The ACLU Fronts a Drive to Disable Ethics Rules for Federal Contractors

Case pending in the D.C. Circuit could undermine the last frontier of campaign-finance regulation.

This piece is one of a number of occasional pieces we will be running on the doings of the United States Court of Appeals for the D.C. Circuit, the most important, and least well-covered court in the country.

The latest front in the ongoing war over campaign finance is in the Court of Appeals for the D.C. Circuit—the transformed D.C. Circuit, which now has a majority of Democrats. Wagner v. Federal Election Commission, which was heard in October, was a hearing in front of the full court—“en banc” is the legal term—and marked the first time all the new judges sat together.

Wagner continues the relentless attack by civil libertarians and conservative political groups on contribution limits—money directly given by individuals or companies to political candidates. In this case, the plaintiffs are government contractors. Current law forbids them to give money to political campaigns or parties—for the common-sense reason that contractors might be willing to kick back money to politicians as a “quid pro quo” for the contracts those politicians influence. Since 1940, contributions by individual federal contractors have been illegal under section 441c of the Federal Election Campaign Act.

The plaintiffs are three individual contractors, previously or currently under contract with the federal government, who want to directly contribute money to federal candidates or political committees while working for the government. The American Civil Liberties Union represents the plaintiffs, pushing the theory that the total ban is a violation of both the First Amendment, and even more boldly, the Fifth Amendment Equal Protection Clause.

Former members of the ACLU have been critical of the organization’s stance on campaign finance. Recently, six former leaders of the ACLU contested the organization’s stance on campaign finance laws in a letter to the Senate Judiciary Committee, stating that “we believe that the current leadership of the National ACLU has endorsed a deeply contested and incorrect reading of the First Amendment as a rigid deregulatory straitjacket that threatens the integrity of American democracy.”

The Supreme Court’s 2010 Citizens United decision embraced that “rigid deregulatory straitjacket” to the benefit of many interests with deep pockets. The public has cringed over the resulting flood of money into political campaigns. Commentators on that decision have tended to oversimplify the current state of the law. For instance, Comedian Stephen Colbert explained to George Stephanopoulos of ABC News that as a result of Citizens United: “Money equals speech, therefore, the more money you have the more you can speak.”

In fact, money doesn’t quite equal speech . . . yet. The Supreme Court divided “speech” in the political campaign context into two categories. The first category contains direct contributions, money that’s given directly by an individual, company, or group to a candidate. The second category contains independent expenditures, money spent independently of a candidate, usually on commercials for a political issue. Since the Supreme Court’s 1976 decision in Buckley v. Valeo, the Supreme Court has analyzed laws regulating the two differently.

Courts scrutinize government regulations of independent expenditures under what lawyers call “strict scrutiny.” That jargon means that the restriction (1) must be based on a “compelling” government interest, and (2) must use the “least restrictive means” necessary to achieve it. Expenditure limits, thus, can only survive if they are necessary to achieve something as important as national defense or racial equality, and if the aim cannot be achieved any other way.

Direct contributions to candidates or committees, however, are not considered to be speech; instead, the courts consider limits on contributions to be restrictions of freedom of association (between the contributor and the candidate) that has an “expressive component” of the contributor’s point of view. Direct contributions pose a danger that independent contributions do not—the danger that the contributor will give the money to get a governmental reward from the politician. Thus government regulations on direct contributions are tested under a looser standard, called the “closely drawn” standard, where courts determine whether the limits Congress employed are substantially mismatched with the ends served. The groups opposed to campaign finance reform, however, want the courts to use the “strict scrutiny” standard for contribution limits too—meaning almost none of them would survive.

Judging from the questioning at oral argument, however, the judges seem poised to uphold the divide in the law of campaign finance. Judge David Tatel, a Clinton appointee suggested that this case is really quite different from other contribution cases. In cases like Citizens United or Arizona Free Enterprise Club’s Freedom Club PAC v. Bennett, Tatel noted, the Supreme Court had discerned a “nefarious purpose” under the First Amendment. That refers to political goals the Supreme Court has ruled out of bounds–such as “leveling the playing field” or limiting the total amount of money in politics. However desirable those aims might be, the Supreme Court has said, the First Amendment does not permit the government to pursue them.

