UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION 

Commissioners: Lina M. Khan, Chair 

Rebecca Kelly Slaughter 

Alvaro Bedoya 

 

 ) 

In the Matter of ) 

 ) 

SEPTEMBER 11, 2023 CIVIL INVESTIGATIVE DEMAND ) 

ISSUED TO CHILDHOOD LEUKEMIA FOUNDATION, ) 

INC. ) Matter No. 222 3073 

 ) 

) 

ORDER DENYING PETITION TO QUASH 

CIVIL INVESTIGATIVE DEMAND 

By KHAN, Chair: 

Childhood Leukemia Foundation, Inc. (“CLF”) has filed a petition (styled as an amended 

petition) to quash a Civil Investigative Demand (“CID”) issued by the Commission on 

September 11, 2023.1

 The Commission previously denied a petition by CLF to quash an earlier 

CID, see In re August 11, 2022 Civil Investigative Demand Issued to Childhood Leukemia 

Corporation, No. 222 3073 (October 19, 2022), and many of CLF’s arguments in the instant 

petition simply rehash arguments that the Commission previously found to be meritless.

2 

For the reasons stated below, the petition is denied. 

I. INTRODUCTION 

CLF is organized as a non-profit corporation under New Jersey law and has been granted 

an exemption from federal taxation under Section 501(c)(3) of the Internal Revenue Code. 3

 In its 

IRS Form 990s, CLS states that its mission is “to educate, empower and lift the spirits of 

children suffering with the devastating effects of cancer throughout the United States.” 4

 It 

operates four main programs: “Keeping Kids Connected iPads,” which provides iPads to 

children with cancer; “Hope Binders,” which have sections to reference and record medical 

information; “Hugs U Wear,” which provides custom made human hair wigs; and “Wish 

1 “Pet.” refers to CLF’s Petition to Quash and the exhibits attached thereto. Citations are to page numbers of the .pdf 

file submitted to the Commission. 2 On June 2, 2023, CLF filed suit against the Commission seeking a declaration that the Commission’s investigation 

is unlawful and that the prior CID is void. Childhood Leukemia Fdn., Inc. v. FTC, No. 3:23-cv-03034 (D.N.J.). The 

Commission (through the Department of Justice) served a motion to dismiss on CLF on September 22, 2023. On 

October 19, 2023, shortly before its response to that motion was due, CLF voluntarily dismissed that action. 

3 See Pet. at 19, 25-33. 4 E.g., Pet. at 75 
Baskets,” which contain age-appropriate items to help children learn and cope with anxiety and 

boredom associated with cancer treatment and hospitalization.5 

In recent years, more than 99% of CLF’s revenue has come from public charitable 

donations obtained through fundraisers and solicitations.6 According to its Form 990s, between 

2019 and 2021, CLF received contributions and grants totaling about $11.5 million, but spent 

about $9.1 million on fundraising expenses, plus another $1.3 million in employee 

compensation, most of which was paid to two executives.7 Thus, it appears from forms filed with 

the IRS that more than 90% of CLF’s fundraising revenue was spent on fundraising and 

employee compensation. Comparatively little was spent on CLF’s programs. For example, the 

2021 Form 990 indicates that CLF spent $126,313 on the iPad program and $43,703 on the wish 

basket program, or about 3.6% and 1.2% of total fundraising contributions, respectively. 8 For 

comparison, CLF reported total compensation of $309,819 to its two highest-paid employees (its 

executive director and chief operating officer), representing about 8.8% of fundraising 

contributions. 9 

The Commission is conducting an investigation to determine whether CLF and/or its paid 

fundraiser, Innovative Teleservices, Inc. (“Innovative”), is engaged in “unfair or deceptive acts 

or practices” in violation of Section 5 of the FTC Act, 15 U.S.C. § 45. The investigation centers 

on whether CLF’s program spending is so de minimis that it is deceptive to tell consumers that 

their money will be spent on the programs described to them. The Commission is also 

investigating whether Innovative is violating the Commission’s Telemarketing Sales Rule 

(“TSR”), 16 C.F.R. Part 310, by contacting potential donors using prerecorded messages (aka 

robocalls) and whether CLF may be liable for assisting and facilitating these practices. 

