Title: People ex rel. Ryan v. Telemarketing Associates, Inc.

State: illinois

Issuer: Illinois Supreme Court

Document:

Docket No. 89738-Agenda 37-May 2001.
THE PEOPLE OF THE STATE OF ILLINOIS ex rel. JAMES E. 
RYAN, Attorney General of Illinois, Appellant, v. 
TELEMARKETING ASSOCIATES, INC., et al., Appellees.
Opinion filed November 21, 2001.
	JUSTICE McMORROW delivered the opinion of the court:
	In an amended complaint, the Attorney General, representing
the people of this state, alleged that Telemarketing Associates,
Inc., and Armet, Inc., corporations which operate as professional
fund-raising services, and their director-owner, Richard Troia
(collectively, the defendants), committed fraud and breached their
fiduciary duty. The charged offenses were premised on the fact
that defendants retained 85% of charitable funds collected on
behalf of a charity, VietNow National Headquarters (VietNow),
and, when soliciting, failed to inform donors that only 15% of their
contribution would be distributed to the charity. The circuit court
dismissed the complaint, finding that no cause of action had been
stated under the facts alleged. The appellate court affirmed. 313
Ill. App. 3d 559. We granted the Attorney General's petition for
leave to appeal (see 177 Ill. 2d R. 315) and now affirm the
judgment of the appellate court.
BACKGROUND
	The circuit court dismissed the Attorney General's amended
complaint after defendants brought a motion to dismiss pursuant
to section 2-615 of the Code of Civil Procedure (735 ILCS
5/2-615 (West 1998)). A motion to dismiss brought under section
2-615 admits all well-pled facts in the plaintiff's complaint.
Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 490 (1996).
Consequently, the following facts, taken from the Attorney
General's complaint, are accepted as true.
	Telemarketing Associates, Inc. (Telemarketing), and Armet,
Inc. (Armet), are professional, for-profit fund-raising corporations
which are wholly owned and controlled by Richard Troia. In
accord with contracts negotiated with VietNow, an Illinois-based,
not-for-profit corporation registered as an Illinois charitable trust,
Telemarketing and Armet solicited funds on behalf of VietNow
beginning in July 1987 and continuing into 1996. Pursuant to its
contracts with VietNow, Telemarketing retained 85% of the gross
collections in the State of Illinois "as its total compensation for all
efforts and costs associated with the Marketing Program." Armet,
through Troia, brokered fund-raising contracts between VietNow
and various out-of-state, third-party solicitors. Pursuant to these
contracts, VietNow received 10% of the gross receipts for out-of-state solicitations, while Armet, as the broker, received between
10% and 20% of these gross receipts.
	Annual financial reports submitted to the Attorney General,
as required by law (see 225 ILCS 460/4 (West 1998)), show that,
from July 1987 until the end of 1995, defendants' fund-raising
efforts on behalf of VietNow resulted in collection of $7,127,851.
Of that amount, $6,073,887 was retained by defendants, netting
VietNow $1,053,964, an amount just under 15% of the gross
receipts.
	VietNow does not complain that it did not receive the
amounts for which it contracted, and there is no suggestion that
defendants have not fully complied with the terms of their
contracts. Further, VietNow has never expressed dissatisfaction
with the fund-raising services provided by defendants and there is
no allegation that defendants made affirmative misstatements to
potential donors.
	In an initial complaint filed on May 30, 1991, the Attorney
General charged defendants with common law fraud and breach of
their duty as fiduciaries of charitable assets. The complaint alleged
that defendants, when making telephone solicitations on behalf of
VietNow, represented that funds donated would go to further
VietNow's charitable purpose. However, according to the
Attorney General, because the fees charged by defendants for
conducting solicitation were "excessive in amount and an
unreasonable use and waste of charitable assets," and because
defendants did not advise donors that only 15% of the funds raised
would be turned over to VietNow, defendants' solicitations were
"knowingly deceptive and materially false" and constituted fraud
and a breach of their fiduciary duty. The Attorney General asked
the circuit court to surcharge the defendants for assets found to
have been misspent or misused and to enjoin defendants from
further solicitation.
