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Tom Ognibene, Yvette Velazquez Bennet, Viviana Vazquez v. Joseph P. Parkes

December 21, 2011

TOM OGNIBENE, YVETTE VELAZQUEZ BENNET, VIVIANA VAZQUEZ- HERNANDEZ, MARTIN DILAN, MARLENE TAPPER, ROBERT PEREZ, FRAN REITER, SHEILA ANDERSEN-RICCI, MARTINA FRANCA ASSOCIATES, LLC, REITER/BEGUN ASSOCIATES, LLC, DENIS GITTENS, OSCAR PEREZ, KINGS COUNTY COMMITTEE OF THE NEW YORK STATE CONSERVATIVE PARTY, AND NEW YORK STATE CONSERVATIVE PARTY, PLAINTIFFS-APPELLANTS, MICHELE RUSSO AND LEROY COMRIE, PLAINTIFFS,
v.
JOSEPH P. PARKES, S.J., IN HIS OFFICIAL CAPACITY AS CHAIRMAN OF THE NEW YORK CITY CAMPAIGN FINANCE BOARD, DALE C. CHRISTENSEN, JR., IN HIS OFFICIAL CAPACITY AS MEMBER OF THE NEW YORK CITY CAMPAIGN FINANCE BOARD, KATHERYN C. PATTERSON, IN HER OFFICIAL CAPACITY AS MEMBER OF THE NEW YORK CITY CAMPAIGN FINANCE BOARD, MARK S. PIAZZA, IN HIS OFFICIAL CAPACITY AS MEMBER OF THE NEW YORK CITY CAMPAIGN FINANCE BOARD, MARK DAVIES, IN HIS OFFICIAL CAPACITY AS EXECUTIVE DIRECTOR OF THE NEW YORK CITY CONFLICTS OF INTERESTS BOARD, MONICA BLUM, IN HER OFFICIAL CAPACITY AS MEMBER OF THE NEW YORK CITY CONFLICTS OF INTERESTS BOARD, STEVEN ROSENFELD, IN HIS OFFICIAL CAPACITY AS MEMBER OF THE NEW YORK CITY CONFLICTS OF INTERESTS BOARD, ANDREW IRVING, IN HIS OFFICIAL CAPACITY AS MEMBER OF THE NEW YORK CITY CONFLICTS OF INTERESTS BOARD, ANGELA M. FREYRE, IN HER OFFICIAL CAPACITY AS MEMBER OF THE NEW YORK CITY CONFLICTS OF INTERESTS BOARD, AND MICHAEL MCSWEENY, IN HIS OFFICIAL CAPACITY AS ACTING CITY CLERK OF NEW YORK CITY, DEFENDANTS-APPELLEES.*FN1



The opinion of the court was delivered by: Paul A. Crotty, District Judge:

09-0994-cv (L)

Ognibene, et al. v. Parkes, et al.

Argued: October 18, 2010

Amended: January 12, 2012

Before: LIVINGSTON, CALABRESI, Circuit Judges, and CROTTY, District Judge.*fn2

Plaintiffs-Appellants*fn3 brought this action in February 2008 against the 11 Defendants-Appellees,*fn4 challenging the constitutionality of certain provisions of 12 New York City's political campaign finance and lobby laws that (1) limit 13 campaign contributions by individuals and entities that have business dealings 14 with the City; (2) exclude such contributions from matching with public funds 15 under the public financing scheme; and (3) expand the prohibition on corporate 16 contributions to include partnerships, LLCs, and LLPs. Plaintiffs appeal from 17 a February 6, 2009 decision of the United States District Court for the Southern 1 District of New York (Swain, J.) granting the Defendants' motion for summary 2 judgment. We affirm the district court's dismissal of Plaintiffs' challenges as to 3 all three provisions.

Affirmed.

