The Honorable James M. Rosenbaum, United States District

1

Judge for the District of Minnesota.

____________

No. 95-1107

____________

Independent Charities of *

America, Inc.; Local *

Independent Charities, Inc.; *

National United Service *

Agencies, Inc.; Environmental *

Federation of America, doing *

business as Earth Share, *

*

Appellants, * Appeal from the United States

* District Court for the

v. * District of Minnesota

*

State of Minnesota, Wayne *

Simoneau, in his capacity as *

Minnesota Commissioner of *

Employee Relations, *

*

Appellees. *

____________

 Submitted: October 20, 1995

 Filed: April 29, 1996

____________

Before McMILLIAN, ROSS and BOWMAN, Circuit Judges.

____________

McMILLIAN, Circuit Judge.

Independent Charities of America, Inc., Local Independent Charities,

Inc., National United Service Agencies, Inc., and Environmental Federation

of America, Inc., d/b/a Earth Share (collectively plaintiffs) appeal from

a final order entered in the United States District Court for the District 1

of Minnesota granting summary judgment in favor of the State of Minnesota

and
Before the 1993 and 1994 amendments at issue in the

 2

present case, § 309.501(1) provided in pertinent part:

Subdivision 1. Definitions.

“Registered combined charitable organization”

means an organization

(1) which is tax exempt under Section 501(c)(3)

of the Internal Revenue Code . . . and to which

contributions are deductible under Section 170 of

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Linda Barton, in her capacity as Minnesota Commissioner of Employee

Relations (collectively the State defendants)on plaintiffs’ claims that

certain statutory amendments limiting access to the Minnesota Employee

Combined Charitable Campaign (Campaign) violate the First Amendment,

federal equal protection and substantive due process, and the Commerce

Clause. Independent Charities of America, Inc. v. Minnesota, No. 4-94-CV483 (D. Minn. Dec. 16, 1994). For reversal, plaintiffs argue that the

district court erred in holding that (1) the exclusion of non-local

fundraisers from the Campaign did not violate plaintiffs’ First Amendment

right to free speech; (2) the exclusion of non-local fundraisers from the

Campaign did not violate their rights to equal protection and due process;

and (3) the State of Minnesota was a “market participant” so as to exempt

the challenged amendments from scrutiny under the Commerce Clause. For the

reasons discussed below, we affirm the order of the district court.

I. Background

The Campaign is an annual fund raising drive whereby a state employee

may elect to have a contribution deducted from his or her paycheck and paid

to a registered combined charitable organization. See Minn. Stat. §

309.501(1)(e) (1994). The Campaign is conducted in the state workplace

during working hours. According to Minn. Stat. § 309.501(3), only

charitable federations which have been recognized by the Campaign as

Registered Combined Charitable Organizations (RCCOs) are eligible to

participate in the Campaign. A charitable federation seeking to

participate in the Campaign on behalf of its member charities must meet the

statutory criteria for RCCOs set forth in Minn Stat. § 309.501(1).2
the Internal Revenue

Code;

(2) which secures funds for distribution to ten

or more charitable agencies in a single, annual

consolidated effort;

(3) which is governed by a voluntary board of

directors which represents the broad interests of

the public;

(4) which distributes at least 70 percent of its

total campaign income and revenue to the designated

agencies it supports and expends no more than 30

percent of its total income and revenue for

management and general costs and fund raising

costs;

(5) and each designated agency supported by the

recipient institution devotes substantially all of

its activities directly to providing health,

welfare, social, or other human services to

individuals;

(6) and each designated agency supported by the

recipient institution provides health, welfare,

social, or other human services, in the community

and surrounding area in which the recipient

institution’s fund drive takes place; and

(7) which has been registered with the

commissioner of commerce in accordance with this

section.

Minn. Stat. § 309.501(1) (1992). 

The Legislature provided a compliance waiver of one year 3

for those RCCOs which could not meet the more stringent criteria if

they had participated in the 1992-93 Campaign.

