Warren E. Burger: Mr. Smith, you may continue.
James Eastman Smith: Thank you, Mr. Chief Justice. And may it please the Court.Shortly before the lunch break, Mr. Chief Justice Burger posed the question as to whether or not, in the absence of a Section 1988 authorization for attorney's fees in the present matter, the Respondents would be able to collect attorney's fees, if they prevail. The answer to that question is no. There is no provision in the State of Maine under that situation as we had before the authorization in the award of attorney's fees however, we would say that this certainly does not place the Respondents necessarily in a different category from other persons in this country who are serving or seeking to obtain legal services. Also there is the pro bono aspect of legal work and finally, there is the Legal Aid Societies which have been in effect for several years in this country. Your Petitioner was stating that the purposes of the Civil Rights Act, as shown by the enactors and legislators pursuant to its predecessor, the Civil Rights Act of 1871, was basically to enforce the Fourteenth Amendment provisions and other rights; and to prevent further trampling of those rights by the Ku Klux Klan.
Potter Stewart: Were the words; and laws, in the original of the statute?
James Eastman Smith: No, sir. They were not.
Potter Stewart: When did they come in?
James Eastman Smith: They came in in 1874 pursuant to the revised draft.
Potter Stewart: Now, what do you suppose they were supposed to cover?
James Eastman Smith: The Petitioner claims, your honor, that the "and-laws" provision was to relate to the Act of 1866; the laws contained therein, as well as the Fourteenth Amendment provisions equal rights, civil rights but not the Social Security Act without a violation of some due-process, equal-protection discriminatory action.
Potter Stewart: Well, specifically, to what kind of laws do you suggest the statute was limited?
James Eastman Smith: Well, if I may give an example --
Potter Stewart: I mean, is there a label you can give it? Civil Rights Laws or something like that?
James Eastman Smith: Civil rights laws; equal rights laws. Where one starts and the other stops, I'm not sure myself.
Potter Stewart: But one of those words, those modifiers are in the statute, as --
James Eastman Smith: They are not.
Potter Stewart: -- of today?
James Eastman Smith: No, sir. The statute says and laws however, as this Court is well aware, it has been interpreted by concurring opinions in the Chapman decision to encompass equal rights, as it has also been interpreted in a concurring opinion not to.
Potter Stewart: Has that been a suggested limitation upon the kinds of law? Two or three members of the Court in the Chapman case, in a separate opinion, expressed the pretty unambiguous view that the "laws" meant what it said. Didn't.
James Eastman Smith: Yes, sir.
Potter Stewart: And specifically, that they included the Social Security Act?
James Eastman Smith: Just as three members stated the opposite --
Potter Stewart: Yes. Although the Chapman case involved not 1983 directly, but 1943. Didn't it?
James Eastman Smith: Yes, sir. The jurisdictional aspect. Here, again, we don't have problems with the Respondents obtaining what relief they're seeking, in the absence of 1983.
Potter Stewart: Right.
James Eastman Smith: The Petitioner also asserts --
Byron R. White: Without 1983, there's no authority for counsel fee awards?
James Eastman Smith: For counsel fees. No, sir. As far as the relief which Respondents sought and received, 1983 was superfluous.
Byron R. White: But if laws" in 1983 if we should construe that to mean just what it says laws and specifically Social Security Laws, then I gather there's a basis for the 1988 counsel fee laws?
James Eastman Smith: Yes, no doubt about it.
Byron R. White: And that's really what we have to decide in this case. Isn't it?
James Eastman Smith: That's correct, your honor. The State would also refer to the majority opinion in Chapman and state that one purpose again of the Congress in the Act of 1871 was to ensure right of action to enforce the protections of the Fourteenth Amendment and the federal laws enacted pursuant thereto. And it is Petitioners firm assertion that the Social Security Act was not a law that was enacted pursuant to the Civil Rights Act. In fact, taking into consideration the passions and events of the time, the Reconstruction day era, your Petitioners find it difficult to believe the legislators, drafters, or revisers could have contemplated a good faith error in computation of welfare benefits to be a violation of civil rights or the Constitution and "laws" as they knew them at that time.
William H. Rehnquist: There were no Social Security benefits at that time. Were there?
James Eastman Smith: That's correct, your honor. If there had been and if people had been deprived of benefits pursuant to a discriminatory action because of their race or ethnic background, such, we'd say it would apply but not under the facts in this case.
William H. Rehnquist: There certainly were Social Security benefits at the time the civil rights attorney's fees Act was enacted in '76.
James Eastman Smith: Yes, sir. However, it's the State's contention that Section 1988 would not apply to the violations in this case before the bar, before the banc. This is predicated upon two main assertions. The first is that the Civil Rights Attorney's Fees Awards Act was based upon Fourteenth Amendment violations. The second is predicated upon the lack of specific statutory authorization, as we believe was mandated by the Alyeska Pipeline decision. Now, in Hutto v Finney, this Court awarded attorney's fees but they awarded attorney's fees pursuant to violations of both the Eighth and the Fourteenth Amendment, neither of which are at issue herein. In Fitzpatrick we had a discrimination claim. We do not have any discrimination in this case. Since 1866, Congress has seen fit to enact over 50 statutes is provide for attorney's fees, but they have not done so regarding the Social Security Act, except in limited areas. One of those areas was Section 406(b)(1) which, I believe was amended in 1966, 1968, and dealt with disability claims. Had Congress seen fit to specifically authorize the award of attorney's fees for a good faith violation in computing of benefits, it is Petitioners' assertion that they surely would have done so, and made it more plain than is made in the ambiguous history of that Act as going through the record as well as through the debates. Once more, the wording of the Act is, that in the discretion of the Court, if a party prevails on the Civil Rights 1983 among other Civil Rights claims, and if it is a proceeding or action to enforce a provision of Section 1983, attorney's fees would be proper. Once again, this was not an action to enforce a provision of 1983, as Petitioners assert. Respondents have argued that the plain meaning theory would prevent any research into the history of Section 1983 prior to the revised statutes of 1979. The State would counter this by saying that throughout concurring opinions and dissenting opinions in Chapman, we believe that the Court has already gone beyond the revised statutes of 1874 and recognized that delving into the history prior to 1874 is indeed necessary. There are other cases in which the Court has also gone into the background of 1983 before the revision of 1874 one of those cases was District of Columbia v Carter, the other was Examining Board v Otero de Flores. The Respondents have not considered Section 1983 in light of the events and passions of the times in which it was enacted for this reason we believe that there are arguments that the "and laws" provision applies must be denied. Finally, the State, while reserving some time for rebuttal, would like to make brief mention of its third argument having to do with exclusive jurisdiction. The State alleges that the State Court does not have authority to hear a Section 1983 claim in a State Court. This was brought to bear in the State Court of Maine we brought it forward for this Court for your disposition.
Thurgood Marshall: What can you tell me from the Martinez v. California case?
James Eastman Smith: I am not aware of that case, your honor.
Thurgood Marshall: It says specifically you could. The State Court could.
James Eastman Smith: Excuse me. I believe that an issue reserved in there was whether or not the States must near. In reading that case, the State does not -- I guess the State would contest that, it strictly and solely held that and that it precluded this argument.Our argument is basically that if one were to look at the specific words of the Act of 1871, we would find that the District and Circuit Courts were given jurisdiction to the exclusion of the State Courts as well as the legislative history of the purposes of the Act, when State Courts were indeed violating many of the civil rights which the Acts of 1866 and 1871 were passed to enforce. For these reasons, the State would ask this Court to overturn the decision of the Maine Supreme Judicial Court and specifically to state that the Social Security Act is not within the provisions of Section 1983.
Potter Stewart: Now what the Maine Supreme Court did is to remand this case to the trial court. Didn't he?