On September 11, 2023, under the authority of a Commission resolution authorizing the 

use of compulsory process, the Commission issued a CID to CLF pursuant to Section 20 of the 

FTC Act, 15 U.S.C. § 57b-1. 10 The CID states that the subject of the investigation is whether 

CLF or Innovative “committed violations of Section 5 of the Federal Trade Commission Act, 15 

U.S.C. § 45(a) and/or committed violations of the Commission’s Telemarketing Sales Rule, 16 

C.F.R. Part 310, relating to the solicitation of charitable donations, and whether Commission 

action to obtain monetary relief would be in the public interest.” 11 The CID seeks an 

investigational hearing of a CLF designee on a variety of topics related to CLF’s governance and 

operations, including fundraising practices and compliance with the TSR. The CID set 

November 16, 2023, as the date for the hearing. After meeting and conferring with Commission 

staff, CLF timely filed the instant petition on October 3, 2023, asking the Commission to quash 

the CID in its entirety. 

5 Pet. at 20-22. 

6 Pet. at 22. 7 Pet. at 35, 41, 75, 81, 117, 123. 

8 Pet. at 126. 

9 Pet. at 123. 

10 Pet. at 156-67. 11 Pet at 158. 

2 
 

 

 

 

 

 

 

 

II. ANALYSIS 

CLF reiterates the same argument that the Commission found meritless in denying CLF’s 

prior motion to quash, i.e., that because it is formally organized as a non-profit corporation, the 

Commission lacks authority to issue and serve the CID. 12 This argument hinges upon Section 4 

of the FTC Act, which provides in relevant part that the term “corporation” shall be deemed to 

include any company “without shares of capital or capital stock or certificates of interest, except 

partnerships, which is organized to carry on business for its own profit or that of its members.” 

15 U.S.C. § 44. 

As explained in the Commission’s prior decision, CLF’s arguments fail for two reasons. 

First, the plain language of Section 20 permits the Commission to serve a CID on any legal 

entity, regardless of whether it is a “corporation” within the meaning of Section 4. 15 U.S.C. 

§ 57b-1(a)(6), (c)(1). Second, an organization’s form of incorporation and tax-exempt status is 

not controlling for purposes of whether the organization is a “corporation” within the meaning of 

Section 4. See, e.g., Cmty. Blood Bank of Kansas City Area v. FTC, 405 F.2d 1011, 1018-19 (8th 

Cir. 1969). The Commission is entitled to determine for itself whether CLF is in fact operating as 

a nonprofit entity, and it needs the information sought in the CID to make that determination. 

Although CLF purports to identify flaws in the Commission’s prior reasoning, none of its 

arguments have merit. 

Additionally, CLF raises two constitutional arguments that were not raised in its prior 

petition. CLF argues that the procedures for challenging a CID deny it due process and that the 

Commission’s structure violates Article II because the Commissioners are not removable by the 

President at will. Neither argument has any merit. 

A. The Commission Has Authority Under Section 20 to Serve a CID on Any 

Legal Entity. 

CLF argues that if it is not a “corporation” within the meaning of Section 4, then the 

Commission lacks authority to serve a CID under Section 20. 13 As the Commission explained in 

its prior decision, the plain language of the FTC Act refutes this argument. Section 20 authorizes 

the Commission to serve a CID on any “person.” 15 U.S.C. § 57b-1(c). 14 “Person” is defined as 

“any natural person, partnership, corporation, association, or other legal entity, including any 

person acting under color or authority of State law.” Id. § 57b-1(a)(6) (emphasis added). CLF 

argues that the term “corporation,” as used in this definition, must have the meaning set forth in 

Section 4. 15 That is true but irrelevant because “person” is defined to include not just a 

12 Pet. at 7-13 

13 Pet. at 4-11. 14 Section 20(c)(1) provides: “Whenever the Commission has reason to believe that any person may be in 

possession, custody, or control of any documentary material or tangible things, or may have any information, 

relevant to unfair or deceptive acts or practices in or affecting commerce (within the meaning of section 45(a)(1) of 

this title), or to antitrust violations, the Commission may, before the institution of any proceedings under this 

subchapter, issue in writing, and cause to be served upon such person, a civil investigative demand requiring such 

person to produce such documentary material for inspection and copying or reproduction, to submit such tangible 

things, to file written reports or answers to questions, to give oral testimony concerning documentary material or 

other information, or to furnish any combination of such material, answers, or testimony.” 15 U.S.C. § 57b-1(c)(1). 