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In 1993, the Minnesota Legislature amended § 309.501 to provide more

restrictive criteria for participation in the Campaign by RCCOs and their

individual member charities. These amendments rendered plaintiffs

ineligible for participation in the 1994-95 Campaign. Three aspects of

3

the 1993 amendments are challenged by plaintiffs. First, the Legislature

amended Minn. Stat.§ 309.501(1)
 Minn. Stat. § 309.501(1)(c) defines an “affiliated agency” as 4

“a charitable agency that is represented by a federation and has an

ongoing relationship with that federation which involves a review

and monitoring process to ensure financial, managerial, and

programmatic responsibility.” Minn. Stat. § 309.501(1)(c) (1994).

-4-

to require participating RCCOs to be “governed by a local, independent,

voluntary board of directors which represents the broad interests of the

public and 90 percent of the directors of the governing board live or work

in the community or surrounding area.” Act of May 14, 1993, ch. 192, § 86,

1993 Minn. Laws 711, 767; Jt. App. 71. Because plaintiffs did not have

local boards of directors, they did not qualify as RCCOs under the 1993

amendments. Second, the Legislature established a local presence

requirement for the RCCOs’ member charities. As amended in 1993,

§ 309.501(1)(b)(6) required that individual member charities, or

“affiliated agencies,” be “incorporated in Minnesota or headquartered in 4

the service area in which the state employee combined charitable campaign

takes place.” Id. As a result of this provision, some affiliated agencies

became unable to participate in the 1994-95 Campaign. Finally, the

Legislature added a local spending requirement to § 309.501(1) , requiring

that each affiliated agency must provide “all or substantially all of its

health, welfare, social, or other human services, in the community and

surrounding area in which the state employee combined charitable campaign

takes place.” Id. Some of plaintiffs’ affiliated agencies were excluded

from the Campaign under this requirement.

In 1994, the Legislature again amended Minn. Stat. § 309.501. First,

it amended section (1)(b)(4) to establish an alternative to the 1993

requirement that a RCCO had to be governed by a local board of directors.

The 1994 amendment provided that “if the charitable agencies are solely

educational institutions which meet the requirements of paragraph (c), [a

RCCO may be governed] by a national board of directors that has a local

advisory board
Open Your Heart to the Hungry and Homeless, a charitable 5

organization created by Minnesota state employees, provides direct

benefits to charities which give food and shelter to indigent

Minnesota residents. 

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composed of members who live or work in the community or surrounding area.”

Act of Apr. 28, 1994, ch. 535, § 1, 1994 Minn. Laws 769, 770; Jt. App. B30,

31. Second, the Legislature added a provision to Minn. Stat. §

309.501(1)(b) stating that “[r]egistered combined charitable organization”

includes a charitable organization organized by Minnesota state employees

and their exclusive representatives for the purpose of providing grants to

nonprofit agencies providing Minnesota residents with food or shelter if

the charitable organization meets the requirements of clauses (1), (4), and

(5).” Id.

The 1993 amendments had the practical effect of excluding from

participation in the 1994-95 Campaign six organizations which had

previously qualified as RCCOs, including the United Negro College Fund

(UNCF), Open Your Heart to the Hungry and Homeless (OYH) , and plaintiffs. 5

Under the 1994 amendments, UNCF and OYH became eligible once again to

participate in the Campaign. 

Plaintiffs, four federated charities who solicit contributions on

behalf of a slate of individual member charities, are incorporated outside

of Minnesota and solicit contributions in state and municipal public

employee campaigns throughout the United States. Plaintiffs’ applications

to the 1994-95 Campaign were rejected due to non-compliance with the

statutory eligibility requirements. On June 22, 1994, plaintiffs

instituted the present action in the United States District Court for the

District of Minnesota, challenging the constitutionality of the 1993 and

1994 amendments to Minn. Stat. § 309.501. The amended complaint alleged

that the challenged amendments violate the First Amendment, federal equal

protection and substantive due process, and the Commerce
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Clause. Plaintiffs sought a declaratory judgment and a permanent

injunction against application of the 1993 and 1994 amendments. In

addition, after filing their complaint, plaintiffs moved for a preliminary

injunction allowing their participation in the 1994-95 Campaign pending

final resolution of the present case. On July 29, 1994, the magistrate

judge issued a Report and Recommendation that plaintiffs’ motion for a

preliminary injunction be denied. The district court, adopting the

magistrate judge’s Report and Recommendation, denied the preliminary

injunction. On subsequent cross-motions for summary judgment, the district

court granted summary judgment in favor of the State defendants. This

timely appeal followed.