James Eastman Smith: He did, sir, for the sole purpose of--
Potter Stewart: Exercising his jurisdiction, but upon the hypothesis that 1988 was applicable.
James Eastman Smith: Yes, sir. For determination of attorney's fees. The lower court did not state why they denied attorney's fees. That was the purpose for remand.
Potter Stewart: But, so far as now appears the trial court may still deny attorney's fees.
James Eastman Smith: That's quite correct, sir.
Warren E. Burger: As a matter of discretion.
James Eastman Smith: As a matter of discretion.
Warren E. Burger: The Supreme Court of Maine has said that the authority is there. Has it not?
James Eastman Smith: Yes, sir.
Warren E. Burger: In his opinion. Mr. Mittel.
Robert Edmond Mittel: Thank you. Mr. Chief Justice. And may it please the Court. I have two major points that I would like to make on behalf of the Respondents.
Warren E. Burger: Would you raise your voice a little, Mr. Mittel?
Robert Edmond Mittel: I will. The first of those major points is that over many years, this Court has given all of the Civil Rights Statutes a broad reading. The second major point deals with the plain meaning of Section 1983 as it now reads. To turn first to what this Court has done in the United States v Price and in Griffin v Breckenridge, it said quite clearly that all of the Reconstruction Civil Rights Statutes were to be read broadly and literally and following that instruction, this Court has over the last 12 years reached a number of decisions in Section 1983, Social Security Act cases. And in each of those cases, there was before this Court a claim for relief which had to turn on Section 1983. Two of those cases bear particular note. The first is Rosado v Wyman; and the second is Edelman v Jordan. Now Rosado is important because by the time that case came to this Court, there was no constitutional claim of any kind remaining in the case. In fact, the constitutional claim had dropped out several years previously in the District Court and in fact, even prior to a remand, if that is the proper word, from the three-judge court to Judge Weinstein. This Court reached and decided the statutory claim; and the only possible cause of action that the Plaintiff in that case could have asserted was based on Section 1983. What had been done in Rosado was later specifically recognized and accepted in Zaelman; now be it in dicta, Edelman was of course about retroactive benefits. But in the course of that opinion, both the majority and one of the dissenting opinions specifically recognize what had happened in Rosado and specifically stated that the cause of action that was before this Court was the statutory 1983 cause of action. The second point is that, as our brief points out, this is a case for the application of the traditional primary rule of statutory construction. One looks to the plain meaning of the statute and applies it unless there is some very clear and convincing reason initially on the face of the statute to not do so and in this case, looking at this statute, there is no ambiguity on its face of any kind that permits the insertion of modifying or limiting words. I should point out here that there are, of course, a range of cases involving federal statutes where Section 1983 actions cannot be brought. First and foremost, there must be defendants who are acting under color of state law. Second Congress can, either expressly or impliedly, preclude federal courts from entertaining Section 1983 statutory causes of action. We discuss that point in some more detail in footnote 12 of our brief. But once those two major exceptions fall by the wayside, we are then left with a very clear, very plain, very unambiguous statute.
Potter Stewart: Well, except there still remains, unless I've missed something you've said, one more issue, it seems to me. Even if you are correct that 1983 embraces claims of violations of the Social Security Act, and even if you are correct that such claims under 1983 can be brought in state courts which have concurrent jurisdiction, there still remains the question, does there not, of whether or not Section 1988, which was enacted in response to the Alyeska opinion in this Court which had to do only with the practice of federal courts in awarding attorney's fees, is applicable at all to attorney's fees in state courts. Even assuming that the first two questions are answered yes that you're correct.
Robert Edmond Mittel: The answer to --
Potter Stewart: The 1983 action can be brought in a state court that a 1983 action embraces a violation of the Social Security Act but nonetheless, the question remains does 1988 apply to the award of attorney's fees to the prevailing party in a state court, by contrast to the federal court.
Robert Edmond Mittel: The answer to that question, your honor, is yes.
Potter Stewart: That's an issue though. Isn't it?
Robert Edmond Mittel: It certainly is.
Potter Stewart: I mean, that's a remaining issue even if you're right on the first two.
Robert Edmond Mittel: That's correct. That is one of the questions that the Maine Supreme Judicial Court reached and resolved unanimously.
Potter Stewart: I know that. But the case is here now.
Robert Edmond Mittel: Oh, yes.
Potter Stewart: And that is one of the issues. Is it not?
Robert Edmond Mittel: No doubt. And the way I would address that issue is by saying several things. First, again looking to the plain language of the statute, it applies in all courts.
Potter Stewart: But it is true as an historic matter of fact, is it not, that the enactment of 1988 was in direct response to this Court's decision in the Alyeska case.
Robert Edmond Mittel: Oh, yes.
Potter Stewart: Then it's really true that the Alyeska case had to do only with federal courts, is it not?
Robert Edmond Mittel: Except for footnote 31, I believe that's correct.
Potter Stewart: And what did footnote 31 say?
Robert Edmond Mittel: Footnote 31 addressed the question of whether or not a state attorney's fee provision, statutory or otherwise, was substantive; and would be applied by federal court in a diversity action. There is also --
Potter Stewart: But it's a little bit different --
Robert Edmond Mittel: Yes, I realize that. But in terms of looking to whether the fees act applies in state courts, one can, if one wishes then, look beyond the plain meaning of the act itself and look here to a very clear and very unambiguous legislative history.
William H. Rehnquist: Let me get you back a moment, if I may, to the first part of your answer in my Brother Stewart's question. Your Supreme Judicial Court rejected in terms, did it not, that attorney's fees were recoverable under state law for this kind of thing. It said it had to be 1988 or nothing, in Part I of its opinion, because the State of Maine hadn't waived its sovereign immunity.
Robert Edmond Mittel: No question about that, your honor. The history of this statute though is also plain and there are several indications which we've cited in our brief, one speech by Father Drinan, who was here this morning, indicating that the act was to apply in both state and federal courts and this court has held in Sullivan that it does apply in state courts although that decision focused on the first sentence of Section 1988 which has been in place since the revised statutes were enacted in 1874. It stands to reason though --
Potter Stewart: The first sentence is the one that borrows from state law.
Robert Edmond Mittel: Yes. The long sentence explaining what remedies are to be applied.
Potter Stewart: The Sullivan opinion was rendered before the enactment of the present 1988. Was it not?
Robert Edmond Mittel: That's correct. Well, the present 1988 is nothing but an additional sentence attached to the original Act. And the other reason though to look to applying the second sentence, the fees act, if you will, in state court, is that in many states, Maine being one, it's a long, long way to the federal court. For people in the northern part of the State -- if people are to retain counsel of their choosing and to bring cases in a straightforward statutory fashion, they should be able to do that in state court. They should not have to if they don't want to, go to federal court. And while we believe that in this case a constitutional claim may very well have been made and may very well have passed the Hagans test, there seemed no reason to do that.
William H. Rehnquist: Of course, we've rejected the same argument when made from an opposite side in the sense that you must have counsel for a person charged with a misdemeanor who may get a prison sentence in a very large state where there may be 12 or 14 counties and it would be a very great burden on the state to supply counsel or a magistrate or that sort of thing. We've said that doesn't make any difference that if the right is there, it's there. And I would think that by inverse logic, the same is true here.
Robert Edmond Mittel: The problem, I suppose, in terms of focusing on the right is that in Chapman, this Court has indicated that the Federal District Court may not have jurisdiction over many of these cases; and the only point, I'm trying to make is that rather than in some cases go without and in other cases strain to resolve the problem that one is left with after Chapman and with Hagans, why not just turn to the Superior Court.
William H. Rehnquist: In some of the Far Western States, thinly populated, the prosecution's option is frequently to just go without in prosecuting a misdemeanor case where they might want a prison term of 6 months or one month or whatever it may be; simply because there are just not enough resources there.
