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Ognibene v. Parkes

February 6, 2009


The opinion of the court was delivered by: Laura Taylor Swain, United States District Judge


Plaintiffs*fn1 bring this action for declaratory and injunctive relief against Defendants alleging that certain provisions of New York City's political campaign finance and lobby laws violate the First and Fourteenth Amendments to the Constitution of the United States and the Voting Rights Act, 42 U.S.C. § 1973. Specifically, Plaintiffs allege that certain recently-enacted amendments to the New York City Administrative Code ("Administrative Code"), commonly known as the "pay-to-play" rules, which reduce to levels below the generally-applicable campaign contribution limits the amounts that lobbyists, and persons engaged in certain business dealings with the City of New York, can contribute to political campaigns, ban contributions by certain types of entities, and deny matching contributions in connection with campaign contributions by lobbyists and certain persons associated with them. Plaintiffs assert that these aspects of the laws unduly burden protected political speech and association in violation of the First Amendment and deny equal protection of the laws in violation of the Fourteenth Amendment, both facially and as applied. The Court has jurisdiction of this action pursuant to 28 U.S.C. §§ 1331 and 1343(a).

Plaintiffs filed an original and an amended complaint in February 2008 and, in April 2008, moved for a preliminary injunction on some, but not all, of the claims asserted in the amended complaint. In their motion for preliminary injunctive relief, Plaintiffs raised facial constitutional challenges to the Administrative Code provisions that lower contribution limits and disallow matching funds for contributions by individuals who have "business dealings with the City" and to the Administrative Code provision prohibiting contributions from partnerships, LLCs and LLPs. The Court ordered the hearing on the injunctive relief requested consolidated with the trial of those claims on the merits. Defendants thereafter moved for summary judgment in their favor on those claims and, with the Court's consent, filed a consolidated brief in support of the motion for summary judgment and in opposition to the motion for injunctive relief. Citizens Union, Common Cause/NY and New York Public Interest Group (collectively "Organization Amici"), filed an amicus curiae brief in support of Defendants, and City Council candidates Brad Lander and Mark Winston Griffith (collectively "Candidate Amici") also filed an amicus curiae brief in support of Defendants.

The parties stipulated that there was no need for an evidentiary proceeding in connection with the motions, and the Court heard oral argument on the motions on November 25, 2008. The Court has carefully considered the submissions and arguments of the parties and amici, including the parties' post-oral argument letter submissions. For the reasons explained below, Plaintiffs' motion for injunctive relief is denied and Defendants' motion for summary judgment is granted. This Opinion constitutes the Court's findings of fact and conclusions of law for purposes of Federal Rules of Civil Procedure 52 and 65.


The following material facts are undisputed. New York City's Campaign Finance Act (the "CFA") established the New York City Campaign Finance Program (the "Program") in 1988. (Defs' 56.1 Stmt. at ¶ 6.)*fn2 The Campaign Finance Board (the "Board") administers the Program and provides public matching funds to candidates running for Mayor, Comptroller, Public Advocate, Borough President and City Council member. (Id. at ¶ 7.) The CFA imposes certain obligations on all candidates, including filing financial disclosure statements reporting contributions and expenditures, limitations on the amount of contributions that can be received from any single contributor, and the obligation to respond to the Board's requests for documentation and information to verify compliance with the Program. (Id. at ¶ 9.) Additionally, "participating candidates" (those candidates who seek to participate in the public financing system), must agree to limitations on the total amount of money the campaign spends promoting the candidate's nomination or election. (Id.) A participating candidate's campaign receives public matching funds for all eligible individual private contributions by New York City residents of up to $175 at a rate of six dollars in public funds for every one dollar in private contributions. (Id. at ¶ 10.) However, under Administrative Code sections 3-702(3) and 3-703(1-a), contributions from organizations, including unions and Political Action Committees ("PACs"), and contributions from certain individuals considered to have business dealings with the City, as defined in the law, as well as individuals identified on a lobbyist's statement of registration, are not eligible for matching. (Id. at ¶ 12.)