II. Discussion

We review a grant of summary judgment de novo. The question before

the district court, and this court on appeal, is whether the record, when

viewed in the light most favorable to the non-moving party, shows that

there is no genuine issue as to any material fact and that the moving party

is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); see,

e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986); Get Away Club, Inc. v.

Coleman, 969 F.2d 664, 666 (8th Cir. 1992); St. Paul Fire & Marine

Insurance Co. v. FDIC, 968 F.2d 695, 699 (8th Cir. 1992). Where the

unresolved issues are primarily legal, rather than factual, summary

judgment is particularly appropriate. Crain v. Board of Police Comm’rs,

920 F.2d 1402, 1405-06 (8th Cir. 1990). 

A. First Amendment Challenge

We begin by addressing plaintiffs’ argument that the 1993 statutory

amendments restricting the eligibility criteria for participation in the

Campaign violate their First Amendment right to freedom of speech. The

Supreme Court has recognized since
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Village of Schaumburg v. Citizens for a Better Environment, 444 U.S. 620

(1980) (Schaumburg), that charitable solicitations “are so intertwined with

speech that they are entitled to the protections of the First Amendment.”

See id. at 632 (municipal ordinance prohibiting public solicitation of

contributions by charitable organizations which did not use at least

seventy-five percent of its receipts for “charitable purposes” was

unconstitutionally overbroad under the First Amendment); see also Secretary

of State v. Joseph H. Munson Co., 467 U.S. 947, 959 (1984) (Munson)

(Maryland statute prohibiting charitable organizations, in connection with

any fund raising activity, from paying expenses of more than twenty-five

percent of the amount raised was unconstitutional limitation on protected

First Amendment solicitation activity).

Schaumburg and Munson, however, involved regulations affecting doorto-door or on-street solicitation. In Cornelius v. NAACP Legal Defense &

Educ. Fund, 473 U.S. 788, 797-99 (1985) (Cornelius), the Supreme Court

recognized a constitutionally significant distinction between such public

forms of charitable solicitation and the type involved in a fund raising

drive conducted in the government workplace. See id. at 798-99. At issue

in Cornelius was the exclusion of legal defense and political advocacy

organizations from the Combined Federal Campaign (CFC), an annual

charitable fund raising drive conducted in the federal workplace during

working hours. See id. at 797-811. The government had limited

participation in the CFC to health and welfare charities providing direct

assistance to individuals, in contrast to nonprofit organizations engaged

in lobbying or public interest litigation. After determining that the

charitable solicitations in the CFC (consisting primarily of 30-word

statements by participating charities) in a campaign pamphlet were

protected speech, the Court concluded that the speech did not occur in

either a traditional public forum or a limited public forum. Rather, it

found that the CFC was a nonpublic forum, such that the
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challenged regulations over access need only be “reasonable in light of the

purpose served by the forum and . . . viewpoint neutral.” See id. at 806.

Applying the “reasonableness” test, the Court upheld the eligibility

criteria excluding legal defense and political advocacy groups from the

CFC, concluding that the restrictions were viewpoint-neutral and that the

federal government might reasonably have concluded that the exclusion of

legal defense and political advocacy groups from the CFC would increase

federal employees’ acceptance of the fund raising drive, limit disruption

in the federal workplace, and avoid the appearance of government

entanglement with particular viewpoints. See id. at 809 (“[T]he President

could reasonably conclude that a dollar directly spent on providing food

or shelter to the needy is more beneficial than a dollar spent on

litigation that might or might not result in aid to the needy.”); see also

Pilsen Neighbors Community Council v. Netsch, 960 F.2d 676, 686 (7th Cir.

1992) (Illinois statute requiring that charities seeking to participate in

state employee deduction program obtain signatures of 4,000 employees and

disclose on all petitions and payroll deduction cards the percentage of

their receipts expended for fund raising and overhead costs was reasonable

and did not violate First Amendment protections); United Black Community

Fund, Inc. v. City of St. Louis, 800 F.2d 758, 760 (8th Cir. 1986) (city’s

decision to limit access to its payroll deduction program to charities

whose administrative and fund raising costs did not exceed twenty-five

percent of contributions was reasonable and viewpoint neutral under the

Cornelius analysis).