	The Attorney General amended his complaint on June 25,
1996, by adding paragraphs which alleged that defendants had
renewed their contracts with VietNow and, under the same terms
as before, had continued to solicit funds on behalf of VietNow into
1996. It was further alleged that defendants' solicitations were in
violation of section 15(b)(5) of the Solicitation for Charity Act
(225 ILCS 460/15(b)(5) (West 1996)), which requires professional
fund-raisers to identify "fully and accurately" the purpose for
which funds are solicited. The Attorney General contended that
defendants violated this provision because they materially
misrepresented the purpose for which funds were being solicited
by telling contributors, either explicitly or implicitly, that funds
collected would be used to help veterans, and that these statements
were inherently false and misleading in light of the high
percentage of funds retained by the defendants.
	The complaint further alleged that defendants, by failing to
reveal to donors the percentage of the contribution which would
actually go to the charity, obtained money from donors under false
pretenses. The same conduct was also alleged to constitute fraud
under the Illinois Consumer Fraud and Deceptive Business
Practices Act (815 ILCS 505/1 et seq. (West 1996)) and under
section 2 of the Uniform Deceptive Trade Practices Act (815 ILCS
510/2 (West 1996)). The complaint requested all available
remedies and penalties authorized by section 9 of the Solicitation
for Charity Act (225 ILCS 460/9 (West 1998)), including an
injunction prohibiting defendants from conducting any future
fund-raising services and forfeiture of their collected fees.
	On September 6, 1996, defendants filed a section 2-615
motion to dismiss, arguing that charitable solicitations were
protected speech under the first amendment. Defendants
contended that, pursuant to Riley v. National Federation of the
Blind of North Carolina, Inc., 487 U.S. 781, 101 L. Ed. 2d 669,
108 S. Ct. 2667 (1988), a claim of fraud could not be maintained
when the basis for the complaint was the percentage of proceeds
retained by the fund-raisers and the failure to volunteer
information concerning the amount of the proceeds that would go
to the charity.
	The trial court granted the motion to dismiss, but allowed the
Attorney General to amend his complaint. On December 4, 1996,
the Attorney General filed an amended complaint. In addition to
the previous allegations, the Attorney General now alleged that
defendants' retention of 85% of the gross proceeds, although
contracted for and agreed to by VietNow, constituted fraud
because defendants retained donor lists from year to year and,
accordingly, should have incurred decreased administrative costs.
Thus, it was alleged, defendants' retention of donor lists was
evidence that defendants' fee was not justified by high
administrative costs.
	Defendants again filed a section 2-615 motion to dismiss,
which was granted. The dismissal was affirmed on appeal. 313 Ill.
App. 3d 559. This court granted the Attorney General's petition
for leave to appeal. 177 Ill. 2d R. 315.

ANALYSIS
	As noted above, the circuit court dismissed the Attorney
General's complaint after defendants brought a section 2-615
motion to dismiss. A section 2-615 motion to dismiss challenges
the legal sufficiency of the complaint. Urbaitis v. Commonwealth
Edison, 143 Ill. 2d 458, 475 (1991). When reviewing a section
2-615 dismissal, the reviewing court must determine whether the
allegations, when construed in the light most favorable to the
plaintiff, are sufficient to establish a cause of action upon which
relief may be granted. Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 490 (1996). Dismissal will be held proper only if it clearly
appears that no set of facts can be proved under the pleadings
which will entitle the plaintiff to recover. Bryson v. News America
Publications, Inc., 174 Ill. 2d 77, 86-87 (1996). We review de
novo a section 2-615 motion to dismiss. Neade v. Portes, 193 Ill. 2d 433, 439 (2000); Abbasi v. Paraskevoulakos, 187 Ill. 2d 386,
391 (1999).
	The Attorney General argues that the circuit court erred in
dismissing his amended complaint. He contends that the complaint
is legally sufficient because it sets forth all of the elements
necessary to state a valid cause of action for common law fraud.
According to the Attorney General, it is a material
misrepresentation for defendants to tell prospective donors that
funds solicited on behalf of VietNow are to be used for a
charitable purpose when, in fact, defendants retain 85% of the
funds solicited and fail to reveal that fact to potential donors at the
point of solicitation.