Robert Edmond Mittel: I understand that.
Potter Stewart: Mr. Mittel, you mentioned in some of these cases, there'd be no federal jurisdiction. I take it there'd be no federal jurisdiction in this case. This very case.
Robert Edmond Mittel: Well, if we had filed the complaint, as we have it here, there certainly would not be. What I suggested --
Potter Stewart: You suggested you might have drafted a constitutional claim of some kind.
Robert Edmond Mittel: No question.
Warren E. Burger: But, no restriction to this appeal?
Robert Edmond Mittel: This was a certiorari petition.
Potter Stewart: And we granted certiorari?
Robert Edmond Mittel: Yes, sir.
Potter Stewart: This clearly isn't a final judgment. Is it?
Robert Edmond Mittel: Well, let me say this we are not certain. We think it is, and I can tell you why.
Potter Stewart: Attorney's fees may or may not be awarded. We don't know.
Robert Edmond Mittel: If you look at the Act and you look at the history of the Act and you look at the way it has been interpreted by a number of Circuit Courts, you see that while indeed the language of the Supreme Judicial Court leases open, quote/unquote, the discretion of the Superior Court, I do not see how that Court could exercise its discretion in any fashion, other than attorney's fees.
Potter Stewart: Well, you don't see how; but other people might.
Robert Edmond Mittel: Well, I understand that. But secondly, this case is not unlike any other case where, after the judgment here, there will be, seeing things my way for a moment, nothing left to do but to award costs.
Warren E. Burger: Well, if the trial judge does on remand award costs, the State might bring the question, depending on how we deal with it here; might bring the underlying question back here.
Robert Edmond Mittel: They might. I'm not sure that under state law they can. That's one of the exceptions to the final judgment rule which is somewhat riddled with exceptions that this Court talks about in Cox Broadcasting v Cohen. There's a Maine case that may raise some doubts as to the ability to do that.
Potter Stewart: The rule is they're all exceptions now, isn't it?
Robert Edmond Mittel: Just about. I mean, as I read Cox Broadcasting and especially footnote 7, I'm not sure I want to say it's left to the unreviewable discretion of this Court; but it is. And there seems to be no real hard, fast rule in any direction. There's another point that I think that I might make about the statute, and the fees act in particular and that is contrary to the assertion that the State is making somewhat silently, the fees act was enacted not to benefit attorneys, but to benefit the people and to enable them to obtain counsel and to be able to litigate their valid claims. And that without the fees act, many, many cases involving many, many justifiable claims, will go unremedied. And that is the purpose of the Act. That's what both the Senate and the House Reports say, and that is what's made clear in the floor debates.
Potter Stewart: Of course, every law is always enacted in the public interest interests in the view of Congress that enacts it. Isn't it.
Robert Edmond Mittel: I think that could be stated with some certainty.
Potter Stewart: I'm sure Congress would so state, if asked.
Robert Edmond Mittel: Yes. No question about it.
Potter Stewart: And often when unasked.
Robert Edmond Mittel: Probably. If the Court has no further questions then, the Respondents would only ask that the judgment of the Maine Supreme Judicial Court be affirmed. Thank you.
Warren E. Burger: Very well, Mr. Mittel. Do you have anything further, Mr. Smith.
James Eastman Smith: Very briefly, sir. May it please the Court. Going to Mr. Justice Stewart's question about the finality of the decision, we would just state that the language of Section 1988 in any action or proceeding to enforce a provision of sections, among them 1983. When the Maine Judicial Supreme Court made that determination on remand that this issue is going to be considered and that the Civil Rights Attorney's Fees Awards Act is applicable in the State action that we believe that the finality to the present action, which was why we brought our writ at the time that we did.
Potter Stewart: Well, I'm not critical of you for filing a petition, after all, we granted it. But it just occurred to me that this isn't final that attorney's fees may never be allowed.
James Eastman Smith: As far as the 1983 question goes though, we believe it to be final.
Warren E. Burger: Thank you, gentlemen. And the case is submitted.


William H. Rehnquist: We will hear arguments next in Randolph Riley, Etcetera, Et Al. , versus National Federation of the Blind of North Carolina, Inc., Et Al. Mr. Thornburg, you may proceed whenever you are ready.
Lacy H. Thornburg: Mr. Chief Justice, and may it please the honorable Court, North Carolina is here today because of the lower courts' interpretations of your decisions in the Munson and Schaumburg. The lower courts' interpretations effectively eliminate the state's police power to regulate the for profit commercial operator who solicits funds for charities. Now, Schaumberg and Munson held that a state's limitations on the amount a charity could spend for fundraising activities violated the charity's First Amendment rights to free speech. North Carolina has placed no limitation on the amount a charity may spend to get its message out. In fact, North Carolina's policy is to promote and to protect the charities because of the fundraising efforts of the charity, and this is the historic parens patriae relationship between a state and a charity. The North Carolina approach regulates two troublesome economic practices of the commercial fundraiser dealing with reasonableness of fees and also point of solicitation disclosure, and eliminates a privilege that was previously given to the commercial fundraiser to operate before being fully licensed. Now, the lower court overlooked the distinction between the publicly supported charity and the commercial fundraiser. North Carolina in this statutory scheme seeks only to regulate the professional fundraiser under its police power. Now, by way of factual background, for a number of years in the state of North Caroline we have mirrored the national practice and problems with the commercial fundraiser as shown by the uncontested record in the case, the difficulties, and the most frequent complaints that were experienced in North Carolina with the fundraisers related to high fees and costs which caused low returns to the charities, a lack of disclosure of fees at the time of solicitation, and frequently the unauthorized use of the charities names at the time solicitations were being made. Now, to assess the factual basis for these fee concerns, I had my staff do an analysis of the reports of five of the largest fundraising groups in North Carolina for the period from 1980 to 1984, and this showed, this analysis showed that charities were receiving on the average less than 20 percent of the total funds that were collected from this source, in other words, 80 percent was regularly going another direction. The other complaints that I mentioned were verified through Better Business Bureaus and Chambers of Commerce and charities and individuals. Now, an examination of the law revealed that for the State of North Carolina there was no definition of fundraising fees on the books. There was no requirement that the commercial fundraiser charge reasonable fees, and there was no requirement for point of disclosure of factual fee data at the time of solicitation, and further it was discovered in the law that the commercial operator was allowed the privilege of beginning the solicitation process without being fully licensed to do so or before the license was obtained. Now, when these deficiencies were brought to the attention of the North Carolina General Assembly, the legislature enacted the statutes that are before you today in this case, and we contend that the purpose of the statutes is set out in the statute, to protect the general public and to protect the charities, and also is in keeping with what Professor Karsch in his Harvard Law Review looks to as saying that we should conserve and use the greatest portion of the wealth donated to further the public charitable purpose, and also adds that waste should be minimized and the diversion of funds for private gain is intolerable. Now, these statutes which are in--
Antonin Scalia: Excuse me. General Thornburg, if that is your objective, to make sure that as much money that is collected goes to the charitable purposes, it seems to me that a much more efficient way than requiring the fundraiser agent to say what percentage of his collected funds went to the charity, not in this campaign but in prior campaigns, a much more effective way would be to require the charity itself, whether it operates directly or through an agent, to tell the prospective donor how much of the donor's money is going to go directly to the intended recipients. For example, requiring the Red Cross to say that X percent of the money you give us is expended on salaries of our officers and employees, and X percent goes to the donees whom you think are going to be getting this money. Or any other organization. Isn't that much more efficient?
Lacy H. Thornburg: --Your Honor, we require that of the charities, although they are not... and through these fundraisers they are not involved, of course, in soliciting the funds, and what we are trying to say is that this fundraiser should make a disclosure to the prospective donor precisely what percent of the money is going to the charity so that the donor will have in mind what the costs are as to the fundraiser.
