The Working Families Party has agreed to shut down its problematic for-profit arm, Data & Field Services, as part of a settlement agreement with former NYC Deputy Mayor Randy Mastro, whose initial lawsuit challenging the labor-backed party’s use of outside canvassing/GOTV operation dates back to 2009.

The WFP also agreed to pay Mastro $100,000 to cover attorneys fees.

Multiple sources familiar with the new settlement – including Mastro himself – confirmed the demise of DFS. A number of individuals with connections to the party expressed relief that its leaders had finally decided to go this route, since this issue has caused so many headaches in recent years – including a probe by the US attorney’s office, which contributed to the delay in Gov. Andrew Cuomo’s agreement to run on the WFP line last fall, but ultimately did not result in any charges.

WFP spokesman TJ Helmstetter declined the confirm the details of the agreement, but released the following statement:

“We’re pleased to put this nuisance lawsuit behind us. The good news for the WFP, our allies and the causes we believe in is that the Working Families Party will continue doing the same, effective and progressive grassroots organizing work it has always done – within a simpler structure.”

“The bad news, for us, is that a big corporate law firm just added $100,000 to their already deep pockets. We hope to make sure that more of that new-found wealth is shared through the genius of progressive taxation.”

Despite the WFP’s insistence that it will be able to continue its work in-house, the loss of DFS will likely reduce the party’s power – at least in the short term. DFS was once the permier political canvassing operation in NYS, helping secure victories for left-leaning candidates like NYC Public Advocate Bill de Blasio and also contributing to the Senate Democrats’ successful – albeit short-lived – takeover of the majority in 2008.

UPDATE: A WFP source insists that there will be no diminishing of the party’s power nor a reduction of the services it is able to provide candidates. In effect, according to this source, the party is simply reverting to the system it had prior to creating DFS, which means candidates will pay for canvassing services via straight contributions and not in a “fee-for-service” manner. The source equated this switch to turning off one spigot and turning on another.

The back story here is rather circuitous.

Following the 2009 NYC elections, Mastro filed a lawsuit on behalf of five Staten Island voters alleging the WFP was doing an end-run around campaign finance laws by providing reduced-rate services to favored candidates. It became clear – thanks in no small part to reporting by former City Hall editor Edward-Isaac Dovere (now at Politico) – that the WFP and DFS were inappropriately intertwined, sharing space and employees.

The WFP hired former Chief Judge Judith Kaye to conduct a probe and issue a report on its inner workings. Her services did not come cheap. In January, the WFP owed more than $107,000 to Kaye’s firm, Skadden Arps, and another firm, Levy Ratner, in connection with its DFS-related legal troubles. That debt appears to have been paid by mid-July, but the WFP was still paying thousands to DFS for fundraising and organizing services.

Last winter, the WFP and Mastro reached a settlement in which the party agreed to take steps to make the DFS an independent entity. But those steps were not taken, and the WFP was found in contempt.

The new settlement agreement, which appears below, is “ironclad,” according to Mastro, who added: “This is the death knell for DFS and a great day for democracy because now the WFP will not be able to so blatently undermine our local campaign finance system anymore.”

In short, the WFP has 60 days to file the necessary tax documents and paperwork with the state Secretary of State to dissolve DFS or risk yet another lawsuit.

The party isn’t going to be able to get around the agreement by hiring outside firms, and even agreed it would not return to court to try to modify this deal or reconstitute some form of DFS for the next three election cycles – basically, a decade.

Settlement Agreement — signed by DFS and WFP (00093384)