By: Mary C. Topic

Pay-to-play laws have risen in prominence in recent years, particularly after Citizens United came down. Pay-to-play laws regulate campaign contributions from government contractors, frequently by taking the form of prohibitions on the award of contracts to those who have made campaign contributions. In enacting such statutes, legislatures seek to combat both actual incidences of corruption, as well as the appearance of corruption.

In a May 2015 opinion by Judge Fisher, and affirmed by Judges Kozinksi and Watford, the Ninth Circuit upheld Hawaii’s law pay-to-play law after an important challenge from a government contractor. The litigation in Yamada v. Snipes centered around Hawaii’s HRS § 11-355(a), which contains a broad prohibition against government contractors making contributions to candidates, candidate committees, non-candidate committees, or “any person for any political purpose or use.” At the initial trial, the plaintiffs were a government contractor, the CEO, and a second person seeking to overturn § 11-355(a), in addition to a number of disclosure requirements associated with campaign spending. The District Court denied the plaintiffs relief and they appealed the decision.

The plaintiffs raised three issues in their appeal to the Ninth Circuit, two of which dealt with due process and First Amendment concerns to disclosure requirements in Hawaii’s campaign financing laws. The last issue that the plaintiffs raised directly concerned pay-to-play: whether Hawaii’s ban on contributions from government contractors is unconstitutional as applied to the plaintiffs’ proposed contributions. The plaintiffs kept the issue fairly narrow, declining to challenge the entirety of the pay-to-play provision and, instead argued that the ban was unconstitutional as applied to their contributions. They asserted that that the candidates they were donating to would not oversee implementation of the contract nor make the award of the contract, so there was a reduced risk of corruption or the appearance of corruption.

In rendering its decision, the court applied “closely drawn” scrutiny, a standard requiring a state to show a “sufficiently important interest” and that the state is only using closely drawn means in advancing that interest. The court found that the ban on contributions met the requirements of closely drawn scrutiny.

The state’s interest in combatting both the appearance of corruption and actual corruption was uncontested; however, the plaintiffs argued that the means of addressing the interest were not closely drawn with respect to candidates and officials without direct dealings with the contract. The court rejected this argument, following the Second Circuit’s reasoning in a case similar with similar facts, Green Party of Connecticut v. Garfield.

The court found that the state’s means of accomplishing its interest were sufficiently closely drawn because the legislation targeted “direct contributions” from contractors. Furthermore, the court rejected the idea that it needed to determine the “precise restriction” needed to promote the state’s interest, just a “reasonable” fit. Under the Supreme Court’s decision in McCutcheon v. Federal Election Commission, the risk of the appearance of corruption, or actual corruption, is highest when a donor makes a direct contribution to a candidate. The Hawaii legislature was addressing such direct contributions in enacting § 11355(a). The court also found that the legislature’s choice in enacting an all-out ban (rather then a spending cap) was justified given Hawaii’s history of pay-to-play scandals.

In addition to upholding the general prohibition against contractor candidate contributions, the court also rejected the plaintiff’s argument on the grounds that the entire Hawaii legislature considers procurement bills. Since the whole legislature considers appropriations, there would be no practical way to completely sever the connection between a legislator and a contractor making a contribution. The court also cited to another practical concern in the plaintiffs’ argument: contributors would not be able to predict if a candidate would become directly involved with a contract at the time of making a donation. In a footnote, the court also noted that Hawaii’s ban was considerably narrower than other states’ bans and even the federal ban.

Yamada has received much attention in the election law arena. One of the attorneys that co-authored an amicus brief in favor of the State’s position was quoted as saying, “The Court clearly recognized that contractor contributions pose a very real potential for corruption, and this contractor sought not only to strike down the ban itself, but also to do away with any disclosure of its independent spending in support of candidates — thus raising the threat significantly.”

While many are applauding the decision as a victory in the fight against corruption, the plaintiffs filed a petition for certiorari in mid-August. There is speculation that the Supreme Court may weigh in on the issue, given that there is a split decision in the Circuit Courts on this issue.

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