Antonin Scalia: You require the charities in North Carolina to tell the donors how much of the money it is getting for, let's say, hunger relief in wherever, will go there?
Lacy H. Thornburg: We require, Your Honor, that they file it with the regulator and it is available on request. The same is true of the... information is true of the fundraiser.
Antonin Scalia: These people have no objection to that, to filing it and having it available on request, as I understand what they are saying here.
Lacy H. Thornburg: I think that is correct, but they do object to making the disclosure at the time of solicitation.
Antonin Scalia: But you don't require the charities themselves to make that much more... much more pertinent disclosure.
Lacy H. Thornburg: If the charities themselves are involved in the solicitation, that is correct, Your Honor, but there is a substantial difference between the commercial operator and the charity itself which of course is the end user of the funds, and taking the property or the funds and using it for the purpose that has been established and its goals that have been established.
Sandra Day O'Connor: Well, I guess there are two cuts being taken. The charity itself takes a cut out of it to pay salaries and expenses before giving direct relief, and if they rely on a professional fundraiser, the professional fundraiser takes a cut for himself before giving anything to charity for which another cut is taken.
Lacy H. Thornburg: Exactly, Your Honor.
Sandra Day O'Connor: Your law that we are looking at relates to the first cut, that taken by the professional fundraiser.
Lacy H. Thornburg: Exactly, and what we are hoping is that this point of solicitation disclosure would bring some interest to bear for the prospective donor on just what is happening to the money, at least in the beginning.
Sandra Day O'Connor: I suppose we look at it under the reasonable time, place, and manner sort of analysis? Is that what we do?
Lacy H. Thornburg: Yes, Your Honor, I think that's correct.
Sandra Day O'Connor: All right. Now, are some of these solicitations made for little things like, come to the Firemen's Relief Ball or the Police Ball and buy a $5 ticket? And they do this on the telephone?
Lacy H. Thornburg: About 95 percent of them are telephone solicitations dealing with some type of show or entertainment. However, there are some--
Sandra Day O'Connor: For relatively small amounts. Buy a ticket to come to X event.
Lacy H. Thornburg: --Yes, Your Honor.
Sandra Day O'Connor: On behalf of some charity.
Lacy H. Thornburg: Exactly.
Sandra Day O'Connor: And North Carolina thinks that having the telephone caller, if it is a professional solicitor, tell the person being called, who is answering the telephone, that over the past year, is it?
Lacy H. Thornburg: Yes, Your Honor.
Sandra Day O'Connor: That the average amount that this particular fundraiser raised, a certain percentage was kept for the fundraiser's fees and expenses?
Lacy H. Thornburg: A certain amount was returned to the charity, and the average--
Sandra Day O'Connor: That is sort of a complicated explanation, isn't it?
Lacy H. Thornburg: --Well, it could bring on a complicated explanation if the fundraiser chose to use it. Certainly it would be required, the law would require this disclosure prior to the time that a solicitation effort is made.
Sandra Day O'Connor: You think it would be more reasonable to have the person just disclose that it is a professional fundraiser making the call and that some portion of it will be retained and not given to the charity?
Lacy H. Thornburg: We think that the minimum amount of information that should be made available would include this number as to what percentage had previously been returned to the charity so that the perceptive donor would understand how much of their money is actually going to a charitable purpose.
Sandra Day O'Connor: But what was done before wouldn't tell you what is going to happen this time, would it?
Lacy H. Thornburg: Well, most of the time you rely on past experience to suggest what the future may be, Your Honor. And we felt that that was a much better way to do it, for example, than to try to say this is the amount that is going to be involved in this campaign when all you are doing is guessing. You are dealing hard factual data when you give a past experience.
Harry A. Blackmun: Of course, you are almost killing every donation by telephone by requiring this, aren't you?
Lacy H. Thornburg: I don't think so, Your Honor. We require, for example, the banks to disclose their amount of interest that they are going to charge, the automobile dealers to disclose what the costs are and what they are doing, and disclosure is nothing new to North Carolina law or to federal law.
Antonin Scalia: Well, it is one thing to disclose... make them disclose what they are going to charge. You are making them disclose what they have charged on earlier occasions to different clients for different campaigns. It is sort of like requiring a lawyer to say to a prospective client how much he has charged for the last ten pieces of litigation that he conducted. Now, there is no necessary relation to what this piece of litigation is going to cost.
Lacy H. Thornburg: Your Honor, if it is the same type of litigation, he certainly ought to have some idea as to what the cost is going to be, and in the Zauderer case you said to the lawyer that he had to disclose some information about cost, at least that the costs were going to be there. We are taking the hard facts and saying the last... thank you, Your Honor.
William H. Rehnquist: You may finish your answer to Justice Scalia's question at 1:00 o'clock.
Lacy H. Thornburg: All right. Thank you, Your Honor.
William H. Rehnquist: Mr. Thornburg, You may continue.
Lacy H. Thornburg: Thank you, Your Honor. By way of further reference to the disclosure aspects, North Carolina's history had been that we have had no trouble with the charities and the difficulty, the problem had come from the fundraiser, and that is what triggered the enactment of this legislation. What the legislation did was define what a fundraising fee was, prohibited unreasonable fees, established a procedure to allow inquiry into these fees that were being charged, authorize the regulator to set a reasonable fee after a full hearing if the fee charged was found to be unreasonable mandated the factual point of disclosure or point of solicitation disclosure, and prohibited commercial operations until the licensure was complete. Now, the definition was added to the statute as to what a fundraising fee was, and unreasonable fundraising fees were made unlawful. Now, percentage guidelines were added to assist the factfinder in determination of the reasonableness of a particular fee at issue, and to meet the concern about First Amendment rights of charities when they opt to speak through the commercial fundraiser the legislature established specific rules to require a finding of reasonableness when the high fee charged was caused by the speech or advocacy requirements of the charity. Now, the statute does not place a percentage limitation on the fundraiser. It merely sets up levels that shift the burden of producing evidence from one party to the other at specified levels above 20 percent. Now, factual mandatory disclosure has minimal First Amendment implications in the commercial context, which is what we are attempting to regulate. The pharmacy cases and the lawyer cases recognize that disclosure operates to inform the potential user of the service, and it is uncontested that the entity required to disclose here is a commercial operator, and what must be disclosed is factual information about past fees. And we contend this Court has held that a state may require this type of disclosure. Now, arguments that the heightened free speech rights of the charities should carry over to a commercial operator, thereby eliminating the state's authority to regulate the activities of the for profit commercial operator we contend should be rejected because the speech rights of the charity are not impacted by the disclosure requirement placed on a hired fundraiser.
Antonin Scalia: General Thornburg, suppose... you say this is just commercial and has nothing to do with free speech rights. Suppose political candidates hire Hollywood personalities to further their political cause. Do you think... and these personalities do it for pay. Do you think the state could impose a requirement that before the famous actor makes a pitch for a particular candidate he would have to say at the beginning, I want you to know that I am doing this for pay, and my usual fee is thus and such? That is just... do you think you could do that?
