Judge puts NJ's 'dark money' law on hold, keeping the names of big donors secret

New Jerseyans won’t know the names of the big spenders trying to influence state politics, after a federal judge on Wednesday halted the state's “dark money” law.

Three groups sued New Jersey over a law Gov. Phil Murphy signed in June, despite calling it unconstitutional, that would require social welfare 501(c)(4) nonprofits and so-called 527 political organizations to publicly report donors that give more than $10,000 and the groups’ spending worth more than $3,000 on elections and political activity.

These independent groups would have had to start recording donor information Oct. 15 and publish the reports next January. But now it's unclear when or if voters will know who donated thousands of dollars in the weeks before the November Assembly elections.  

“To have this delay allows another election cycle to go by where people can manipulate outcomes in the dark because they have a bigger checkbook then the rest of us," said the law's sponsor, Sen. Troy Singleton, D-Burlington. 

The groups that sued, the libertarian Americans for Prosperity, the liberal American Civil Liberties Union and the Illinois Opportunity Project, argue that the law violates the First Amendment and targets certain political groups and not others. It requires information to be published about ads that talk about regulations, legislation and ballot measures, and not just candidates and election speech, which goes further than similar laws in other states and federal law. 

"While I respect the judicial decision, it is difficult not to be deeply disappointed by it,” said another sponsor, Assemblyman Andrew Zwicker, D-Middlesex. "This was a law that had been worked on for many years and something that had been and is deeply needed here in New Jersey, to understand where large quantities of money are originating from that are being used to influence the state. It’s critical to our democracy and to an open government."

Americans for Prosperity, which was founded by the megadonor brothers Charles and David Koch, praised the 3rd Circuit Court's opinion. 

“Americans should be free to advocate for causes they believe in without retaliation by elected officials," Tony Howley, Americans for Prosperity's New Jersey state director, said in a statement. "We are proud to stand with a diverse mix of organizations who share a commitment to making it easier for people to engage on the issues they’re passionate about, and grateful to the court for preserving all Americans’ First Amendment rights while this important issue is litigated.”

The group also argued in court in September that the law was confusing and would stifle speech because donors wouldn’t know whether their actions would fall under the law.

“All organizations that want to stay on the safe side will have to keep their mouths shut and stay out of New Jersey,” said Derek Shaffer, an attorney for Americans for Prosperity. “You’ve got donors and organizations that have to make life-or-death calls about whether or not a certain action will ultimately trigger [the law].”

New Jersey's lawyers argued that the state campaign finance agency, the Election Law Enforcement Commission, will craft rules that help people better understand the law, and that the lawsuit is premature. They also said ELEC wouldn't enforce the section of the law dealing with "political information" until the rules cleared up the language. 

"It’s a dark hole," said Assistant District Attorney Stuart Feinblatt, who argued for the state. "Where are these contributors coming from? What are their interests? Why are they motivated to advocate? This is what the citizens of New Jersey are entitled to know. It’s about transparency.”

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During the September hearing, Americans for Prosperity repeatedly pointed to the political infighting that surrounded the law. Senate President Stephen Sweeney, D-Gloucester, pushed the dark money bill through the Legislature, after years of inaction, when a nonprofit linked to the governor reneged on its promise to disclose its donors. 

Murphy vetoed the bill, but after facing a potential veto override from the Legislature, he turned around and signed the exact same bill, saying he feared it might "infringe upon constitutionally protected speech" and "could spawn time-consuming litigation." He said he made a deal with legislative leaders to pass "cleanup" legislation, but that bill hasn't moved. 

“The governor said months ago the bill was unconstitutional as written and fell short of the worthy goal of strengthening disclosure requirements and enhancing public trust in the political process," said Mahen Gunaratna, Murphy's communications director. "Today’s ruling affirms the governor’s decision to conditionally veto the bill back in May.”

Arguments against the law

Americans for Prosperity blasted different parts of the "dark money" law in opening arguments, saying:

• It captures only some political spending: The law applies to 501(c)(4) nonprofits and 527 groups, but not other political entities like unions or trade organizations or LLCs, Americans for Prosperity argued. New Jersey said it didn't have to address an entire problem in one fell swoop, and that most independent spending in New Jersey comes from the groups addressed in the law. 
• It will be too burdensome for national groups: The law doesn't clarify what is required for national groups that spend money in New Jersey. If a person from California donated $11,000 to a national group, which then transferred funds to its Oregon branch, and then New Jersey, would it have to report that donation? 
• It's just confusing: New Jersey's attorneys said the law would apply only to speech with an opinion, and that neutral, nonpartisan political information would not count. So if the League of Women Voters sent out a mailer that described all candidates without endorsing one, it wouldn't count, Feinblatt said. But the text of the law says it covers speech that “contains facts on any such candidate or public question,” which seems to include that example, Americans for Prosperity lawyers argued. 

Judge Brian Martinotti asked New Jersey's lawyers about a specific situation during the hearing: Would a scorecard grading politicians on their tax policy count under the law? Feinblatt said he wasn't sure. 

“Doesn’t that get right to the point?" Martinotti said. "If you can't answer it defending the law, how are they going to advise their clients that this is what’s covered and this is what’s not?”