Appeals court allows Illinois campaign finance caps

CHICAGO (Reuters) - A federal appeals court ruled on Wednesday that an Illinois law limiting contributions to political campaigns can remain in force at least until the November 6 election.

Passed in 2009, the law imposed a $5,000 limit on contributions from individuals, a $10,000 limit on unions and corporations, and a $50,000 limit on political action committees.

The Illinois Liberty Political Action Committee, a self-described "free enterprise," challenged the law in federal court, saying it violated free speech and equal protection rights guaranteed by the U.S. Constitution.

The group asked a judge in the U.S. District Court for the Northern District of Illinois for a preliminary injunction blocking the law.

When the district court judge refused, the PAC appealed and asked the 7th U.S. Circuit Court of Appeals to block the law while its appeal was heard.

On Wednesday, the appellate court refused to grant the injunction and upheld the lower court's initial refusal to block the law, leaving the limits in place at least through the November general election.

In its ruling, the three-judge panel said the PAC's attorneys "have not shown that they are likely to succeed on the merits of their challenge to contribution limits."

The ruling means the case will now go back to the district court.

Diane Cohen, general counsel for the Liberty Justice Center, the group that filed the challenge on behalf of the PAC, said she was not surprised by the setback.

"We knew it was going to be an uphill battle," Cohen said.

Wednesday's ruling by the 7th Circuit Court was the second legal setback this week for opponents of state caps on contributions by individuals and political committees.

On Tuesday, the U.S. Supreme Court refused to block a Montana law limiting campaign contributions to candidates for state office.

The high court upheld a ruling by the U.S. 9th Circuit Court of Appeals earlier this month that temporarily reinstated Montana's right to regulate campaign contributions after a lower court struck down the restrictions as unconstitutional.

Several conservative advocacy groups had asked the Supreme Court to intervene in the Montana case and temporarily block enforcement of the 9th Circuit Court's decision. But the court, in a one-paragraph ruling, denied the petition.

The legal fight over state campaign finance laws has been closely watched following a 2010 U.S. Supreme Court decision that corporations and unions had a constitutional free-speech right to spend freely to support or oppose political candidates.

That decision has unleashed a torrent of campaign spending from groups outside the efforts of candidates in the presidential and congressional elections.

(This story is corrected with name of appellate court in 11th paragraph)

(Editing by Greg McCune and Christopher Wilson)