Court Opinion

ID: 3016526
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:15:43.80015+00
Date Added: 2024-06-11T11:46:59.611367
License: Public Domain

____________

                                  No. 95-1107
                                 ____________

Independent Charities of              *
America, Inc.; Local                  *
Independent Charities, Inc.;          *
National United Service               *
Agencies, Inc.; Environmental         *
Federation of America, doing          *
business as Earth Share,              *
                                      *
                  Appellants,         * Appeal from the United States
                                      * District Court for the
      v.                              * District of Minnesota
                                      *
State of Minnesota, Wayne             *
Simoneau, in his capacity as          *
Minnesota Commissioner of             *
Employee Relations,                   *
                                      *
                  Appellees.          *

                                 ____________

                    Submitted:    October 20, 1995

                        Filed:     April 29, 1996
                                 ____________

Before McMILLIAN, ROSS and BOWMAN, Circuit Judges.
                              ____________

McMILLIAN, Circuit Judge.

      Independent Charities of America, Inc., Local Independent Charities,
Inc., National United Service Agencies, Inc., and Environmental Federation
of America, Inc., d/b/a Earth Share (collectively plaintiffs) appeal from
a final order entered in the United States District Court1 for the District
of Minnesota granting summary judgment in favor of the State of Minnesota
and

       1
       The Honorable James M. Rosenbaum, United States District
Judge for the District of Minnesota.
Linda Barton, in her capacity as Minnesota Commissioner of Employee
Relations (collectively the State defendants)on plaintiffs’ claims that
certain statutory amendments limiting access to the Minnesota Employee
Combined Charitable Campaign (Campaign) violate the First Amendment,
federal equal protection and substantive due process, and the Commerce
Clause.   Independent Charities of America, Inc.        v. Minnesota, No. 4-94-CV-
483 (D. Minn. Dec. 16, 1994).            For reversal, plaintiffs argue that the
district court erred in holding that (1) the exclusion of non-local
fundraisers from the Campaign did not violate plaintiffs’ First Amendment
right to free speech; (2) the exclusion of non-local fundraisers from the
Campaign did not violate their rights to equal protection and due process;
and (3) the State of Minnesota was a “market participant” so as to exempt
the challenged amendments from scrutiny under the Commerce Clause.           For the
reasons discussed below, we affirm the order of the district court.

                                    I.   Background

      The Campaign is an annual fund raising drive whereby a state employee
may elect to have a contribution deducted from his or her paycheck and paid
to a registered combined charitable organization.               See Minn. Stat. §
309.501(1)(e) (1994).         The Campaign is conducted in the state workplace
during    working hours.        According to Minn. Stat. § 309.501(3), only
charitable federations which have been recognized by the Campaign as
Registered Combined Charitable Organizations (RCCOs) are eligible to
participate       in   the   Campaign.     A   charitable   federation   seeking   to
participate in the Campaign on behalf of its member charities must meet the
statutory criteria for RCCOs set forth in Minn Stat. § 309.501(1).2

              2
           Before the 1993 and 1994 amendments at issue in the
present case, § 309.501(1) provided in pertinent part:

      Subdivision 1.          Definitions.

           “Registered combined charitable organization”
      means an organization

      (1) which is tax exempt under Section 501(c)(3)
      of the Internal Revenue Code . . . and to which
      contributions are deductible under Section 170 of

                                           -2-
      In 1993, the Minnesota Legislature amended § 309.501 to provide more
restrictive criteria for participation in the Campaign by RCCOs and their
individual   member   charities.   These   amendments   rendered   plaintiffs
                                                         3
ineligible for participation in the 1994-95 Campaign.        Three aspects of
the 1993 amendments are challenged by plaintiffs.   First, the Legislature
amended Minn. Stat.§ 309.501(1)

      the Internal Revenue
      Code;

      (2) which secures funds for distribution to ten
      or more charitable agencies in a single, annual
      consolidated effort;

      (3) which is governed by a voluntary board of
      directors which represents the broad interests of
      the public;

      (4) which distributes at least 70 percent of its
      total campaign income and revenue to the designated
      agencies it supports and expends no more than 30
      percent of its total income and revenue for
      management and general costs and fund raising
      costs;

      (5) and each designated agency supported by the
      recipient institution devotes substantially all of
      its activities directly to providing health,
      welfare, social, or other human services to
      individuals;

      (6) and each designated agency supported by the
      recipient institution provides health, welfare,
      social, or other human services, in the community
      and surrounding area in which the recipient
      institution’s fund drive takes place; and

      (7) which    has   been   registered  with   the
      commissioner of commerce in accordance with this
      section.