In the present case, plaintiffs concede that the Campaign, like the

CFC at issue in Cornelius, is a nonpublic forum. Yet they attempt to

distinguish the holding of Cornelius on the basis that the restrictions on

access to the CFC were in furtherance of an end -- the provision of food

and shelter to the indigent -- that was not only reasonable but also

laudable. By contrast, they argue, the 1993 amendments to Minn. Stat. §

309.501 “espouse no such worthy or even reasonable objective.” Brief for

Appellants at 6-7. 
-9-

Thus, they contend that the 1993 amendments violate their First Amendment

right to freedom of speech.

In response, the State defendants argue the district court correctly

found that the challenged amendments satisfy the “reasonableness” test set

forth in Cornelius for restrictions on access to a nonpublic forum. The

State defendants place great weight on the fact that the Supreme Court

clarified in Cornelius that easing administrative manageability and

reducing workplace disruption are legitimate justifications for restricting

access to a nonpublic forum. See Cornelius, 473 U.S. at 809-10. The State

defendants maintain that the amendments to Minn. Stat. § 309.501 satisfy

the “reasonableness” standard, because they were enacted to increase the

manageability of the Campaign and to reduce disruption in the State

workplace. We agree.

Although the purpose of the 1993 amendments to Minn. Stat. 

§ 309.501 is not articulated in the statute itself, defendant Linda Barton,

the state Commissioner of Employee Relations at the time the amendments

were enacted, testified before the legislative appropriations conference

committee that the goal of the eligibility restrictions was to simplify

the Campaign and make it operate more smoothly. See Linda Barton Aff. ¶

9, Jt. App. 68. Thus, to the extent that the 1993 amendments created a

local nexus requirement, they were intended to make the Campaign more

appropriate and relevant to the State and its employees. Id. The State

has a legitimate interest in minimizing workplace disruption and

administrative difficulties related to the Campaign. In our view, the 1993

amendments are reasonable because they are wholly consistent with these

legitimate interests of the State. See Perry Education Ass’n v. Perry

Local Educators’ Ass’n, 460 U.S. 37, 49 (1983) (preferential access to

interschool mail system given to union representing teachers of the school

district did not violate First Amendment). The State defendants might

reasonably have concluded that requiring RCCOs and their affiliated

agencies to
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demonstrate certain local connections would make the Campaign operate more

efficiently by limiting the overall number of participating RCCOs and by

restricting participation to those charities which provide a substantial

benefit to Minnesota residents. In addition, the 1993 amendments are

viewpoint-neutral, because there is no suggestion that the criteria for

participation in the Campaign are intended to suppress one viewpoint or

advance another. 

Finally, we note that the Supreme Court in Cornelius made clear that

a restriction on access to a nonpublic forum does not violate the First

Amendment “merely because use of that forum may be the most efficient means

of delivering the speaker’s message.” See Cornelius, 473 U.S. at 809.

Even if the 1993 amendments preclude plaintiffs from participating in

future Campaigns, they still retain ample alternative channels to solicit

contributions from State employees -- such as direct mail and in-person

solicitation outside the workplace -- because the amendments place no

restrictions on plaintiffs’ general ability to solicit donations in the

State. Therefore, because the 1993 amendments are both viewpoint-neutral

and reasonably related to a legitimate state interest, we hold that they

do not violate plaintiffs’ First Amendment right to freedom of speech.

B. Equal Protection and Due Process Challenge

We now turn to plaintiffs’ argument that the 1993 and 1994 amendments

to Minn. Stat. § 309.501 violate their equal protection and substantive due

process rights under the United States Constitution. Plaintiffs maintain

that these amendments violate the Equal Protection Clause by creating a

local/non-local distinction between charitable federations and affiliated

agencies eligible for participation in the Campaign. Although plaintiffs

concede that rational basis review should govern their equal
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protection claim, they contend that neither the 1993 nor the 1994

amendments rationally promote a legitimate State objective. Similarly,

they contend that the 1994 amendments run afoul of the Due Process Clause

by creating alternatives to certain statutory eligibility criteria which

have enabled UNCF and OYH to participate in the 1994-95 Campaign. In

effect, plaintiffs argue that the State has violated the Due Process Clause

by arbitrarily and capriciously granting UNCF and OYH preferential

treatment. 

