A major overhaul of the city’s campaign finance system could face a legal roadblock, as a powerful local lobbyist said he is preparing a lawsuit challenging the legislation for violating the free speech rights of lobbyists and city contractors.

If successful, the suit could curtail or topple the changes championed by Mayor Bloomberg and the City Council speaker, Christine Quinn. The bill would limit lobbyists and those who receive city contracts to campaign contributions of no more than $400, while other donors could give up to $4,950 and also have their contributions matched with up to $1,050 in taxpayer funds. The legislation passed a council committee last week by a 6–1 vote, and it is expected to pass the full City Council tomorrow.

While the bill’s supporters say it will decrease the influence of money in politics, the lobbyist spearheading the legal challenge, Sidney Davidoff, said the regulation would unfairly single out and impose rules on a large group of lobbyists and contractors.

“We have a tremendous group of people who can’t participate like their neighbors can,” Mr. Davidoff, who plans to file the suit after the bill is passed to become a law, said. “That is a second class citizenship — it is an interference of their rights to participate in the electoral process.”

Supporters of the bill are brushing off the possibility of the bill being struck down in court, arguing that the restrictions placed on lobbyists and contractors are within the boundaries of the law.

“If we had excluded them entirely from being able to contribute, that would have been a bigger issue, but we put a cap on it,” the chairman of the City Council Governmental Operations Committee, Simcha Felder, said. The Supreme Court last year struck down a Vermont law imposing a $400 limit on contributions to candidates for state office in the Green Mountain State.

The Bloomberg administration, which would be the target of any legal challenge, examined judicial precedent and is confident the bill is constitutional, an attorney with the city’s law department, Jeffery Friedlander, said in a statement.

Support for the bill has been strong within the Council, and many top lobbyists who privately oppose the restrictions say they’re keeping quiet for now, letting Mr. Davidoff take the lead in publicly challenging the elected officials with whom they so often work.

One of the few outspoken opponents of the legislation in City Hall, Council Member Vincent Ignizio, predicts the legal challenge will prevail, as the bill allows “for one person’s voice to be louder than another.”

“It limits that person’s voice, and that, on its face, I don’t believe is just, and I don’t believe it’s constitutional,” Mr. Ignizio said.
Campaign finance authorities say the state of the law on the issue is blurry.

“The classic campaign finance jurisprudence may be a bit up the air,” a campaign finance lawyer with Skadden, Arps, Slate, Meagher & Flom in Washington, D.C., Lawrence Noble, said.

Generally, donation bans on certain groups have been upheld in the past, Mr. Noble said, so long as the government that created the law can demonstrate a need, often by demonstrating a risk of corruption.

“The courts have said that you can have contributions prohibitions if you have a compelling governmental interest,” he said.
In addition to restricting donations from lobbyists and city contractors, the proposed campaign finance overhaul changes the formula for matching public funds, putting a greater emphasis on smaller donations. It also bans contributions from limited liability companies, but not from labor unions. If passed by the City Council, the new rules created by the legislation would go into effect for the 2009 citywide elections, though a lawsuit could potentially put a hold on the start date.

Mr. Davidoff said he wasn’t yet sure whether his suit would be filed in federal or state court.