Minn. Stat. § 309.501(1) (1992).
         3
         The Legislature provided a compliance waiver of one year
for those RCCOs which could not meet the more stringent criteria if
they had participated in the 1992-93 Campaign.

                                   -3-
to require participating RCCOs to be “governed by a local, independent,
voluntary board of directors which represents the broad interests of the
public and 90 percent of the directors of the governing board live or work
in the community or surrounding area.”            Act of May 14, 1993, ch. 192, § 86,
1993 Minn. Laws 711, 767; Jt. App. 71.               Because plaintiffs did not have
local boards of directors, they did not qualify as RCCOs under the 1993
amendments.       Second,      the    Legislature    established     a   local   presence
requirement     for    the   RCCOs’     member   charities.     As   amended     in   1993,
§   309.501(1)(b)(6)         required    that     individual   member    charities,      or
“affiliated agencies,”4 be “incorporated in Minnesota or headquartered in
the service area in which the state employee combined charitable campaign
takes place.”    Id.    As a result of this provision, some affiliated agencies
became unable to participate in the 1994-95 Campaign.                      Finally, the
Legislature added a local spending requirement to § 309.501(1) , requiring
that each affiliated agency must provide “all or substantially all of its
health, welfare, social, or other human services, in the community and
surrounding area in which the state employee combined charitable campaign
takes place.”    Id.    Some of plaintiffs’ affiliated agencies were excluded
from the Campaign under this requirement.

      In 1994, the Legislature again amended Minn. Stat. § 309.501.                   First,
it amended section (1)(b)(4) to establish an alternative to the 1993
requirement that a RCCO had to be governed by a local board of directors.
The 1994 amendment provided that “if the charitable agencies are solely
educational institutions which meet the requirements of paragraph (c), [a
RCCO may be governed] by a national board of directors that has a local
advisory board

      4
      Minn. Stat. § 309.501(1)(c) defines an “affiliated agency” as
“a charitable agency that is represented by a federation and has an
ongoing relationship with that federation which involves a review
and monitoring process to ensure financial, managerial, and
programmatic responsibility.” Minn. Stat. § 309.501(1)(c) (1994).

                                            -4-
composed of members who live or work in the community or surrounding area.”
Act of Apr. 28, 1994, ch. 535, § 1, 1994 Minn. Laws 769, 770; Jt. App. B30,
31.     Second,     the    Legislature    added   a    provision     to   Minn.   Stat.   §
309.501(1)(b) stating that “[r]egistered combined charitable organization”
includes a charitable organization organized by Minnesota state employees
and their exclusive representatives for the purpose of providing grants to
nonprofit agencies providing Minnesota residents with food or shelter if
the charitable organization meets the requirements of clauses (1), (4), and
(5).”    Id.

        The 1993 amendments had the practical effect of excluding from
participation       in    the   1994-95   Campaign    six   organizations     which   had
previously qualified as RCCOs, including the United Negro College Fund
(UNCF), Open Your Heart to the Hungry and Homeless (OYH)5, and plaintiffs.
Under the 1994 amendments, UNCF and OYH became eligible once again to
participate in the Campaign.

        Plaintiffs, four federated charities who solicit contributions on
behalf of a slate of individual member charities, are incorporated outside
of Minnesota and solicit contributions in state and municipal public
employee campaigns throughout the United States.            Plaintiffs’ applications
to the 1994-95 Campaign were rejected due to non-compliance with the
statutory       eligibility     requirements.     On    June   22,    1994,   plaintiffs
instituted the present action in the United States District Court for the
District of Minnesota, challenging the constitutionality of the 1993 and
1994 amendments to Minn. Stat. § 309.501.              The amended complaint alleged
that the challenged amendments violate the First Amendment, federal equal
protection and substantive due process, and the Commerce

            5
         Open Your Heart to the Hungry and Homeless, a charitable
organization created by Minnesota state employees, provides direct
benefits to charities which give food and shelter to indigent
Minnesota residents.

