The Wagner case, decided today by the D.C. Circuit, is important because of its analysis of the constitutionality of federal campaign contribution restrictions and, by extension, of pay-to-play laws generally. Covington has been monitoring this case since the district court decision in 2012, to the argument before the D.C. Circuit in 2013, and the decision by the appellate court to vacate the opinion in the same year.

Part of the procedural wrangling in the case was due to tricky jurisdictional issues. But the substantive issues strike at the heart of modern campaign finance. No doubt this latter inquiry is at least part of the reason it took the D.C. Circuit Court about nine months from the argument on September 30, 2014, to issue today’s opinion.

Strictly speaking, the decision focuses on the federal ban on contributions by contractors to federal candidates and parties. The opinion might have been broader, covering contributions to political action committees that make contributions to candidates. That broader question would have been interesting because, in the absence of control or earmarking by the donor, the concern about corruption is arguably lessened when an intermediary, such as any one of a wide variety of PACs, makes independent determinations about how to use its money. However, the two plaintiffs whose challenge included desired contributions to political committees and PACs were no longer federal contractors by the time the Court issued its opinion. So the Court declined to address the broader question as to contributions to PACs.

Many aspects of this case are interesting, but the following are a few highlights:

  • The Court recognized not only a governmental interest in protecting against quid pro quo corruption and its appearance—which is the interest that has recently been the focus of the Supreme Court—but also the “protection against interference with merit-based public administration.” In some respects, this is a broader principle that could justify a broader set of restrictions than the concern about quid pro quo corruption alone, though it is arguably more relevant to restrictions applied to individual contractors (as here) in the context of federal government as an employer.
  • Although the Court acknowledges that political parties cannot award contracts, it favorably cites a district court for the proposition that “federal officeholders and candidates may value contributions to their national parties. . . in much the same way they value contributions to their own campaigns.” This is an expansive rationale and leads to all manner of questions.
  • The Court specifically identifies the enactment of pay-to-play laws by states and municipalities as evidence that restrictions on contributions are thought necessary to prevent corruption and to provide for merit-based administration. The Court’s assembly of a list of corruption scandals leading to contribution restrictions will no doubt be cited by other courts and may provide comfort to jurisdictions concerned about the constitutionality of their restrictions.
  • The Court rejected an argument that a higher level of scrutiny should apply. One result of the Court’s analysis is that we may continue to see a distinction between laws restricting independent expenditures (even to support a particular government official) and contributions made directly to the campaign of that same official.
  • Finally, this opinion does not bode well for recent challenges by the New York and Tennessee Republican parties to the Securities and Exchange Commission’s pay-to-play law, a challenge which, as we noted, has faced procedural challenges of its own. That suit is also before the D.C. Circuit.

Covington will be monitoring the fallout of the Wagner case and its implications for the future of campaign finance.