### The Honorable James M. Rosenbaum, United States Distric t 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 I ndependent Charities, Inc., National United Service Agencies, Inc., an d 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

### Bef ore the 1993 and 1994 amendments at issue in th e 2 

### present case, § 309.501(1) provided in pertinent part: Subdivision 1. Definitions. “Registered combined charitable o rganization” means an organization (1) wh ich is tax exempt under Section 501(c)(3 ) of the Internal Revenue Code . . . and to whic h contributions are deductible under Section 170 o f
-2- Linda Barton, in her capacity as Minnesota Commissioner of Employe e Relat ions (collectively the State defendants)on plaintiffs’ claims tha t cert ain statutory amendments limiting access to the Minnesota Employe e Co mbined Charitable Campaign (Campaign) violate the First Amendment , federa l equal protection and substantive due process, and the Commerc e Clause. Independent Charities of America, Inc. v. Minnesota , No. 4-94-CV

483 (D. Minn. Dec. 16, 1994). For reversal, plaintiffs argue that th e district court erred in holding that (1) the exclusion of non-loca l 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 p rotection 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 th e reasons discussed below, we affirm the order of the district court.

I. Background

The Campaign is an annual fund raising drive whereby a state employe e may elect to have a contribution deducted from his or her paycheck and pai d to a registered combined charitable organization. See Minn. Stat. § 309 .501(1)(e) (1994). The Campaign is conducted in the state workplac e during w orking hours. According to Minn. Stat. § 309.501(3), onl y charit able federations which have been recognized by the Campaign a s Re gistered Combined Charitable Organizations (RCCOs) are eligible t o partic ipate in the Campaign. A charitable federation seeking t o participate in the Campaign on behalf of its member charities must meet th e statutory criteria for RCCOs set forth in Minn Stat. § 309.501(1). 2

### the Internal Revenue

Code; (2) wh ich secures funds for distribution to te n or m ore charitable agencies in a single, annua l consolidated effort; (3) wh ich is governed by a voluntary board o f directors which represents the broad interests o f the public; (4) whi ch distributes at least 70 percent of its total campaign income and revenue to the designate d agenc ies it supports and expends no more than 3 0 perce nt of its total income and revenue fo r management and general costs and fund raisin g costs; (5) an d each designated agency supported by th e recipient institution devotes substantially all of it s activities directly to providing health , welfare, social, or other human services t o individuals; (6) an d each designated agency supported by th e rec ipient institution provides health, welfare , social, or other human services, in the communit y and surrounding area in which the recipien t institution’s fund drive takes place; and (7) which has been registered with th e commissioner of commerce in accordance with thi s 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 crit eria if they had participated in the 1992-93 Campaign.
-3- In 1993, the Minnesota Legislature amended § 30 9.501 to provide more restrictive criteria for participation in the Campaign by RCCOs and their individual member charities. These amendments rendered plaintiff s ineligi ble for participation in the 1994-95 Campaign. Three aspects o f 3 the 1993 amendments a re challenged by plaintiffs. First, the Legislature amended Minn. Stat.§ 309.501(1)

### Minn. Stat. § 309.501(1)(c) defines an “a ffiliated 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 m onitoring process to ensure financial, managerial, an d 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 go verning board live or work in the community or surrounding area.” Act of May 14, 1993, ch. 192, § 86 , 1993 Mi nn. Laws 711, 767; Jt. App. 71. Because plaintiffs did not hav e local boa rds of directors, they did not qualify as RCCOs under the 199 3
ame ndments. Second, the Legislature established a local presenc e requi rement for the RCCOs’ member charities. As amended in 1993 , § 309 .501(1)(b)(6) required that individual member charities, o r “affiliate d agencies,” be “incorporated in Minnesota or headquartered in 4 the service area in w hich the state employee combined charitable campaign takes place.” Id . As a result of this provision, some affiliated agencie s became unable to participate in the 1994-95 Campaign. Finally, th e Legislature added a local spending requirement t o § 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 an d surrounding area in w hich the state employee combined charitable campaign takes place.” Id . S ome of plaintiffs’ affiliated agencies were excluded from the Campaign under this requirement.

