Source: http://www.leagle.com/decision/19881268487US781_11241/RILEY%20v.%20NATIONAL%20FEDERATION%20OF%20BLIND
Timestamp: 2017-06-22 18:32:42
Document Index: 232370339

Matched Legal Cases: ['§ 131', '§ 131', '§ 131', '§ 131', '§ 131', '§ 131', '§ 131', '§ 131']

RILEY v. NATIONAL FEDERATION OF BLIND | 487 U.S. 781 (1988) | Leagle.com
Citing Case 487 U.S. 781 (1988)
Errol Copilevitz argued the cause for appellees. With him on the brief was John P. Jennings, Jr.*
Responding to a study showing that in the previous five years the State's largest professional fundraisers had retained as fees and costs well over 50% of the gross revenues collected in charitable solicitation drives, North Carolina amended its Charitable Solicitations Act in 1985. As amended, the Act prohibits professional fundraisers from retaining an "unreasonable" or "excessive" fee,1 a term defined by a three-tiered schedule.2 A fee up to 20% of the gross receipts collected is deemed reasonable. If the fee retained is between 20% and 35%, the Act deems it unreasonable upon a showing that the solicitation at issue did not involve the "dissemination of information, discussion, or advocacy relating to public issues as directed by the [charitable organization] which is to benefit from the solicitation." Finally, a fee exceeding 35% is presumed unreasonable, but the fundraiser may rebut the presumption by showing that the amount of the fee was necessary either (1) because the solicitation involved the dissemination of information or advocacy on public issues directed by the charity, or (2) because otherwise the charity's ability to raise money or communicate would be significantly diminished. As the State describes the Act, even where a prima facie showing of unreasonableness has been rebutted, the factfinder must still make an ultimate determination, on a case-by-case basis, as to whether the fee was reasonable — a showing that the solicitation involved the advocacy or dissemination of information does not alone establish that the total fee was reasonable. See Brief for Appellants 10-11; Reply Brief for Appellants 2-3.
Finally, professional fundraisers may not solicit without an approved license.4 In contrast, volunteer fundraisers may solicit immediately upon submitting a license application. N. C. Gen. Stat. § 131C-4 (1986). A licensing provision had been in effect prior to the 1985 amendments, but the prior law allowed both professional and volunteer fundraisers to solicit as soon as a license application was submitted.
We revisited the charitable solicitation field four years later in Secretary of State of Maryland v. Joseph H. Munson Co., 467 U.S. 947 (1984), a case closer to the present one in that the statute directly regulated contracts between charities and professional fundraisers. Specifically, the statute in question forbade such contracts if, after allowing for a deduction of many of the costs associated with the solicitation, the fundraiser retained more than 25% of the money collected. Although the Secretary was empowered to waive this limitation where it would effectively prevent the charitable organization from raising contributions, we held the law unconstitutional under the force of Schaumburg. We rejected the State's argument that restraints on the relationship between the charity and the fundraiser were mere "economic regulations" free of First Amendment implication. Rather, we viewed the law as "a direct restriction on the amount of money a charity can spend on fundraising activity," and therefore "a direct restriction on protected First Amendment activity." 467 U. S., at 967, and n. 16. Consequently, we subjected the State's statute to exacting First Amendment scrutiny. Again, the State asserted the prevention of fraud as its principal interest, and again we held that the use of a percentage-based test was not narrowly tailored to achieve that goal. In fact, we found that if the statute actually prevented fraud in some cases it would be "little more than fortuitous." An "equally likely" result would be that the law would "restrict First Amendment activity that results in high costs but is itself a part of the charity's goal or that is simply attributable to the fact that the charity's cause proves to be unpopular." Id., at 966-967.
The State's remaining justification — the paternalistic premise that charities' speech must be regulated for their own benefit — is equally unsound. The First Amendment mandates that we presume that speakers, not the government, know best both what they want to say and how to say it. See Tashjian v. Republican Party of Connecticut, 479 U.S. 208, 224 (1987) (criticizing State's asserted interest in protecting "the Republican party from undertaking a course of conduct destructive of its own interests," and reiterating that government " `may not interfere [with expressions of First Amendment freedoms] on the ground that [it] view[s] a particular expression as unwise or irrational' ") (quoting Democratic Party of United States v. Wisconsin ex rel. La Follette, 450 U.S. 107, 124 (1981)); cf. First National Bank of Boston v. Bellotti, 435 U.S. 765, 791-792, and n. 31 (1978) (criticizing State's paternalistic interest in protecting the political process by restricting speech by corporations); Linmark Associates, Inc. v. Willingboro, 431 U.S. 85, 97 (1977) (criticizing, in the commercial speech context, the State's paternalistic interest in maintaining the quality of neighborhoods by restricting speech to residents). "The very purpose of the First Amendment is to foreclose public authority from assuming a guardianship of the public mind through regulating the press, speech, and religion." Thomas v. Collins, 323 U.S. 516, 545 (1945) (Jackson, J., concurring). To this end, the government, even with the purest of motives, may not substitute its judgment as to how best to speak for that of speakers and listeners; free and robust debate cannot thrive if directed by the government. We perceive no reason to engraft an exception to this settled rule for charities.
