By Daniel Tay

Law360 (July 10, 2020, 1:14 PM EDT) -- Supporters of an Idaho income tax hike ballot initiative can start gathering signatures electronically, as the Ninth Circuit denied the state government's request to stay a federal judge's order giving the campaign extra time to collect signatures.

On Thursday, the Ninth Circuit denied a request by Republican Gov. Brad Little and Secretary of State Lawerence Denney to stay an order requiring the state to allow Reclaim Idaho 48 extra days to gather signatures for its Invest in Idaho initiative. The initiative, which Reclaim Idaho seeks to place on the Nov. 3 ballot, would ask voters to raise the top state income tax rate and the corporate income tax rate.

If approved, the higher tax rates are estimated to raise $170 million annually, earmarked for education funding.

The appeals court ordered the case placed on its calendar for August. 

Little said he would seek a stay from the U.S. Supreme Court.

"We will continue our efforts to preserve the integrity of Idaho's duly enacted laws and to prevent the disruption to our upcoming elections that this decision will cause," Little said in a statement.

Under the contested order by District Court Judge B. Lynn Winmill, Thursday was the last day for the state to come to an agreement with the campaign on a plan for secure electronic signature collection. According to Judge Winmill's order, Reclaim Idaho is now allowed to carry out its own plan, which must "ensure the highest available standards" for security, since the state and campaign have not reached an agreement.

Reclaim Idaho will begin collecting signatures early next week, according to the group's co-founder, Luke Mayville.

"After weeks of work and multiple discussions with the state, we've developed a detailed, industry-standard plan for the collection of electronic signatures in compliance with the judge's order," Mayville said in a statement. "We've made every effort to solicit the state's feedback and adjust our design accordingly."

The initiative would ask voters to raise the top state income tax rate to 9.925% from 6.925% on individuals, trusts and estates with taxable income of $250,000 or more, and on married couples with taxable income of at least $500,000. It would also ask voters to raise the corporate income tax rate to 8% from 6.925%.

Little and Denney said Thursday in a district court filing that they had "grave concerns" about Reclaim Idaho's plan that prevented them from agreeing to it. Among the concerns, Little and Denney said there was no indication Reclaim Idaho's chosen private contractor for signature gathering would use the data the organization proposed to collect to verify the collected signatures.

Agreeing to Reclaim Idaho's proposal would "undermine public faith in elections and disregard the will of Idaho's elected representatives," Little and Denney said in their filing.

The campaign lodged its complaint against the officials on June 8, alleging they violated its First Amendment rights by not providing a safe method to gather signatures amid the spread of COVID-19, the respiratory illness caused by the novel coronavirus, before the April 30 deadline to submit petitions. Reclaim Idaho had gathered about 30,000 of the 55,057 signatures required to qualify for the Nov. 3 ballot when the pandemic hit the state in March, according to court documents.

Judge Winmill sided with the campaign in ruling from the bench June 23 and denied a state request to stay his original order on June 29. He then issued an order June 30 that the state must provide an additional 48 days for Reclaim Idaho to collect signatures, after the state had missed a deadline for choosing whether to grant the campaign extra time or certify the initiative based on the signatures already collected. Little and Denney's appeal to the Ninth Circuit was docketed July 1.

Circuit Judge Consuelo Callahan dissented Thursday, saying Little and Denney had made a substantial showing that Judge Winmill's order was beyond his authority.

"The district court cannot create by judicial fiat a process for electronic signature gathering that is not otherwise permitted under Idaho's laws," Judge Callahan wrote. "That is up to the state's Legislature."

The relief, Judge Callahan added, "effectively rewrites Idaho's election laws."

Mayville did not respond to requests for comment.

Chief Judge Sidney R. Thomas and Senior Circuit Judge Mary M. Schroeder were in the majority, with Circuit Judge Consuelo Callahan dissenting.

Reclaim Idaho is represented by Deborah Ferguson and Craig Durham of Ferguson Durham PLLC.

Little and Denney are represented by Robert A. Berry and Megan A. Larrondo of the Idaho Attorney General's Office.

The case is Reclaim Idaho et al. v. Brad Little et al., case number 20-35584, in the U.S. Court of Appeals for the Ninth Circuit.

--Editing by Neil Cohen.

For a reprint of this article, please contact reprints@law360.com.