Lacy H. Thornburg: I think we could do that if it's strictly commercial aspects, Your Honor, and that's what we are trying to say, is, if you use... if you are paying somebody to do that, then you have to reveal at the point of... at the point of solicitation a disclosure as to what your practice has been. Now, you will note the information that has to be disclosed, all it says is just two or three things there that have to be told. It doesn't say how they are being told or how you qualified or what they tell in addition to that. It is not a censorship matter. It's a matter of just requiring disclosure of minimum information. And we contend that fee disclosure by a separate entity used by a charity on an occasional basis neither requires the charity to speak nor prohibits it from speaking, any message that it wants, and public policy requires this. Otherwise, any commercial operator could limit the state's regulation by using the name of a charity to apply to its operation. Now, why the difference between disclosure as to a commercial operator and not the charity? Our position is that the commercial operator is and has been the source of the problem in North Carolina. The views and the conducts, the fundraising operation as a business is involved and usually works on a percentage of gross receipts and the incentive is to obtain as many donations as quickly as possible, which indicates or suggests that you give very little information or it is almost an open invitation if you do give information to give some, misrepresentations. Now, usually, one of the problems is, they are usually transitory. Set up a phone bank. Hire a few employees. Conduct the solicitation. Collect the funds. And within a short period of time the fundraiser is gone, and clearly the public's expectation is that the lion's share of these proceeds are going to the charity, and actually, in reality, in North Carolina, as indicated in our joint appendix, where it is set out in full, usually less than 20 percent is going to the charity. Now, we say that such a discrepancy and a disparity is ultimately going to cripple the charitable fundraising throughout the state because once the people are finally told or they get the message that this much of the money is going into some place other than the charity, then it is going to make it more and more difficult to raise money in this or any other fashion, because the amount of money there is limited, of course, while the number of charities and the number of requests continues to grow.
Byron R. White: Doesn't this approach, though, make it awfully tough on the charities who rely on expensive events to raise their money? They may give a dinner, and they may only get $10 a head, but it costs them an awful lot of money.
Lacy H. Thornburg: Yes, and all of that is provided for, Your Honor. If that is a reasonable part of the cost, then of course the fee is allowed. The amount can go up to 100 percent of the dollar, and that is no problem in situations such as Your Honor is referring to. What we say in the disclosure aspects is simply that it is the difference between what you take in and what you take out, and that is a very rational reason. You pay $20 for a meal, sell the ticket for $25.
Byron R. White: Well, I suppose the basis for the invalidation was the First Amendment, is that it, in the court below?
Lacy H. Thornburg: Yes. Yes, Your Honor.
Byron R. White: And what was the argument, that disclosure burdens First Amendment rights? Is that--
Lacy H. Thornburg: Yes.
Byron R. White: --By saying I... if last year my experience was so and so--
Lacy H. Thornburg: That you are effectively chilling the rights of the charity to be heard, and that, of course, is the interpretation. As a matter of fact, if I recall the District Court's decision, there was simply a per curiam at the Fourth Circuit level, he said that it was questionable as to whether there was any way that the state could regulate a fundraiser that is involved in solicitation for a charity. North Carolina's position is, of course, that this is a commercial operation, and that we do have regulatory rights under police power.
Anthony M. Kennedy: --Reasonableness is determined on a case by case basis?
Lacy H. Thornburg: Yes, Your Honor. When a challenge occurs, reasonableness would be determined on a case by case basis.
Anthony M. Kennedy: What happens if a charity has high hopes but the fundraising thing is something of a flop? It gives the dinner that Mr. Justice White talked about and nobody comes. Or it has a big television advertising campaign and nothing happens. You judge after the fact whether the expense was reasonable?
Lacy H. Thornburg: Yes, Your Honor. We look at it, or the regulator--
Anthony M. Kennedy: Are there any statutory criteria for reasonableness?
Lacy H. Thornburg: --Yes, Your Honor.
Anthony M. Kennedy: And what are they?
Lacy H. Thornburg: The statute sets up these percentages, 20 percent--
Anthony M. Kennedy: I understand the percentages, but other than that the only touchstone is reasonableness?
Lacy H. Thornburg: --It is reasonableness with speech aspect, dissemination of information and so forth, if I understand Your Honor's question. Now, you see, we have not been... first of all, we have not been able to develop any rules or regulations or anything else dealing with this broad statutory scheme for the simple reason that the day this was to go into effect they came in with a restraining order, and that was the end of the effective... or any effort. It is strictly a facial attack. No application has been made, and we haven't had an opportunity to get into the details.
Anthony M. Kennedy: But the statute doesn't even say reasonable in relation to what? Reasonable in relation to the amount obtain? Reasonable in relation to the difficulty of the message?
Lacy H. Thornburg: Reasonable in relation to all the facts before the regulator, the hearing officer, Your Honor. All the evidence.
Anthony M. Kennedy: But time, place, and manner regulations must be neutral and can't afford the... any latitude for discretion, and it seems to me this is an open-ended standard.
Lacy H. Thornburg: There are minimum require Your Honor, dealing with speech that we put in there that the legislature sets out. If speech is involved, dissemination of information is involved, go up to 100 percent. Otherwise, the regulator looks at all the facts, and Justice White's example would be a good example of the fundraiser would come in and lay his books on the table and say, look, this is how much I paid for that meal. There would be no contest or difficulty with that, or a determination or a detailed explanation of reasonableness or unreasonableness. It would be obvious what the answer should be.
Thurgood Marshall: Mr. Attorney General, do you say that this is a business tax?
Lacy H. Thornburg: A business tax, Your Honor?
Thurgood Marshall: Yes.
Lacy H. Thornburg: No, Your Honor, it is an effort to--
Thurgood Marshall: Well, do you treat charities like like any other business in North Carolina?
Lacy H. Thornburg: --No, Your Honor, we give them special--
Thurgood Marshall: I thought so.
Lacy H. Thornburg: --Yes, sir, we do, and we are saying that these fundraisers who are going out and getting the money are just keeping too much of it, and we want more of it to go back to the charity, and that the state has a right to say your costs have got to be reasonable.
Thurgood Marshall: They have got to ask for this.
Lacy H. Thornburg: There are a variety and number. I think the largest--
Thurgood Marshall: The Attorney General was [inaudible], wasn't it?
Lacy H. Thornburg: --No, I don't believe--
Thurgood Marshall: Wasn't that the one who asked for it?
Lacy H. Thornburg: --No, I don't think so, Your Honor. The National Federation for the Blind.
Harry A. Blackmun: General Thornburg, religious corporations, churches often hire professionals when they are making a new building or some capital investment. You do have an exemption in your statute for religious corporations, don't you?
Lacy H. Thornburg: Yes, we do, Your Honor.
Harry A. Blackmun: Why do you have that?
Lacy H. Thornburg: Because, I think the best answer to that, Your Honor, is simply, we just don't have the problems with those folks. The problems are with the fundraisers who work for hire, for profit.
Harry A. Blackmun: Well, churches, I have known churches that hire fundraisers for profit and for hire.
Lacy H. Thornburg: We just simply in North Carolina don't have that problem. We, as I understand what this Court has said in the past, we can attack problems piecemeal. we don't have to solve them all at once. This is a problem that has been brought to our attention, and the legislature has responded. If the churches become a problem, if the charities become a problem, then we can deal with that.
Antonin Scalia: General, the problem... I find it hard to credit your argument that you are helping the charities here and protecting them against something. One of the plaintiffs here is a charity. The only amici we have had who are charities have all intervened on the side of your opponent, not on your side. They evidently don't think they are being helped. Why is it that you think they are being helped?
Lacy H. Thornburg: Because we think... first of all, we think that the case has been misrepresented and missold to the charities. In Munson and Schaumburg you were talking about, once you said... if you don't meet this 25 percent test, then you don't get out and solicit, and this cuts off all of your avenues. We think that is the type rationale that has been sold to these charities in this case, and it is just the opposite. We are dealing, for example, if we have a problem with one for hire fundraiser. All of the rest of the for hire fundraisers are still there. The charity can continue its solicitation. It can get out any message that it chooses. It can use its officers, its members, its volunteers, its media, all of the rest.
Antonin Scalia: Maybe it wants to determine for itself what is a reasonable price for it to pay to get its message across and doesn't want you to determine it for it. Shouldn't it have that right?
Lacy H. Thornburg: It has the right to contract and then the donor, the attorney general, the charity has a right to contest if this is found to be unreasonable or if you don't have these formulas involved.