Appellants seek declaratory and injunctive relief, alleging that recently- 27 enacted amendments to the New York City Administrative Code, commonly 28 known as the "pay-to-play" rules, violate the First Amendment to the U.S. 29 Constitution by unduly burdening protected political speech and association, the 1 Fourteenth Amendment by denying equal protection of the laws, and the Voting 2 Rights Act, 42 U.S.C. § 1973.*fn5 The challenged provisions (1) reduce below the 3 generally-applicable campaign contribution limits the amounts that people who 4 have business dealings with the City, including lobbyists, can contribute to 5 political campaigns, N.Y.C. Admin. Code § 3-703(1-a) (for candidates who 6 participate in the City's optional public financing program, set forth in N.Y.C. 7 Admin. Code § 3-703 ("participating candidates")), 3-719(2)(b) (for candidates 8 who do not participate in this program ("non-participating candidates")); (2) deny 9 matching funds for contributions by people who have business dealings with the 10 City and certain people associated with lobbyists, N.Y.C. Admin. Code §§ 3- 11 702(3), 3-703(1-a); and (3) extend the existing prohibition on corporate 12 contributions to partnerships, LLCs, and LLPs, N.Y.C. Admin. Code §§ 3- 13 703(1)(l) (for participating candidates), 3-719(2)(b) (for non-participating 14 candidates). Appellants argue, inter alia, that the lack of evidence of actual pay- 15 to-play corruption in City politics means that there is no legitimate interest to 16 be protected; that the regular contribution limits already in place sufficiently 17 address any possible interest in reducing actual or perceived corruption; and 18 that Citizens United v. Federal Election Commission, 130 S.Ct. 876 (2010), 1 prohibits all contribution limits based on the source's identity. The district court 2 rejected appellants' arguments and dismissed the claims on summary judgment.*fn6

We affirm as to all three provisions, finding that the laws are closely drawn to 4 address the significant governmental interest in reducing corruption or the 5 appearance thereof.

I. Facts

In 1988, after a recent wave of local scandals, the New York City Council 8 passed the Campaign Finance Act ("CFA"), establishing the Campaign Finance 9 Program ("Program"). (A-819.) The Campaign Finance Board ("Board") 10 administers the Program and provides public matching funds to candidates 11 running for the three citywide offices of Mayor, Comptroller, and Public 12 Advocate; the five offices of Borough President; and the fifty-two offices of the 13 City Council. The CFA imposes certain obligations on all candidates, including 14 the filing of financial disclosure statements reporting contributions and 15 expenditures, limitations on the amount of contributions from any single donor, 16 and the obligation to respond to the Board's requests to verify compliance with 17 the Program. N.Y.C. Admin. Code § 3-701, et seq. The CFA also limits per- 18 person contributions for all covered elections in a single calendar year to $4,950 1 for Mayor, Comptroller, or Public Advocate; $3,850 for Borough President; and 2 $2,750 for City Council.*fn7 Id. § 3-703(1)(f).

Additionally, candidates who seek to participate in the public financing 4 system must agree to limitations on the total amount of money the campaign 5 spends promoting the candidate's nomination or election. A participating 6 candidate's campaign receives public matching funds for all eligible individual 7 private contributions from New York City residents of up to $175 at a rate of six 8 dollars in public funds for every one dollar in private contributions. Id. §§ 3-703, 9 3-705(1), (2). Contributions from organizations, however, including unions and 10 Political Action Committees ("PACs"), are not eligible for matching. Id. § 3- 11 702(3).

In 1998, the New York City Charter Revisions Commission ("Commission") 13 sought to resolve problems that the existing law did not address. (A-314-A-316.)

It proposed, and the City's voters passed by referendum, a Charter amendment 15 that directed the Board to prohibit corporate contributions for all participating 16 candidates; required these candidates to disclose contributions from individuals 17 and organizations doing business with the City; and directed the Board to 18 promulgate rules fleshing out these "doing business" limitations. N.Y.C. Charter 1 §§ 1052(a)(11), (a)(12)(a). In its recommendation, the Commission identified 2 concerns about contractor and lobbyist contributions, but noted the lack of 3 evidence that such contributions had actually influenced the award of a 4 particular contract or passage of a bill. Report of the New York City Charter 5 Revision Commission 12-13 (Aug. 20, 1998) ("1998 Commission Report").

Nevertheless, the Commission concluded that there was "no doubt that these 7 contributions have a negative impact on the public because they promote the 8 perception that one must 'pay to play.'" Id. at 19. The City Council later enacted 9 a separate ban on corporate contributions to all candidates, including non- 10 participating candidates. N.Y.C. Admin. Code § 3-703(1)(l).