In general, the CFA limits per-person contributions for all covered elections in a single calendar year to $4,950 for Mayor, Comptroller or Public Advocate, $3850 for Borough President, and $2,750 for City Council.*fn3 (Id. at ¶ 13.) Under certain circumstances, contributions exceeding these limits by up to half the applicable amount may be made. (Id.) Certain individuals who have "business dealings with the City" are subject to lower limitations,*fn4 and certain types of organizations are not permitted to make any contributions. (Id. at ¶ 14.)

In 1998, a New York City Charter Revision Commission (the "Commission") made a series of recommendations relating to campaign finance reform, including that corporate contributions "should be banned outright" because they are "inherently problematic." (Id. at ¶ 17.) The Commission characterized a ban on corporate contributions as "a step toward solving" the problem of "doing business" contributions. (Id. at ¶ 18.) The Commission also proposed regulating contributions from those who do business with the City. (Id.) The Commission identified concerns relating to contractor and lobbyist contributions, but acknowledged that "[g]enerally there is no evidence that these campaign contributions actually influence the award of a particular contract or passage of a bill." (Id.; see also Pines Decl., Ex. F, Report of the New York City Charter Revision Commission dated August 20, 1998 ("1998 Commission Report") at p. 19.) Despite the lack of evidence of actual influence, the Commission concluded that there is "no doubt that these contributions have a negative impact on the public because they promote the perception that one must 'pay to play.'" (Id.)

The Commission proposed, and the City's voters approved through a referendum, a 1998 Charter amendment requiring the Board to prohibit corporate campaign contributions, requiring participating candidates to disclose contributions received from individuals and entities doing business with the City and directing the Board to "promulgate such rules as it deems necessary to regulate the acceptance by candidates participating in the voluntary system of campaign finance reform of campaign contributions by individuals and entities doing business with the city, including rules that determine which business dealings shall be covered by such rules." (Defs' 56.1 Stmt. at ¶¶ 19-20, 14; see also Charter §§ 1052(a)(12)-(13).) The City Council later enacted a separate ban on corporate contributions to candidates, including non-participating candidates. (Defs' 56.1 Stmt. at ¶ 20.)

In 2005, New York City's Vendor Information Exchange System ("VENDEX"), containing information about City vendors, and a database of lobbyists registered with the City Clerk's office became available online. (Id. at ¶ 24.) The Board held several public hearings during 2005 and 2006 relating to "doing business" contributions, (Id. at ¶ 25), and requested that research be conducted by a team of students at New York University's Wagner Graduate School of Public Service based on the VENDEX and lobbying database data. In its interim report on "doing business" contributions, dated June 19, 2006, the Board reported based on the students' research that campaign contributions by individuals and entities "doing business"*fn5 with the City represented 27.5% of the monies contributed in the 2001 election cycle and 22.3% of those contributed in the 2005 election cycle. (Id. at ¶¶ 26-27; see also Loprest Decl., Ex. A, Interim Report of the New York City Campaign Finance Board on "Doing Business" Contributions ("2006 Interim Report").) The study also concluded that contributors who gave large amounts of money were more likely to be "doing business" with the City than were smaller contributors. (Id.) In its post-election report on the 2005 elections, which was published in 2006 (the "2005 Election Report"), the Board made several recommendations for improving the CFA, including banning all organizational contributions (including contributions from partnerships, LLCs, PACs and unions), and regulating contributions byindividuals and entities "doing business" with the City. (Id. at ¶¶ 30-32; Loprest Decl., Ex B., Public Dollars for the Public Good ("2005 Election Report" ).)