Thurgood Marshall: Well, if the charity wants to spend 80 percent, what right have you to say they can't?
Lacy H. Thornburg: Your Honor, these... the State of North Carolina stands in a parens patriae relationship in regard to charitable funds. At least that is our position. States since the 1600s I think in England have been trying to see that the maximum amount of these funds goes to the charitable purpose, and we don't think the charity ought to have the unlimited right.
Thurgood Marshall: Can you stop the charity from buying a porch that is worth $5 and paying $5 million for it? Could you stop them from doing that?
Lacy H. Thornburg: A porch? Not--
Thurgood Marshall: Could you stop them from throwing their money away?
Lacy H. Thornburg: --No, I think not, Your Honor.
Thurgood Marshall: Well, isn't that what you are doing here?
Lacy H. Thornburg: No, I think we are regulating at the right place, and that is where the first cut comes, and we are simply saying that the charity... that we are regulating a commercial operation. We are not trying to regulate the charity. And that this should be treated as a control or an attempt to control the commercial operator under the state's police power.
John Paul Stevens: May I just ask you one other question?
Lacy H. Thornburg: Yes.
John Paul Stevens: Justice Blackmun asked about the religious exemption, and this... one of the interests you seek to serve is that the donor know how much of the donation will go to the charity. Why isn't that interest equally implicated in these television ministries and the like?
Lacy H. Thornburg: Your Honor, I wish... I wish we could control the television ministries--
John Paul Stevens: Well, why couldn't this--
Lacy H. Thornburg: --but I'm not sure we could because I think, of course, I think speech rights are very definitely involved totally there, and you have the problems that, yes, that would be involved, but we are not trying to do that. We are only trying to deal at this point with one aspect of a problem, and we feel that we have to start somewhere, and let me say again to the honorable Court that this is a facial attack on what we consider to be a valid economic regulatory scheme, and that the charity's speech rights would be only minimally impacted, if at all, and that the heightened scrutiny test of... First Amendment test is inapplicable, and the minimum rationality test is that which should be used. Thank you, Your Honors.
Harry A. Blackmun: --General, do you concede that the heightened scrutiny is the proper standard?
Lacy H. Thornburg: In this instance?
Harry A. Blackmun: Yes.
Lacy H. Thornburg: No, Your Honor.
Harry A. Blackmun: I thought you just--
Lacy H. Thornburg: No, I say that it does not apply.
Harry A. Blackmun: --I thought you just mentioned that you did.
Lacy H. Thornburg: No, I meant to say that we say the heightened scrutiny test does not apply. The minimum rationality test does apply.
William H. Rehnquist: Thank you, General Thornburg. We will hear now from you, Mr. Copilevitz.
Errol Copilevitz: Mr. Chief Justice, and may it please the Court, the value of speech is its content, not its source. It is the activity, not the actor, which is at issue. The Court has ruled twice in this decade that charitable solicitation is entitled to full First Amendment protection. It is a matter of constitutional indifference whether the activity is carried out by the charity directly or through a professional representative. Charities perform many vital welfare functions for the benefit of the state and its citizenry. The state seems to recognize the desirability of having charities function in North Carolina. At Page 4 of his reply brief, the Attorney General makes the assertion that the regulatory scheme at bar is "pro-charity". Those who speak for the charitable community would answer by noting that if it is the aim of the charity to help, it has missed by a wide margin. What the state in fact has done is to create a statutory scheme based upon the subjective test of reasonableness which creates a very real and present danger of censorship. The pro-charity claim of the state is refuted by the great number of charities that have joined these plaintiffs as amici.
Byron R. White: Could I ask you, is it feasible in your mind to separate the professional fundraisers who help the charities get their message out and those who just raise money?
Errol Copilevitz: Where the professional representative is acting as a conduit or an agent of the charitable organization's speech it is not possible to separate that out.
Byron R. White: Well, the charity hires a professional fundraiser to raise some money. Say it is an annual basis, annual basis. You don't... you think any time a professional raises money for a charity, that it is distributing the message of the charity and should be treated in that manner?
Errol Copilevitz: I think the important thing to keep in mind, and the important consideration is the message of the charity, and when a professional representative is speaking for the charity, taking their message forward and seeking financial support, he is also involved in an activity that includes the dissemination of information. It may be advocacy. It may be public education. His putting forward the message of the charity is the speech of the charity, and in that instance I believe that it is entitled to the highest possible speech.
Byron R. White: Just asking for money?
Errol Copilevitz: I think--
Byron R. White: I get telephone calls that say, I am calling for a certain organization. I know the organization. They never tell me a thing about it. This is the annual campaign for X. I am familiar with it. They never say a word. I know what it's all about. I give them some money. Now, is that--
Errol Copilevitz: --If I call you for the National Federation of the Plind of North Carolina, I am calling you on behalf of their causes and what they represent, and if you know what those causes are and accept what they represent and want to answer with your financial support, I think we have been involved in an aspect of speech.
Byron R. White: --You are arguing then that there is no, there is just no situation in which the restrictions may be applied, for instance, the licensing provision could not be applied to any professional fundraisers for a charity?
Errol Copilevitz: No, I don't believe that that is a correct statement of what I am saying. I am saying that there is speech--
Byron R. White: Well, here is a professional fundraiser for a charity. Now, you say every time they raise money for a charity it is furthering the message of the charity and it is protected by the First Amendment and you can't have a prior restraint.
Errol Copilevitz: --But this Court has ruled in both Schaumberg and Munson that you can have a disclosure by registration and by passing certain rigid standards to quality that professional to act, and in the State of North Carolina and in this case the lower court held that it was not a burden on the charity's free speech right to have that person identify not only their name but the fact that they were a professional, giving the name and the address of those that they worked for.
Byron R. White: Well, I know, but that isn't all that this North Carolina scheme does in licensing, does it?
Errol Copilevitz: Well, if we are talking about the licensing of the--
Byron R. White: That's what I am.
Errol Copilevitz: --professional fundraiser, the licensing provision is standardless, and the Court invalidated it because it did not comply with Shuttlesworth--
Byron R. White: All right. So you say there is no professional fundraiser for a charity in North Carolina that may be subjected to the licensing provision because of the First Amendment.
Errol Copilevitz: --There were certain other provisions of the North Carolina registration requirements for professional representatives that were not challenged, that are still on the books, and that are still being complied with by professional representatives.
Byron R. White: What about the licensing provisions?
Errol Copilevitz: There is still a license being issued and granted because there are requirements to file a bond and file certain information, and this provision amended an existing provision that required the providing of information, the filing of a bond, and the filing of financial reports, all of which were things that this Court pointed to in Schaumberg, and that is what is in place in North Carolina today.
William H. Rehnquist: Mr. Copilevitz, do you think a state could regulate the price of theater tickets, put a maximum price on theater tickets, or do you think the... could the theater object that you are suppressing the playwright's free speech if you do that?
Errol Copilevitz: I don't know that a state could impose a maximum price on a theater ticket unless there was a given consideration that was a substantial state interest to do that.
William H. Rehnquist: In other words, you don't think that a state has police power to, say, set maximum prices for bread like we said they did in Nebbia versus New York, and cases like that?
Errol Copilevitz: I think that where there is a compelling state interest--
William H. Rehnquist: Well, but did Nebbia say anything about compelling state interest?
Errol Copilevitz: --Well, in this case we are dealing with a speech interest.
William H. Rehnquist: No, I mean, I asked you about Nebbia.
Errol Copilevitz: No, sir.
William H. Rehnquist: Nebbia just said it is within the police power of the state. Wouldn't the same thing apply to setting a maximum price for theater tickets?
Errol Copilevitz: It would depend upon what the state's interest in doing that. If we were coming at it from the avenue of the concern of the free speech and interstate commerce and other things, I think it would be problematical.