In 2006, after several public hearings and studies, the Board reported that 12 over twenty percent of the contributions in the 2001 and 2005 election cycles 13 were from individuals and entities doing business with the City, who comprised 14 less than six percent of contributors, and that large contributions were more 15 likely than small contributions to come from such donors. N.Y.C. Campaign Fin. 16 Bd., Interim Report on "Doing Business" Contributions 12, 13 (June 19, 2006) 17 ("Interim Report"). In addition, incumbents-considered to have greater 18 influence on city decisions-were more likely to receive these large donations 19 than challengers. N.Y.C. Campaign Fin. Bd., Public Dollars for the Public Good: 20 A Report on the 2005 Elections 122 (2006) ("2005 Election Report"). In order to 7 1 improve the CFA, the Board recommended banning all organizational 2 contributions (including partnerships, LLCs, PACs, and unions) and regulating 3 contributions by individuals and entities doing business with the City. 2005 4 Election Report, 120, 122.

That year, the City passed Local Laws 15 and 17, which created a 6 mandatory electronic filing system for lobbyists; required full lobbyist disclosure 7 of all fundraising and consulting activities; banned all gifts from lobbyists to City 8 Officials; and excluded contributions from lobbyists and the individuals 9 identified on their statements of registration from the definition of "matchable 10 contribution." N.Y.C. Admin. Code §§ 3-213, 3-216.1, 3-225, 3-702(3)(g). This 11 latter category of exclusions includes the lobbyist's spouse or domestic partner 12 and, if the lobbyist is an organization, any officer or employee who engages in 13 lobbying activity, as well as his or her spouse or domestic partner. 14 In 2007, the City Council voted 44-4 to pass Local Law 34, requiring 15 disclosure of, and restricting contributions from, individuals and entities who 16 have business dealings with the City, as defined in the CFA. The law lowers 17 these donors' contribution limits approximately twelve-fold, to $400 (from the 18 generally-applicable level of $4,950) for the three City-wide offices; to $320 (from 19 $3,850) for Borough offices; and to $250 (from $2,750) for City Council.*fn8 The law 1 also makes these contributions ineligible for public matching, and extends the 2 ban on corporate contributions to LLCs, LLPs, and partnerships. Id. §§ 3- 3 703(1)(l), 3-703(1-a), 3-719(2)(b). The corresponding City Council Committee 4 Report referred to the Board's 2005 Election Report and stated that, 5 [w]hile there is nothing intrinsically wrong with contributions from those 6 doing business with the City, the ability of such individuals to contribute 7 could create a perception, regardless of whether such perception is 8 accurate, that such individuals have a higher level of access to the City's 9 elected officials. It is important to eradicate this perception and reduce 10 the appearance of undue influence associated with contributions from 11 individuals doing business with the City.

12 (N.Y.C. Council, Comm. on Gov'tl Affairs, Report of the Govt'l Affairs Div., for 13 Int. No. 586-2007, 24-25 (June 12, 2007) ("Committee Report").) The Committee 14 Report explained that the expansion of the corporate contribution ban addressed 15 a "loophole" that allowed similarly structured business entities to circumvent the 16 contribution limits. (Id. at 29.)

17 The "doing business" limits apply to contributions from any natural person 18 who is a chief executive officer, chief financial officer, and/or chief operating 19 officer; serves in a senior managerial or equivalent capacity; or has an interest 20 exceeding ten percent in an entity that has "business dealings" with the City or 21 affiliate agency, unless that person is the candidate or a relative. N.Y.C. Admin. 22 Code § 3-703(1-a). "Business dealings" include: (1) contracts greater than or 23 equal to $100,000 for the procurement of goods, services, or construction; (2) real 9 1 property acquisitions or dispositions; (3) applications for approval of transactions 2 involving office space, land use, or zoning changes; (4) certain concessions and 3 franchises greater than or equal to $100,000; (5) grants greater than or equal to 4 $100,000; (6) economic development agreements; (7) contracts for investment of 5 pension funds; and (8) transactions with lobbyists.*fn9 Id. § 3-702(18).