15 Pet. at 10. 

3 
corporation but any kind of “legal entity.” Regardless of whether CLF is a “corporation” under 

Section 4, it certainly is a legal entity. 

CLF argues that the Commission’s reliance on the statutory term “other legal entity” is 

“misplaced.” 16 It attempts to bolster this position with a misleading citation to Community Blood 

Bank. According to CLF, Community Blood Bank supports the proposition that “‘[T]he 

distinction made in the [FTC] Act between corporations acting for profit and nonprofit 

corporations would be erased if all the Commission had to do, in order to obtain [authority]’ to 

issue and serve CIDs to non-profit corporations was to just classify them as ‘other legal 

entities.’” 17 Although the first part of the sentence is an accurate quotation from Community 

Blood Bank, it is truncated and taken out of context. The Eighth Circuit said nothing about the 

“other legal entity” language—nor could it have, since Section 20 was not enacted until 1980 and 

Community Blood Bank was decided 11 years earlier. Rather, the court held that “the distinction 

made in the Act between corporations acting for profit and nonprofit corporations would be 

erased if all the Commission had to do, in order to obtain jurisdiction, was to name the officers, 

directors and other personnel of a nonprofit corporation as the respondents.” Cmty. Blood Bank, 

405 F.2d at 1021 (emphasis added). Nothing in this holding suggests that the Commission can or 

should ignore the plain text of Section 20 authorizing service of a CID on a “corporation” or 

“other legal entity.” 

CLF also proffers a misleading citation to FTC v. Winters National Bank & Trust Co., 

601 F.2d 395 (6th Cir. 1979). According to CLF, Winters holds that “Section 20 ‘is not an 

independent grant of authority or source of substance [sic] power for the Commission.” 18 

Winters, however, said nothing about Section 20 because it was decided the year before Section 

20 was enacted. Winters dealt with the scope of the Commission’s authority under Section 9 of 

the FTC Act, 15 U.S.C. § 49, which authorizes the issuance of subpoenas. The court held that the 

Commission properly issued a subpoena for documents to a bank, which are not subject to the 

Commission’s investigative authority, see 15 U.S.C. § 46(a), because the bank was not the 

subject of the Commission’s investigation. Winters, 601 F.2d at 401-04. 

To the extent CLF is arguing that the logic of Winters prevents issuance of a CID to an 

entity formally organized as a nonprofit corporation, the argument fails for multiple reasons. 

First, this case involves a CID issued pursuant to Section 20, not a subpoena under Section 9. 

The two procedures are distinct, and they are governed by different statutory provisions. Second, 

whether an entity is a “bank” is a straightforward matter which can be determined by looking at 

its charter, but as discussed in more detail below, whether an entity is a nonprofit turns on how it 

is actually operated in practice, which cannot necessarily be determined without investigation. 

Finally, even if the rule of Winters did apply and CLF were determined to be a true nonprofit, the 

CID would still be proper because the subject of the investigation also includes potential 

violations by Innovative, a for-profit entity. 19 

Prior Commission decisions have recognized that the Commission’s investigatory 

authority under Section 20 is broader than its enforcement authority under Section 5. For 

16 Pet. at 11. 

17 Pet. at 11. 

18 Pet. at 8 (quoting Winters, 601 F.2d at 400). 

19 Pet. at 158. 

4 
 

 

 

 

 

 

 

 

 

 

example, the Commission “can require production of material from an entity that is not subject to 

the Commission’s enforcement authority if that material furthers the investigation of possibly 

illegal conduct by entities that are subject to the agency’s jurisdiction, such as for-profit 

telemarketers making calls on [the CID recipient’s] behalf.” In re Feature Films for Fams., Inc., 

150 F.T.C. 866, 870 (2010). And the Commission “also possesses the authority to investigate 

whether its jurisdiction extends to [the CID recipient].” Id. at 871; see also In re March 19, 2014 

Civil Investigative Demand Issued to Police Protective Fund, Inc., 157 F.T.C. 1913, 1919-20 

(2014). 20 Both of those circumstances apply here: the Commission is investigating potentially 

illegal conduct by Innovative, and it is also investigating whether CLF is properly subject to the 

Commission’s enforcement jurisdiction. 

