The IEs are Coming: Regulated-Industry Companies Now Free to Make Independent Expenditures in NJ

Genova Burns LLC

Genova Burns LLC

Late yesterday, the United States District Court of the District of New Jersey held that a century-old statute “does not ban any entity from making independent expenditures” in New Jersey. The decision comes just in time for the 2021 general election in New Jersey with the governor’s race and all 120 seats in the New Jersey Legislature up for grabs.

In the underlying suit, the New Jersey Bankers Association (“NJBA”) filed a complaint against the New Jersey Attorney General alleging that a New Jersey statute (N.J.S.A. 19:34-45) violates the First Amendment rights of the NJBA and its banking-institution members to make both independent expenditures and direct political contributions in New Jersey.

By its express terms, the statute – which dates back to 1911 – prohibits banks (and certain other highly-regulated companies such as insurance companies and utilities) from “pay[ing] or contribut[ing] money or thing of value in order to aid or promote the nomination or election of any person, or in order to aid or promote the interests, success or defeat of any political party.” As the Attorney General has previously opined, the ban was intended by the Legislature to address the “evil” of corporate influence over elected government officials and to insulate those officials from the sway of industries or businesses that are the subject of extensive government regulation.

The regulated-industry ban pre-dates modern campaign-finance law and pay-to-play restrictions. So, the question becomes – is the regulated-industry ban still necessary? With respect to the NJBA’s suit, the Court says “yes” and “no.” Yesterday’s decision does make it clear that New Jersey’s regulated-industry ban is unconstitutional with respect to its prohibition on independent expenditures, but the Court was not willing to overturn the ban on direct contributions by regulated-industry companies and their majority shareholders.

The bottom line is that, for the time being (pending an appeal), regulated-industry companies are free to make independent expenditures (that is, expenditures that are not coordinated with the candidate or the candidate’s agents) in New Jersey, but they still may not take out their checkbooks to make direct contributions to New Jersey political recipients.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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