William H. Rehnquist: Well, supposing the state says we want a lot of people to be able to go to the theater, just like we want a lot of people to be able to buy bread. That's what they wanted in Nebbia.
Errol Copilevitz: I think in that circumstance you probably could, but I think that in this circumstance where we are dealing with the burden on free speech there are other considerations at hand. I would like to go back--
Antonin Scalia: Do you think the state could put a maximum price on how much a political organization can rent a hall for a political rally?
Errol Copilevitz: --No, sir, I do not.
Antonin Scalia: So I guess what we are talking about on your view of it is whether this is closer to a political type speech than it is to whatever normal theater speech would be, on your view.
Errol Copilevitz: Well, this Court has held twice in this decade that this... the activity of charitable solicitation is the functional equivalent of political speech, and when you impact that you take different considerations into effect as you do in an outright commercial situation, and the impact on the free speech interest here is illustrated by the example that the Court made earlier this morning where under the existing North Carolina law if it were not challenged and I were calling you on a controversial type of issue, let's say Contra aid, whether I am for it or against it, involving an organization that is involved in advocacy on one side of that question and wants financial support to accomplish some of the goals to further its aims, its program service, when I call you under this law as it is written I have to begin my telephone conversation by identifying my name, the name of the company that I work for, their address, what their track record was for the preceding 12 months of delivering funds to charitable organizations in North Carolina--
Sandra Day O'Connor: Well, Mr. Copilevitz, that, of course, is the disclosure section. Could we return for just a minute to the limitation on fees that I thought we were discussing? Under... as I understand this statute, under Section 10(d) the fundraiser can charge as much as 100 percent of the gross receipts if it is necessary for advocacy reasons. Isn't that right?
Errol Copilevitz: --It is--
Sandra Day O'Connor: It really isn't a limitation on amount that can be collected if it is necessary for advocacy.
Errol Copilevitz: --It is theoretically possible. Practically it is impossible. What will happen is, those who are the professional representatives, if they are faced with this statute knowing that the burden of proof shifts once 35 percent is expired, if they are involved in a special event that includes dissemination of information about the National Federation of the Blind, the director of human resources has no guidelines as to what he may determine as to both reasonable or unreasonable, and the statute is unclear as to who may institute a complaint. It can be done by the director of human resources. It can be done theoretically by any resident of the State of North Carolina. And if he does this hearing and the burden is on the would-be speaker rather than the would-be censor, and if the director of human resources can then in his discretion grant a judgment against the professional representative, why would any professional representative choose to work in the State of North Carolina? The affidavits of the plaintiffs, who are two individuals that have worked, have said that they would not work in North Carolina, and if we take the professional representative away from the small organization that needs this medium to reach the public to seek support, then we will kill the small charity as compared to their ability to get into the marketplace. And I would point out another thing, that the statute and this statutory scheme is a most clear example of form over substance, and I would like to illustrate that to the Court. Suppose for the moment that there is an issue of Time Magazine that has 25 pages on the Contra issue, and here is a large organization that can buy 50,000 of these at 80 cents apiece, and they have a large sales force, they have a large group of employees. They put their employees on the phone, and they call up people and say, buy this magazine, it is all about the issue, the price is a dollar, and they make 20 cents profit. They are not burdened with any of these provisions. If, on the other hand, the National Federation of the Blind, who does not have the manpower or the expertise, has the same opportunity in a commercially viable product of a controversial nature, it cannot do the same thing. It has to hire someone to sell those magazines, and that someone is going to want some money for their effort. And so, if there is 20 cents' profit and they divide that profit evenly, the National Federation of the Blind gets their message out and everybody is... the consumer gets the same product, but the person selling it for the National Federation of the Blind has to go through this litany of disclosures. And there's even more in the North Carolina law by administrative law. In the affidavit filed by Ed Edgerton they also have to say that they are being compensated and that you can make donations directly to the charity. They have to put up a $20,000 bond, and then they face the uncertain judgment of the director of human resources as to whether that was a reasonable expenditure. Dividing the 20 cents 50-50, was that reasonable? Was paying 80 cents for the magazine reasonable? Who knows after the fact what he is going to determine? Who knows how many of those magazines are going to be sold? The end result is that they could lose money. The director of human resources could say it is unreasonable and enter a judgment against the professional to protect the charity. I am telling you the professional representatives will not make their services available if this kind of statutory regulation is allowed to stand.
Antonin Scalia: Well, that is not really dispositive. I mean, you acknowledge that the state could impose a tax on engaging in the business of being a professional fundraiser, I presume, right?
Errol Copilevitz: Yes, sir.
Antonin Scalia: And a fundraiser might say, well, given the choice of fundraising in North Carolina or somewhere else that doesn't have the tax, I will just stay out of North Carolina, but that wouldn't make it unconstitutional, would it?
Errol Copilevitz: Well, if they are staying out of North Carolina because the statutory scheme creates a prior restraint, it is the charities that are complaining. It is the charities that are the plaintiffs in the case at bar.
Antonin Scalia: Well, if it's a prior restraint, fine. But the mere fact that its effect is to keep people out... keep fundraisers out of North Carolina, that in and of itself doesn't prove anything. A lot of things can keep professional fundraisers out of North Carolina.
Errol Copilevitz: But we are talking about them as a class of... a medium for a certain group, a certain size of charitable organizations, and this certain group or class of charitable organizations is being joined by the larger and the most substantial charitable organizations in this country.
William H. Rehnquist: Probably a lot of bucket shop operators had the same reaction to states which passed blue sky laws requiring securities disclosure. They wouldn't work in those states. But we never held those statutes unconstitutional because the bucket shop operators complained.
Errol Copilevitz: From the aspect of the charity are talking about a free speech interest as compared to a commercial speech, and--
William H. Rehnquist: Well, probably the corporations that... whose stock is being sold by bucket shop operators could mae the same contention, that they were complaining, they didn't like the blue sky laws, either.
Errol Copilevitz: --Well, I would take exception with the example and illustrate it perhaps by the Zauderer case, which the state has relied on a great deal, that says that the advertising of a lawyer can be regulated as to his client, as to potential clients. The State of North Carolina again already has a statute in place that makes a professional representative advise a charity in advance if his contract is going to exceed more than 50 percent. Once the lawyer is hired by the client, as I am before this Court today, I believe I am engaging in protected expression in urging my client's point here today. But if I choose to run an advertisement next week to attract potential new clients, then I am engaging in commercial speech. The professional fundraiser, to the extent that he seeks to attract business from charities, is engaged in commercial speech. To the extent that he wants to do business in North Carolina, he can be subjected to reasonable and rational and definitive legislation and reporting requirements but where, and once he has that client--
Thurgood Marshall: I assume we can rule against you and not touch the lawyers.
Errol Copilevitz: --I don't think that is possible. I think that one is a conduit of free speech.
Thurgood Marshall: Try me. 0 [Generallaughter.]