In 2006, the City enacted Local Laws 15 and 16, which, inter alia, amended Administrative Code section 3-213 to create a mandatory electronic filing system for "lobbyists," added section 3-216.1 (requiring full lobbyist disclosure of all fundraising and consulting activities), and added section 3-225 (banning all gifts from lobbyists to City officials), and Local Law 17, which amended the Administrative Code section 3-702(3) definition of a "matchable contribution" to exclude contributions from lobbyists and any other persons required to be included in statements of registration required to be filed with the City Clerk pursuant to Administrative Code section 3-213(c)(1). (Defs' 56.1 Stmt. at ¶¶ 34-36; see also Local Laws 15, 16, and 17 (Pines Decl. Exs. C-E).) According to section 3-213(c)(1), the spouse or domestic partner of a lobbyist, and, if the lobbyist is an organization, any officer or employee of such lobbyist who engages in any lobbying activity or who is employed in a division of the organization that engages in lobbying activity, and the spouse or domestic partner of such officer or employee, are to be included on the registration statement. See N.Y.C. Admin. Code § 3-213(c)(1). Administrative Code section 3-213(b) provides that "[s]uch statements of registration shall be kept in electronic form in the office of the city clerk and shall be available for public inspection."

In 2007, the City Council passed Local Law 34, which requires disclosure of and reduces the contribution limits for individuals who have "business dealings with the City," as defined in the CFA.*fn6 (Defs' 56.1 Stmt. at ¶ 38.) Among other changes, Local Law 34 amended Administrative Code section 3-703*fn7 by adding subdivision 1-a, which restricted contributions from those having "business dealings" with the City from the generally-applicable levels to $400 for citywide campaigns, $320 for Borough President, and $250 for City Council, and amending section 3-702(3) to make such contributions ineligible for public matching. (Defs' 56.1 Stmt. at ¶ 39; Local Law 34 (Pines Decl. Ex. A).) Local Law 34 added subdivisions 18 and 20 to section 3-702, which defined "business dealings with the City" and "persons" for the purposes of the "Doing Business Database." Local Law 34 also amended section 3-703(1)(l) to extend the ban on corporate contributions to LLCs, LLPs and partnerships. (Defs' 56.1 Stmt. at ¶ 39; Local Law 34 (Pines Decl. Ex. A).)

The City Council Committee Report (the "Committee Report") relating to these amendments referenced the 2006 Interim Report, and stated that, "[w]hile there is nothing intrinsically wrong with contributions from those doing business with the City, the ability of such individuals to contribute could create a perception, regardless of whether such perception is accurate, that such individuals have a higher level of access to the City's elected officials. It is important to eradicate this perception and reduce the appearance of undue influence associated with contributions from individuals doing business with the City." (Defs' 56.1 Stmt. at ¶ 40; see also Pines Decl., Ex. H, New York City Council, Report of the Governmental Affairs Division, Committee on Governmental Operations, for Int. No. 586-2007, ("Committee Report") at 24-25.) With respect to the expansion of the corporate contribution ban to other types of entities, the Committee Report described the change as addressing "a loophole in the law that permits similarly structured business entities, such as limited liability companies ("LLC"), limited liability partnerships ("LLP") and partnerships" to contribute up to the full contribution limit. (Defs' 56.1 Stmt. at ¶ 41.)

The so-called "doing business" restrictions apply to a "natural person" who is "a chief executive officer, chief financial officer and/or chief operating officer . . . or . . . serving in an equivalent capacity" or who is "employed in a senior managerial capacity" or has an interest which "exceeds ten percent" of an entity that has "business dealings" with the City or affiliate agency. (Id. at ¶ 44.) "Business dealings" are defined, in section 3-702(18), to include certain transactions that fall within the following categories: (i) contracts for the procurement of goods, services and construction; (ii) concessions and franchises; (iii) grants; (iv) economic development agreements; (v) contracts for investment of pension funds; (vi) real property acquisitions or dispositions; and (vii) applications for land use approvals or zoning text amendments. (Defs' 56.1 at ¶ 42.) There are separate rules concerning "actions, transactions and agreements providing affordable housing." (Id.; see also N.Y.C. Admin. Code § 3-702(18).)