B. The Information Sought in the CID Is Needed To Enable the 

Commission To Determine Whether CLF Is Operated as a Nonprofit. 

CLF also argues that it is “unquestionable” that it is “a charitable non-profit corporation” 

that is outside of the Commission’s enforcement jurisdiction. 21 It has submitted evidence 

supporting this assertion in the form of a declaration from CLF’s executive director, which 

attaches certificates of amendment to CLF’s articles of incorporation, a letter from the IRS 

stating that its records show CLF’s is a tax-exempt entity, and CLF’s Form 990s for 2019 to 

2021. 22 But CLF’s argument puts the cart before the horse. The Commission cannot determine 

whether CLF is truly operated as a nonprofit without obtaining the information requested 

through the CID. 

The law is clear that just because a corporation is organized as a nonprofit entity under 

state law and has been granted tax-exempt status does not mean that it is not a “corporation” 

under Section 4. See Cmty. Blood Bank, 405 F.2d 1018-19 (“[W]e do not mean to hold or even 

suggest that the charter of a corporation and its statutory source are alone controlling.”); FTC v. 

AmeriDebt, Inc., 343 F. Supp. 2d 451, 460 (D. Md. 2004) (“Although AmeriDebt is incorporated 

as a non-stock corporation with tax-exempt status, the Court finds this insufficient to insulate it 

from the regulatory coverage of the FTC Act.”). It is equally clear that the Commission has the 

power to investigate the facts to determine whether an organization is subject to its regulatory 

jurisdiction. 23 Thus a party “may not normally resist [investigative process] on the ground[s] that 

20 CLF argues that Police Protective Fund was wrongly decided, and that the CID recipient there did not “bring the 

inherent limitations of the Commission’s jurisdiction to issue CIDs ... to the Commission’s attention.” Pet. at 8 n.2. 

But as discussed above, the plain text of Section 20 provides that the Commission may issue a CID to any legal 

entity, regardless of whether it is a “corporation” under Section 4. CLF also argues that Feature Films is 

inapplicable because it is the subject of the investigation. That argument ignores the fact that Innovative is also a 

subject of the investigation. Pet. at 8-9 n.2. Thus, even if CLF were determined to be a true nonprofit, the CID would 

still be proper. 

21 Pet. 12. 22 See Pet. at 19-154. 

23 See, e.g., Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 627 (1973) (agency’s “jurisdiction to 

determine whether it has jurisdiction is as essential to its effective operation as is a court’s like power.”); Endicott 

Johnson Corp. v. Perkins, 317 U.S. 501, 509 (1943) (where evidence sought in agency subpoena “was not plainly 

incompetent or irrelevant to any lawful purpose of the [agency] ... it was the duty of the District Court to order its 

production.”); Fed. Mar. Comm’n v. Port of Seattle, 521 F.2d 431, 434 (9th Cir. 1975) (“[E]ach independent 

regulatory administrative agency has the power to obtain the facts requisite to determining whether it has 

jurisdiction over the matter sought to be investigated.”). 

5 
the agency lacks regulatory jurisdiction.” FTC v. Ken Roberts Co., 276 F.3d 583, 586 (D.C. Cir. 

2001) (quoting FTC v. Ernsthal, 607 F.2d 488, 490 (D.C. Cir. 1979). 

CLF acknowledges that its corporate form and tax-exempt status are not determinative of 

whether it is truly a nonprofit organization. It cites the two-pronged test the Commission has 

employed for analyzing this question, which looks to both the source and destination of an 

organization’s income. 24 See In re Coll. Football Ass’n, 117 F.T.C. 971, 998 (1994) (“The notfor-profit jurisdictional exemption under Section 4 requires both that there be an adequate nexus 

between an organization’s activities and its alleged public purposes and that its net proceeds be 

properly devoted to recognized public, rather than private, interests.”); see also In re California 

Dental Ass’n, 121 F.T.C. 190, 290 (1996) (“[A]n organization that falls short on either prong 

comes within our jurisdiction.”), aff’d, 128 F.3d 720 (9th Cir. 1997), and aff’d in relevant part, 

