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Court frees PAC to collect unlimited contributions in NY mayoral race

By Joseph Ax

NEW YORK (Reuters) - A conservative political action committee can accept unlimited contributions in support of the Republican candidate for New York City mayor, Joseph Lhota, a federal appeals court ruled on Thursday, less than two weeks before election day.

In addition to permitting what could be a sizable injection of campaign cash into the race on behalf of Lhota, who badly trails Democrat Bill de Blasio in polls, the ruling could have a lasting effect on New York's elections.

The decision is the latest in a series of rulings unshackling donors to independent political committees since the U.S. Supreme Court's controversial 2010 ruling in the Citizens United case, which said there is no governmental interest in limiting such contributions.

The latest case involved a New York statute that limits individuals to $150,000 in aggregate campaign contributions to all committees and candidates in any given year.

The New York Progress and Protection PAC was founded by Craig Engle, a partner at Washington law firm Arent Fox, whose past clients include the National Republican Senate Committee and 2012 Republican presidential candidate Jon Huntsman.

The independent committee said it had at least one donor, Alabama businessman Shaun McCutcheon, willing to give $200,000 or more to the PAC on Lhota's behalf. McCutcheon is also the plaintiff in a U.S. Supreme Court case argued two weeks ago that challenges federal limits on the total amount individuals can give to candidates during an election cycle.

U.S. District Judge Paul Crotty in Manhattan on October 17 denied the PAC's bid for an injunction stopping the state from enforcing the law, saying that doing so just weeks before the election could create chaos.

However, the U.S. Court of Appeals for the 2nd Circuit said on Thursday the PAC had shown "a substantial likelihood of success of the merits." A unanimous three-judge panel reversed Crotty's decision and issued a preliminary injunction putting the law on hold; the case will continue before Crotty.

"The Supreme Court held in Citizens United v. FEC that the government has no anti-corruption interest in limiting independent expenditures," Judge Dennis Jacobs wrote for the appeals court. "It follows that a donor to an independent expenditure committee such as NYPPP is even further removed from political candidates and may not be limited in his ability to contribute to such committees."

New York Attorney General Eric Schneiderman, whose office defended the law, was "deeply disappointed," a spokesman said.

"Attorney General Schneiderman believes that every voter should have an equal voice in our democracy, and that New York's campaign finance laws are essential to protecting the integrity and fairness of our elections. We are deeply disappointed with this decision," the spokesman said.

Michael Carvin, a lawyer who represented the PAC, said 27 judges in a dozen cases had found similar laws in other states unconstitutional.

"This law has been DOA (dead on arrival) ever since Citizens United," he said.

And Terence Pell, the president of the Center for Individual Rights, which also represented the PAC, said the ruling ensured that Lhota would have enough money to compete.

"With this decision, New York City voters will now get a more democratic mayoral race, one with an even financial playing field," he said.

Engle, the PAC's founder, declined to say whether he expects many donors to step forward. He also would not say when the PAC would begin to purchase ads in support of Lhota.

At a campaign event on Thursday, Lhota said, "I have nothing to do with that case."

De Blasio's campaign, however, criticized the decision, with a spokeswoman warning that it would empower wealthy "Republican extremists" to "drown out the voices of New Yorkers."

Jerry Goldfeder, a prominent election lawyer in Manhattan, said he doubted even a large influx of cash could swing the election to Lhota. But he said he was worried about the impact on state elections if the law is struck down for good.

"It's just another example of the courts stripping away campaign finance regulations," Goldfeder said.

The case is New York Progress and Protection PAC v. Walsh, 2nd Circuit U.S. Court of Appeals, No. 13-3889.

(Reporting by Joseph Ax; Editing by Daniel Trotta, Steve Orlofsky and Tim Dobbyn)

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