Transactions falling into one of the aforementioned categories are considered "business dealings" when the aggregate value of the transactions between the entity and the City or affiliated agency, over the course of a certain time period, reaches or exceeds a certain specified amount. For example, a franchisee is considered to have "business dealings" with the City when the estimated annual value of all franchises that the franchisee has been awarded in the past year amount to $100,000 or more. (Defs' 56.1 Stmt. at ¶ 66.) Procurement contracts, concessions, franchises and grants valued at $5,000 or less are not considered in calculating "business dealings." (Id. at ¶¶ 52, 66, 71.) Contracts and concessions awarded through publicly-advertised competitive sealed bidding and emergency contracts are also excluded from the calculation. (Id. at ¶¶ 49, 66.)

As of June 30, 2008, New York City agencies, excluding affiliated entities, held a combined total of 19,578 open contracts worth approximately $55.4 billion. (Id. at ¶ 47.) Entities considered to have business dealings with the City as of June 30, 2008, included a wide range of for-profit and non-profit entities. (Id. at ¶ 113; Schaffer Decl. ¶¶ 38-39.) Non-profit entities listed include the 116th Street Block Association, Inc., the Association to Benefit Children, the Brooklyn Botanic Garden Corporation, the Institute for Labor and the Community, the Southeast Bronx Neighborhood Center, Inc., The Legal Aid Society, and other health and social services providers, day care centers, youth programs, educational and cultural institutions, religious organizations, community organizations, advocacy organizations and others. (Defs' 56.1 Stmt. at ¶ 113.) Several labor organizations or union-affiliated entities, including municipal labor organizations, have procurement contracts with the City or an affiliated agency that are considered "business dealings" under the law. (Defs' 56.1 Stmt. at ¶ 114; admitted in Pls' 56.1 at ¶ 114; see also Schaffer Decl. ¶ 40.) Defendants concede that City procurement rules do not apply to collective bargaining with City unions, or to employer-employee relationships for non-unionized employees. (Defs' 56.1 Stmt. at ¶ 54.)

The "doing business" limits also apply to individuals who are "lobbyists." (Id. at ¶ 44.) The Administrative Code contains two different definitions of lobbyists in section 3-702. Section 3-702(18) defines "lobbyist" narrowly, by reference to section 3-211's lobbyist definition, which encompasses "every person or organization retained, employed or designated by any client to engage in lobbying." N.Y.C. Admin. Code §§ 3-702(18); 3-211(a). Section 3-702(16) defines "lobbyist" more broadly, as including not only those considered lobbyists under the section 3-211(a) definition, but also the lobbyist's spouse, domestic partner and unemancipated childen, as well as, when the lobbyist is an organization, the officers and employees of the organization who engage in lobbying or work for a division of the organization that engages in lobbying activities, and family members of such officers and employees. See N.Y.C. Admin. Code § 3-702(16). Defendants contend that the narrower lobbyist definition is currently applied in construing the "doing business" limitations, but admit that the broader definition of lobbyist has been used in the past. (Defs' 56.1 Stmt. at ¶ 44; Pls' 56.1 Stmt. at ¶ 44; Defs' Dec. 2, 2008, letter; see also Defs' Mot. for. Summary Judgment at n. 4 ("While the CFB initially construed the Doing Business contribution limits as reaching "lobbyists" as defined by § 3--702(16), it has more recently clarified that, for the purpose of those contribution limits, "lobbyist" shall have the narrower scope of § 3-211(a).").)

The parties agree that there are certain campaign contributions that are not subject to the lower "doing business" limits, but which nonetheless are still ineligible for matching. (See e.g., Defs' Dec. 2, 2008, letter.) Administrative Code section 3-702(3) defines "matchable contribution" and categorizes as ineligible for matching not only those contributions from contributors subject to the "doing business" limitations, N.Y.C. Admin. Code § 3-702(3)(h), but also "contributions from lobbyists or other persons required to be included in a statement of registration filed pursuant to section 3-213(c)(1)." N.Y.C. Admin. Code § 3-702(3)(g). Pursuant to this provision, the contributions of some individuals who are affiliated with lobbyists, but who are not, under the narrower "lobbyist" definition, subject to the lower "doing business" limits, are ineligible for matching.


