On appeal from Executive Order 7, January 20, 2010.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Judges Stern, Sabatino and J. N. Harris.
On January 20, 2010, Governor Chris Christie issued Executive Order Number 7 ("EO 7" or "the executive order"), which attempts to extend to labor unions and labor organizations certain "pay-to-play" restrictions on political campaign contributions. The full text of EO 7 reads as follows:
WHEREAS, it is the clear and express intent of this Administration that all individuals who are elected to or otherwise hold public office shall adhere to the highest ethical standards; and
WHEREAS, prior actions of the New Jersey Legislature and existing Executive Orders have imposed stringent requirements on those individuals who hold public positions; and WHEREAS, since 2004, there have been a series of legislative and executive actions which have imposed restrictions on the campaign contributions of those who contract with the State of New Jersey and other public entities, so as to avoid actual conflicts of interest or even the appearance of conflicts of interest in the public contracting process; and WHEREAS, even though these "pay-to-play" restrictions have had a positive impact on the public contracting process, they have not extended their reach to all "business entities" which contract with the State of New Jersey and other public entities; and WHEREAS, even though contributions in excess of the amount identified in legislation, Executive Orders, and regulations are restricted to many forms of political and campaign committees, these restrictions have not extended their reach to all such committees;
NOW, THEREFORE, I, CHRIS CHRISTIE, Governor of the State of New Jersey, by virtue of the authority vested in me by the Constitution and by the Statutes of this State do hereby ORDER, and DIRECT:
1. Prior Executive Orders implementing "pay-to-play" restrictions are hereby modified to include within the definition of the term "Business Entity" any Labor Union or Labor Organization which enters into contracts with the State of New Jersey and its instrumentalities or with other New Jersey public entities. The reference in this Executive Order to "labor unions" and "labor organizations" shall include any political committee formed by any such labor union or labor organization, one of the purposes of which political committee is to make political contributions. All Department and Agency heads are directed to revise current regulations to be consistent with this change.
2. Prior Executive Orders implementing "pay-to-play" restrictions are hereby modified to include Legislative Leadership Committees within the list of committees and depositories as to which the contribution restrictions are applicable. All Department and Agency heads are directed to revise current regulations to be consistent with this change.
3. This Order shall take effect immediately.
Appellants, six labor unions that are the duly-elected representatives of more than 300,000 public employees, have brought this consolidated emergent appeal, alleging that EO 7 is unconstitutional in numerous respects. In particular, appellants contend that EO 7 conflicts with the terms of existing legislation and thereby infringes upon principles of separation of powers, in violation of article III, paragraph 1, of the New Jersey Constitution. Appellants further argue that EO 7 transgresses their rights of free speech, political association, and equal protection under the Federal and State Constitutions. They seek immediate injunctive relief so that they can exercise their rights of political participation without fear of some form of debarment or disqualification.
The Governor maintains that EO 7 represents the lawful exercise of his constitutional powers. He asserts that EO 7 simply extends the provisions of pay-to-play executive orders that were issued by his two immediate predecessors in office, and that EO 7 serves legitimate public purposes that can be harmonized with existing statutes.
Because we conclude, for the reasons explained in this opinion, that paragraph 1 of EO 7 violates principles of separation of powers, we invalidate it to the extent that it is written or intended to be construed to cover labor unions and collective bargaining*fn1 agreements. We do so without prejudice to the potential adoption of an appropriate statute that might enact pay-to-play reforms covering labor organizations, but in a manner consistent with existing statutes or which explicitly amends those existing laws.
EO 7 follows a series of statutes and gubernatorial executive orders generated over the past six years, which have been focused upon restricting the actual or perceived impact of political campaign contributions upon governmental procurement decisions. As we noted in In re Earle Asphalt Co., 401 N.J. Super. 310, 321 (App. Div. 2008), aff'd o.b., 198 N.J. 143 (2009), there is a "strong governmental interest in limiting political contributions by businesses that contract with the State[.]" That strong governmental interest has been recognized by both the Legislative and Executive Branches of our State Government. See N.J.S.A. 19:44A-20.13; 36 N.J.R. 4562(b).
As N.J.S.A. 19:44A-20.13 declares, "[w]hen a person or business interest makes or solicits major contributions to obtain a contract awarded by a government agency or independent authority, this constitutes a violation of the public's trust in government and raises legitimate public concerns about whether the contract has been awarded on the basis of merit[.]" Ibid. "It is essential that the public have confidence that the selection of State contractors is based on merit and not on political contributions made by such contractors[.]" Ibid. Likewise, "it is essential that the public have trust in the processes by which taxpayer dollars are spent[.]" Ibid.
