US Chamber of Commerce: Hawaii Act 11 Lawsuit Challenges Corporate Spending Ban

• The U.S. Chamber of Commerce has sued Hawaii's Attorney General and Department of Commerce and Consumer Affairs Director over Act 11, a law banning corporate political spending.
• Act 11, effective July 1, 2027, prohibits corporations, nonprofits, and unions from spending money on candidates, parties, or ballot measures.
• The Chamber argues Act 11 violates the First Amendment, especially by attempting to regulate out-of-state corporations.
• Hawaii's Attorney General Anne Lopez previously testified against the bill, calling it "likely impossible to defend" and warning of high legal costs.
• This is the second constitutional challenge to Act 11 this year, following a lawsuit filed by the Grassroot Institute of Hawaii in June.

The Chamber argues that this Hawaii corporate political spending ban directly contravenes the First Amendment protections for election spending established by the U.S. Supreme Court, setting the stage for a high-stakes legal battle over the Hawaii Act 11 constitutionality.

The U.S. Chamber of Commerce, the nation's largest business advocacy group, has initiated legal proceedings against Hawaii's Attorney General Anne Lopez and Department of Commerce and Consumer Affairs Director Nadine Ando. The lawsuit seeks to invalidate Act 11, a state law enacted in May that aims to restrict political expenditures by various organizations. This legal action represents a significant challenge to the state's attempt to redefine corporate political speech rights in Hawaii.

Act 11, which is slated to take effect on July 1, 2027, broadly prohibits corporations, nonprofits, labor unions, and trade associations from spending money to support or oppose political candidates, parties, or ballot measures. The Chamber argues that this Hawaii corporate political spending ban directly contravenes the First Amendment protections for election spending established by the U.S. Supreme Court, setting the stage for a high-stakes legal battle over the Hawaii Act 11 constitutionality.

Hawaii lawmakers designed Act 11 as a direct Citizens United challenge Hawaii, asserting that since the state grants corporations their existence and powers, it can also dictate their political engagement. This legislative theory posits that Hawaii possesses the authority to limit the political powers retained by entities it creates. However, the U.S. Chamber of Commerce identifies a critical flaw in this reasoning, highlighting that Act 11 extends its prohibitions to corporations formed in other states—entities over which Hawaii has no foundational authority.

The Chamber's complaint explicitly states that Hawaii lacks the power to unilaterally diminish the First Amendment rights of out-of-state corporations. Furthermore, it argues that the state cannot effectively silence these entities by threatening to revoke their authorization to conduct business within Hawaii's borders. This core dispute underscores the fundamental disagreement over the scope of corporate political speech rights Hawaii and the state's ability to regulate First Amendment election spending Hawaii.

The U.S. Chamber of Commerce asserts that Act 11 is already creating a chilling effect on its planned activities for the 2027-2028 election cycle. The organization intends to allocate resources to inform Hawaii voters about state candidates' positions on free enterprise issues, including their stances on Act 11 itself. This initiative is part of a broader national campaign, "The New Fight for Free Enterprise," which commenced with a cross-country bus tour in September and includes a digital advertising push targeting states like Hawaii where candidates endorsed by the Democratic Socialists of America are running. The Chamber emphasizes that such campaigns require extensive lead time, making the impending ban a current impediment.

Penalties for violating Act 11 are severe, ranging from the suspension of operating authority and a ban on government contracts to the loss of tax-exempt status, revocation of corporate charters, and ultimately, forced dissolution. Notably, the state's own Attorney General, Anne Lopez, a defendant in the current lawsuit, previously testified against the bill during its legislative phase. She warned lawmakers that the measure would be "likely impossible to defend" without a reversal of *Citizens United* by the Supreme Court and cautioned about the substantial legal fees taxpayers would incur in defending the law. Republican State Representative Chris Muraoka echoed these concerns on the House floor, casting the sole vote against the bill and pointing to the financial burden on residents.

This US Chamber of Commerce Hawaii Act 11 lawsuit is not the first constitutional challenge to the law this year. In June, the Grassroot Institute of Hawaii, a Honolulu-based think tank, filed its own lawsuit, contending that Act 11 is unconstitutionally vague in addition to being an outright ban on speech. The ongoing litigation highlights a concerted effort to prevent the implementation of the Hawaii corporate political spending ban.

Daryl Joseffer, president of the U.S. Chamber Litigation Center, articulated the core principle at stake, stating that the First Amendment does not grant government officials the authority to determine who can participate in public discourse. The outcome of these legal challenges will significantly shape the landscape of First Amendment election spending Hawaii and the future of corporate political speech rights in the state, particularly as the 2027 effective date approaches.

Lawyers advising corporations, nonprofits, or unions operating in Hawaii should monitor this litigation closely, as its outcome will determine the legality of Act 11's ban on corporate political spending and the scope of First Amendment rights for entities in the state post-2027. Compliance officers need to be aware of the potential future restrictions and the ongoing legal uncertainty surrounding political expenditures in Hawaii.

Source: Original reporting via Courthouse News