	The Attorney General further contends that the alleged
misrepresentations also constitute constructive fraud and breach
of fiduciary duty because the defendants' retention of 85% of the
solicited proceeds, even if there was no intent to deceive, is
"prejudicial to the public welfare" and a breach of the public's
trust and confidence in charitable solicitation. The Attorney
General admits that, ordinarily, donors anticipate that a certain
amount of their contributions will be applied to "overhead."
However, he claims that retention of 85% of donated funds goes
well beyond any reasonable expectation of the public. As support
for this position, the Attorney General has attached to his
complaint the affidavits of 44 VietNow donors who assert that
they would not have given money to the charity had they known
how little of their donation was to be directed to the intended
cause.
	The Attorney General acknowledges the first amendment
precedent relied upon by the circuit and appellate courts.
Nevertheless, he claims the representations made by the
defendants are actionable, notwithstanding the protections
afforded charitable solicitations by the first amendment. We
disagree.
	We begin by examining the scope of first amendment
guarantees afforded charitable solicitations. We use as guidance
three decisions of the United States Supreme Court, Village of
Schaumburg v. Citizens For a Better Environment, 444 U.S. 620,
63 L. Ed. 2d 73, 100 S. Ct. 826 (1980), Secretary of State v.
Joseph H. Munson Co., 467 U.S. 947, 81 L. Ed. 2d 786, 104 S. Ct. 2839 (1984), and Riley v. National Federation of the Blind of
North Carolina, Inc., 487 U.S. 781, 101 L. Ed. 2d 669, 108 S. Ct. 2667 (1988).
	In Schaumburg, a not-for-profit corporation properly
registered as a charitable trust under Illinois law was denied a
permit to solicit door-to-door by the Village of Schaumburg
pursuant to a Village ordinance which required permit applicants
to provide "[s]atisfactory proof that at least seventy-five percent
of the proceeds of such solicitations will be used directly for the
charitable purpose of the organization." The charitable corporation
sued the Village in federal district court, arguing that the ordinance
violated the first and fourteenth amendments. The charity was
granted summary judgment and the court of appeals affirmed.
	On review, the United States Supreme Court, after examining
prior authority, concluded that charitable appeals for funds fall
within the protection of the first amendment because "solicitation
is characteristically intertwined with informative and perhaps
persuasive speech seeking support for particular causes or for
particular views on economic, political, or social issues, and ***
that without solicitation the flow of such information and
advocacy would likely cease." Schaumburg, 444 U.S.  at 632, 63 L. Ed. 2d  at 84, 100 S. Ct.  at 834. Accordingly, the Court found
that the 75% limitation in the Village's ordinance was "a direct
and substantial limitation on protected activity that cannot be
sustained unless it serves a sufficiently strong, subordinating
interest that the Village is entitled to protect." Schaumburg, 444
U.S at 636, 63 L. Ed. 2d  at 87, 100 S. Ct.  at 836. The Court then
rejected the Village's contention that its ordinance was justified
because it was substantially related to the important governmental
interests in preventing fraud, crime, and undue annoyance.
Although the Court acknowledged that preventing fraud was
indeed an important interest, the Court held that the ordinance was
not narrowly drawn so as not to interfere with first amendment
freedoms. Schaumburg, 444 U.S.  at 636-37, 63 L. Ed. 2d  at 87-88,
100 S. Ct.  at 836. The ordinance only "peripherally promoted" the
asserted governmental interest of protecting against fraud because,
as the Court observed, costs incurred by charitable organizations
conducting fund-raising campaigns can vary dramatically
depending on a wide range of variables, some of which are beyond
the control of the organization. Schaumburg, 444 U.S.  at 637 n.10,
63 L. Ed. 2d  at 87 n.10, 100 S. Ct.  at 836 n.10. Thus, the Court
found there was no rational reason to conclude that a charity which
uses more than 25% of the funds it collects on fund-raising,
salaries, and overhead should automatically be labeled fraudulent.
Schaumburg, 444 U.S.  at 636-37, 63 L. Ed. 2d  at 87, 100 S. Ct.  at
836.