In 1994, the Legislature again amended Minn. Stat. § 309.501. First , it a mended section (1)(b)(4) to establish an alternative to the 199 3 requirement that a RC CO had to be governed by a local board of directors. The 1994 amendment provided that “if the charitable agencies are solel y educational instituti ons which meet the requirements of paragraph (c), [a RCCO ma y be governed] by a national board of directors that has a loca l advisory board

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

### organization created by Minnes ota state employees, provides direct ben efits to charities which give food and shelter to indigen t Minnesota residents.
-5- 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. Se cond, the Legislature added a provision to Minn. Stat. § 309.501(1)(b) stating that “[r]egistered combine d charitable organization” includes a charitable organization organized by Minnesota state employees and their exclusive representatives for the purp ose of providing grants to nonprofit agencies providing Minnesota residents with food or shelter if the charitable organization meets the requirements of clauses (1), (4), an d (5).” Id

.

The 19 93 amendments had the practical effect of excluding fro m par ticipation in the 1994-95 Campaign six organizations which ha d previo usly qualified as RCCOs, including the United Negro College Fun d (UNCF), Open Your Heart to the Hungry and Homeless (OYH) , and plaintiffs. 5 Under the 1994 amendments, UNCF and OYH became eligible once again t o participate in the Campaign.

Plain tiffs, four federated charities who solicit contributions o n behalf of a slate of individual member charities , are incorporated outside of Min nesota and solicit contributions in state and municipal publi c employee campaigns throughout the United States. Plaintiffs’ applications to t he 1994-95 Campaign were rejected due to non-compliance with th e sta tutory eligibility requirements. On June 22, 1994, plaintiff s instituted the presen t 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 a mendments violate the First Amendment, federal equal protection and substantive due process, and the Commerce

### -6-

Clause

. Plaintiffs sought a declaratory judgment and a permanen t injunction against application of the 1993 and 1994 amendments. I n addition, after filing their complaint, plaintif fs moved for a preliminary injunction allowing their participation in the 1994-95 Campaign pendin g final res olution of the present case. On July 29, 1994, the magistrat e judge issued a Report and Recommendation that plaintiffs’ motion for a prelim inary injunction be denied. The district court, adopting th e
ma gistrate judge’s Report and Recommendation, denied the preliminar y injunction. On subsequent cross-motions for summary judgment, the distric t court granted summary judgment in favor of the State defendants. Thi s timely appeal followed.

II. Discussion

We review a grant of summary judgment de novo. The question before the district court, a nd this court on appeal, is whether the record, when viewe d in the light most favorable to the non-moving party, shows tha t there is no genuine issue as to any material fact and that the moving part y 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 & Marin e Insurance Co. v. FDIC , 968 F.2d 695, 699 (8th Cir. 1992). Where th e
unres olved issues are primarily legal, rather than factual, summar y 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 addressi ng 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. Th e Supreme Court has recognized since

### -7-

Village of Schaumburg v. Citizens for a Better Environment , 444 U.S. 620 (1980) ( Schaumburg ), that charitable solicitations “are so intertwined wit h speech that they are entitled to the protections of the First Amendment.” See id

. at 632 (municipal ordinance prohibiting public solicitation o f contri butions by charitable organizations which did not use at leas t seventy-five percent of its receipts for “charitable purposes” wa s unconstitutionally overbroad under the First Amendment); see also Secretar y of State v. Joseph H. Munson Co. , 467 U.S. 947, 959 (1984) ( Munson ) (Maryland statute prohibiting charitable organiz ations, 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 regula tions 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 Cour t recognized a constitu tionally significant distinction between such public forms of charitable solicitation and the type involved in a fund raising drive conducted in the government workplace. Se e id. at 798-99. At issue in Cornelius was the exclusion of legal defense and political advocac y org anizations from the Combined Federal Campaign (CFC), an annua l charit able fund raising drive conducted in the federal workplace durin g working hours. See id. at 797-811. The government had limite d participation in the CFC to health and welfare charities providing direct assistance to individ uals, in contrast to nonprofit organizations engaged in lobbying or public interest litigation. After determining that th e ch aritable solicitations in the CFC (consisting primarily of 30-wor d statements by participating charities) in a campaign pamphlet wer e prote cted speech, the Court concluded that the speech did not occur i n either a traditional public forum or a limited public forum. Rather, it found that the CFC was a nonpublic forum, such that the

