Type: Law Bulletins
Date: 05/03/2012

Can Government Contractors Make Campaign Contributions? Pay-to-Play Prohibition Persists

The Supreme Court ruled, in the 2010 Citizens United v. FEC decision, that the limitations placed on campaign contributions by corporations and unions were unconstitutional.  As is common in the aftermath of a significant decision, follow-on lawsuits have been filed challenging other bans or limitations on the same or similar grounds.  One such decision, issued on April 16, 2012, should be of particular interest to Federal Government contractors, especially given the federal elections taking place this year. 

The plaintiffs, in Wagner v. FEC, filed suit in the District Court for the District of Columbia, alleging that the 70-year-old ban on federal contractors making campaign contributions (specifically Section 441(c) of the Federal Election Campaign Act) should be invalidated.  Yes, that’s correct.  Companies or individuals receiving Federal contracts are banned from making campaign contributions.  The “pay-to-play” contribution restrictions were enacted in response to the “Democratic campaign book” scandal, which refers to the practice of requiring contractors to “buy campaign books at extremely inflated prices.”  This practice left contractors with little choice but to make contributions if they wished to get any work.  Finding that this was “just a subterfuge to levy cold-blooded blackmail,” Congress enacted a ban on all campaign contributions to “prevent corruption and the appearance thereof.”

The Wagner plaintiffs challenged the ban on both First Amendment and Equal Protection grounds.  In considering a motion for preliminary injunction, Judge Boasberg’s decision weighed both arguments and found them lacking.  Because the plaintiffs were found unlikely to succeed on the merits, the preliminary injunction was denied.
Examining the First Amendment argument, the trial court applied intermediate “closely drawn” scrutiny, which means that a restriction of free speech rights will only be upheld if is found “closely drawn to match a sufficiently important interest.”  The court then analyzed the relevant Governmental interest in preventing corruption as well as the appearance of corruption.  Having found that this interest was “no doubt…sufficiently important to warrant restrictions in political contributions,” the question narrowed to whether or not the total ban on contributions by Federal contractors was sufficiently closely drawn to serve the Government’s interest.  The court found persuasive other cases, the history of the ban, and other available avenues for political expression and, as a result, found that the ban passed Constitutional muster. 

With regards to the Equal Protection argument, plaintiffs in this suit were unique in that they were unincorporated individuals who held relatively low-dollar contracts.  It was unfair, they argued, that they were totally banned from making political contributions, whereas Federal employees and contractor-related entities (such as executives, shareholders, employees, and political action committees) were not similarly banned.  The court found that neither the Federal employees nor the contractor-related entities were similarly situated as required by an Equal Protection argument.  Although some Federal employees often work alongside contractors and perform similar tasks, the history of corruption in seeking Federal employment was not similar to that of seeking Federal contracts.  The court also failed to be persuaded that corporate-related entities were similarly situated.

Given that this decision was issued within the context of a motion for preliminary injunction, plaintiffs still have the opportunity to develop their case further.  However, it seems unlikely that the court would turn 180 degrees and come out on the other side of this issue.  Therefore, for now, it appears that the total ban on federal contractor political campaign contributions will survive post-Citizens United review.

Wagner v. FEC, No. 11-1841(JEB), Apr. 16, 2012, D.D.C.  The case may be accessed at 2012 WL 1255145 (D.D.C.).  

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