U.S. District Judge Leslie Kobayashi told lawyers in Honolulu she was inclined to find that the Grassroot Institute of Hawaii has standing to challenge Act 11 before the parties even finished their arguments. By the end of the Tuesday hearing she indicated the state law restricts political speech, then took both sides’ motions under advisement without issuing a ruling.
The nonprofit free-market group wants the measure blocked before it takes effect on July 1, 2027. Hawaii rewrote its corporate code to strip corporations, nonprofits, unions and other entities of the power to spend money supporting or opposing candidates or certified ballot measures. Violations can carry penalties up to dissolution. Supporters framed the statute as a response to the U.S. Supreme Court’s 2010 decision in Citizens United v. FEC. Courthouse News reported the exchange in federal court.
The case pits a limited-government advocacy group against a state claim that Hawaii alone decides what powers its corporations may exercise. The Institute for Free Speech is representing Grassroot. The U.S. Chamber of Commerce has filed a separate federal challenge to the same law.
Kobayashi, an Obama appointee, opened by signaling skepticism of the state’s bid to toss the suit. She pointed to Grassroot’s long record of public engagement since its founding in 2001.
The judge told counsel the group had shown a history of community involvement and First Amendment activity on political questions. She said she was a little mystified as to why that was not enough.
Deputy Solicitor General Ewan Rayner argued Grassroot could not show Act 11 would actually reach its work. He said the group had not demonstrated spending money or anything of value on covered activity. Rayner estimated the November ballot would carry about 30 questions and claimed Grassroot showed no interest in advocating on those questions.
He also stressed that Act 11 covers ballot-measure spending only after certification, leaves research and lobbying untouched, and contains a news and commentary exemption. In his telling, most of what Grassroot does would remain lawful.
"Apparently Grassroot has no interest in advocating on any of those questions,"
Rayner told the court. He added that the state is not constitutionally required to approve certain corporate purposes or grant corporate powers, citing the Supreme Court’s 2014 Hobby Lobby decision.
Kobayashi pushed back. She described Grassroot’s work as the very essence of political speech. White papers, events, fundraising and public commentary all revolved around political questions, she said.
The judge noted a general inference that the group raises money, holds events and engages the public. She told the state’s lawyer she was having difficulty following the argument that this activity somehow fell outside the law’s reach or failed to establish injury.
"What Grassroot does is, of course, the very essence of political speech,"
Kobayashi said. She later added that whether the group provides white papers or other materials, it all revolves around political speech.
Owen Yeates, the Institute for Free Speech attorney for Grassroot, argued the group’s own descriptions of events, interviews and mailings made the spending obvious. He warned that the state’s corporate-powers theory could let government condition corporate existence on silence about politics.
"The government, as a requirement of getting corporate existence, could say that you can’t speak about politics,"
Yeates said. “That’s a terrifying idea.” He also noted the rising cost of stamps when discussing mailings and outreach.
Act 11 revises Hawaii’s corporate code. It removes the power of covered entities to spend in candidate races or on certified ballot measures. The state presents the change as a decision about which powers to grant, not a restriction of existing rights. Grassroot and its counsel call that a direct limit on core political speech protected after Citizens United.
Citizens United struck down limits on independent corporate spending in elections. Hawaii’s statute is described in the reporting as a first-in-the-nation ban of its kind aimed at that precedent. The law is scheduled to take effect July 1, 2027, giving the litigation time to develop before any penalties attach.
Grassroot’s stated mission is to educate the public about individual liberty, economic freedom and limited government. Examples cited in court included a 2008 letter to the Honolulu Star-Advertiser about a rail initiative and a 2010 blog post. The group receives donations and has maintained that public posture for more than two decades.
The state moved to dismiss. Grassroot seeks to block the law. Kobayashi floated the possibility of dismissing without prejudice so the think tank could amend and identify specific expenditures. She did not adopt that path from the bench. Instead she took both motions under advisement.
The court has not announced when a written decision will issue. No public order resolving standing or the constitutional claims has been released from the Tuesday hearing. Investigators and litigants will need to determine how the judge ultimately treats the injury showing, the corporate-powers theory, and the First Amendment analysis.
A separate suit by the U.S. Chamber of Commerce is also pending in federal court over Act 11. The two challenges raise overlapping questions about whether a state may use its corporate code to prohibit election-related spending that federal precedent has treated as protected speech.
If Act 11 stands, corporations, nonprofits and unions in Hawaii face the risk of dissolution for spending that supports or opposes candidates or certified ballot measures. If Grassroot prevails, the state will be blocked from enforcing that revise against the group and, potentially, more broadly.
Rayner maintained the statute leaves publishing research and lobbying lawmakers alone. Yeates and the judge focused on the practical reality that advocacy groups raise money and communicate with the public precisely to influence political questions. Kobayashi’s comments on the record placed political speech at the center of the dispute.
The judge stopped short of granting either side’s motion. Her pre-argument inclination on standing and her post-argument view that the law restricts political speech leave the parties waiting for a formal order. The effective date remains more than two years away, but the constitutional lines are already being drawn in Honolulu federal court.
When states revise corporate powers to silence election speech, the First Amendment does not take a holiday. Courts exist to keep that boundary clear.