                                           -5-
Clause.       Plaintiffs   sought    a    declaratory   judgment   and   a   permanent
injunction against application of the 1993 and 1994 amendments.                     In
addition, after filing their complaint, plaintiffs moved for a preliminary
injunction allowing their participation in the 1994-95 Campaign pending
final resolution of the present case.             On July 29, 1994, the magistrate
judge issued a Report and Recommendation that plaintiffs’ motion for a
preliminary injunction be denied.                The district court, adopting the
magistrate judge’s Report and Recommendation, denied the preliminary
injunction.    On subsequent cross-motions for summary judgment, the district
court granted summary judgment in favor of the State defendants.                  This
timely appeal followed.

                                    II.   Discussion

      We review a grant of summary judgment de novo.            The question before
the district court, and this court on appeal, is whether the record, when
viewed in the light most favorable to the non-moving party, shows that
there is no genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law.             Fed. R. Civ. P. 56(c); see,
e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986); Get Away Club, Inc. v.
Coleman, 969 F.2d 664, 666 (8th Cir. 1992); St. Paul Fire & Marine
Insurance Co. v. FDIC, 968 F.2d 695, 699 (8th Cir. 1992).                    Where the
unresolved issues are primarily legal, rather than factual, summary
judgment is particularly appropriate.             Crain v. Board of Police Comm’rs,
920 F.2d 1402, 1405-06 (8th Cir. 1990).

      A.       First Amendment Challenge

      We begin by addressing plaintiffs’ argument that the 1993 statutory
amendments restricting the eligibility criteria for participation in the
Campaign violate their First Amendment right to freedom of speech.                 The
Supreme Court has recognized since

                                           -6-
Village of Schaumburg v. Citizens for a Better Environment, 444 U.S. 620
(1980) (Schaumburg), that charitable solicitations “are so intertwined with
speech that they are entitled to the protections of the First Amendment.”
See id. at 632 (municipal ordinance prohibiting public solicitation of
contributions by charitable organizations which did not use at least
seventy-five    percent     of   its    receipts    for    “charitable    purposes”     was
unconstitutionally overbroad under the First Amendment); see also Secretary
of State v. Joseph H. Munson Co., 467 U.S. 947, 959 (1984) (Munson)
(Maryland statute prohibiting charitable organizations, in connection with
any fund raising activity, from paying expenses of more than twenty-five
percent of the amount raised was unconstitutional limitation on protected
First Amendment solicitation activity).

      Schaumburg and Munson, however, involved regulations affecting door-
to-door or on-street solicitation.          In Cornelius v. NAACP Legal Defense &
Educ. Fund, 473 U.S. 788, 797-99 (1985) (Cornelius), the Supreme Court
recognized a constitutionally significant distinction between such public
forms of charitable solicitation and the type involved in a fund raising
drive conducted in the government workplace.              See id. at 798-99.      At issue
in Cornelius was the exclusion of legal defense and political advocacy
organizations     from    the    Combined    Federal      Campaign   (CFC),    an    annual
charitable fund raising drive conducted in the federal workplace during
working   hours.      See   id.    at    797-811.      The     government   had     limited
participation in the CFC to health and welfare charities providing direct
assistance to individuals, in contrast to nonprofit organizations engaged
in lobbying or public interest litigation.                 After determining that the
charitable solicitations in the CFC (consisting primarily of 30-word
statements   by    participating       charities)    in    a   campaign   pamphlet     were
protected speech, the Court concluded that the speech did not occur in
either a traditional public forum or a limited public forum.                   Rather, it
found that the CFC was a nonpublic forum, such that the

                                            -7-
challenged regulations over access need only be “reasonable in light of the
purpose served by the forum and . . . viewpoint neutral.”           See id. at 806.
Applying the “reasonableness” test, the Court upheld the eligibility
criteria excluding legal defense and political advocacy groups from the
CFC, concluding that the restrictions were viewpoint-neutral and that the
federal government might reasonably have concluded that the exclusion of
legal defense and political advocacy groups from the CFC would increase
federal employees’ acceptance of the fund raising drive, limit disruption
in   the   federal   workplace,   and   avoid    the   appearance    of   government
entanglement with particular viewpoints.        See id. at 809 (“[T]he President
could reasonably conclude that a dollar directly spent on providing food
or   shelter to the needy is more beneficial than a dollar spent on
litigation that might or might not result in aid to the needy.”); see also
Pilsen Neighbors Community Council v. Netsch, 960 F.2d 676, 686 (7th Cir.
1992) (Illinois statute requiring that charities seeking to participate in
state employee deduction program obtain signatures of 4,000 employees and
disclose on all petitions and payroll deduction cards the percentage of
their receipts expended for fund raising and overhead costs was reasonable
and did not violate First Amendment protections); United Black Community
Fund, Inc. v. City of St. Louis, 800 F.2d 758, 760 (8th Cir. 1986) (city’s
decision to limit access to its payroll deduction program to charities
whose administrative and fund raising costs did not exceed twenty-five
percent of contributions was reasonable and viewpoint neutral under the
Cornelius analysis).