### -8-

challenged regulations over access need only be “reasonable in light of th e purpose served by the forum and . . . viewpoint neutral.” See id. at 806. Ap plying the “reasonableness” test, the Court upheld the eligibilit y criter ia excluding legal defense and political advocacy groups from th e CFC, concluding that the restrictions were viewpoint-neutral and that the federal government might reasonably have concluded that the exclusion of leg al defense and political advocacy groups from the CFC would increas e federal employees’ ac ceptance of the fund raising drive, limit disruption in the federal workplace, and avoid the appearance of governmen t 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 o n litigation that might or might not result in aid to the needy.”); see also Pilsen Neighbors Comm unity Council v. Netsch , 960 F.2d 676, 686 (7th Cir. 1992) (Illinois statute requiring that charities seeking to participate in state employee deduct ion program obtain signatures of 4,000 employees and dis close on all petitions and payroll deduction cards the percentage o f their receipts expended for fund raising and ove rhead costs was reasonable and did not violate First Amendment protections); United Black Community Fund, Inc. v. City of St. Louis , 800 F.2d 758, 7 60 (8th Cir. 1986) (city’s decision to limit access to its payroll deduction program to charitie s whose administrative and fund raising costs did not exceed twenty-fiv e percen t of contributions was reasonable and viewpoint neutral under th e Cornelius analysis).

In the present case, plaintiffs concede that the Campaign, like the CFC at is sue in Cornelius , is a nonpublic forum. Yet they attempt t o distinguish the holding of Cornelius on the basi s that the restrictions on
access to the CFC were in furtherance of an end -- the provision of food and sh elter to the indigent -- that was not only reasonable but als o laudable. By contrast, they argue, the 1993 amendments to Minn. Stat. § 309.501 “espouse no s uch worthy or even reasonable objective.” Brief for Appellants at 6-7.

### -9-

Thus, they contend th at the 1993 amendments violate their First Amendment right to freedom of speech.
In response, the State defendants argue the dis trict 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 Cour t clarified in Cornelius that easing administrative manageability an d reducing workplace disruption are legitimate justifications for restrictin g
access to a nonpublic forum. See Cornelius , 473 U.S. at 809-10. The Stat e 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 Stat e 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 amendment s
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. A pp. 68. Thus, to the extent that the 1993 amendments created a local n exus requirement, they were intended to make the Campaign mor e appropriate and relev ant to the State and its employees. Id . The State has a legitimate interest in minimizing workplace disruption an d administrative difficulties related to the Campaign. In our view, the 199 3 amendm ents are reasonable because they are wholly consistent with thes e legit imate interests of the State. See Perry Education Ass’n v. Perr y Local Educators’ Ass’n , 460 U.S. 37, 49 (1983) (preferential access t o interschool mail system given to union represent ing teachers of the school district did not violate First Amendment). The State defendants migh t
reaso nably have concluded that requiring RCCOs and their affiliate d agencies to

### -10-

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 ar e viewpo int-neutral, because there is no suggestion that the criteria fo r par ticipation in the Campaign are intended to suppress one viewpoint o r advance another.
Finally, we note that the Supreme Court in Corn elius made clear that
a restric tion on access to a nonpublic forum does not violate the Firs t Amendment “merely because use of that forum may be the most efficient mean s of de livering the speaker’s message.” See Cornelius , 473 U.S. at 809

. Even i f the 1993 amendments preclude plaintiffs from participating i n future Campaigns, the y still retain ample alternative channels to solicit
con tributions from State employees -- such as direct mail and in-perso n solici tation outside the workplace -- because the amendments place n o restri ctions on plaintiffs’ general ability to solicit donations in th e State. Therefore, be cause 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 amendment s to Minn. Stat. § 309.501 violate their equal protection and substantive du e process rights under the United States Constitution. Plaintiffs maintain tha t these amendments violate the Equal Protection Clause by creating a local/non-local disti nction between charitable federations and affiliated agencies eligible for participation in the Campaign. Although plaintiffs concede that rational basis review should govern their equal

### -11-

prote ction claim, they contend that neither the 1993 nor the 199 4 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 hav e enabled UNCF and OYH to participate in the 1994-95 Campaign. I n effect, plaintiffs argue that the State has violated the Due Process Claus e by arbitrarily and capriciously granting UNCF and OYH preferentia l treatment.

Addr essing plaintiffs’ federal equal protection claim, the Stat e defendants argue that the district court correct ly found that the 1993 and 199 4 amendments were rationally related to the State’s legitimat e objec tives in minimizing workplace disruption and increasing th e manageability of the Campaign. The State defendants also note that th e State was not require d 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 t o promote the State’s legitimate goal of clarifyin g the purpose and goals of the Campaign and making it more manageable. Thus, they argue that the 199 4 amendments fall well within the parameters of both federal equal protectio n and substantive due process. We agree.