526 U.S. 756, 765-69 (1999). CLF argues that the evidence it has submitted demonstrates that it 

satisfies this test. 25 

The problem with this argument is that the Commission cannot make that determination 

at this stage of proceedings based solely on the evidence that CLF has voluntarily supplied to 

avoid compliance with the CID. As we explained in Police Protective Fund, “the Commission is 

not required to take at face value an organization’s claim that it is a charitable organization, and 

can require it to produce documents and other information to enable the Commission to make 

that determination for itself.” 157 F.T.C. at 1916. CLF “may not foreclose that inquiry simply by 

asserting that, if conducted, the inquiry would yield facts favorable to [it].” Id. at 1917. 

CLF argues that the Commission has become “fixated on CLF’s telemarketing 

fundraising expenses.” 26 While CLF is correct that there is nothing inherently illegal about a 

nonprofit utilizing telemarketing to raise money, CLF’s own records in this case show that more 

than 90% of CLF’s fundraising revenue from 2019 to 2021 was spent on fundraising and 

employee compensation. This raises serious questions about whether CLF is in fact being 

operated as a nonprofit and whether it is deceiving consumers as to how their donations will be 

used. 

Here, as in Police Protective Fund, the Commission will conduct a careful examination 

to determine whether CLF is carrying on business “for its own profit or that of its members.” 15 

U.S.C. § 44. The Commission may consider CLF’s form of organization and tax-exempt status, 

but as discussed above those factors are not dispositive. Rather, the Commission “will conduct a 

fact-intensive inquiry into how the corporation actually operates,” including examination of “the 

primary purpose of the organization, the extent to which funds or other benefits may have been 

conferred on related for-profit companies or individuals, and the extent to which the organization 

may have been used by individuals or for-profit entities as a device to seek monetary gain.” 

Police Protective Fund, 157 F.T.C. at 1917-18. For purposes of this inquiry, ‘[t]he extent to 

24 Pet. at 11-12. 

25 Pet. at 9-11. 

26 Pet. at 14. 

6 
which an entity confers benefits on private interests is relevant even if those benefits are not in 

the form of ‘profits’ as that term is traditionally understood.” Id. at 1918. 27 

In sum, the Commission is not required simply to accept CLF’s representation that it is a 

nonprofit based on CLF’s selective presentation of evidence. It needs the information requested 

in the CID to determine whether CLF is truly operated as a nonprofit. 

C. CLF’s Constitutional Arguments Lack Merit. 

CLF argues that Section 20 violates the Due Process Clause of the Fifth Amendment 

because a party seeking to modify or set aside a CID must first petition the Commission for 

relief. See 15 U.S.C. § 57b-1(f). According to CLF, this procedure “deprives CLF of its Fifth 

Amendment due process right to a fair trial before a neutral judge appointed in accordance with 

Article III of the Constitution with the procedural protections of a federal court.” 28 

This argument fails because “CIDs are not self-enforcing.” FTC v. O’Connell Assocs., 

Inc., 828 F. Supp. 165, 168 (E.D.N.Y. 1993). If CLF does not comply with the CID, the 

Commission will be required to petition a court to enforce the subpoena. See 15 U.S.C. § 57b1(e). Should that happen, CLF will have a hearing before an Article III judge. The petition to 

quash procedure simply functions as an exhaustion requirement; a CID recipient who fails to 

raise objections in a petition to quash before the agency generally waives those objections if the 

Commission later seeks to enforce the CID in court. See O’Connell, 828 F. Supp. at 168-170. 

CLF cites nothing to suggest that exhaustion requirements, which are commonplace in agency 

practice, violate due process. 

Furthermore, CLF’s arguments appear to confuse Commission investigations with the 

Commission’s administrative enforcement proceedings. 29 At this point, the Commission is 

merely conducting an investigation. It has not made any determination that there is reason to 

believe that a violation of the FTC Act or the TSR has occurred or is occurring. If the 

Commission ultimately determines that there is sufficient evidence to warrant filing of an 

enforcement complaint, it will then consider whether to sue in district court, see 15 U.S.C. 