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

                                        -8-
Thus, they contend that the 1993 amendments violate their First Amendment
right to freedom of speech.

      In response, the State defendants argue the district court correctly
found that the challenged amendments satisfy the “reasonableness” test set
forth in Cornelius for restrictions on access to a nonpublic forum.                 The
State defendants place great weight on the fact that the Supreme Court
clarified    in   Cornelius   that   easing       administrative   manageability    and
reducing workplace disruption are legitimate justifications for restricting
access to a nonpublic forum.      See Cornelius, 473 U.S. at 809-10.          The State
defendants maintain that the amendments to Minn. Stat. § 309.501 satisfy
the “reasonableness” standard, because they were enacted to                increase the
manageability of the Campaign and to reduce disruption in the State
workplace.    We agree.

      Although the purpose of the 1993 amendments to Minn.              Stat.
§ 309.501 is not articulated in the statute itself, defendant Linda Barton,
the state Commissioner of Employee Relations at the time the amendments
were enacted, testified before the legislative appropriations conference
committee that the goal of the            eligibility restrictions was to simplify
the Campaign and make it operate more smoothly.             See Linda Barton Aff. ¶
9, Jt. App. 68. Thus, to the extent that the 1993 amendments created a
local nexus requirement, they were intended to make the Campaign more
appropriate and relevant to the State and its employees.             Id.    The   State
has   a   legitimate   interest      in    minimizing    workplace   disruption     and
administrative difficulties related to the Campaign.           In our view, the 1993
amendments are reasonable because they are wholly consistent with these
legitimate interests of the State.             See Perry Education Ass’n v. Perry
Local Educators’ Ass’n, 460 U.S. 37, 49 (1983) (preferential access to
interschool mail system given to union representing teachers of the school
district did not violate First Amendment).              The State defendants might
reasonably have concluded that requiring RCCOs and their affiliated
agencies to

                                            -9-
demonstrate certain local connections would make the Campaign operate more
efficiently by limiting the overall number of participating RCCOs and by
restricting participation to those charities which provide a substantial
benefit to Minnesota residents.       In addition, the 1993 amendments are
viewpoint-neutral, because there is no suggestion that the criteria for
participation in the Campaign are intended to suppress one viewpoint or
advance another.

         Finally, we note that the Supreme Court in Cornelius made clear that
a restriction on access to a nonpublic forum does not violate the First
Amendment “merely because use of that forum may be the most efficient means
of delivering the speaker’s message.”        See Cornelius, 473 U.S. at 809.
Even if the 1993 amendments preclude plaintiffs from participating in
future Campaigns, they still retain ample alternative channels to solicit
contributions from State employees -- such as direct mail and in-person
solicitation outside the workplace -- because the amendments place no
restrictions on plaintiffs’ general ability to solicit donations in the
State.    Therefore, because the 1993 amendments are both viewpoint-neutral
and reasonably related to a legitimate state interest, we hold that they
do not violate plaintiffs’ First Amendment right to freedom of speech.

         B.    Equal Protection and Due Process Challenge

         We now turn to plaintiffs’ argument that the 1993 and 1994 amendments
to Minn. Stat. § 309.501 violate their equal protection and substantive due
process rights under the United States Constitution.      Plaintiffs maintain
that these amendments violate the Equal Protection Clause by creating a
local/non-local distinction between charitable federations and affiliated
agencies eligible for participation in the Campaign.      Although plaintiffs
concede that rational basis review should govern their equal

                                      -10-
protection    claim,       they    contend     that   neither    the    1993       nor    the   1994
amendments rationally promote a legitimate State objective.                              Similarly,
they contend that the 1994 amendments run afoul of the Due Process Clause
by creating alternatives to certain statutory eligibility criteria which
have enabled UNCF and OYH to participate in the 1994-95 Campaign.                                 In
effect, plaintiffs argue that the State has violated the Due Process Clause
by   arbitrarily     and    capriciously        granting    UNCF   and       OYH    preferential
treatment.

