State has agreed to permanent injunction against earlier law that drew fire from both sides of the political spectrum

Credit: Pepi Stojanovski on Unsplash

New Jersey’s 9-month-old law requiring so-called dark-money advocacy groups to disclose their funders is all but dead, leaving its sponsors working on a new transparency effort they hope to see enacted in time to cover the tens of millions of dollars expected to be spent in this year’s elections.

The state has agreed to a permanent injunction against the law as part of a settlement it has reached in two of the three lawsuits filed by politically active nonprofits and is working toward a similar agreement in the third. U.S. District Court Judge Brian Martinotti, sitting in Trenton, has yet to approve the settlements, but several sources say he’s expected to do so.

Under the settlements with the ACLU and its New Jersey arm and the Illinois Opportunity Project, the state agrees not to enforce the disclosure law against any independent expenditure committee. The law, which Gov. Phil Murphy signed essentially under duress last June, requires politically active nonprofit 501(c)(4) and 527 groups to disclose their large contributors — those giving $10,000 or more — when the groups spend at least $3,000 to influence an election, legislation or regulations. The rules were supposed to take effect last Oct. 15.

Jeffrey Brindle, the executive director of the N.J. Election Law Enforcement Commission (ELEC), is among those who have long called for regulations on dark-money spending, which has become a dominant force in elections. The state’s 2018 congressional races drew a record $49 million in dark money — nearly all of which is untraceable, meaning voters don’t know who is trying to sway their vote.

Congress is on the ballot again this year, this time with the presidential race topping the ticket, and dark-money spending is expected to reach record levels. The ballot question asking New Jerseyans to legalize recreational marijuana is also likely to draw millions in spending by politically active nonprofits.

The settlement stipulates that the state could enact future legislation and regulations related to the issue, and the nonprofits could also challenge those in court.

Moving ahead

Sen. Troy Singleton (D-Burlington) and Assemblyman Andrew Zwicker (D-Middlesex), the lead sponsors of the law, issued a joint statement saying the lawsuits had kept the state “in limbo for too long” and the settlements will allow them to move ahead with a new effort to shine a light on dark money.

“We have already begun working with the legislative leadership on the next steps and we believe there is a clear path forward,” the lawmakers said. “With the presidential and congressional elections later this year, we expect tens of millions of ‘dark money’ dollars to be spent in an attempt to influence the outcomes. We will continue to fight to ensure that those organizations that accept anonymous large donations are forced to disclose their sources. We must shine a light on who is working secretly to change the course of our elections.”

A spokesman for Attorney General Gurbir Grewal declined to comment on the settlements.

It had seemed clear from last September’s hearing on the law and Martinotti’s preliminary injunction that it would be hard for the state to successfully defend the transparency measure. Martinotti had found language in the law overly broad and “constitutionally troubling.”

Murphy signed S-150 last year to avoid an override of his conditional veto of a nearly identical bill. But in a statement upon signing the law, he warned that it might be deemed unconstitutional and could face legal challenges.

None of the plaintiff groups commented on the pending settlements.

Fight far from over

David Keating, president of the Institute for Free Speech that describes itself as a protector of First Amendment political rights, applauded the state’s decision to settle the suits, calling the New Jersey law “among the nation’s worst for speech and association rights.”

Keating, who has been called the inventor of political committees known as SuperPACs that can raise and spend unlimited sums of money as long as they don’t coordinate with candidates, said the law could have exposed people to “harassment and retaliation” for supporting certain organizations that would have had to have disclosed their contributions.

“Attorney General Grewal deserves credit for recognizing this law was indefensible,” Keating said. “Settling the litigation will lift the chill on free speech and save taxpayers from wasting more money on legal bills.”

David Goodman, team leader of the New Jersey chapter of RepresentUs, the grassroots group that supports election and campaign-funding reforms, said he is confident the state will be able to enact changes or write a new law to address the problem of dark money.

“The fight against ‘dark money’ is not over,” Goodman said. “S-150 may be dead but this is just the first round. We are ready to throw our full support behind a clean-up bill, one that remedies past defects and will withstand future legal challenges.”

There was talk of lawmakers voting for a “cleanup” bill to address constitutional concerns both after Murphy signed S-150 and after Martinotti issued the preliminary injunction, but lawmakers decided not to proceed pending a final court determination. At one point, both Senate President Steve Sweeney (D-Gloucester) and Assembly Speaker Craig Coughlin (D-Middlesex) had intervened in court to defend the law but last month they withdrew.

Zwicker, one of the two prime sponsors of the law, has introduced two potential revisions based on concerns raised by Martinotti, Murphy and some organizations, in the new session.

One of the bills (A-1206) would modify how the law governs groups that advocate for or against legislation or regulations, including through issue advocacy ads. The other (A-1204) would focus the law more narrowly on groups specifically advocating for or against a candidate or public question within 60 days before an election and eliminate the requirement for disclosing funders when a group engages only in advocacy toward legislation or regulations.

Zwicker said the lawmakers have not decided yet whether to proceed with one of those measures or write something different. But they want to act quickly as campaigning for this year’s races is already underway.

“The goal is to make the strongest disclosure we possibly can, but not to repeat ourselves” and end up back in court, Zwicker said. Moving as soon as possible on a solution is important, he added, because the amounts spent by dark-money groups “are astounding and this year these numbers are going to be even bigger … As we get closer to November, that amount of money is going to increase exponentially.”

Settling the suit is preferable to spending what could be years in court arguing over the current law, he said.

Drawing fire from both sides

The law had made strange bedfellows of groups allied in opposition to it, with the ACLU on the left and IOP and Americans for Prosperity on the right. All the groups are considered grassroots politically active nonprofits and all would have had to have complied with the law.

Lawyers for the ACLU and IOP have agreed to settle and not seek to force the state to pay court costs, which they could do. The question of “AFP’s claim for legal fees,” is still under discussion in settlement talks with the state, according to a letter Assistant Attorney General Stuart Feinblatt sent to Martinotti last Wednesday advising him of the prospective settlements.

AFP, which received almost $57 million in contributions and grants in 2017, according to its Form 990 U.S. tax filing, was the first group to challenge the law in court. The organization does not disclose its donors but is known to be funded by multi-billionaire Charles Koch of Koch Industries. The election spending website OpenSecrets listed AFP as the fourth biggest dark-money player in 2016, with a total $13.3 million spent. Topping that list was the NRA Institute for Legislative Action, an adjunct of the National Rifle Association, which spent $35.2 million that year.

While the issue of dark money has been discussed for years, legislation requiring disclosure had languished until early 2019. That’s when the bill got Sweeney’s backing and started to move swiftly through the Legislature.

Sweeney got on board after a dark-money group supporting Murphy, his frequent sparring partner, reneged on a pledge to voluntarily disclose its donors. The group eventually did disclose its funders.