N.Y. Campaign Donation Cap Barred, Win for Lhota Backers

An independent political action committee backing Republican Joe Lhota for New York City mayor isn’t subject to a state law that bars individuals from giving it more than $150,000 in a year, a federal appeals court ruled.

The U.S. Court of Appeals in New York today reversed a lower-court judge’s decision and gave a potential boost to Lhota, who is trailing Democrat Bill de Blasio in the polls less than two weeks before the Nov. 5 election.

The appeals panel applied the U.S. Supreme Court’s 2010 Citizens United decision, preliminarily blocking enforcement of the cap against New York Progress and Protection PAC. Alabama businessman Shaun McCutcheon had told the court he wanted to contribute $200,000 to the group in support of Lhota.

“Every sum that a donor is forbidden to contribute to NYPPP because of this statute reduces constitutionally protected speech,” the three-judge panel said.

Today’s ruling and Citizens United, which removed restrictions on spending by independent groups, would allow unlimited amounts of money to be collected and spent on political campaigns in New York, where mayoral candidates who participate in the public campaign finance system are limited to spending $6.4 million.

The judges ordered the lower court to issue a preliminary injunction barring the state from enforcing the cap against NYPPP, saying the group has “a substantial likelihood of success” in its challenge to the law. The ruling applies only to NYPPP.

‘Independent Expenditure’

“It’s an independent expenditure,” said Jessica Proud, Lhota’s spokeswoman. “We have nothing to do with it, so we’re not commenting.”

“Today’s decision will empower the right-wing billionaires, like the Koch Brothers, and Tea Party groups who support Joe Lhota, to drown out the voices of New Yorkers,” said a de Blasio spokeswoman, Lis Smith. “The stakes are too high to let the same Republican extremists who shut down the government hijack the mayoral election.”

Tomorrow is the deadline for reporting donations and spending up to and through Oct. 21 under New York campaign-finance rules. The last report was issued Sept. 30 for contributions and expenses as of Sept. 26.

‘Too Late’

“If it were three months ago, Lhota might have been able to use the money to make the race more competitive,” said William Cunningham, managing director of Dan Klores Communications Inc., a public relations firm. “It’s a little too late for it to have any impact on the outcome now.”

Cunningham served as senior political adviser to former New York Governors Mario Cuomo and Hugh Carey and former U.S. Senator Daniel Moynihan. He also advised current New York Mayor Michael Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg LP.

De Blasio, 52, had about $1.3 million on hand as of the last report, after spending about $446,000 of the $6.4 million allowed for the general election.

Lhota, 59, had $985,000 in cash on hand after spending about $318,500 between the Sept. 10 Republican primary and the last report. The Campaign Finance Board gave Lhota another $39,000 in public funds today.

“Whether the ruling will have an impact on raising money depends on the willingness of the donors, who may feel it’s daunting when polls consistently show de Blasio 40 points ahead,” Cunningham said.

Decision Reversed

The appeals court reversed an Oct. 17 decision by U.S. District Judge Paul Crotty in Manhattan. Crotty had said a ruling temporarily blocking enforcement of the law against NYPPP would leave the state free to prosecute contributors giving more than $150,000 to other groups. It would also threaten to disrupt the status quo within days of the election, Crotty said.

“The magnitude of the harm to the public from an unpredictable and unjust election process far exceeds the potential hardships to NYPPP,” Crotty said in his ruling. Today, he issued the injunction called for in the appeals court’s ruling.

Under the city’s public campaign-finance system, mayoral candidates get a 6-to-1 match for each resident’s donation amounting to $175 or less. So far, de Blasio has received about $246,000 in public matching funds for the general election and Lhota $553,000, including disbursements made today, according to Matt Sollars, a spokesman for the Campaign Finance Board. More matching funds will be given out Nov. 1.

‘Tidal Wave’

“Today’s reversal by the court of appeals could unleash a last-minute tidal wave of special interest money into the election,” Sollars said in an e-mailed statement. “However, thanks to new rules put in place for this election, these contributions will be visible to the public. Independent expenditures by outside groups and contributions to those groups must be disclosed to the CFB within 24 hours during the last two weeks before Election Day.”

After today, candidates will be required to issue daily reports of any contributions of $1,000 or more they receive, and any spending of $10,000 on one day or over several days for a single vendor, according to Sollars.

“There’s a finite amount of advertising time still available on TV, and you would need a comprehensive targeted direct-mail campaign sitting on the shelf,” Cunningham said. “Joe’s problem is that this ruling coming at this time probably offers him resources but won’t change the overall dynamic of the race.”

Court ‘Victory’

Terry Pell, president of the Center for Individual Rights, which is co-counsel for the NYPPP in the suit, called the appeals court’s decision a “victory” for New Yorkers.

“Today’s ruling will allow New York’s mayoral election to proceed without the burden of unconstitutional campaign limits,” he said in an e-mailed statement.

A final debate between de Blasio and Lhota is scheduled for Oct. 29.

The case is New York Progress and Protection PAC v. Walsh, 13-3889, U.S. Court of Appeals for the Second Circuit (Manhattan).

To contact the reporters on this story: Bob Van Voris in federal court in Manhattan at Or rvanvoris@bloomberg.net; Henry Goldman in New York at hgoldman@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.