        Addressing plaintiffs’ federal equal protection claim, the State
defendants argue that the district court correctly found that the 1993 and
1994    amendments    were        rationally    related     to   the    State’s          legitimate
objectives    in     minimizing       workplace       disruption       and    increasing         the
manageability of the Campaign.               The State defendants also note that the
State was not required to articulate its reasons for creating the current
statutory scheme in order to withstand scrutiny under the rational basis
test.   Similarly, in response to plaintiffs’ substantive due process claim,
the State defendants maintain that the 1994 amendments were enacted to
promote the State’s legitimate goal of clarifying the purpose and goals of
the Campaign and making it more manageable.                Thus, they argue that the 1994
amendments fall well within the parameters of both federal equal protection
and substantive due process.            We agree.

        Because the 1993 and 1994 amendments to Minn. Stat. § 309.501 do not
target or exclude a suspect class, they will withstand scrutiny under the
Equal Protection Clause so long as they are rationally related to a
legitimate governmental objective.             FCC v. Beach Communications, Inc., 113
S. Ct. 2096, 2101 (1993).               Under rational basis review,                     challenged
statutory classifications are accorded a strong presumption of validity,
which is overcome only if the party challenging them negates “every
conceivable basis which might support it.”                 Id. at 2102.        In the present
case, plaintiffs have failed to make such a showing.                          As we concluded
above, we think the Legislature might rationally have concluded

                                               -11-
that restricting access to the Campaign to charities meeting the local
connection requirements would not only decrease workplace disruption but
would also render the Campaign more manageable and relevant to State
employees.      In sum, plaintiffs’ rejected First Amendment claim fares no
better when presented in equal protection garb.               See Perry, 460 U.S. at 54-
55 (upholding under rational basis review preferential access given by
school district to exclusive bargaining representative of teachers in that
district).

          Also without merit is plaintiffs’ claim that the 1994 amendments to
Minn. Stat. § 309.501 violates the Due Process Clause.                The Supreme Court
made clear in Minnesota v. Clover Leaf Creamery Co., 449 U.S. 446, 470 n.12
(1981), that a statute which satisfies the rational basis test in an equal
protection      analysis   also   satisfies        the   rational    basis     test   under
substantive due process analysis.           Because we have concluded that the 1994
amendments reasonably promote legitimate State objectives, we hold that the
amendments comport with the requirements of the Due Process Clause.

          C.    Commerce Clause Challenge

          Finally, plaintiffs contend that the 1993 amendments to Minn. Stat.
§ 309.501 violate the dormant Commerce Clause by prohibiting out-of-state
federations and non-local affiliated agencies from participating in the
Campaign.       The district court concluded that the 1993 amendments were
exempt from scrutiny under the Commerce Clause because the State was acting
as   an    employer   rather   than   a    regulator     by   defining   the    charitable
organizations which would have access to its workplace for fund raising
purposes.      Slip op. at 25-26 (order from the bench).          On appeal, plaintiffs
contend that this determination was erroneous, because the State, by
enacting the 1993 amendments to Minn. Stat. § 309.501, is regulating the
charitable solicitation market.           First, we must determine whether the State
falls within the “market participant” exception to the

                                            -12-
dormant Commerce Clause and, if it does not, we must consider whether the
1993 amendments impermissibly burden out-of-state charitable federations
seeking to participate in the Campaign.

      Although the Commerce Clause is by its text an affirmative grant of
power to Congress to regulate interstate and foreign commerce, the Clause
has long been recognized as a self-executing limitation on the power of the
States to enact laws imposing substantial burdens on such commerce.          South-
Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87 (1984) (Wunnicke);
see also Wyoming v. Oklahoma, 502 U.S. 437, 454-59 (1992) (Oklahoma
violated the Commerce Clause in requiring coal-fired electric utilities in
the state to burn coal mixture containing at least ten percent Oklahoma-
mined coal).      This “negative” or “dormant” aspect of the Commerce Clause
prohibits economic protectionism - that is, regulatory measures designed
to   benefit   in-state      economic   interests   by   burdening     out-of-state
competitors.   New Energy Co. v. Limbach, 486 U.S. 269, 273 (1988).           It is
well-settled, however, that the dormant Commerce Clause does not apply to
states which are acting as “market participants,” rather than as “market
regulators.”      See, e.g., White v. Massachusetts Council of Construction
Employees, 460 U.S. 204, 214-15 (1983) (White) (City of Boston could
require   firms    seeking   eligibility   for   award   of   public   construction
contracts to have a work force made up of at least fifty percent of Boston
residents); Reeves, Inc. v. Stake, 447 U.S. 429, 434-47 (1980) (Reeves)
(South Dakota could constitutionally confine sale of cement produced at a
state-owned plant solely to state residents during cement shortage because
the State, as a seller of cement, was exempt from dormant Commerce Clause);
Hughes v. Alexandria Scrap, 426 U.S. 794, 805 (1976) (Alexandria Scrap)
(market participant exception applied to Maryland program to pay a bounty
for every Maryland-titled junk car converted into scrap, despite imposition
of more stringent documentation standards on out-of-state processors,
because the program affected the market no differently than if Maryland
were a private company bidding up the