Section 3-702 of the Administrative Code contains two definitions of 7 "lobbyist." The first is narrow, referencing § 3-211's definition of "every person 8 or organization retained, employed or designated by any client to engage in 9 lobbying." The second is broader, encompassing anyone included in § 3-211, as 10 well as the lobbyist's spouse or domestic partner; unemancipated children; and, 11 for entities, the organization's officers and employees who engage in lobbying or 12 work for a division of the organization that engages in lobbying activities and 13 their family members.*fn10 Id. § 3-702(16). Appellees concede that the narrower 14 definition applies to the doing business limitations, even though the broader 15 definition has been used in the past.*fn11 (Appellee's Br. 11 n.5). Contributions from 16 individuals who are affiliated with lobbyists (i.e., included in the broader 1 definition) are ineligible for matching even if they are not, under the narrower 2 lobbyist definition, subject to the lower "doing business" limits.

3 As of June 30, 2008, New York City agencies (excluding affiliated entities) 4 held 19,578 open contracts worth approximately $55.4 billion. (Simpson Decl. 5 ¶ 5). A wide range of for-profit and non-profit entities qualify as having business 6 dealings with the City, including Con Edison, Waste Management of New York 7 LLC, the New York City Ballet, the Legal Aid Society, the Brooklyn Botanic 8 Garden Corporation, various health and social services providers, day care 9 centers, religious organizations, and labor organizations. See generally Doing 10 Business Portal, http://www.nyc.gov/html/doingbiz/home.html (last visited Aug, 11 10, 2011). Although several labor organizations and union-affiliated entities 12 have business dealings on account of procurement contracts with the City, 13 "collective bargaining with City employee unions is a distinct process that is 14 governed by State law." (Simpson Decl. ¶ 8). As a result, the procurement rules 15 (and, consequently, the "doing business" limits) do not apply to collective 16 bargaining with City unions or to employer-employee relationships for non- 17 unionized employees. (Id.)

18 Appellants filed an original and amended complaint in February 2008 and, 19 in April 2008, moved for a preliminary injunction on some of the claims asserted, 20 raising facial challenges to these three provisions. After the district court 1 postponed the hearing on injunctive relief until the trial on the merits, the 2 Appellees moved for summary judgment. The parties then stipulated that there 3 was no need for an evidentiary proceeding in connection with the motions.

4 Several amicus curiae briefs were filed in support of Appellees, both by public 5 interest organizations and by City Council candidates.

II. The District Court Decision on Motion for Summary Judgment

By Order dated February 6, 2009, the district court denied Appellants' 8 motions for preliminary and permanent injunctive relief and granted Appellee's 9 motion for summary judgment on the same grounds: that the challenged limits 10 served a sufficiently important governmental interest-addressing the reasonable 11 concern about actual and apparent corruption by those doing business with the 12 City. While there was no recent evidence of actual corruption with respect to 13 campaign contributions, the district court reasoned, given the public's perception 14 of continuing corruption, fueled by actual pay-to-play scandals in the 1980s, the 15 City properly imposed the challenged limits to combat corruption, correct 16 misperceptions, and instill public confidence in the City's political and 17 governmental processes. 599 F. Supp. 2d at 445-46. The court also found that 18 the contribution limits were closely drawn to respond to this interest in 19 eliminating actual and apparent corruption, rejecting Appellants' arguments 20 concerning the failure to index for inflation and viewpoint discrimination. Id. at 21 454-55.

The district court subjected the non-matching provisions to the same 2 analysis and concluded that they were permissible. Id. at 456. It reasoned that 3 the legislature should not be required to use taxpayer dollars to match 4 contributions it has determined present a risk of corruption. Id. The court also 5 held that using the broader definition of lobbyist does not render these 6 provisions overbroad because this expanded reach is necessary to prevent 7 circumvention of the contribution limits. Id. at 457.

Finally, the district court upheld the ban on contributions from 9 partnerships, LLCs, and LLPs for the same reasons that it found justified 10 prohibiting corporate contributions, specifically, to prevent circumvention of the 11 valid contribution limits and the use of business forms to deploy for political 12 ends business assets amassed for business reasons. Id. at 459-60. The court also 13 ...


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