The foregoing discussion demonstrates that the State's additional interest cannot justify the regulation. But, alternatively, there are several legitimate reasons why a charity might reject the State's overarching measure of a fundraising drive's legitimacy — the percentage of gross receipts remitted to the charity. For example, a charity might choose a particular type of fundraising drive, or a particular solicitor, expecting to receive a large sum as measured by total dollars rather than the percentage of dollars remitted. Or, a solicitation may be designed to sacrifice short-term gains in order to achieve long-term, collateral, or noncash benefits. To illustrate, a charity may choose to engage in the advocacy or dissemination of information during a solicitation, or may seek the introduction of the charity's officers to the philanthropic community during a special event (e. g., an awards dinner). Consequently, even if the State had a valid interest in protecting charities from their own naivete or economic weakness, the Act would not be narrowly tailored to achieve it.
Despite our clear holding in Munson that there is no nexus between the percentage of funds retained by the fundraiser and the likelihood that the solicitation is fraudulent, the State defines, prima facie, an "unreasonable" and "excessive" fee according to the percentage of total revenues collected. Indeed, the State's test is even more attenuated than the one held invalid in Munson, which at least excluded costs and expenses of solicitation from the fee definition. 467 U. S., at 950, n. 2. Permitting rebuttal cannot supply the missing nexus between the percentages and the State's interest.7
According to the State, we need not worry over this burden, as standards for determining "[r]easonable fundraising fees will be judicially defined over the years." Reply Brief for Appellants 6. Speakers, however, cannot be made to wait for "years" before being able to speak with a measure of security. In the interim, fundraisers will be faced with the knowledge that every campaign incurring fees in excess of 35%, and many campaigns with fees between 20% and 35%, will subject them to potential litigation over the "reasonableness" of the fee. And, of course, in every such case the fundraiser must bear the costs of litigation and the risk of a mistaken adverse finding by the factfinder, even if the fundraiser and the charity believe that the fee was in fact fair. This scheme must necessarily chill speech in direct contravention of the First Amendment's dictates. See Munson, supra, at 969; New York Times Co. v. Sullivan, 376 U.S. 254, 279 (1964).8
In striking down this portion of the Act, we do not suggest that States must sit idly by and allow their citizens to be defrauded. North Carolina has an antifraud law, and we presume that law enforcement officers are ready and able to enforce it. Further North Carolina may constitutionally require fundraisers to disclose certain financial information to the State, as it has since 1981. Munson, supra, at 967, n. 16. If this is not the most efficient means of preventing fraud, we reaffirm simply and emphatically that the First Amendment does not permit the State to sacrifice speech for efficiency. Schaumburg, 444 U. S., at 639; Schneider v. State, 308 U.S. 147, 164 (1939).
It is not clear that a professional's speech is necessarily commercial whenever it relates to that person's financial motivation for speaking. Cf. Bigelow v. Virginia, 421 U.S. 809, 826 (1975) (state labels cannot be dispositive of degree of First Amendment protection). But even assuming, without deciding, that such speech in the abstract is indeed merely "commercial," we do not believe that the speech retains its commercial character when it is inextricably intertwined with otherwise fully protected speech. Our lodestars in deciding what level of scrutiny to apply to a compelled statement must be the nature of the speech taken as a whole and the effect of the compelled statement thereon. This is the teaching of Schaumburg and Munson, in which we refused to separate the component parts of charitable solicitations from the fully protected whole. Regulation of a solicitation "must be undertaken with due regard for the reality that solicitation is characteristically intertwined with informative and perhaps persuasive speech . . . , and for the reality that without solicitation the flow of such information and advocacy would likely cease." Schaumburg, supra, at 632, quoted in Munson, 467 U. S., at 959-960. See also Meyer v. Grant, 486 U.S. 414, 422, n. 5 (1988); Thomas v. Collins, 323 U. S., at 540-541. Thus, where, as here, the component parts of a single speech are inextricably intertwined, we cannot parcel out the speech, applying one test to one phrase and another test to another phrase. Such an endeavor would be both artificial and impractical. Therefore, we apply our test for fully protected expression.9
Although we do not wish to denigrate the State's interest in full disclosure, the danger the State posits is not as great as might initially appear. First, the State presumes that the charity derives no benefit from funds collected but not turned over to it. Yet this is not necessarily so. For example, as we have already discussed in greater detail, where the solicitation is combined with the advocacy and dissemination of information, the charity reaps a substantial benefit from the act of solicitation itself. See Munson, supra, at 963; Schaumburg, 444 U. S., at 635. Thus, a significant portion of the fundraiser's "fee" may well go toward achieving the charity's objectives even though it is not remitted to the charity in cash.10 Second, an unchallenged portion of the disclosure law requires professional fundraisers to disclose their professional status to potential donors, thereby giving notice that at least a portion of the money contributed will be retained.11 Donors are also undoubtedly aware that solicitations incur costs, to which part of their donation might apply. And, of course, a donor is free to inquire how much of the contribution will be turned over to the charity. Under another North Carolina statute, also unchallenged, fundraisers must disclose this information upon request. N. C. Gen. Stat. § 131C-16 (1986). Even were that not so, if the solicitor refuses to give the requested information, the potential donor may (and probably would) refuse to donate.