                                        -13-
price of auto scrap).     The rationale for the distinction drawn between
States acting as market participants and those acting as market regulators
is that the Commerce Clause primarily applies to state taxes and regulatory
measures interfering with private trade in the national marketplace.
Alexandria Scrap, 426 U.S. at 807-08.     By contrast, there is no indication
that the Clause was intended to limit the ability of the States themselves
to operate in the free market.   Reeves, 447 U.S. at 437.    In addition, as
the Supreme Court explained in Reeves, because state proprietary activities
are often burdened with the same restrictions imposed on private market
participants, “[e]venhandedness suggests that, when acting as proprietors,
States should similarly share existing freedoms from federal constraints,
including the inherent limits of the Commerce Clause.”      Id. at 439.

        In the present case, plaintiffs acknowledge that the State acts as
an employer, and therefore participates in the labor market, by hiring
employees.   Yet they maintain that the relevant market in this case is the
charitable fund raising market, which exists independently of the labor
market.    Plaintiffs argue that by     enacting the 1993 amendments to Minn.
Stat. § 309.501, the State is regulating the charitable fund raising market
and that the real participants in this market are state employees, acting
as “buyers” of charitable services, and charitable federations, acting as
“sellers” of such services.    Thus, plaintiffs attempt to distinguish the
present case from White, Reeves, and Alexandria Scrap on the basis that the
State is not acting as a buyer or seller in the charitable fund raising
market.

        The State defendants respond, first, that by implementing the 1993
amendments to Minn. Stat. § 309.501 the State is not acting as a market
regulator but rather, as an employer, by limiting access to its workplace
for the purpose of fund raising.      They contend that the State, like any
private employer, has the right to select the parties with whom it will
deal.    The State defendants rely on

                                      -14-
Fireside Nissan, Inc. v. Fanning, 30 F.3d 206, 216 n.4 (1st Cir. 1994), for
the proposition that the “market participant” exception applies not only
when a State enters the market as a buyer or seller, but also when it acts
as an employer to favor local citizens.           Id.    We agree with the position
of the State defendants.

      By excluding from the Campaign those charitable federations that
could not meet the local connection requirements of the 1993 amendments,
the State is acting as an employer restricting access to its workplace.
Although the State is participating in the charitable fund raising market,
it is doing so as a proprietor         allowing its employees to make charitable
contributions in the workplace.        As such, the State may exercise discretion
as to the charities permitted to solicit from state employees during
working hours, in the same way that any private employer may limit the
parties   who   conduct    business     with    employees     during   the   work   day.
Therefore, we reject plaintiffs’ argument that the market participant
exception    does   not   apply   to   local    and   state   governments    acting   as
employers.      We note that in White, 460 U.S. at 211 n.7, one factor
influencing the Court’s application of the market participant doctrine to
the City of Boston’s requirement that city residents comprise at least
fifty percent of the work force of each firm awarded a public construction
contract was the Court’s observation that “[e]veryone affected by the order
is, in a substantial if informal sense, ‘working for the city.’” Id.

      Moreover, the policies underlying the market participant exception
also support its application to local and state governments acting as
employers.   As we explained above, this exception is founded on the notion
that when a state enters the open market as a proprietor, rather than as
a regulator, there is less danger that the state’s activity will interfere
with Congress’s plenary power to regulate the market.             See, e.g., Reeves,
447 U.S. at 437-39.         We think this reasoning squarely envelops the
situation where a State or local government acts as an

                                         -15-
employer, and we see no well-founded reason to constrict the proprietary
activities covered by the market participant exception to acts of buying
or   selling.     Cf.   Barton      B.   Clark,   Give   ‘Em     Enough   Rope:     States,
Subdivisions and the Market Participant Exception to the Dormant Commerce
Clause, 60 U. Chi. L. Rev. 615, 627 (1993) (contending that the fundamental
principle of the market-participant doctrine should be whether a State is
acting in a manner that “could legally be undertaken by a private party”).