	Four years after rendering its decision in Schaumburg, the
Supreme Court was asked to consider the constitutionality of a
Maryland statute which prohibited charitable organizations from
paying or agreeing to pay " 'as expenses in connection with any
fund-raising activity a total amount in excess of 25 percent of the
total gross income raised or received by reason of the fund-raising
activity.' " Secretary of State v. Joseph H. Munson Co., 467 U.S. 947, 950 n.2, 81 L. Ed. 2d 786, 792 n.2, 104 S. Ct. 2839, 2843 n.2
(1984), quoting Md. Code Ann., Bus. Reg. §103A (1982). The
statute contained a provision which authorized a waiver of the
25% limitation " 'in those instances where the 25% limitation
would effectively prevent a charitable organization from raising
contributions.' "
	Reaffirming its holding in Schaumburg, the Munson Court
held that the Maryland percentage-based statute, like the ordinance
in Schaumburg, substantially restricted a protected first
amendment activity and that "the means chosen to accomplish the
State's objectives are too imprecise, so that in all its applications
the statute creates an unnecessary risk of chilling free speech ***."
Munson, 467 U.S.  at 968, 81 L. Ed. 2d  at 803, 104 S. Ct.  at 2853.
Percentage-based limitations, the Court reiterated, are
insufficiently related to the governmental interest in preventing
fraud. Furthermore, the constitutional deficiencies of the
percentage-based limitation could not be remedied by the addition
of a waiver provision which granted governmental authorities the
discretion to dispense with the percentage limitation upon a
showing of financial necessity. Munson, 467 U.S.  at 962, 81 L. Ed. 2d  at 799-800, 104 S. Ct.  at 2850. The Munson Court explained:
		"The flaw in the statute is not simply that it includes
within its sweep some impermissible applications, but
that in all its applications it operates on a fundamentally
mistaken premise that high solicitation costs are an
accurate measure of fraud. That the statute in some of its
applications actually prevents the misdirection of funds
from the organization's purported charitable goal is little
more than fortuitous. It is equally likely that the statute
will restrict First Amendment activity that results in high
costs but is itself a part of the charity's goal or that is
simply attributable to the fact that the charity's cause
proves to be unpopular. On the other hand, if an
organization indulges in fraud, there is nothing in the
percentage limitation that prevents it from misdirecting
funds. In either event, the percentage limitation, though
restricting solicitation costs, will have done nothing to
prevent fraud." Munson, 467 U.S.  at 966-67, 81 L. Ed. 2d 
at 802, 104 S. Ct.  at 2852.
	Despite Munson's condemnation of percentage-based
limitations on charitable solicitation, the Supreme Court was
called upon just four years later to decide whether another
percentage-based regulation, which had recently been added to the
North Carolina Charitable Solicitations Act, suffered from the
same constitutional deficiencies as the laws struck down in
Schaumburg and Munson. See Riley v. National Federation of the
Blind of North Carolina, Inc., 487 U.S. 781, 101 L. Ed. 2d 669,
108 S. Ct. 2667 (1988). The North Carolina statute in Riley
differed from the laws in Schaumburg and Munson in that it
regulated professional for-profit fund-raisers rather than the
charitable organizations themselves.
	Responding to a study which showed that professional fund-raisers typically retained fees "well over 50% of the gross revenues
collected in charitable solicitation drives," North Carolina enacted
a statute which prohibited fund-raisers from charging an
"unreasonable" or "excessive" fee. Riley, 487 U.S.  at 784, 101 L. Ed. 2d  at 681, 108 S. Ct.  at 2761. A three-tiered, percentage-based
schedule was used to define the "reasonable fee" that a
professional fund-raiser could charge. Specifically, a fund-raiser
could charge up to 20% of its gross receipts without running afoul
of the "reasonableness" requirement. A fund-raising fee between
20% and 35% of gross receipts, however, was presumptively
unreasonable and excessive "if the party challenging the fund-raising fee also proves that the solicitation does not involve the
dissemination of information, discussion, or advocacy relating to
public issues as directed by the person established for a charitable
purpose which is to benefit from the solicitation." Finally, the
statute provided that, if the fund-raising fee was 35% or more of
the gross receipts, the fund-raiser would carry the burden of
proving that the fee was "necessary." Necessity, according to the
statute, could be proved by evidence (1) that the fee was required
due to the dissemination of information, discussion or advocacy
for the charitable purpose, or (2) that the charity's ability to solicit
would otherwise be "significantly diminished." The statute also
required professional fund-raisers to disclose to potential donors,
at the point of solicitation, the "average percentage of gross
receipts actually turned over to charities by the fundraiser for all
charitable solicitations conducted in North Carolina within the
previous 12 months." Riley, 487 U.S.  at 786, 101 L. Ed. 2d  at 682,
108 S. Ct.  at 2672.
	After close examination of the statute, the Riley Court ruled
that the percentage-based definition of an "unreasonable" fee
could not pass constitutional muster because "using percentages
to decide the legality of the fundraiser's fee is not narrowly
tailored to the State's interest in preventing fraud." Riley, 487 U.S. 
