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Colorado Supreme Court Finds Pay-to-Play Law Unconstitutional

The below Colorado update was written and circulated today by Government Contracts attorneys C. Richard Pennington and Tyson Bareis out of McKenna Long & Aldridge LLP’s Colorado office.

The Colorado Supreme Court recently struck down a law that prohibited holders of sole-source state and local government contracts from making contributions to elected officials in Colorado. As we previously reported, this case is the latest episode in the continuing tension between a public that is increasingly skeptical of government contractors’ campaign contributions and the First Amendment rights, including the right to participate in the political process, that are afforded to all individuals and organizations. While the Colorado Supreme Court’s decision should rightfully be viewed as a victory for contractors and the First Amendment, the decision will not be the end of this tension or such laws.

In November 2008, Colorado voters narrowly passed Colorado’s Pay-to-Play law, which took the form of Amendment 54 to the Colorado Constitution. Citing a “presumption of impropriety between contributions to any campaign and sole source government contracts, “Amendment 54 prohibits holders of sole source state and local contracts from contributing to any political party or any candidate for elected office in the state. The law defines a sole source contract as “any government contract that does not use a public and competitive bidding process soliciting at least three bids prior to awarding the contract.”

The Colorado Supreme Court held that the Pay-to-Play law was unconstitutional in its entirety because, among other things, the law was not drafted narrowly enough to achieve its goal of eliminating the appearance of impropriety in the award of sole source contracts without significantly limiting constitutionally protected activity. The Court also noted that the cross-jurisdictional nature of the Amendment meant that fundraising in local governments would be limited by a donating entity’s contractual relationships with other, unrelated jurisdictions, like state government.

For contractors doing business in Colorado, the state’s Supreme Court decision means that they are no longer subject to the Pay-to-Play law’s prohibitions on political contributions. Importantly, however, the decision does not eliminate the possibility that Colorado may seek to enact laws similar to the “Pay-to-Play” law that was found to be unconstitutional. Instead, the Court’s decision implied that similar laws, even if they specifically target contractors, may be constitutional as long as the laws are drafted narrowly enough to address the laws’ stated concerns without significantly limiting constitutionally protected speech.

While it is impossible to predict future legislation, in light of the current anti-contractor sentiment and the political gains that can be had by proposing sweeping legislation to eliminate perceived “corruption,” contractors in Colorado and elsewhere should not expect the Colorado Supreme Court’s decision to prevent attempts to enact similar “Pay-to-Play” laws. MLA will continue to follow efforts to enact such laws, and contractors may wish to involve themselves in responding to such proposed laws by educating lawmakers and the public as to the ineffective and counterproductive nature of such laws.


Colorado Supreme Court Finds Pay-to-Play Law Unconstitutional

Sole Source Contractors Tackle Colorado’s Amendment 54

There is no state in the union whose “pay-to-play” law is currently being examined as closely as Colorado’s. In November 2008, 51% of Colorado voters approved “Amendment 54,” which impacts “sole source contractors.” Specifically, Amendment 54 prohibits “sole source government contractors” with contracts over $100,000, and its 10% owners, officers, directors,and trustees, and their “immediate families,” from making or soliciting contributions to political parties or candidates for state or local office during the term of the sole source contract and for two years thereafter. As the term is used here, “sole source government contract” means any government contract that does not use a public and competitive bidding process soliciting at least three bids prior to awarding the contract.

Shockingly, the “immediate family” that is prohibited from making such contributions includes any spouse, child, spouse’s child, son-in-law, daughter-in-law, parent, sibling, grandparent, grandchild, stepbrother, stepsister, stepparent, parent-in-law, brother-in-law, sister-in-law, aunt, niece, nephew, guardian, or domestic partner from making contributions, where applicable. Given that a great number of Colorado citizens likely are not in daily contact with each of their stepbrothers or nieces, it is easy to envision a scenario where this unwieldy regulation could penalize individuals or entities that are not engaging in any untoward activity. This is not to mention the logistical nightmare that such broad restrictions create for both reporting and regulating entities.

Not surprisingly, Amendment 54 prompted a torrent of litigation shortly after it went into effect. In June of this year, Denver District Court Judge Catherine Lemon granted an injunction against Amendment 54, agreeing with both business and labor interests who had argued that Amendment 54 was causing confusion and violating free-speech rights.

It now appears as if we will know the final fate of Amendment 54 soon enough. On August 26, it was reported that the Colorado Supreme Court has “fast tracked” the lawsuit against Amendment 54, directing attorneys to submit relevant records by Sept. 4.

Just as fascinating as the underlying lawsuit challenging Amendment 54 are the unintended consequences of the amendment. In this story, the Denver Post reports that monthly fundraising in Colorado fell by as much as two-thirds after the amendment took effect.

Sole Source Contractors Tackle Colorado’s Amendment 54