§§ 53(b), 57b, or to issue an administrative complaint, see 15 U.S.C. § 45(b). CLF’s complaints 

27 See also FTC v. Gill, 183 F. Supp. 2d 1171, 1184-85 (C.D. Cal. 2001) (company was “not a legitimate nonprofit 

organization” where evidence showed individual defendant lived in corporate office, paid personal expenses from 

corporate account, and otherwise commingled assets); In re Ohio Christian Coll., 80 F.T.C. 815, 848 (1972) 

(“Profit, for the purpose of Section 4 of the Federal Trade Commission Act, is not limited to dividends, gains or 

direct reward”); cf. Liu v. SEC, 140 S. Ct. 1936, 1946 (2020) (expenses such as “extraordinary salaries” may amount 

to “dividends of profit under another name”). 

28 Pet. at 15. 

29 Pet. at 15. CLF cites Justice Gorsuch’s recent statement that “some say the FTC has not lost an in-house 

proceeding in 25 years.” Axon Enterprise, Inc. v. FTC, 143 S. Ct. 890, 918 (2023) (Gorsuch, J., concurring). 

Justice’s Gorsuch’s statement is not entirely accurate. See, e.g., Maureen K. Ohlhausen, Administrative Litigation at 

the FTC: Effective Tool for Developing the Law or Rubber Stamp?, 12 J. Comp. L. & Econ. 623, 630-35 (2016) 

(surveying Commission decisions from 1977 to 2016). Moreover, the Supreme Court has repeatedly held that the 

combination of investigative, prosecutorial, and adjudicative functions within a single administrative agency does 

not violate due process. Withrow v. Larkin, 421 U.S. 35, 47, 56 (1975); see also FTC v. Cement Inst., 333 U.S. 683, 

701 (1948). Commission administrative enforcement proceedings are conducted in strict compliance with the 

Administrative Procedure Act, which among other things prohibits ex parte communications between the 

Commissioners and the agency staff who prosecute the complaint. See 5 U.S.C. § 554(d)(2); 16 C.F.R. § 4.7(b). 

7 
about the Commission’s administrative enforcement proceedings are thus premature and not 

relevant to the question of whether the CID should be quashed. 

CLF next argues that the structure of the Commission violates Article II because the 

Commissioners are removable only for cause. This argument is squarely foreclosed by 

Humphrey’s Executor v. United States, 295 U.S. 602 (1935), which upheld the for-cause removal 

requirement. Id. at 626-32. Contrary to CLF’s argument, Seila Law LLC v. CFPB, 140 S. Ct. 

2183 (2020), did not overrule Humphrey’s Executor. To the contrary, the Supreme Court made 

clear that “we do not revisit Humphrey’s Executor or any other precedent today.” Id. at 2206. 

Furthermore, even if the Supreme Court were to revisit Humphrey’s Executor in some 

future case, that would not by itself invalidate the Commission’s CID. In Collins v. Yellin, 141 S. 

Ct. 1761 (2021), the Supreme Court held that where agency officials were properly appointed, an 

unconstitutional restriction on removal does not void the agency’s actions unless the removal 

restriction actually caused harm. Id. at 1787-88. Harm might be shown, for example, if the 

President “had attempted to remove [an agency official] but was prevented from doing so by a 

lower court decision holding that he did not have ‘cause’ for removal,” or “had made a public 

statement expressing displeasure with actions taken by [an agency official] and had asserted that 

he would remove [the official] if the statute did not stand in the way.” Id. at 1789. Here, CLF has 

not attempted to make any showing of harm resulting from the President’s inability to remove 

Commissioners other than for cause. 

CLF’s constitutional arguments thus provide no basis for quashing the subpoena. 

III. CONCLUSION 

For all the foregoing reasons, IT IS HEREBY ORDERD THAT the Petition to Quash 

Civil Investigative Demand filed by Childhood Leukemia Foundation, Inc., be, and it hereby is, 

DENIED. 

IT IS FURTHER ORDERED that Childhood Leukemia Foundation, Inc., shall comply 

in full with the Commission’s Civil Investigative Demand and shall appear ready to testify on the 

specified topics at the designated location on November 16 at 9 a.m. PT, or at other such date, 

time, and location as FTC staff may determine. 

By the Commission. 

8