at 789, 101 L. Ed. 2d  at 684, 108 S. Ct.  at 2673. The Court
explained that the statute's defect was that it defined an
"unreasonable" and "excessive" fee according to the percentage of
total revenues collected, "[d]espite our clear holding in Munson
that there is no nexus between the percentage of funds retained by
the fundraiser and the likelihood that the solicitation is
fraudulent." Riley, 487 U.S.  at 793, 101 L. Ed. 2d  at 687, 108 S. Ct.  at 2675.
	Moreover, the Court found the North Carolina statute suffered
from a "more fundament flaw" than the one in Munson-it placed
fund-raisers at risk of having to rebut the presumption of
unreasonableness, case by case, based on nothing more than "a
loose inference that the fee might be too high." Riley, 487 U.S.  at
793, 101 L. Ed. 2d  at 687, 108 S. Ct.  at 2676. The Court found it
constitutionally unacceptable for fund-raisers to have to wait until
"reasonable" fees were "judicially defined over the years." Riley,
487 U.S.  at 793, 101 L. Ed. 2d  at 687, 108 S. Ct.  at 2676. In the
interim, the Court held, fund-raisers would be unable to speak with
any level of security and would run the risk of incurring litigation
costs, as well as the possibility of a mistaken adverse ruling. Riley,
487 U.S.  at 793-94, 101 L. Ed. 2d  at 687, 108 S. Ct.  at 2676. As
a result, fund-raisers would be less inclined to contract with many
charitable organizations, especially less popular ones, and the
ability of charities to speak would be substantially diminished.
Riley, 487 U.S.  at 794, 101 L. Ed. 2d  at 688, 108 S. Ct.  at 2676.
	 The Riley Court also found constitutionally offensive the
statutory provision which mandated fund-raisers to reveal to
potential donors, at the point of solicitation, the amount of
charitable proceeds turned over to a charity. The provision, the
Court held, was a content-based regulation of protected speech
which was unduly burdensome and not narrowly tailored. As the
Court explained, a compelled disclosure requirement presumes,
incorrectly, that a charity derives no benefit from funds collected
but not disbursed to it. Further, a disclosure requirement would
"almost certainly hamper the legitimate efforts of professional
fundraisers to raise money for the charities they represent." Riley,
487 U.S.  at 799, 101 L. Ed. 2d  at 691, 108 S. Ct.  at 2679.
	Keeping in mind the holdings of Schaumburg, Munson, and
Riley, we turn to the case at bar. The Attorney General contends
that the present case is distinguishable from Riley and its
predecessors because here the problem of fraud is being attacked,
not through the application of "broad prophylactic" ordinances or
statutes affecting all fund-raisers (see Schaumburg, 444 U.S.  at
637, 63 L. Ed. 2d  at 88, 100 S. Ct. at 836), but through the
enforcement of the state's antifraud laws against specific
defendants for "specific instances of deliberate deception." See
Riley, 487 U.S.  at 803, 101 L. Ed. 2d  at 694, 108 S. Ct.  at 2681
(Scalia, J., concurring). Thus, the Attorney General reasons, his
complaint utilizes the "less intrusive" measures for attacking fraud
suggested by the Schaumburg Court. Schaumburg, 444 U.S.  at
637, 63 L. Ed. 2d  at 88, 100 S. Ct.  at 836. The Attorney General
argues:
		"The complaint [at issue in this case] is the constitutional
alternative to the prohibitive legislation at issue in
Schaumburg and the burden-shifting legislation at issue in
Munson and Riley. Here, the people seek to have the
judicial process determine, under the specific facts of this
distinct case, whether these particular defendants
defrauded the public and violated their fiduciary duties as
holders of charitable funds."
