Ban on federal election campaign contributions by federal government contractors withstands constitutional challenge: Will the Supreme Court review the ban?

July 09, 2015

Government Contracts Alert

Author(s): Douglas Dziak, Brian J. Whittaker

In a unanimous en banc ruling issued on July 7, 2015, the D.C. Circuit Court of Appeals (“D.C. Circuit”) upheld the longstanding ban on federal campaign contributions by individuals while they negotiate or perform federal contracts. The 11–0 ruling in Wagner v. FEC may set the stage for review by the United States Supreme Court (“Supreme Court”), which has, in recent years, struck down multiple campaign finance reform laws based on the First Amendment right to political speech.

The ban on government contractor contributions

The statute at issue—52 U.S.C. § 30119(a)(1)—makes it unlawful for any person “who enters into any contract with the United States … to make any contribution of money or other things of value, or to promise … to make any such contribution to any political party, committee, or candidate for public office or to any person for any political purpose.”

The D.C. Circuit recognized that a total ban on federal contributions by contractors is a significant restriction on speech. Nevertheless, the D.C. Circuit concluded that the ban is permissible because the statute is narrowly tailored to advance the government’s sufficiently important interests in preventing corruption, the appearance of corruption, and interference with merit-based public administration. In doing so, the D.C. Circuit rejected application of the highest level of constitutional scrutiny, even though the Supreme Court applied the highest level of scrutiny when it ruled that the ban on corporate independent political expenditures was unconstitutional in Citizens United v. FEC. As justification for the statute, the D.C. Circuit explained the lengthy history of pay-to-play contractor scandals to demonstrate instances of federal contractor corruption and ties to political donations.

Notably, the D.C. Circuit only considered the ban on contributions by an individual contractor to federal candidates or political parties. The D.C. Circuit did not, for example, consider application of the ban to independent expenditure committees, more commonly known as Super PACs, or individual expenditures on electoral advocacy.

What’s next?

There are two potential outcomes that government contractors, including individuals and corporations, should monitor regarding this case: (1) Will the Obama Administration, emboldened by the D.C. Circuit’s decision in Wagner, complete work on its long-rumored Executive Order (“EO”) that would require government contractors to disclose all political expenditures, including those to non-disclosed 501(c)(4) organizations and Super PACS? And (2) Will the Supreme Court review the D.C. Circuit’s decision, in light of its decisions in Citizens United and similar cases, if a petition for a writ of certiorari is filed?

Prior to the 2012 presidential election, an EO requiring government contractors to disclose additional information regarding political activities was rumored to be forthcoming. Yet, the EO was never released. Recently, a number of outside proponents of greater campaign finance limits and restrictions have publicly called for the Obama Administration to issue the rumored EO. The D.C. Circuit’s decision in Wagner provides advocates of the EO with the legal rationale to support the EO. With the backing of outside advocates and armed with this decision, the administration might finally issue the rumored EO.

At the same time, the Supreme Court has recently overturned many longstanding campaign finance restrictions, and the filing of a petition for a writ of certiorari in Wagner would not be surprising. Whether the Supreme Court would grant such a petition is a significant question due to the narrow facts and unanimous decision by the D.C. Circuit. As the 2016 elections approach, the answer to that question will become increasingly important for government contractors currently barred from making contributions.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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