Plaintiffs assert that they are entitled to an injunction prohibiting enforcement of the Administrative Code provisions lowering the contribution limits for those "doing business" with the City (including insofar as those provisions apply to lobbyists), the provisions denying matching for campaign contributions by "doing business" contributors as well as by relatives and employees of lobbyists, and the extension of the corporate contributions ban to LLCs, LLPs and partnerships,*fn8 contending that the challenged provisions are facially violative of the First and Fourteenth Amendments to the Constitution of the United States. The Court has consolidated its consideration of the request for preliminary injunctive relief with the determination on the merits of the subject claims. Defendants cross-move for summary judgment on those aspects of Counts II, III, IV, VII, VIII and IX of the Amended Complaint on which Plaintiffs are seeking injunctive relief.

I. Legal Standard

To obtain permanent injunctive relief, the moving party "must demonstrate (1) actual success on the merits and (2) irreparable harm." Cartier v. Symbolix, Inc., 454 F. Supp. 2d 175, 186 (S.D.N.Y. 2006). Summary judgment pursuant to Rule 56(c) of the Federal Rules of Civil Procedure is to be granted in favor of the moving party when "the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The party moving for summary judgment bears the burden of establishing that no genuine issue of material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Evidence must be viewed in a light most favorable to the non-moving party and all reasonable inferences must be drawn in favor of the non-moving party. Rubens v. Mason, 527 F.3d 252, 254 (2d Cir. 2008).

The parties agree that there are no issues of material fact in connection with these motions. For the reasons explained below, the Court finds that Defendants are entitled as a matter of law to summary judgment in their favor on the aspects of the Administrative Code as to which Plaintiffs have asserted facial constitutional challenges. In light of this conclusion, Plaintiffs' requests for injunctive relief must be denied, as they have failed to demonstrate that they are entitled to prevail on the merits of their facial challenges.

II. The "Doing Business" Contribution Limits

A. Level of Scrutiny/Standard

In a series of campaign finance decisions beginning with Buckley v. Valeo, 424 U.S. 1 (1976), the Supreme Court has recognized a fundamental First Amendment interest in political speech and distinguished, in evaluating constraints on such speech and related activity, between constraints on campaign expenditures and constraints on campaign contributions. The Court has applied strict scrutiny to restraints on expenditures. Contribution limits are, however, treated differently. Because they constitute only indirect constraints on protected speech and associational rights,*fn9 contribution limits are subject to a more lenient standard of review and are upheld if they are supported by a sufficiently important state interest and closely drawn to comport with that interest. See, e.g., Davis v. Federal Election Comm'n, 128 S.Ct. 2759, 2770 (2008) (recognizing that the test for contribution limits is whether "they are closely drawn to serve a sufficiently important interest") (internal quotations omitted).

Concerns regarding the prevention of corruption and the prevention of public perceptions of corruption, which undermine public confidence in the integrity of government, have been recognized repeatedly as sufficiently important to support closely drawn restrictions. Corruption and corruption-appearance related justifications for restraints that only incidentally affect speech by cabining contributors' efforts to provide candidates with money with which to speak require little scrutiny, as "it [is] difficult to isolate suspect contributions," Buckley, 424 U.S. at 30, and without legislative authority to impose measures designed to protect against the appearance of corruption, "the cynical assumption that large donors call the tune could jeopardize the willingness of voters to take part in democratic governance." Nixon v. Shrink Missouri Gov't PAC, 528 U.S. 382, 390 (2000).

The Supreme Court has recognized, however, that contribution restrictions can be so draconian as to constrain candidates' ability to amass sufficient funds to speak effectively. In such situations, the unusually draconian restraints, or factors combining to effect such restraints, must be supported by a showing of special justifications in addition to meeting the requirement that they be closely drawn. Randall v. Sorrell, 548 U.S. 230, 261 (2006). The question of whether contribution limits impose such restraints on candidates' ability to amass ...

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