Addressing plaintiffs’ federal equal protection claim, the State

defendants argue that the district court correctly found that the 1993 and

1994 amendments were rationally related to the State’s legitimate

objectives in minimizing workplace disruption and increasing the

manageability of the Campaign. The State defendants also note that the

State was not required to articulate its reasons for creating the current

statutory scheme in order to withstand scrutiny under the rational basis

test. Similarly, in response to plaintiffs’ substantive due process claim,

the State defendants maintain that the 1994 amendments were enacted to

promote the State’s legitimate goal of clarifying the purpose and goals of

the Campaign and making it more manageable. Thus, they argue that the 1994

amendments fall well within the parameters of both federal equal protection

and substantive due process. We agree.

Because the 1993 and 1994 amendments to Minn. Stat. § 309.501 do not

target or exclude a suspect class, they will withstand scrutiny under the

Equal Protection Clause so long as they are rationally related to a

legitimate governmental objective. FCC v. Beach Communications, Inc., 113

S. Ct. 2096, 2101 (1993). Under rational basis review, challenged

statutory classifications are accorded a strong presumption of validity,

which is overcome only if the party challenging them negates “every

conceivable basis which might support it.” Id. at 2102. In the present

case, plaintiffs have failed to make such a showing. As we concluded

above, we think the Legislature might rationally have concluded
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that restricting access to the Campaign to charities meeting the local

connection requirements would not only decrease workplace disruption but

would also render the Campaign more manageable and relevant to State

employees. In sum, plaintiffs’ rejected First Amendment claim fares no

better when presented in equal protection garb. See Perry, 460 U.S. at 54-

55 (upholding under rational basis review preferential access given by

school district to exclusive bargaining representative of teachers in that

district).

Also without merit is plaintiffs’ claim that the 1994 amendments to

Minn. Stat. § 309.501 violates the Due Process Clause. The Supreme Court

made clear in Minnesota v. Clover Leaf Creamery Co., 449 U.S. 446, 470 n.12

(1981), that a statute which satisfies the rational basis test in an equal

protection analysis also satisfies the rational basis test under

substantive due process analysis. Because we have concluded that the 1994

amendments reasonably promote legitimate State objectives, we hold that the

amendments comport with the requirements of the Due Process Clause.

C. Commerce Clause Challenge

Finally, plaintiffs contend that the 1993 amendments to Minn. Stat.

§ 309.501 violate the dormant Commerce Clause by prohibiting out-of-state

federations and non-local affiliated agencies from participating in the

Campaign. The district court concluded that the 1993 amendments were

exempt from scrutiny under the Commerce Clause because the State was acting

as an employer rather than a regulator by defining the charitable

organizations which would have access to its workplace for fund raising

purposes. Slip op. at 25-26 (order from the bench). On appeal, plaintiffs

contend that this determination was erroneous, because the State, by

enacting the 1993 amendments to Minn. Stat. § 309.501, is regulating the

charitable solicitation market. First, we must determine whether the State

falls within the “market participant” exception to the
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dormant Commerce Clause and, if it does not, we must consider whether the

1993 amendments impermissibly burden out-of-state charitable federations

seeking to participate in the Campaign.

Although the Commerce Clause is by its text an affirmative grant of

power to Congress to regulate interstate and foreign commerce, the Clause

has long been recognized as a self-executing limitation on the power of the

States to enact laws imposing substantial burdens on such commerce. SouthCentral Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87 (1984) (Wunnicke);

see also Wyoming v. Oklahoma, 502 U.S. 437, 454-59 (1992) (Oklahoma

violated the Commerce Clause in requiring coal-fired electric utilities in

the state to burn coal mixture containing at least ten percent Oklahomamined coal). This “negative” or “dormant” aspect of the Commerce Clause

prohibits economic protectionism - that is, regulatory measures designed

to benefit in-state economic interests by burdening out-of-state

competitors. New Energy Co. v. Limbach, 486 U.S. 269, 273 (1988). It is

well-settled, however, that the dormant Commerce Clause does not apply to

states which are acting as “market participants,” rather than as “market

regulators.” See, e.g., White v. Massachusetts Council of Construction

Employees, 460 U.S. 204, 214-15 (1983) (White) (City of Boston could

require firms seeking eligibility for award of public construction

contracts to have a work force made up of at least fifty percent of Boston

residents); Reeves, Inc. v. Stake, 447 U.S. 429, 434-47 (1980) (Reeves)