      Our conclusion that the State is acting as a market participant,
rather than as a market regulator, in implementing the 1993 amendments to
Minn. Stat. § 309.501 is reinforced because the general regulation of
charitable organizations is addressed elsewhere in Minn. Stat. Chs. 309
(Social and Charitable Organizations) and 317A (Nonprofit Corporations).
By contrast, Minn. Stat. § 309.501 is directed solely towards defining the
criteria that charitable federations must meet in order to qualify as RCCOs
eligible to participate in the Campaign.             Plaintiffs’ arguments to the
contrary are without merit.

       Plaintiffs contend, however, that even if the State is held to be a
participant in the charitable solicitation market, Commerce Clause scrutiny
is still warranted, because the State is impermissibly regulating outside
this market in the “downstream” market of charitable distribution.                         In
other words, plaintiffs maintain that the present case most closely
resembles Wunnicke, 467 U.S. at 96, in which the Supreme Court rejected
Alaska’s invocation of the market participant doctrine.                    In Wunnicke,
Alaska had instituted a program of selling timber at a substantially
reduced price from state-owned forests on the condition that buyers agree
to process that timber at in-state facilities prior to export.                    See   id.
at 96-98.    The Court held that “although the State may be a participant in
the timber market, it is using its leverage in that market to exert a
regulatory    effect    in   the    processing    market,   in    which   it   is    not    a
participant.”    Id. at 98.        It reasoned:

                                          -16-
             In the commercial context, the seller
             usually has no say over, and no interest in,
             how the product is to be used after sale; in
             this case, however, payment for the timber
             does not end the obligations of the
             purchaser, for, despite the fact that the
             purchaser has taken delivery of the timber
             and has paid for it, he cannot do with it as
             he pleases.    Instead, he is obligated to
             deal with a stranger to the contract after
             completion of the sale.

Id. at 96.   Relying on Wunnicke, plaintiffs argue that the 1993 amendments
to Minn. Stat. § 309.501 regulate “downstream,” in the
charitable distribution market, by requiring that each member charity
supported by a RCCO “provid[e] all or substantially all of        its health,
welfare, social, or other human services, in the community and surrounding
area in which the . . . [Campaign] takes place.”            Minn. Stat. §
309.501(1)(b)(8).   We think plaintiffs’ argument is misguided.    Unlike the
State of Alaska in Wunnicke, which acted as a seller of timber in the
commercial market, the State of Minnesota in the present case is acting as
an employer in the charitable fund raising market by restricting the
charities that may solicit from state employees in the State workplace
during business hours.    In restricting charitable participation in the
Campaign, the State has required that the member charities of each RCCO
must provide all or substantially all of their services in the State.      By
establishing this requirement, the State is not performing a function
separate from its role of an employer in restricting the charities which
may solicit from State employees.   Rather, in determining which charities
may have access to its employees, the State is merely considering the
regions where the charities will provide a substantial portion of their
benefits.    Thus, the present case is distinguishable from Wunnicke, in
which Alaska, as a seller of timber, imposed requirements which were wholly
unrelated to the purchase and sale of timber.    See Wunnicke, 567 U.S. at
96-98.

                                    -17-
      Because we hold that the State is a market participant in the present
case, the Commerce Clause presents no barrier to the 1993 amendments
restricting the eligibility criteria for participation in the Campaign.6
We therefore affirm the order of the district court concluding that the
1993 amendments to Minn. Stat. § 309.501 are exempt from scrutiny under the
Commerce Clause.

                              III.   CONCLUSION

      For the foregoing reasons, we hold that the exclusion of non-local
fund raisers from the Campaign does not violate plaintiffs’ First Amendment
right to free speech or their rights to equal protection and due process.
We further hold that the State is a “market participant”; thus the 1993
amendments to Minn. Stat.
§ 309.501 are exempt from scrutiny under the Commerce Clause.   Accordingly,
the judgment of the district court is affirmed.

      A true copy.

            Attest:

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

           6
           Thus, we need not consider the impact that the 1993
regulations have on out-of-state charitable federations and
affiliated agencies seeking to participate in the Campaign.

                                     -18-