With the 2009 Gregoire-Rossi rematch barely underway, Democrats are already irate over “misleading” radio ads sponsored by the Building Industry Association of Washington. It’s a familiar ritual by now.
Aggressive, unrelenting, and often unscrupulous, the lobbying group for the homebuilding industry is the bête noire of the local left. They loudly attack government, environmentalism, regulation, and pretty much anything else that restrains their members from paving over the state. The association’s core constituency of put-upon small-business owners is energized, it seems, by the shrill, aggrieved rhetoric—while urban liberals boil over like Elmer Fudd. In 2004, the BIAW spent well over a half-million dollars trying to get Rossi elected governor, and seems poised to spend at least that much again.
But if howling over BIAW tactics is now a political tradition, so too is the dream of cutting off the builders’ financial lifeline. A decade ago, a story in Eastsideweek described how the BIAW pays for its political machine—namely, by siphoning off 20% of its members’ annual refund from a state-run industrial-insurance program. In the years since, labor unions, Democrats, and other BIAW enemies have made it their mission to derail the gravy train. First there were complaints to the Public Disclosure Commission. Then a union-friendly head of the Department of Labor and Industries tried to change the rules of the program. Then Democrats at the statehouse tried to do the same through multiple pieces of legislation. Each time, the BIAW has defeated, overturned, or otherwise squelched the effort.
But hope, and new schemes, spring eternal. The latest is a lawsuit spearheaded by Seattle attorney Knoll Lowney, who has previously represented unions, anti-Eyman groups, and Futurewise (the growth-management advocates who regularly clash with the BIAW), among others.
His clients this time are a pair of unhappy BIAW members from Bellingham—A-1 Builders and RE Sources. They allege a host of BIAW offenses, including deceptive marketing, violation of the First Amendment, and dereliction of fiduciary duty. Their stated aim: to stop the BIAW from pocketing another $10 million or so in insurance refunds this year, thereby depriving the group of its 2009 election bankroll.
Understanding the suit demands a bit of background on industrial insurance, which covers the cost of on-the-job injuries. Employers are required to have the coverage, just as you’re required to insure your car. And in Washington, companies buy their insurance directly from the state (rather than from a private provider like Geico). It can be painfully expensive, especially for small firms doing the dangerous work of home construction.
But if you pay your premiums into a pool with other employers in the same industry, the state will give you a break. The individual cost isn’t any lower, but the pool can participate in a “retrospective rating” program, which gives a refund to the pool when total premiums exceed the cost of claims. The BIAW runs the biggest such pool in Washington, and its group has earned a sizable refund every year since the program started in 1982.
The BIAW charges its members a relatively low fee to sign up for the pool, then makes up for it on the back end, pocketing 20% of the annual refund before paying out the balance. Some of that money is used to cover BIAW expenses—managing claims, providing advice on safety, etc. The rest is profit, which the BIAW uses to underwrite its political activism. Over the past five years, the BIAW’s take from the refund checks has totaled almost $40 million.
Lowney’s lawsuit, filed last year, claims the BIAW doesn’t adequately disclose any of this. True, the contract’s fine print does state that 20% is withheld. But the contract says this money is collected by the BIAW “for marketing and promotion of the Plan,” not for running anti-Gregoire attack ads on the radio. “A significant portion of BIAW members join BIAW primarily to participate in [the retro plan] and do not support the aggressive political activities of the BIAW,” the suit contends.
That’s true of the plaintiffs, at least. A-1’s president, Rick Dubrow, serves on the Whatcom County steering committee of Futurewise and is a longtime sustainability booster. The sign in front of his business, as shown on the company Web site, offers this quote: “To tread heavily on the earth is to tread heavily on one’s self.” Dubrow’s also on the board of RE Sources, a nonprofit group that salvages and resells building material at the RE Stores in Seattle and Bellingham. He declined to discuss the suit, but a court exhibit quotes him saying he’s “embarrassed” to be a BIAW member; he just needs the refund. In an interview, he said it provides $2,000 to $5,000 annually.
Lowney argues that his clients are being forced to subsidize the BIAW’s far-right agenda, which is a violation of their First Amendment rights. In recent years the courts have been sympathetic to suits challenging “compelled speech.” For instance, union members in some union-only shops can now “opt out” of having their dues spent on political activity. The situation here is analogous, the plaintiffs contend. And though you can generally only sue the government for violating your rights of free speech, in this case the BIAW is a “state actor” by virtue of its role as an integral go-between in a state-mandated tax program, the suit says.
But the BIAW argues that no one’s forcing its members to do anything. Having industrial insurance may be mandatory, but getting it through the BIAW pool is not, since there are other trade associations one can turn to.
As for deception, the BIAW admits that its marketing materials generally do not mention the 20% cut. But the builders’ group says its members know full well about the fee and what it’s spent on, especially after 10 years of publicity on the subject. Indeed, BIAW members have historically rallied to its side whenever state regulators and legislators have tried to “save” them from the BIAW’s profiteering.
As for the contract, the BIAW says in a court filing that the plaintiffs have it all wrong. That 20% isn’t to be spent on marketing; it’s payment for marketing. The contract “simply identifies services for which the fee is earned, just as when money is given to a teenager ‘for cutting the grass.'” (In fact, since the lawsuit, the BIAW has changed its contract language to better reflect this assertion. PDF here.)
The BIAW says it’s under no obligation to run the program without a profit, or return 100% of the refund money to members, as Dubrow seems to want. “Plaintiffs are like a person asserting a constitutional right to buy Girl Scout cookies at the organization’s cost, because of objections to the reference to God in the Girl Scout oath,” says a filing from BIAW attorneys Davis Wright Tremaine. “If you don’t like the program, don’t buy the cookies.”
But the plaintiffs respond that the BIAW program, by virtue of its size, provides such an economic advantage to the participants that it’s the only real choice for businesses that want to be competitive. And they advance another more technical argument: Because the BIAW refund money passes through a trust, it is subject to much tighter regulations regarding disclosure and distribution—rules that the BIAW’s current practices allegedly violate.
Clever as it may be, the lawsuit so far does not look to be any more effectual than previous runs at the builders have been. Last week, U.S. District Court Judge Ricardo S. Martinez sent the plaintiffs packing from federal court, saying he did not have jurisdiction over two of their three claims and that they’d have to refile at the state level. His ruling seemed to express considerable doubt about the complaint, and indicated that, in his view, the plaintiffs’ problem was more with state regulations than with the BIAW’s behavior.
The suit’s by no means dead. But the ruling makes it unlikely that the plaintiffs can disable the builders’ war chest in advance of the gubernatorial election. All that’s left is the shouting. And there will be plenty of that.
