The nonpartisan political group No Labels, along with a number of affiliated super PACs, is facing a lawsuit from contractors who say they were stiffed for millions of dollars of work in the 2018 cycle, let go in favor of political strategists with ties to the group’s president, Nancy Jacobson — and her husband, Mark Penn.
In the complaint, which was filed in the Supreme Court of New York this week, strategists Matthew Kalmans and Sacha Samotin say their firm, Applecart, helped implement No Labels’s current strategy of creating PACs that can invest in primaries and general elections to boost centrist candidates; they seek $3.7 million in damages, saying money they were owed was shunted away from them, in breach of contract.
No Labels’s leaders and its affiliated strategists say the lawsuit is without merit and the charge that Penn was “calling the shots,” as the lawsuit puts it, is baseless.
“We were willing to let the cookie crumble, but if they’re going ahead with this, we’ll be doing a counterclaim,” Jacobson said on Friday. “I gave them complete trust and control, and they did not deliver.”
Penn, a former political strategist for both Bill Clinton and Hillary Clinton, has gained new national attention for criticizing special counsel Robert S. Mueller III’s probe of the Trump administration. While not affiliated with No Labels, he used a Tuesday appearance on “Tucker Carlson Tonight” to talk up a plan — advanced by No Labels — to elect a speaker of the House with bipartisan support.
“There’s a problem-solvers group that is looking to have some influence, if the result is close, in terms of changing the rules and naming the speaker,” Penn said.
The 45-page complaint tells a story of political blunders that Applecart blames on Penn and that No Labels affiliates blame on Applecart. According to the complaint, it was Kalmans and Samotin, Republicans who identified as moderates, who presided over the group’s first political successes.
“It has been well reported that No Labels was a dysfunctional organization with no record of success prior to the 2016 cycle,” Samotin said. “During a time that the experts have said is hostile to centrist candidates, we chose challenging races and were successful in seven out of 11 races. We will defend that record to anybody.”
In 2016, the strategists signed a contract with No Labels that tied them exclusively to the group until 2019. In 2016, they plowed into primaries in Kansas and Florida to boost, respectively, center-right Republican Roger Marshall in a race against then-Rep. Tim Huelskamp, and state legislator Darren Soto in a seat vacated by then-Rep. Alan Grayson. It acted through super PACs, as the “No Labels” association “was thought likely to be unhelpful in a partisan primary election.” Applecart’s other high-profile work in that cycle included data for Gov. John Kasich’s (R-Ohio) super PAC.
“We were the last candidate to enter the race, and Applecart’s data allowed us to scale quickly despite being wildly outspent by our rivals,” said the PAC’s strategist, Matt David. “Their data helped us ID key supporters in New Hampshire, and the polling predicted the successful result of the primary to the 2nd decimal point.”
After the election, No Labels planned to up the super PAC project and spend $25 million to $50 million in 2018 to continue shaping primaries. The project was approved, and the team began identifying targets — starting with Illinois’s 3rd District, where Democratic Rep. Daniel Lipinski would end up barely holding off a left-wing challenger.
But Kalmans and Samotin claim that later electoral efforts were undone by Penn. In July 2017, according to the complaint, “Jacobson recommended, urged, and/or instructed Kalmans and Samotin to use several vendors indirectly in which a private equity firm owned by Penn had a stake, including SKDKnickerbocker, a television advertising firm, Targeted Victory, a digital advertising firm, and PMX Agency, a mailing house. Jacobson also urged Kalmans to omit a Penn-owned entity from a conflicts disclosure made to donors.”
Penn did not comment when asked about the accusation, though he has said he has nothing to do with the operation of No Labels. The Stagwell Group, a private equity firm run by Penn, does own SKDKnickerbocker and owns a small minority stake in Targeted Victory; emails seen by The Washington Post show both Penn and SKDKnickerbocker’s Bill Knapp corresponding on a decision to place ads in Lipinski’s race. According to Knapp, Applecart is misrepresenting an exchange in which he was asking about an ad buy that he was not involved in.
“The assertion concerning Stagwell and SKDKnickerbocker is utterly false," Knapp said. “The implication we were paid in any way is complete fantasy.”
Targeted Victory’s Zachary Moffatt said that Applecart’s work did not hold up to scrutiny, a complaint echoed by others named in the lawsuit.
“Vendors Applecart hired and supervised on the committees' behalf were not placed under contracts,” said Margaret White, the director of the Country Forward super PAC, which was created as part of the campaign strategy. “Refunds of tens of thousands of dollars have already been recovered after we undertook to perform the due diligence that Applecart failed to do.” (Applecart says this is not true, and if it were true these refunds would show up on FEC reports.)
At the heart of the complaint was an effort in Indiana’s 4th District, which opened this year when an incumbent Republican ran for U.S. Senate. The No Labels strategy to elect Steve Braun, seen as the more moderate Republican in what would be a safe seat, was to bring down two more conservative candidates, Jim Baird and Diego Morales. One of the mailers against Baird attacked him for a gas tax increase, saying it had cost voters “an arm and a leg” — a line that backfired because Baird, a Vietnam veteran, had lost a limb in the war.
According to Applecart, that blunder was the pretext for a meeting that began unraveling the agreement with No Labels. “Jacobson told Kalmans and Samotin that going forward all strategic decisions relating to the No Labels’ super PAC campaign would be made by Penn, along with SKD Knickerbocker partner Bill Knapp, and No Labels’ co-founder Tom Davis,” the complaint reads.
Davis defended that decision, saying the team that swept in to look at the Indiana results decided Applecart had committed “political malpractice” and “needed adult supervision.” Former senator Joseph I. Lieberman, a No Labels co-chair, said Applecart had looked promising but wilted under inspection.
“They were charging us for things they had not even done,” Lieberman said.
“Applecart was spending 50 percent or more of the overall costs in each race on non-voter contact expenses (much of which was paid directly to themselves),” White wrote in an email. “Applecart only won four of the races this cycle during their work with us.”
Kalmans and Samotin say the pushback is false — they were involved with five wins in this cycle, they say, and it was White, not them, in charge of budgets. They maintain that Applecart was simply not paid for 1,714 hours of completed work and that a No Labels attorney had signed off on the “arm and a leg” mailer. That debacle, they say, was “a pretext on which to hand over strategic oversight of No Labels’ super PAC campaign to Penn.” The rest may be fought out in court.
This story has been updated with input from Bill Knapp, related to Applecart’s claims about who was and was not involved in ad buys.