Errol Copilevitz: I think I will decline. The plaintiffs in this case by affidavit have expressed very real and legitimate concerns. Their assertions remain unrefuted. Unlike the larger, more substantial groups, these groups cannot rely on media advertising, door-to-door or telephone solicitation without the help of professional representatives and be financially successful. They lack name recognition, they lack expertise, they lack the manpower. These challenged provisions make the availability of those services to them most unlikely and in our view impossible. No one seeks to avoid the right of a prospective donor to inquire. No one ask that misrepresentation be allowed. And indeed, North Carolina, even without these challenged provisions, has the most substantial disclosure provisions of any state in this country. In spite of protestations to the contrary, the concept of disclosure itself is not at issue. The main distinction between this case and the matters that this Court was confronted with in both the Maryland statute in Munson and the Village of Schaumburg ordinance in Schaumburg was that this disclosure goes to content of speech. The disclosure that was talked about in Schaumburg and Munson was a disclosure of public record. There are three kinds of disclosure. There is government-compelled disclosure, which is the filing of registrations, the obtaining of licenses, the bonds, the financial report. There is the disclosure upon request, North Carolina as a part of these amended statutes... or, excuse me, prior to these amended statutes, still on the books and unchallenged, is a state statute that makes it a criminal offense not to disclose upon request by a citizen of North Carolina in writing, giving a full financial report. That remains on the books. The third type of disclosure is a compelled disclosure to every prospective donor. The North Carolina legislation had three separate parts. The trial court found that it was not an undue burden to require the disclosure of the name, to require the disclosure of the name of the professional company and the fact of employment. They did find that it was an undue burden to disclose the track record of the professional for the preceding 12 months, calling it irrelevant. It also... the Court raised the question rhetorically that if the interest--
Byron R. White: If you are going to rely on the First Amendment how did it infringe First Amendment rights? Anything that was irrelevant burden. First Amendment rights?
Errol Copilevitz: --What burdens the First Amendment rights is that when you are dealing with face to face solicitation, or telephone solicitation, as this Court said in Members of the City Council of Los Angeles versus Benson, that face to face solicitation and telephone is entitled to extra consideration because of the nature of the activity. It is the most accessible to the smaller and the less financially able. It is the most delicate speech-wise, and when--
Byron R. White: So?
Errol Copilevitz: --So that when the state requires me that in addition to being able and before I can give the message of those I represent I have to tell you my name, the name of the company I work for, their address, and what that company's track record is for the preceding 12 months, by the time that I get to talk to you about the message of the National Federation of the Blind and their interest in advocacy on the right of blind citizens, I will have received a dial tone. That is the burden on the First Amendment interest of the National Federation of the Blind. That is why this case was filed.
Byron R. White: I would think... I would think you would challenge on the same grounds, the requirement that you give that information if it is required. I mean, if it is asked for, if it is asked for by the person you are soliciting.
Errol Copilevitz: I don't think that there is the same constitutional problem. I don't think there is any limit to what you can require a charity or those who represent them to disclose.
Byron R. White: After all, if you... I guess then you could just hang up if you didn't want to give the information, I guess.
Errol Copilevitz: If you could not get the information you would hang up. But what we are talking about is the method or manner of how we deliver that information to the prospective donor. If we allow the charity to choose a context of its message, I think we can require the charity to disclose all types of matters, including financial. The other, contrary to the fact assumption of this particular type of statute, is that summary financial information somehow measures the true worth of a charity, and that simply is not so. This Court has ruled that high costs are not a measure of fraud or indeed the worth of a charity. Charities have high costs for a number of different reasons. The worth of a charity involves its program service, its message, its past performance, its plans, and yes, to some extent its financial efficiency, but there are a number of considerations that we want people to consider before they part with their money, and in order to give them all of that information, the charity should be allowed to choose a context. There are other states, like New York, that require a written disclosure on all materials that go out in the mail that says you may obtain additional financial information by writing to the Office of the Secretary of State, and it gives you a mailing address. The State of West Virginia has a comparable written provision. These are notice disclosure provisions, and I believe that they are constitutional. It says to people, you can find out more if you want, and it allows the charity to go into the marketplace of ideas and support and deliver its message without having to dilute its message with summary financial information that is inherently inaccurate. We have attached a copy of a financial position paper issued by the American Institute of Certified Public Accountants to illustrate that whenever you deal with a summary financial figure, whether it is percentages as to the costs or whether it is the percentage on the track record, you are dealing with allocations. Fundraising is never carried on in a vacuum. The charity receives more than dollars. It receives the benefit of having its name increased by awareness in the community. It may get mailings sent out. It may get a number of services. How you allocate the goods that the charity receives is critical. How the director of human resources decides whether a cost is 20 percent or 35 percent is absolutely critical. The purpose of including the document in the appendix was to illustrate the absolute imprecise nature of non-for profit accounting, that you measure functions. It is possible to send you a letter and have that letter be two pages, and one-and-three-quarters pages of that letter deal with the program service of the National Federation of the Blind, and the last paragraph of that letter says, if you like what you hear, if you think we are worthy, we want your support. Now, what portion of those expenses are allocable to fundraising expenses and what portion is allocable to program service? What did the charity really get? They got more than money. They got increased name recognition. They delivered a program service. I am standing before this Court telling you I have had this argument with accountant after accountant, state after state. There is no precise answer. It is a subjective area. And when we deal with presumtually protected speech, and particularly here, speech that is analogous to political speech, core speech is entitled to the highest protection that the Constitution allows, and subjective criteria is not suitable to determine whether someone has the right to speak or not to speak.
John Paul Stevens: May I ask if your argument applies equally to telephone... I know in the strongest context over the telephone because people probably hang up pretty fast, but what about a written disclosure? Why is that so harmful, because you can add a further explanation in the written material.
Errol Copilevitz: I don't believe that written disclosure is harmful at all. I believe that--
John Paul Stevens: In other words, this would be all right if applied merely to written solicitations?
Errol Copilevitz: --If it only was required to be given in writing, even before a person parted with consideration--
John Paul Stevens: And even to the donor, not just to a central place where they can call up and get the information.
Errol Copilevitz: --I don't believe that that creates the constitutional problems that point of solicitation oral disclosure--
Antonin Scalia: Well, you would still have the problem that it doesn't mean anything. I mean, the problem you were just immediately addressing, that these figures as to what the past record--
Errol Copilevitz: --But what it does is, it gives the charity a chance to explain figures and amplify.
Antonin Scalia: --I see.
Errol Copilevitz: It gives them the context of allowing you to understand what it's all about, and that form the charity needs because worthy charities have high costs, and if they have to start by telling you that they have high costs, and that professionals are involved, and all these other things, they are never going to receive your support.
Thurgood Marshall: Counsel, do you have any answer to the statement made by the Attorney General that the study shows practically all of the charities only get 20 percent?
Errol Copilevitz: Well, I think what the Attorney General said is that they picked out five particular professional fundraisers and as to those five the studies showed 20 percent. The question here is compounded--
Thurgood Marshall: What does the record show?
Errol Copilevitz: --I don't know what the overall record of the State of North Carolina would show.
Thurgood Marshall: You mean, this is not in the record in this case?
Errol Copilevitz: This is in the record as to, I believe, five different companies. It is not the record of every charity and every--
John Paul Stevens: If he is telling us the truth, and I certainly assume he is, it is the five largest for profit professional fundraisers licensed between 1980 and 1984 in North Carolina, the five largest.
Errol Copilevitz: --I would suggest to you that the records also show from Mr. Edgerton's deposition that there's many times the number of five professional fundraising representatives that are licensed to work in the State of North Carolina, and that North Carolina would be better served to enforce its existing statutes and require the disclosure of professional fundraisers to the charities as to what kind of track record they have. That's where the meaningful part is, not to the prospective donor.
John Paul Stevens: May I just go back? Your principal concern is either telephone or in person solicitation, isn't it, to people who have not met before or communicated before? You don't want the introductory conversation to include this information.
Errol Copilevitz: I am willing to live with the introductory part. I am willing to tell you my name as the Court has required that I must do and give you notice of the fact that I somehow am a professional representative. I think that those are fine, and the Court so found. What I find difficult and impossible to live with is then including some summary financial figure, and in this case the summary financial figure has no relevance necessarily to the charity that I am calling for. I may have as a professional representative never dealt with this charity, and my experience may be totally irrelevant to my current experience with this charity and my contract. Thank you.
William H. Rehnquist: Thank you, Mr. Copilevitz. General Thornburg, you have one minute remaining.
Lacy H. Thornburg: Nothing further, Your Honor.
William H. Rehnquist: Very well. The case is submitted.