	The Attorney General's argument suggests, in part, that the
present action is a "less intrusive" means of combating fund-raising fraud because it is an instance of individual litigation, i.e.,
a single complaint, and not a broad, regulatory statute. We reject
this contention. When the Supreme Court spoke of the
government's right to pursue "less intrusive" measures, it plainly
meant that the government retained the right to regulate the
conduct of fund-raisers in a manner which was "less intrusive" of
their constitutional rights. The present action is not "less
intrusive" within the meaning of the Supreme Court's holdings
simply because it is an instance of individual litigation.
	Thus, in this case, to determine whether the Attorney
General's complaint is a "less intrusive" means of regulating
defendants' speech and, hence, permitted by Riley and its
predecessors, we must examine the allegations of the complaint
and decide whether those allegations offend the first amendment
principles set forth in the Supreme Court decisions. Stated
otherwise, we must determine whether the Attorney General's
complaint operates to limit defendants' ability to engage in
solicitation-an activity protected by the first amendment-in a
manner found constitutionally impermissible by the Supreme
Court in Schaumburg, Munson and Riley. We conclude that it
does.
	The Attorney General's complaint seeks to enjoin defendants
from conducting any future fund-raising activities based on
allegations that defendants, when soliciting on behalf of VietNow,
committed "fraud" because they made "false statements"
concerning the purpose for which funds were being solicited.
However, the statements made by defendants during solicitation
are alleged to be "false" only because defendants retained 85% of
the gross receipts and failed to disclose this information to donors.
Thus, the Attorney General's complaint is, in essence, an attempt
to regulate the defendants' ability to engage in a protected activity
based upon a percentage-rate limitation. This is the same
regulatory principle that was rejected in Schaumburg, Munson and
Riley.
	As the Supreme Court has pointed out, high solicitation costs,
and a solicitor's high rate of retaining receipts, can be attributable
to a number of factors. Certain types of fund-raising campaigns,
for example, include a wide range of activities that must be paid
for. The present case illustrates this point. The Attorney General
has attached defendants' contracts with VietNow to his complaint
and made them a part of the pleadings. These contracts show that,
in exchange for its fee, Telemarketing agreed to supply and pay the
salaries of all marketing personnel, as well as pay all costs for an
office and phones. In addition, Telemarketing agreed to be
responsible for producing, publishing, editing and paying all costs
for the annual publication of more than 2,000 copies of an
advertising magazine which would "increase community
awareness of [VietNow]." The contract required Telemarketing to
conduct "an efficient and professional marketing program,
promote goodwill on behalf of [VietNow], and enhance good
public relations."
	Contracts between VietNow and Armet provided that third-party professional fund-raisers would conduct an advertising and
public awareness campaign in conjunction with the sale of
advertizing in a quarterly publication. The quarterly publication
would be produced by Armet. At least 30% of the quarterly
publication was to be devoted to editorial content provided by
VietNow. Armet also agreed to maintain a live, nationwide, toll-free telephone number which individuals could call to obtain
information regarding VietNow.
	Defendants in this case were contracted to perform a wide
range of activities on behalf of VietNow, all of which were to be
paid for out of the solicited funds. This example illustrates the
principle that, because of the many different factors that may
contribute to high solicitation costs, it is incorrect to assume, as a
matter of law, that there is a nexus between high solicitation costs
and fraud. See Riley, 487 U.S.  at 793, 101 L. Ed. 2d  at 687, 108 S. Ct.  at 2675.
	Further, and more fundamentally, it is incorrect to presume
that there is nexus between high solicitation costs and fraud
because, as the Supreme Court has explained, the percentage of
proceeds turned over to a charity is not an accurate measure of the
amount of funds used "for" a charitable purpose. See Munson, 467 U.S.  at 967 n.16, 81 L. Ed. 2d  at 802 n.16, 104 S. Ct.  at 2852 n.16.
Charities often reap nonmonetary benefits by having their message
disbursed by the solicitation process. In fact, as the Schaumburg
Court observed, the solicitation may be so intertwined with
informative and persuasive speech that the solicitation itself is part
of the charitable purpose. This point is aptly demonstrated in the
case at bar. The defendants' contracts with VietNow required
defendants to produce publications that "increased community
awareness" about VietNow. Defendants were also directed to
conduct their solicitations in a manner that would "promote
goodwill" on behalf of VietNow. The fund-raising services
defendant provided, therefore, were inextricably intertwined with
the advancement of VietNow's philosophy and purpose.
