HONOLULU — A federal judge on Tuesday signaled that a legal challenge to Hawaii Act 11, the state’s first-in-the-nation ban on corporate election spending, is likely to proceed. Before arguments began, U.S. District Judge Leslie Kobayashi said she was inclined to find that the Grassroot Institute of Hawaii has standing to contest Hawaii Act 11. By the end of the hearing, she also suggested the measure limits political speech, while stopping short of ruling on the pending motions.
“What Grassroot does is, of course, the very essence of political speech,” Judge Kobayashi said during the session.
Hawaii Act 11 at the center of the dispute
The Grassroot Institute of Hawaii, a nonprofit promoting limited government, is asking the court to block Hawaii Act 11 before it takes effect on July 1, 2027. The state is seeking dismissal. Supporters describe the law as a response to the 2010 U.S. Supreme Court ruling in Citizens United v. FEC, which invalidated caps on independent corporate election spending.
Rather than directly regulating campaign finance, Hawaii Act 11 amends the state’s corporate code to deny corporations, nonprofits, unions and other entities the authority to spend money supporting or opposing candidates or certified ballot measures. Violations can carry penalties up to corporate dissolution.
Debate over standing and scope
Deputy Solicitor General Ewan Rayner argued the think tank could not show the law reaches its activities. He said Hawaii Act 11 covers spending on ballot measures only after certification, while much of Grassroot’s efforts involve advocating to place measures on the ballot or to keep them off. As examples of advocacy on certified measures, he cited a 2008 letter to the Honolulu Star-Advertiser concerning a rail initiative and a 2010 blog post, which he said fall under the statute’s exemption for news and commentary. He also noted that this November’s ballot is expected to feature roughly 30 questions, adding that Grassroot has not indicated plans to campaign on those matters.
Judge Kobayashi expressed skepticism, suggesting the state’s position would favor single-issue groups whose future advocacy is easy to anticipate. “Grassroot has shown that it has this history of community involvement, exercising its First Amendment rights, being involved in political questions,” she said. “I’m a little mystified as to why that’s not enough.”
Rayner further contended Grassroot has not shown it expends money or anything of value on activity covered by Hawaii Act 11. He said the organization receives donations but does not specifically connect those funds, or paid staff time, to advocacy on certified ballot measures.
The judge floated dismissing the case without prejudice to allow the group to amend its complaint to identify relevant expenditures. Owen Yeates, an attorney with the Institute for Free Speech representing Grassroot, countered that the organization’s descriptions of events, interviews and mailings make the spending apparent. “We all know the price of stamps keeps going up,” he said. Kobayashi acknowledged the state’s point but said she is considering how precisely Grassroot must itemize its spending. “There’s a general inference that they raise money, that they hold events, that they do all of these things,” she said.
Core constitutional questions around Hawaii Act 11
On the merits, the state argues Hawaii has authority to define the powers of entities it charters. Citing the U.S. Supreme Court’s 2014 Hobby Lobby decision, Rayner said the state is not curbing existing rights but withholding certain corporate powers. “The state is not constitutionally required to approve certain corporate purposes or grant corporate powers,” he said.
Judge Kobayashi questioned how that theory applies to Grassroot, whose stated mission since 2001 is to educate the public about individual liberty, economic freedom and limited government. She said the argument might be more apt for a veterinary hospital suddenly entering politics, whereas Grassroot’s work is inherently political. “Whether they’re providing white papers or what have you, it all revolves around political speech,” she said.
Rayner responded that Hawaii Act 11 leaves most of Grassroot’s activities untouched, including publishing research and lobbying lawmakers, and withholds only the specific corporate power to spend money on candidate elections and certified ballot measures. Yeates warned that under the state’s theory, any advocacy organization could be denied political speech as a condition of corporate status. “The government, as a requirement of getting corporate existence, could say that you can’t speak about politics,” he said. “That’s a terrifying idea.”
The U.S. Chamber of Commerce has filed a separate federal lawsuit challenging Hawaii Act 11. Judge Kobayashi took both sides’ motions under advisement and did not indicate when she will rule.
Separately, the U.S. Supreme Court is also weighing disputes over federal statutes and constitutional limits, including in a challenge centered on the constitutional structure in the Suncor Energy case.