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D.C. District Court Upholds Federal Contractor Pay-to-Play Restriction

April 18, 2012

 

For the second time in recent months, the United States District Court for the District of Columbia has upheld a long-standing contribution ban in the face of a post-Citizens United constitutional challenge. This latest ruling, which upheld the federal ban on political contributions by federal contractors, has potential implications for other so-called “pay-to-play” restrictions—including the “pay-to-play” rules promulgated by the Securities and Exchange Commission, Municipal Securities Rulemaking Board, Commodities Futures Trading Commission, and other state and local government agencies.

In Wagner v. FEC, No. 11-1841 (D.D.C. Apr. 16, 2012), the Court rejected a challenge to the more than 70 year old ban on contributions by federal contractors to candidates, political committees, and parties in connection with federal elections. The decision follows Bluman v. FEC, No. 10-1766 (D.D.C. Aug. 8, 2011), in which the Court upheld the prohibition on contributions and expenditures on direct advocacy by foreign nationals in federal elections.

In Wagner, three federal contractors filed suit alleging that the federal ban on contractor contributions—initially enacted as a part of the 1940 amendments to the Hatch Act, and now codified as part of the Federal Election Campaign Act, 2 U.S.C. § 441c(a)—facially violates both the First Amendment and the equal protection guarantee of the Fifth Amendment. Their argument rested in part upon the landmark decision in Citizens United v. FEC, 130 S. Ct. 876 (2010).

The Court rejected plaintiffs’ motion for preliminary injunction preventing the Federal Election Commission from enforcing the ban, holding that plaintiffs did not have a likelihood of success on the merits of either claim. Writing for the Court, Judge James E. Boasberg held that there can “be no doubt that preventing ‘pay-to-play’ deals or pressure on contractors to give – or the appearance that either is occurring – is sufficiently important to warrant restrictions on political contributions by federal contractors.” Wagner, slip. op. at 9. The Court further held that the ban was closely drawn to this sufficiently important government interest.

While the Court made only passing reference to other “pay-to-play” restrictions—including those impacting the financial services industry—the reasoning employed by the Court could readily apply to uphold such restrictions, whether on the federal, state or local level. In addition, the decision provides further indication that lower courts are not rushing to overturn standing campaign finance law in the wake of the Supreme Court’s Citizens United decision.

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If you would like to discuss this matter further, please contact Ted Kassinger at (202) 383-5170, Bob Rizzi at (202) 383-5322, Jonathan Singer at (202) 383-5238, or your primary contact at O’Melveny & Myers LLP.