But, Judge Tatel said, this law concerns “corruption just in the procurement process, and its focus only applies to people participating in that process and only while they’re participating. So it seems that the fit is actually quite snug.” He added that the ban on contributions by such contractors “doesn’t raise all these concerns that lurk behind the other contribution cases.” Judge Brett Kavanaugh, a George W. Bush appointee, followed up by asking, “Why isn’t this case better viewed as a really a government ethics case [rather] than a kind of campaign finance case that we’ve seen in recent years?”

The unspoken answer is that courts judge regulations of campaign finance far more harshly than traditional government ethics rules. If the contribution limits are limits on speech, courts can more easily refuse deference to Congress’ judgments. Judge Kavanaugh noted “that history seems to be something we should pay particular attention to,” and the history here is fairly powerful. Section 441c is the current version of a 1940 law enacted after several corruption scandals came to light within the civil service. For instance, federal contractors were “required” to buy multiple copies of the “Democratic Campaign Book” at inflated prices after being gently reminded of the business they received from the government. Moreover, federal workers of the New Deal’s Works Progress Administration were required to give a portion of their monthly wage as political tribute, sometimes literally placing the money under a Democratic donkey paperweight on their supervisor’s desk. Congress sought to eliminate dangers of a “pay-to-play” dynamic and to prevent partisanship from infecting the federal workforce.

George Washington University professor Alan Morrison, a civil libertarian and Ralph Nader ally with decades of experience in public interest litigation, represented the challengers. Judge Cornelia Pillard, an Obama appointee, questioned Professor Morrison—“I know you’re arguing for strict scrutiny but there isn’t any precedent, is there, that contributions limits should be reviewed under strict scrutiny?”

“I would agree there is no Supreme Court precedent on strict scrutiny under the First Amendment,” Morrison responded But, he argued, the Supreme Court had applied the “closely drawn” standard in the recent case of McCutcheon v. Federal Election Commission, where the Supreme Court struck down aggregate limits on direct contributions. McCutcheon “demonstrates clearly that the closely drawn standard has ‘great teeth,’ as the [Supreme] Court said in that case,” he argued. Judge Patricia Millett, another Obama appointee, shot back that the government in McCutcheon was “regulating speech of the general citizenry,” not contract government employees—suggesting that the First Amendment issue in McCutcheon was fundamentally different.

This case has followed a circuitous course to end up before the en banc court of the D.C. Circuit. The complexities are worth following because they illustrate the unique jurisdiction of the D.C. Circuit, which is the reviewing court for a huge number of federal regulations and statutes. The case first came before the D.C. Circuit, in the form of a three-judge panel, in May of 2013 as an appeal from a November 2012 decision of the District Court for the District of Columbia. The district court had upheld the statutory ban by granting the government’s motion for summary judgment.

Turns out a district court isn’t allowed to do that. According to the law concerning challenges to the Federal Election Campaign Act, procedurally a lower court is required, when presented with a constitutional challenge to FECA to do two things, and two things only. The lower court shall (1) certify substantial constitutional questions (in other words, ensure there’s a real issue of constitutional interpretation), and (2) make factual findings. Then the case is heard before a full panel of the D.C. Circuit, which will decide the legal and constitutional issues.

Because the plaintiffs’ lawsuit raised a constitutional question—whether a total ban on campaign contributions by individual federal contractors violates the First and Fifth Amendments—those questions can only be answered by the full en banc panel of the D.C. Circuit. Hence, the circuitous route back to the D.C. Circuit.

Even if the D.C. Circuit upholds the divide in campaign finance law, the conservative majority on the Supreme Court could demolish it. In the campaign finance arena, the Roberts Court majority is openly contemptuous of legislators’ judgments. They might decide that worrying about contractors making kickbacks to politicians was all very well in the past, but is no longer a current problem.

Josh Swanner

Josh Swanner is a 2014 graduate of the University of Baltimore.