The concept of pay-to-play has been described as "the political practice of rewarding campaign contributors with nobid government contracts." Paula A. Franzese & Daniel J. O'Hern, Sr., Restoring the Public Trust: An Agenda For Ethics Reform of State Government and a Proposed Model for New Jersey, 57 Rutgers L. Rev. 1175, 1222 (2005). The evil arises when prospective vendors "pay" contributions to candidates for public office, or to their affiliated political organizations, in order to "play" for (i.e., be awarded or favorably considered in the award of) government contracts when those candidates take or retain public office.
Even though various ethics laws, procurement laws, and criminal laws already forbid the making of political contributions as a quid pro quo for receiving a government contract, a frequent problem in establishing the violation of those laws is "proving the connection between the contributions and the contract." Ibid. Consequently, pay-to-play provisions (perhaps more accurately described as "anti-pay-to-play" provisions) typically "prohibit the participation in the public contracting field of campaign contributors whose donations exceed certain minimum levels." Ibid.
To address these concerns over pay-to-play practices, a succession of statutes and executive orders were promulgated in our State between 2004 and 2008, preceding the issuance of EO 7 in January 2010.*fn2 Because EO 7, by its own terms, is couched as an effort to build upon those prior enactments, and because the historical context bears upon our analysis of the issues before us, we discuss those prior enactments in some detail.
The first set of pay-to-play restrictions were enacted by the Legislature on June 10, 2004, and signed into law by former Governor McGreevey less than a week later on June 16, 2004. See L. 2004, c. 19. That statute, now commonly referred to as "Chapter 19," was entitled "An Act Concerning Certain Campaign Contributions By Certain Business Entities and County Political Party Committees[.]" Ibid.; see also Assemb. B. 2, 211th Leg. Sess. (2004) (utilizing that title); S.B. 2, 211th Leg. Sess. (2004) (same). The statute expressly indicated that it was "supplementing [L.] 1973, c. 83 [N.J.S.A. 19:44A-1 to -26], and amending [L.] 1973, c. 83 [N.J.S.A. 19:44A-1 to -26]." L. 2004, c. 19 (emphasis added).
The New Jersey Campaign Contributions and Expenditures Reporting Act, L. 1973, c. 83 ("Chapter 83"), N.J.S.A. 19:44A-1 to -26, which Chapter 19 literally "supplemented" and "amended," covers a wide scope of matters dealing with political campaign contributions, expenditures, and reporting. Chapter 83 includes several requirements that place ceilings*fn3 upon political contributions that can be lawfully made by various enumerated categories of donors.
The donors that are subject to Chapter 83's contribution limits specifically include, among other categories, a "labor organization of any kind which exists or is constituted for the purpose, in whole or in part, of collective bargaining, or of dealing with employers concerning the grievances, terms or conditions of employment, or of other mutual aid or protection in connection with employment[.]" See N.J.S.A. 19:44A-11.3(a) (containing this reference to labor organizations); N.J.S.A. 19:44A-11.4(a), (b), & (c) (same). When the Legislature amended Chapter 83 in 2002 to impose further restrictions upon donations to certain political committees, it repeated the same explicit language encompassing labor organizations. See L. 2001, c. 384, § 3; N.J.S.A. 19:44A-11.5(c).
As initially enacted, Chapter 19 injected pay-to-play restrictions into the statutory scheme by limiting the political donations payable by prospective government contractors. The law, in its original form, disallowed a "business entity," a term specifically defined within the new statute, see N.J.S.A. 19:44A-20.7, to obtain no-bid government contracts with an anticipated value above $17,500 from any state, county, or municipal agency, in circumstances where the business entity had made a political contribution above a defined monetary threshold to an elected official or to a political party at the state, county, or municipal level. See N.J.S.A. 19:44A-20.3 to -20.12.*fn4
As a sign that the Legislature recognized the impact these new restrictions would cause when they were superimposed upon existing statutes, it explicitly stated, in several places, that Chapter 19's provisions were being enacted "[n]otwithstanding the provisions of any other law to the contrary." See L. 2004, c. 19, §§ 1-4; N.J.S.A. 19:44A-20.3 to -20.5.
Chapter 19 originally included an exemption for contracts awarded pursuant to a "fair and open process." N.J.S.A. 19:44A-20.3. This exemption pertained to contracts that were publicly advertised; provided for public solicitations; awarded according to set written criteria; and publicly announced when awarded. N.J.S.A. 19:44A-20.7 (defining a "fair and open process").
As defined in Chapter 19, a "business entity" subject to its restrictions is: any natural or legal person, business corporation, professional services corporation, limited liability company, partnership, limited partnership, business trust, association or any other legal commercial entity organized under the laws of this State or of any other state or foreign jurisdiction. [N.J.S.A. 19:44A-20.7 (emphasis added).]
The detailed legislative statement accompanying Chapter 19, as recited in both the Assembly version of the bill and the Senate version, commented that the purpose of the new law was to reduce the risk of actual or perceived corruption which may result when public contracts are awarded to business entities that have contributed to elected officials having control, or apparent control, over the awarding of those contracts, or to political party committees at various levels of government that may have influence over the officials responsible for awarding such contracts, a practice commonly referred to as "pay-to-play." [Assemb. B. 2, 211th Leg. Sess. (2004) (Sponsor's Statement); S.B. 2, 211th Leg. Sess. (2004) (Sponsor's Statement).]