Because the 1993 and 1994 amendments to Minn. S tat. § 309.501 do not target or exclude a s uspect class, they will withstand scrutiny under the Equal Pro tection Clause so long as they are rationally related to a legitimate governmental objective. FCC v. Beach Communications, Inc. , 113 S. Ct. 20 96, 2101 (1993). Under rational basis review, challenge d statutory classifications are accorded a strong presumption of validity, which is overcome only if the party challenging them negates “ever y conceivable basis which might support it.” Id. at 2102. In the present
cas e, plaintiffs have failed to make such a showing. As we conclude d above, we think the Legislature might rationally have concluded

### -12-

that restricting access to the Campaign to charities meeting the loca l connection requirements would not only decrease workplace disruption but woul d also render the Campaign more manageable and relevant to Stat e emp loyees. In sum, plaintiffs’ rejected First Amendment claim fares n o better when presented in equal protection garb. See Perry , 460 U.S. at 54

- 55 (up holding under rational basis review preferential access given b y school district to exclusive bargaining represen tative of teachers in that district).

Also without merit i s 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.1 2 (1981), that a statute which satisfies the ratio nal basis test in an equal protec tion analysis also satisfies the rational basis test unde r substantive due process analysis. Because we ha ve concluded that the 1994 amendments reasonably promote legitimate State objectives, we hold that th e 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 th e Campaig n. The district court concluded that the 1993 amendments wer e exempt from scrutiny under the Commerce Clause because the State was actin g
as an employer rather than a regulator by defining the charitabl e org anizations which would have access to its workplace for fund raisin g purposes. Slip op. at 25-26 (order from the bench). On appeal, plaintiff s conten d that this determination was erroneous, because the State, b y enacting the 1993 amendments to Minn. Stat. § 309.501, is regulating the charitable solicitation market. First, we must determine whether the Stat e falls within the “market participant” exception to the

### -13-

dormant Commerce Clau se and, if it does not, we must consider whether the 1993 amendments impermissibly burden out-of-state charitable federation s seeking to participate in the Campaign.

Although the Commerc e 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 th e States to enact laws imposing substantial burdens on such commerce. South

Central Timber Dev., Inc. v. Wunnicke , 467 U.S. 82, 87 (1984) ( Wunnicke );
see also Wyoming v. Oklahoma , 502 U.S. 437, 454-59 (1992) (Oklahom a violated the Commerce Clause in requiring coal-f ired 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 be nefit in-state economic interests by burdening out-of-stat e competitors. New Ene rgy 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 regula tors.” See, e.g., White v. Massachusetts Council of Constructio n Empl oyees , 460 U.S. 204, 214-15 (1983) ( White ) (City of Boston coul d require firms seeking eligibility for award of public constructio n contracts to have a work force made up of at lea st fifty percent of Boston
res idents); Reeves, Inc. v. Stake , 447 U.S. 429, 434-47 (1980) ( Reeves ) (South Dakota could c onstitutionally confine sale of cement produced at a state-owned plant solely to state residents duri ng cement shortage because the State, as a seller of cement, was exempt from dormant Commerce Clause) ; Hug hes v. Alexandria Scrap , 426 U.S. 794, 805 (1976) ( Alexandria Scrap ) (market participant e xception applied to Maryland program to pay a bounty for every Maryland-titled junk car converted into scrap, despite impositio n of more stringent documentation standards on out-of-state processors , bec ause the program affected the market no differently than if Marylan d were a private company bidding up the

### -14-

price of auto scrap). The rationale for the distinction drawn betwee n States acting as market participants and those a cting as market regulators is that the Commerce Clause primarily applies to state taxes and regulator y
me asures interfering with private trade in the national marketplace

. Alexandria Scrap , 426 U.S. at 807-08. By contra st, there is no indication that the Clause was intended to limit the abilit y of the States themselves to operate in the fre e market. Reeves , 447 U.S. at 437. In addition, as the Supreme Court explained in Reeves , because state proprietary activitie s
are often burdened with the same restrictions imposed on private marke t participants, “[e]venhandedness suggests that, w hen acting as proprietors, States should similar ly 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 hirin g employees. Yet they maintain that the relevant market in this case is the charit able fund raising market, which exists independently of the labo r market. Plaintiffs argue that by enacting the 1993 amendments to Minn. Stat. § 309.501, the State is regulating the charitable fund raising marke t and that the real par ticipants in this market are state employees, acting as “buyers” of charit able 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 th e State i s not acting as a buyer or seller in the charitable fund raisin g market.

The State defendants respond, first, that by implementing the 1993 amendme nts to Minn. Stat. § 309.501 the State is not acting as a marke t regulator but rather, as an employer, by limiting access to its workplace for the purpose of fund raising. They contend that the State, like an y private e mployer, has the right to select the parties with whom it wil l deal. The State defendants rely on

### -15-

Fireside Nissan, Inc. v. Fanning , 30 F.3d 206, 216 n.4 (1st Cir. 1994), fo r the proposition that the “market participant” exception applies not only when a State enters the market as a buyer or sel ler, but also when it acts
as an employer to favor local citizens. Id . We agree with the position of the State defendants.