Moreover, because the solicitation process is so enmeshed with the
charitable purpose, it is irrelevant whether or not defendants'
administrative costs were reduced, as the Attorney General
alleged, because defendants retained donor lists from year to year.
	For similar reasons, fraud cannot be defined in such a way
that it places on solicitors the affirmative duty to disclose to
potential donors, at the point of solicitation, the net proceeds to be
returned to the charity. Compelled disclosure, as the Riley Court
held, is based on a presumption that the net proceeds returned to
a charity are the only benefit that a charity derives from
solicitation. This presumption is incorrect. As discussed above,
often a large portion of the funds solicited are used "for a
charitable purpose" although only a fraction of the proceeds are
actually turned over to the charity. The net proceeds returned to a
charity do not accurately reflect the amount of funds which go
toward the charitable purpose because that figure fails to take into
consideration the charity's nonmonetary objectives, such as
dissemination of information and advocacy, which are by-products
of the solicitation that cannot be quantified. Consequently, any
rule of law which burdens speech by requiring solicitors to make
statistical disclosures, at the point of solicitation, is not narrowly
tailored to the state's asserted interest of protecting the public from
being misled about the way their charitable dollars are being spent.
See Riley, 487 U.S.  at 798-99, 101 L. Ed. 2d  at 690-91, 108 S. Ct. 
at 2678-79.
	We note, too, that professional fund-raisers who are
telemarketers, as the defendants in this case, are particularly
disadvantaged by a disclosure requirement. As the Riley Court
observed, "if the potential donor is unhappy with the disclosed
percentage, the fundraiser will not likely be given a chance to
explain the figure; the disclosure will be the last words spoken as
the donor *** hangs up the phone." Riley, 487 U.S.  at 800, 101 L. Ed. 2d  at 691, 108 S. Ct.  at 2679.
	Finally, we note that, although the Attorney General's
complaint is aimed at regulating the fund-raising efforts of the
defendants, this case has far-reaching implications for all fund-raisers. If a complaint such as the one at issue in this case was
allowed to proceed, all fund-raisers in this state would have the
burden of defending the reasonableness of their fees, on a case-by-case basis, whenever in the Attorney General's judgment the
public was being deceived about the charitable nature of a fund-raising campaign because the fund-raiser's fee was too high. Fund-raisers, therefore, would be at a constant risk of incurring litigation
costs, as well as civil and criminal penalties, which could produce
a substantial chilling effect on protected speech, based on nothing
more than a "loose inference that the fee might be too high." See
Riley, 487 U.S.  at 793, 101 L. Ed. 2d  at 687, 108 S. Ct.  at 2676.
Such a procedure cannot be condoned.
	In light of the foregoing, we conclude that the Attorney
General's complaint suffers from the same "fundamental flaw"
described by the Supreme Court in Schaumburg, Munson and
Riley. The complaint incorrectly presumes that there is a nexus
between high solicitation costs and fraud and attempts to regulate
defendant's constitutionally protected solicitations on that basis.
Contrary to the Attorney General's contentions, the complaint is
not a "less intrusive" means of regulation but is, instead,
indistinguishable from the regulatory measures struck down in
Schaumburg, Munson and Riley. We conclude, therefore, that the
Attorney General's complaint is prohibited under first amendment
principles and was properly dismissed.
	We are mindful of the opportunity for public
misunderstanding and the potential for donor confusion which
may be presented with fund-raising solicitations of the sort
involved in the case at bar. However, the United States Supreme
Court decisions in Riley, Munson and Schaumburg compel us to
reach the decision we announce today.

CONCLUSION
	The Attorney General's complaint is not legally sufficient. It
does not state a cause of action for fraud or breach of fiduciary
duty. Although the Attorney General purports to be charging
defendants with specific instances of misrepresentation, his
complaint is, at its core, a constitutionally impermissible
percentage-based limitation on defendants' ability to engage in a
protected activity. As such, the complaint is constitutionally
deficient pursuant to Schaumburg, Munson, and Riley.
Accordingly, we affirm the judgment of the appellate court, which
affirmed the dismissal of the Attorney General's complaint.
Affirmed.