(South Dakota could constitutionally confine sale of cement produced at a

state-owned plant solely to state residents during cement shortage because

the State, as a seller of cement, was exempt from dormant Commerce Clause);

Hughes v. Alexandria Scrap, 426 U.S. 794, 805 (1976) (Alexandria Scrap)

(market participant exception applied to Maryland program to pay a bounty

for every Maryland-titled junk car converted into scrap, despite imposition

of more stringent documentation standards on out-of-state processors,

because the program affected the market no differently than if Maryland

were a private company bidding up the
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price of auto scrap). The rationale for the distinction drawn between

States acting as market participants and those acting as market regulators

is that the Commerce Clause primarily applies to state taxes and regulatory

measures interfering with private trade in the national marketplace.

Alexandria Scrap, 426 U.S. at 807-08. By contrast, there is no indication

that the Clause was intended to limit the ability of the States themselves

to operate in the free market. Reeves, 447 U.S. at 437. In addition, as

the Supreme Court explained in Reeves, because state proprietary activities

are often burdened with the same restrictions imposed on private market

participants, “[e]venhandedness suggests that, when acting as proprietors,

States should similarly share existing freedoms from federal constraints,

including the inherent limits of the Commerce Clause.” Id. at 439.

In the present case, plaintiffs acknowledge that the State acts as

an employer, and therefore participates in the labor market, by hiring

employees. Yet they maintain that the relevant market in this case is the

charitable fund raising market, which exists independently of the labor

market. Plaintiffs argue that by enacting the 1993 amendments to Minn.

Stat. § 309.501, the State is regulating the charitable fund raising market

and that the real participants in this market are state employees, acting

as “buyers” of charitable services, and charitable federations, acting as

“sellers” of such services. Thus, plaintiffs attempt to distinguish the

present case from White, Reeves, and Alexandria Scrap on the basis that the

State is not acting as a buyer or seller in the charitable fund raising

market. 

The State defendants respond, first, that by implementing the 1993

amendments to Minn. Stat. § 309.501 the State is not acting as a market

regulator but rather, as an employer, by limiting access to its workplace

for the purpose of fund raising. They contend that the State, like any

private employer, has the right to select the parties with whom it will

deal. The State defendants rely on
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Fireside Nissan, Inc. v. Fanning, 30 F.3d 206, 216 n.4 (1st Cir. 1994), for

the proposition that the “market participant” exception applies not only

when a State enters the market as a buyer or seller, but also when it acts

as an employer to favor local citizens. Id. We agree with the position

of the State defendants.

By excluding from the Campaign those charitable federations that

could not meet the local connection requirements of the 1993 amendments,

the State is acting as an employer restricting access to its workplace.

Although the State is participating in the charitable fund raising market,

it is doing so as a proprietor allowing its employees to make charitable

contributions in the workplace. As such, the State may exercise discretion

as to the charities permitted to solicit from state employees during

working hours, in the same way that any private employer may limit the

parties who conduct business with employees during the work day.

Therefore, we reject plaintiffs’ argument that the market participant

exception does not apply to local and state governments acting as

employers. We note that in White, 460 U.S. at 211 n.7, one factor

influencing the Court’s application of the market participant doctrine to

the City of Boston’s requirement that city residents comprise at least

fifty percent of the work force of each firm awarded a public construction

contract was the Court’s observation that “[e]veryone affected by the order

is, in a substantial if informal sense, ‘working for the city.’” Id.

Moreover, the policies underlying the market participant exception

also support its application to local and state governments acting as

employers. As we explained above, this exception is founded on the notion

that when a state enters the open market as a proprietor, rather than as

a regulator, there is less danger that the state’s activity will interfere

with Congress’s plenary power to regulate the market. See, e.g., Reeves,

447 U.S. at 437-39. We think this reasoning squarely envelops the

situation where a State or local government acts as an
-16-

employer, and we see no well-founded reason to constrict the proprietary

activities covered by the market participant exception to acts of buying

or selling. Cf. Barton B. Clark, Give ‘Em Enough Rope: States,

Subdivisions and the Market Participant Exception to the Dormant Commerce

Clause, 60 U. Chi. L. Rev. 615, 627 (1993) (contending that the fundamental

principle of the market-participant doctrine should be whether a State is

acting in a manner that “could legally be undertaken by a private party”).

