Federal judge strikes down New York laws limiting donations to 'super PACs'

By Joseph Ax

NEW YORK (Reuters) - A federal judge on Thursday reluctantly struck down New York's limits on donations to independent political action committees as unconstitutional, potentially ushering in a new era of "super PACs" in state campaigns.

District Judge Paul Crotty said the statutes could not survive First Amendment scrutiny in light of recent landmark Supreme Court decisions that have lessened restrictions on big-money political donors. He noted that personally, he disagrees with the high court.

"I think there is a risk of quid pro quo corruption, but the Supreme Court has not recognized it," he said during a hearing in Manhattan federal court. "We know what the Supreme Court has held, whether we like it or not, and I'm bound to follow it."

The New York laws had limited the amount of money individual donors could contribute to independent political committees, known as super PACs, that operate separately from a candidate's campaign. Under Crotty's ruling, super PACs can now raise unlimited funds, though committees that coordinate with parties or candidates are still subject to limits.

In October, the federal appeals court in New York blocked the state from enforcing the laws in question, pending the disposition of the underlying case, and noted that similar laws had been struck down elsewhere.

Crotty's decision came just weeks after the Supreme Court ruled that donors could contribute funds to as many candidates, parties and committees as they wish, in a case brought by a Republican businessman, Alabama resident Shaun McCutcheon, challenging federal caps. The court did not alter the rules that limit the amount of money donors can give to any one candidate.

The Supreme Court's decision in the McCutcheon case followed its seminal 2010 ruling in Citizens United v. Federal Election Commission, which opened the door for unlimited spending by independent groups in federal elections as a form of free speech. Both were 5-4 rulings along party lines, with the court's conservatives in the majority.

McCutcheon himself has given $60,000 to NYPPP since October, according to state campaign finance records. NYPPP has also collected $200,000 from tycoon David Koch, who with his brother founded one of the country's most prominent conservative super PACs, Americans for Prosperity.

A spokesman for New York Attorney General Eric Schneiderman, who defended the law in court, said the attorney general was disappointed by the decision.

"The corrosive influence of money in politics is well-known and a danger to our system of government, as the judge himself acknowledged today," said the spokesman, Matt Mittenthal. "Unfortunately, the judge considered himself bound to this result by this month's Supreme Court decision in the McCutcheon case, together with Citizens United."

Craig Engle, NYPPP's founder and a partner with Washington, D.C., law firm Arent Fox, said in an interview that Crotty's ruling was "not controversial" given the Supreme Court precedents.

The decision could have a major impact on state and local races, said Jerry Goldfeder, an election lawyer with Stroock & Stroock & Lavan in New York.

"I expect there to be a proliferation of independent expenditures with regard to state and municipal races," he said. "This takes the lid off unlimited spending by people who wish to pour their resources into a campaign."

NYPPP was originally formed to boost the candidacy of Republican Joseph Lhota, who unsuccessfully challenged Democrat Bill de Blasio in New York City's mayoral race last year. Engle declined to say whether NYPPP had plans to support other conservative candidates in New York.

A lawyer for New York Attorney General Eric Schneiderman, who defended the law, argued that the statutes were intended to prevent corruption. But Crotty, who was nominated by Republican President George W. Bush in 2005, said the Supreme Court's narrow view of what constitutes corruption had tied his hands.

"One thing is certain: large political donations do not inspire confidence that the government in a representative democracy will do the right thing," he said. "Today's reality is that the voices of ‘we the people' are too often drowned out by the few who have great resources."

(Reporting by Joseph Ax; Editing by Noeleen Walder and David Gregorio)

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