Given our previous discussion and precedent, it will not do simply to ignore the First Amendment interest of professional fundraisers in speaking. It is well settled that a speaker's rights are not lost merely because compensation is received; a speaker is no less a speaker because he or she is paid to speak. E. g., New York Times Co. v. Sullivan, 376 U. S., at 265-266. And the State's asserted power to license professional fundraisers carries with it (unless properly constrained) the power directly and substantially to affect the speech they utter. Consequently, the statute is subject to First Amendment scrutiny. See Lakewood v. Plain Dealer Publishing Co., 486 U.S. 750, 755-756 (1988) (when a State enacts a statute requiring periodic licensing of speakers, at least when the law is directly aimed at speech, it is subject to First Amendment scrutiny to ensure that the licensor's discretion is suitably confined).13
Generally, speakers need not obtain a license to speak. However, that rule is not absolute. For example, States may impose valid time, place, or manner restrictions. See Cox v. New Hampshire, 312 U.S. 569 (1941). North Carolina seeks to come within the exception by alleging a heightened interest in regulating those who solicit money. Even assuming that the State's interest does justify requiring fundraisers to obtain a license before soliciting, such a regulation must provide that the licensor "will, within a specified brief period, either issue a license or go to court." Freedman v. Maryland, 380 U.S. 51, 59 (1965). That requirement is not met here, for the Charitable Solicitations Act (as amended) permits a delay without limit. The statute on its face does not purport to require when a determination must be made, nor is there an administrative regulation or interpretation doing so. The State argues, though, that its history of issuing licenses quickly constitutes a practice effectively constraining the licensor's discretion. See Poulos v. New Hampshire, 345 U.S. 395 (1953). We cannot agree. The history to which the State refers relates to the period before the 1985 amendments, at which time professional fundraisers were permitted to solicit as soon as their applications were filed. Then, delay permitted the speaker's speech; now, delay compels the speaker's silence. Under these circumstances, the licensing provision cannot stand.14
These activities are a far cry indeed from the activities of professional solicitors such as those involved in Munson and the present case. In Munson, the plaintiff, an Indiana corporation, was "a professional for-profit fundraiser in the business of promoting fundraising events and giving advice to customers on how those events should be conducted. Its Maryland customers include[d] various chapters of the Fraternal Order of Police." 467 U. S., at 950. The professional fundraisers in the present case presumably operate in the same manner. Yet the Court obdurately refuses to allow the various States which have legislated in this area to distinguish between the sort of incidental fundraising involved in Lovell, Schneider, and Martin on the one hand, and the entirely commercial activities of people whose job is, simply put, figuring out how to raise money for charities.
But even accepting that Schaumburg and Munson were rightly decided, I cannot join in the extension of their principles to the North Carolina statute involved here. This Act provides, at its heart, only that no professional fundraiser may charge a charity "an excessive and unreasonable fundraising fee." N. C. Gen. Stat. § 131C-17.2(a) (1986). Unlike the statute at issue in Schaumburg, which directly prevented charities from soliciting donations unless they could show that 75% of the proceeds were used for charitable purposes, 444 U. S., at 624, the fee provisions of this Act put no direct burden on the charities themselves. And, unlike the Maryland statute in Munson, the fee provisions are designed to allow the professional fundraiser whose fees are challenged to introduce evidence that the fees were in fact reasonable under the circumstances. In my view, the distinctions between the statute in this case and those in Munson and Schaumburg are crucial to the proper First Amendment analysis of the Act, for they make this Act both less burdensome on the protected speech activities of charitable organizations and more carefully tailored to the interests that the State is trying to serve by regulating fundraising fees.