The effective date of Chapter 19 designated by the Legislature was to be eighteen months in the future, January 1, 2006. L. 2004, c. 19, § 15.
Three months after the enactment of Chapter 19, Governor McGreevey signed Executive Order 134 ("EO 134"), on September 22, 2004. See 36 N.J.R. 4562(b) (Oct. 18, 2004). EO 134 generally attempted to strengthen certain aspects of Chapter 19 as it related to State contracts, and to accelerate the implementation of pay-to-play restrictions.
In particular, EO 134 sought to extend the reach of pay-to-play restrictions by covering all contracts above $17,500 in value entered into by the State or by "any of its purchasing agents or agencies or those of its independent authorities," implicitly including State contracts subject to a "fair and open process" that were otherwise exempted from Chapter 19. Id. at 4563, ¶¶ 1-2. EO 134 was confined to State procurement, and did not cover procurement by county or municipal governments. The executive order utilized the identical definition of a "business entity" contained in Chapter 19. Id. at 4563, ¶ 4. Like Chapter 19, EO 134 made no reference to labor unions, labor organizations, or collective bargaining.
The preamble of EO 134 reaffirmed the State's compelling interest in protecting the integrity of government by refraining from awarding contracts to business entities because they are contributors to political candidates and holders of public office. Id. at 4562-63. Focusing upon the State's important role in procurement decisions, the preamble to EO 134 underscored that "in the procurement process, our public policy grants to the State broad discretion, taking into consideration all factors, to award a contract to a bidder whose proposal will be most advantageous to the State[.]" Id. at 4563 (emphasis added).
As a further indication of its procurement focus, EO 134 contains numerous references to public bidding terminology, directing that:
Every contract and bid application and specifications promulgated in connection therewith covered by this Order shall contain a provision describing the requirements of this Order and a statement that compliance with this Order shall be a material term and condition of said contract and/or bid application and binding upon the parties thereto upon the entry of all applicable contracts. [Id. at 4564, ¶ 11 (emphasis added).]
In that same procurement-oriented vein, EO 134 instructed that "[p]rior to awarding any contract or agreement to procure services or any material, supplies or equipment from, or for the acquisition, sale, or lease of any land or building from or to, any business entity," that State purchasing agencies require, "as part of the procurement process," each such business entity to report all political contributions it made during the preceding four years to specified political organizations. Id. at 4563, ¶ 5 (emphasis added). See also id. at 4563, ¶ 6 (likewise referring to contracts or agreements "to procure services, or any material, supplies or equipment[,]" or pertaining to the sale or lease of land or buildings).
Paragraph 13 of EO 134 stated that it "shall take effect October 15, 2004, and is intended to have prospective effect only." Id. at 4564, ¶ 13. This effective date, less than a month after EO 134's issuance, was substantially sooner than the effective date of January 1, 2006 chosen by the Legislature for activating the pay-to-play restrictions of Chapter 19.
EO 134 further sought to regulate contracts made with the Executive Branch when a contribution was made to a county, as opposed to a statewide, political committee. Id. at 4563, ¶¶ 1 & 2. It also expanded the time period in which a covered business entity was barred from contributing to a Governor, a candidate for Governor, a State political party committee or a county political committee, to eighteen months before the commencement of negotiations for a contract. Compare L. 2004, c. 19, §§ 1-2 with 36 N.J.R. 4563, ¶ 1.*fn5
On October 15, 2004, the nonpartisan Office of Legislative Services ("OLS") issued an opinion that EO 134 was constitutionally invalid. The OLS opinion concluded that EO 134 usurped legislative powers in several respects, in particular by changing the effective date of Chapter 19, by including contracts that were subject to a "fair and open process" within the pay-to-play restrictions, and by expanding the types of political committees that were covered.
Following the OLS opinion casting doubt upon EO 134's constitutional validity,*fn6 Assembly Bill A-1500 and Senate Bill S- 2052 were introduced in October and November 2004. These companion bills, both expressly "modeled on" EO 134, were ultimately enacted as L. 2005, c. 51 ("Chapter 51"), and signed into law by Acting Governor Codey on March 22, 2005. Chapter 51 is mainly codified at N.J.S.A. 19:44A-20.13 to -20.25, appearing right after most of the provisions earlier adopted in Chapter 19, N.J.S.A. 19:44A-20.3 to -20.12.
Like both Chapter 19 and EO 134 which preceded it, Chapter 51 seeks to thwart pay-to-play activities that can improperly influence government procurement decisions. See also Earle Asphalt, supra, 401 N.J. Super. at 321-23. The preamble to Chapter 51 expressing the Legislature's findings and declarations of policy, N.J.S.A. ...