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IN THE
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
No.
98-4158
AMERICAN
TARGET ADVERTISING, INC.,
Plaintiff-Appellant,
v.
FRANCINE A.
GIANI,
Defendant-Appellee.
BRIEF AMICUS
CURIAE OF THE
FREE SPEECH DEFENSE AND EDUCATION FUND, ET AL.
IN SUPPORT OF APPELLANT
APPEAL FROM THE
UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
Case No.
2:97-CV-610B
William J. Olson
John S. Miles
Alan Woll
John F. Callender
WILLIAM J. OLSON, P.C.
8180 Greensboro Drive, Suite 1070
McLean, Virginia 22102-3860
(703) 356-5070
Michael J. Norton
NORTON-LINDSTONE, LLC
5445 DTC Parkway, Suite 850
Englewood, Colorado 80111-3053
(303) 221-5522
Mark B. Weinberg
WEINBERG & JACOBS, LLP
One Central Plaza, Suite 1200
Rockville, Maryland 20852
(301) 468-5500
Herbert W. Titus
TROY A. TITUS, P.C.
5221 Indian River Road
Virginia Beach, Virginia 23464
(757) 467-0616
Attorneys for Amici Curiae, Free Speech
Defense and Education Fund, Inc., et al.
STATEMENT OF INTEREST OF THE FREE
SPEECH DEFENSE AND EDUCATION FUND, INC. AND ITS CO-AMICI
CURIAE
This Amicus Curiae Brief is submitted on behalf of the
Free Speech Defense and Education Fund, Inc. ("FSDEF"), a
nonprofit educational organization dedicated to the defense
of First Amendment rights. FSDEF, incorporated in 1995 in
Maryland, is a nonpartisan educational organization exempt
under section 501(c)(3) of the Internal Revenue Code
("IRC").
Joining as co-amicus is the Free Speech
Coalition, Inc. (McLean, Virginia), a nonpartisan section
501(c)(4) organization dedicated to the protection of
constitutional rights, including freedom of speech. Its
members include nonprofit organizations which communicate
and solicit contributions throughout the country, as well as
for-profit firms that assist such nonprofits.
Joining as co-amici are the following IRC
section 501(c)(3) charitable/educational organizations that
use direct mail nationally as part of their educational and
fundraising efforts:
American Center for Law & Justice (Washington,
DC)
American Studies Center (Washington, DC)
Americans Back in Charge Foundation (Washington,
DC)
America's Future Inc. (St. Louis, MO)
Citizens United Foundation (Fairfax, VA)
The Claremont Institute (Claremont, CA)
Free Congress Research & Education Foundation
(Washington, DC)
The Lincoln Institute for Research and Education,
Inc. (Washington, DC)
Local Government Council (Washington, DC)
National Center for Cardiac Information (Burke,
VA)
Policy Analysis Center (Burke, VA)
Second Amendment Foundation (Bellevue, WA)
United States Equestrian Team, Inc. (Gladstone,
NJ)
United States Taxpayers Institute (Vienna, VA)
Young America's Foundation (Herndon, VA)
Also joining as co-amici are the
following IRC section 501(c)(4) social welfare organizations
(also considered "charities" under the Utah Act) that use
direct mail nationally as part of their educational and
fundraising efforts:
American Conservative Union (Alexandria, VA)
Christian Coalition (Chesapeake, VA)
Citizens United (Fairfax, VA)
Council for Government Reform (Annandale, VA)
Council of Volunteer Americans, Inc. (Annandale,
VA)
The Seniors Coalition (Fairfax, VA)
60 Plus Association (Arlington, VA)
TREA Senior Citizens League (Alexandria, VA)
United Seniors Association Inc. (Fairfax, VA)
Finally, joining as co-amici are the
following for-profit organizations, direct mail agencies
assisting nonprofit organizations with their educational and
fundraising program:
Concepts Direct, Inc. (Richmond, VA)
The Delta Group USA, Inc. (Annandale, VA)
Morgan-Meredith & Associates (Chantilly, VA)
Richard Norman Company (Reston, VA)
Squire & Heartfield Direct, Inc. (Oakton, VA)
Stephen Winchell & Associates (Arlington, VA)
Like countless organizations throughout
the nation, FSDEF and its co-amici have a strong interest in
the matters raised in this litigation. Utah's Charitable
Solicitations Act, as applied in this case, adversely
affects the exercise of First Amendment rights, imposing a
prior restraint on the dissemination of ideas. In addition,
Utah's Act reaches beyond its borders and controls the
out-of-state activities of out-of-state nonprofits and their
fundraising consultants.
As other states have similar statutes,
FSDEF and its co-amici face cumulative regulatory and tax
barriers, which have substantial and adverse impact on their
First Amendment rights. Since this Nation was founded,
Americans have been free to communicate on public policy
issues with fellow citizens in every state. Any state
regulation that chills such communication &emdash; including
mass mailings generated by using modern technology, and
periodicals, including newsletters &emdash; strikes at the
fundamental right of Americans to speak and to assemble and
consult with others to exercise more effectively their
rights of association and petition.
ISSUES PRESENTED:
1. Did the District Court err in holding that the Utah Act,
as applied, does not violate appellant's right to Due
Process of Law?
2. Did the District Court err in holding that the Utah Act,
as applied, does not violate appellant's rights under the
Commerce Clause?
3. Did the District Court err in holding that the Utah Act
does not violate appellant's First Amendment rights to
freedom of speech, press, association and petition?