By e xcluding from the Campaign those charitable federations tha t 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 chari table fund raising market, it is doing so as a p roprietor allowing its employees to make charitable contributions in the workplace. As such, the State may exercise discretio n
as t o the charities permitted to solicit from state employees durin g working hours, in the same way that any private employer may limit th e partie s who conduct business with employees during the work day

. Therefo re, we reject plaintiffs’ argument that the market participan t excep tion does not apply to local and state governments acting a s employers. We note that in White , 460 U.S. at 211 n.7, one facto r influencing the Court ’s application of the market participant doctrine to the City of Boston’s requirement that city residents comprise at leas t fifty percent of the work force of each firm awa rded a public construction contract was the Court’s observation that “[e]veryone affected by the orde r is, in a substantial if informal sense, ‘working for the city.’” Id

.

Moreover, the policies underlying the market participant exception also su pport its application to local and state governments acting a s employers. As we explained above, this exceptio n 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 plena ry power to regulate the market. See, e.g., Reeves , 447 U.S. at 437-39. We think this reasoning squarely envelops th e 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 sell ing. 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 fundamenta l principle of the mark et-participant doctrine should be whether a State is acting in a manner that “could legally be undert aken by a private party”).

Our conclusion that the State is acting as a market participant , rather than as a mark et regulator, in implementing the 1993 amendments to Minn. S tat. § 309.501 is reinforced because the general regulation o f charit able organizations is addressed elsewhere in Minn. Stat. Chs. 30 9 (Social and Charitable Organizations) and 317A (Nonprofit Corporations). By contrast, Minn. Stat. § 309.501 is directed s olely towards defining the criteria that charitable federations must meet in order to qualify as RCCO s eligible to participate in the Campaign. Plaintiffs’ arguments to th e 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 scrutin y is still warranted, b ecause the State is impermissibly regulating outside this market in the “downstream” market of charitable distribution . I n other words, plaintiffs maintain that the present case most closel y resembles Wunnicke , 467 U.S. at 96, in which the Supreme Court rejecte d Alaska ’s invocation of the market participant doctrine. In Wunnicke , Alas ka had instituted a program of selling timber at a substantiall y reduced price from st ate-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 Sta te may be a participant in the timbe r market, it is using its leverage in that market to exert a
re gulatory effect in the processing market, in which it is not a participant.” Id. at 98. It reasoned:

### -17- In the commercial context, the selle r usually has no say over, and no i nterest in, how the product is to be used aft er sale; in thi s case, however, payment for the timbe r does not end the obligations of th e purchaser, for, despite the fact that th e pur chaser has taken delivery of the timbe r and has paid for it, he cannot do with it as he pl eases. Instead, he is obligated t o deal with a stranger to the contract afte r completion of the sale.

Id. at 96. Relying on Wunnicke , plaintiffs argu e that the 1993 amendments to Minn. Stat. § 309.501 regulate “downstream,” in the charita ble distribution market, by requiring that each member charit y 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 whic h 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 th e commercial market, the State of Minnesota in the present case is acting as
an e mployer in the charitable fund raising market by restricting th e charities that may solicit from state employees in the State workplac e during business hours. In restricting charitable participation in th e Campaign, the State has required that the member charities of each RCC O must provide all or s ubstantially all of their services in the State. By establ ishing this requirement, the State is not performing a functio n separate from its role of an employer in restricting the charities which may solicit from Stat e employees. Rather, in determining which charities may have a ccess to its employees, the State is merely considering th e reg ions where the charities will provide a substantial portion of thei r benefits. Thus, the present case is distinguishable from Wunnicke , i n which Alaska, as a seller of timber, imposed requirements which were wholl y unrelated to the purchase and sale of timber. See Wunnicke , 567 U.S. at 96-98.

### Thu s, we need not consider the impact that the 199 3 6 

### regulations have on out-of-state charitable federations an d affiliated agencies seeking to participate in the Campaign.
-18- Because we hold that the State is a market participant in the presen t
case , the Commerce Clause presents no barrier to the 1993 amendment s restricting the eligibility criteria for participation in the Campaign. 6 We therefore affirm the order of the district court concluding that th e 1993 amendments to Minn. Stat. § 309.501 are exempt from scrutiny under th e 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 Amendmen t right to free speech or their rights to equal protection and due process. We furthe r hold that the State is a “market participant”; thus the 199 3 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.