Our conclusion that the State is acting as a market participant,

rather than as a market regulator, in implementing the 1993 amendments to

Minn. Stat. § 309.501 is reinforced because the general regulation of

charitable organizations is addressed elsewhere in Minn. Stat. Chs. 309

(Social and Charitable Organizations) and 317A (Nonprofit Corporations).

By contrast, Minn. Stat. § 309.501 is directed solely towards defining the

criteria that charitable federations must meet in order to qualify as RCCOs

eligible to participate in the Campaign. Plaintiffs’ arguments to the

contrary are without merit.

Plaintiffs contend, however, that even if the State is held to be a

participant in the charitable solicitation market, Commerce Clause scrutiny

is still warranted, because the State is impermissibly regulating outside

this market in the “downstream” market of charitable distribution. In

other words, plaintiffs maintain that the present case most closely

resembles Wunnicke, 467 U.S. at 96, in which the Supreme Court rejected

Alaska’s invocation of the market participant doctrine. In Wunnicke,

Alaska had instituted a program of selling timber at a substantially

reduced price from state-owned forests on the condition that buyers agree

to process that timber at in-state facilities prior to export. See id.

at 96-98. The Court held that “although the State may be a participant in

the timber market, it is using its leverage in that market to exert a

regulatory effect in the processing market, in which it is not a

participant.” Id. at 98. It reasoned:
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In the commercial context, the seller

usually has no say over, and no interest in,

how the product is to be used after sale; in

this case, however, payment for the timber

does not end the obligations of the

purchaser, for, despite the fact that the

purchaser has taken delivery of the timber

and has paid for it, he cannot do with it as

he pleases. Instead, he is obligated to

deal with a stranger to the contract after

completion of the sale.

Id. at 96. Relying on Wunnicke, plaintiffs argue that the 1993 amendments

to Minn. Stat. § 309.501 regulate “downstream,” in the 

charitable distribution market, by requiring that each member charity

supported by a RCCO “provid[e] all or substantially all of its health,

welfare, social, or other human services, in the community and surrounding

area in which the . . . [Campaign] takes place.” Minn. Stat. §

309.501(1)(b)(8). We think plaintiffs’ argument is misguided. Unlike the

State of Alaska in Wunnicke, which acted as a seller of timber in the

commercial market, the State of Minnesota in the present case is acting as

an employer in the charitable fund raising market by restricting the

charities that may solicit from state employees in the State workplace

during business hours. In restricting charitable participation in the

Campaign, the State has required that the member charities of each RCCO

must provide all or substantially all of their services in the State. By

establishing this requirement, the State is not performing a function

separate from its role of an employer in restricting the charities which

may solicit from State employees. Rather, in determining which charities

may have access to its employees, the State is merely considering the

regions where the charities will provide a substantial portion of their

benefits. Thus, the present case is distinguishable from Wunnicke, in

which Alaska, as a seller of timber, imposed requirements which were wholly

unrelated to the purchase and sale of timber. See Wunnicke, 567 U.S. at

96-98.
Thus, we need not consider the impact that the 1993

 6

regulations have on out-of-state charitable federations and

affiliated agencies seeking to participate in the Campaign.

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Because we hold that the State is a market participant in the present

case, the Commerce Clause presents no barrier to the 1993 amendments

restricting the eligibility criteria for participation in the Campaign.6

We therefore affirm the order of the district court concluding that the

1993 amendments to Minn. Stat. § 309.501 are exempt from scrutiny under the

Commerce Clause.

III. CONCLUSION

For the foregoing reasons, we hold that the exclusion of non-local

fund raisers from the Campaign does not violate plaintiffs’ First Amendment

right to free speech or their rights to equal protection and due process.

We further hold that the State is a “market participant”; thus the 1993

amendments to Minn. Stat. 

§ 309.501 are exempt from scrutiny under the Commerce Clause. Accordingly,

the judgment of the district court is affirmed.

A true copy.

Attest:

 CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.