Even if heightened scrutiny should apply, the fee provisions in the North Carolina statute in my view still survive. This Court has never indicated that the State's interest in preventing fraud would not be sufficient to support a narrowly tailored regulation of fees. See Schaumburg, 444 U. S., at 636-637; Munson, 467 U. S., at 961. Here, the State asserts the additional interest of "promot[ing] the efficient transmission of the public's money to the charity through the medium of the for-profit, professional fundraiser," Reply Brief for Appellants 3, or as I put it in Munson, protecting the "expectations of the donor who thinks that his money will be used to benefit the charitable purpose in the name of which the money was solicited," 467 U. S., at 980, n. 2.1
The inclusion of these factors in the "reasonableness" determination of the factfinder protects against the vices of the fixed-percentage scheme struck down in Munson. The limited waiver of the 25% limitation in Munson was found unacceptable because the statute gave the State "no discretion to determine that reasons other than financial necessity warrant a waiver." 467 U. S., at 963. This meant that organizations whose high solicitation costs were a result of the dissemination of information would not be able to obtain waivers and would thus be prevented by the 25% limitation from hiring professional fundraisers. Id., at 963-964. No such problem exists here: the statute mandates that First Amendment considerations such as the desire to disseminate information and the ability of the charity to get its message across be taken into account by the factfinder in determining reasonableness. Thus, unlike the statute in Munson, it cannot be said that the reasonableness limitation is overbroad, as the North Carolina statute is designed and carefully tailored to avoid any restrictions on "First Amendment activity that results in high costs but is itself a part of the charity's goal or that is simply attributable to the fact that the charity's cause proves to be unpopular," Munson, supra, at 967. In my view, the fee provisions of the statute thus satisfy the constitutional requirement that it be narrowly tailored to serve the State's compelling interests. I would reverse the judgment of the Court of Appeals on this issue.
FootNotes * Briefs of amici curiae urging reversal were filed for the State of Indiana et al. by Linley E. Pearson, Attorney General of Indiana, David A. Miller, Christine M. Page, and David M. Sommers, Deputy Attorneys General, and Charlie Brown, Attorney General of West Virginia; and for the State of Maine et al. by James E. Tierney, Attorney General of Maine, and Stephen L. Wessler, Assistant Attorney General, Joseph J. Lieberman, Attorney General of Connecticut, and David E. Ormstedt, Assistant Attorney General.
1. "Fee" for purposes of the statute includes the costs and expenses of solicitation. N. C. Gen. Stat. § 131C-3(5a) (1986).
2. North Carolina Gen. Stat. § 131C-17.2 (1986) provides:
3. North Carolina Gen. Stat. § 131C-16.1 (1986) states:
4. North Carolina Gen. Stat. § 131C-6 (1986) provides:
5. The dissent suggests that the State's regulation is merely economic, having only an indirect effect on protected speech. However, as we demonstrate, the burden here is hardly incidental to speech. Far from the completely incidental impact of, for example, a minimum wage law, a statute regulating how a speaker may speak directly affects that speech. See Meyer v. Grant, 486 U.S. 414, 421-423, and n. 5 (1988). Here, the desired and intended effect of the statute is to encourage some forms of solicitation and discourage others.
6. North Carolina was apparently surprised to learn of the charities' opposition to its law, and at oral argument could only surmise that the charities had been misinformed regarding the pro-charity nature of the statute. Tr. of Oral Arg. 20-21. Nonetheless, every charity that has stated a position before us in this case (and there are almost 60 of them other than appellees) supports the judgment below.
7. Even if percentages are not completely irrelevant to the question of fraud, their relationship to the question is at best tennous, as Schaumburg and Munson demonstrate.
8. The dissent is correct that the statute requires that expenses incurred in the dissemination of information be considered legitimate by the factfinder. But that does not address the primary defect here: that fraud is presumed by a surrogate and imprecise formula. Nor does it suffice to argue, as does the dissent, that the statute is valid because the fundraiser, not the charity, is the object of the regulation. Fining the fundraiser based upon its speech for the charity has an obvious and direct relation to the charity's speech. See Munson, 167 U. S., at 967, and n. 16. Moreover, the fundraiser has an independent First Amendment interest in the speech, even though payment is received. See, e. g., New York Times Co. v. Sullivan, 376 U. S., at 265-266.
9. Of course, the dissent's analogy to the securities field entirely misses the point. Purely commercial speech is more susceptible to compelled disclosure requirements. See Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 171 U.S. 626 (1985).
