Powell received a B.A. in Political Science from UCLA and a J.D. from Loyola Law School in Los Angeles

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