10. In addition, the net "fee" itself benefits the charity in the same way that an attorney's fee benefits the charity, or the purchase of any other professional service benefits the charity. That the fundraiser's fee does not first pass through the charity's hands is of small import.
11. The Act, as written, requires the fundraiser to disclose his or her employer's name and address. Arguably, this may not clearly convey to the donor that the solicitor is employed by a for-profit organization, for example, where the employer's name is "Charitable Fundraisers of America." However, nothing in this opinion should be taken to suggest that the State may not require a fundraiser to disclose unambiguously his or her professional status. On the contrary, such a narrowly tailored requirement would withstand First Amendment scrutiny.
12. The figure chosen by the State for disclosure is curious. First, it concerns unrelated past solicitations without regard for whether they are similar to the solicitation occurring at the time of disclosure. Thus, the high percentage of retained fees for past dinner-dance fundraisers must be disclosed to potential contributors during a less expensive door-to-door solicitation. Second, the figure does not separate out the costs and expenses of prior solicitations, such as printing, even though these expenses must also be borne by charities not subject to the disclosure requirement (i. e., those engaging in employee or volunteer staffed campaigns). The use of the "gross" percentage is even more curious in light of the fact that most contracts between the solicitor and the charity provide for a fee based on the percentage of "net" funds collected (i. e., the gross funds collected less costs), making this more relevant figure far easier to come by. Brief for Appellants 15.
13. Even were we to focus only on the charities' First Amendment interest here, we still could not adopt the dissent's reasoning, for its logic in that regard necessarily depends on the premise that professional fundraisers are interchangeable from the charities' vantage. There is no reason to believe that is so. Fundraisers may become associated with particular clients or causes. Regulating these fundraisers with the heavy hand that unbridled discretion allows affects the speech of the clients or causes with which they are associated. Nor are we persuaded by the dissent's assertion that this statute merely licenses a profession, and therefore is subject only to rationality review. Although Justice Jackson did express his view that solicitors could be licensed, a proposition not before us, he never intimated that the licensure was devoid of all First Amendment implication. Thomas v. Collins, 323 U.S. 516, 544-545 (1945) (Jackson, J., concurring).
14. In addition, appellees assert that the Secretary of State has unbridled discretion to grant or deny a license, and that the differential treatment of professional and nonprofessional fundraisers denies them equal protection of the laws. In light of our conclusion that the licensing provision is unconstitutional on other grounds, we do not reach these questions.
1. I find it hard to understand the Court's complaint that the statute's attempts to encourage charity and charitable contributions and to maximize the funds that flow to charities are based on "the paternalistic premise that charities' speech must be regulated for their own benefit," ante, at 790. All economic regulation of this sort is "paternalistic" in the sense that it prevents parties who wish to contract with one another from entering into a contract on precisely the terms that they would choose. But ever since West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937), finally overruled Lochner v. New York, 198 U.S. 45 (1905), and Adkins v. Children's Hospital, 261 U.S. 525 (1923), "paternalism" has been a perfectly acceptable motive for legislative regulation of this sort. Olsen v. Nebraska ex rel. Western Reference & Bond Assn., Inc., 313 U.S. 236, 246 (1941).
2. Neither Schaumburg nor Munson holds that the "percentage of gross receipts" figure is irrelevant to the question whether a particular fee is unreasonable or fraudulent. See Munson, 467 U. S., at 961, 966, and n. 14. The problem with the figure was that, standing alone, it was "simply too imprecise an instrument to accomplish" the end of preventing fraud. Id., at 961.
3. In the words of the statute, the fundraiser must disclose "[t]he average of the percentage of gross receipts actually paid to [charities] by the professional fund-raising counsel or professional solicitor conducting the solicitation for all charitable sales promotions conducted in this State by that [fundraiser] for the past 12 months, or for all completed charitable sales promotions where the [fundraiser] has been soliciting funds for less than 12 months." N. C. Gen. Stat. § 131C-16.1(3) (1986).
4. There is absolutely no basis in the record to conclude that the licensing and registration requirements of the Act are so onerous that they would drive professional fundraisers out of the State to such an extent that there would be none left for a charity to hire. If there were such evidence, then I would certainly agree that the licensing provisions did have the effect of restricting speech by charities, at least for those charities who rely heavily on professional fundraising.
5. Indeed, the record also indicates that even if the charity decides to wait until the licensing proceedings are complete in order to hire a specific fundraiser, the charity will not have long to wait. See App. 58-62. The speed with which licensing proceedings have been handled by the State in the past belies appellees' claim that the waiting period for professional fundraisers has a chilling effect on the charities' right to speak.