STATEMENT OF THE CASE:
The Utah Charitable Solicitations Act ("the Utah Act")
regulates and requires the licensure of out-of-state
professional fundraising counsel ("PFCs") who advise
nonresident organizations soliciting charitable
contributions in Utah. Under the Act, PFCs must (i) apply
for a state license, file various documents, and make
certain disclosures to the Utah Division of Consumer
Protection, (ii) pay a $250 annual registration fee (license
tax), and (iii) secure a $25,000 bond or letter of credit.
If they do not obtain a Utah state license, their clients
are not permitted to use the U.S. Mail to communicate with
to residents of Utah while, even incidentally, soliciting
contributions. See Utah Code Ann., sec. 13-22-1, et seq.
(1953, Supp. 1997).
Appellant American Target Advertising,
Inc. ("ATA"), a Virginia for-profit corporation, provides
consulting services to nonprofit organizations that use
direct mail to communicate with and solicit funds from the
general public. ATA was retained by Judicial Watch, a
nonprofit organization incorporated and operating in the
District of Columbia, to plan, manage, counsel and prepare
materials relating to Judicial Watch's program to
disseminate public policy information and ideas to, and
solicit funds from, the American public. When Judicial Watch
applied to register under the Utah Act, the application was
denied because ATA had not registered with the Utah Division
of Consumer Protection.
ATA filed suit against the Director of
Utah's Division of Consumer Protection, seeking, inter alia,
injunctive relief against enforcement of the Act. Following
limited discovery, the parties filed cross-motions for
summary judgment. On August 18, 1998, the District Court
sustained the Utah Act in its entirety and ordered that
ATA's suit be dismissed.
SUMMARY OF ARGUMENT:
Utah's Charitable Solicitations Act, as applied to ATA,
violates ATA's Due Process rights. There is simply no nexus
between ATA and Utah justifying any licensing jurisdiction
over ATA whatsoever. There is no evidence that ATA
"purposefully directed" any activities to take place in
Utah, nor that ATA established any presence in Utah at
all.
Utah's Act, as applied to ATA, also
violates ATA's rights under the Commerce Clause. There is no
"substantial nexus" between ATA and Utah justifying any tax
or regulation of ATA whatsoever. Furthermore, the Utah Act
imposes an excessive burden upon ATA's interstate operations
without redounding to any legitimate benefit to the
State.
Utah's Act also violates ATA's First and
Fourteenth Amendment rights. It imposes a discriminatory
prior restraint upon nonprofit solicitors and the residents
of Utah. It also grants unconstitutional discretion to Utah
government authorities.
ARGUMENT:
I. THE UTAH ACT, AS APPLIED TO ATA, VIOLATES THE DUE PROCESS
CLAUSE OF THE FOURTEENTH AMENDMENT
The court below found "that American Target has
'purposely directed' its fundraising efforts toward
residents of [Utah]." Based solely upon that
finding, and relying exclusively upon Burger King Corp. v.
Rudcewicz, 471 U.S. 462 (1985), the district judge ruled
that "American Target [having] established minimum
contacts with the State of Utah so as to subject itself to
the jurisdiction of Utah courts
, Utah may therefore
require American Target to submit to the requirements of the
Utah Charitable Solicitations Act without violating the Due
Process Clause of the Fourteenth Amendment." Slip op. p. 18.
This ruling is clearly erroneous.
As the U.S. Supreme Court observed in
Quill Corp. v. North Dakota, 504 U.S. 298 (1992), a state
regulation or tax is not justified where an out-of-state
business has merely "purposefully directed its activities"
towards that state's residents. Rather, there must also be
evidence that the out-of-state business (as opposed to a
client of the out-of-state business) has engaged "in
continuous and widespread solicitation of business within a
State" (or in other activities comparable in magnitude), and
that the tax (or regulation) imposed be "related to the
benefits" that the out-of-state business "receives from
access to the State." Only after finding all three factors
&emdash; not just the one erroneously found by the court
below &emdash; did the Court rule in Quill that the Due
Process Clause "does not bar enforcement of that State's use
tax." Id., 504 U.S. at 308.
As concurring Justice Antonin Scalia
explained, the Quill ruling did not "mean that the due
process standards for adjudicative jurisdiction and those
for legislative (or prescriptive) jurisdiction are
necessarily identical
" Id., 504 U.S. at 319-20. To
illustrate this point, Justice Scalia cited two previous
Court decisions: Asahi Metal Industry Co. v. Superior Court,
480 U.S. 102 (1987), and American Oil Company v. Neill, 380
U.S. 451 (1965).
In Asahi, an "adjudicative jurisdiction"
case, the Court applied the "purposely directed" test,
ruling that a foreign company's "mere awareness" that its
product might be sold in the forum state did not meet the
Burger King requirement of Due Process. 480 U.S. at 105,
108-12. By contrast, in American Oil, a "legislative
jurisdiction" case, the Court applied a more rigorous
formula. In addition to its review of the "foreseeability"
that a company's goods would enter the taxing state, the
court also examined whether the company had contributed to
that entry by other acts within the state. Finding that it
had not, the Court ruled that the state's excise tax on a
transaction that took place wholly outside the state
violated the company's due process rights. 380 U.S. at
457-59. Since this case involves legislative jurisdiction,
the Due Process standard in Quill and American Oil applies
in this case, not the standard in Burger King.
A. ATA Did Not Have a Taxable or Regulatory Presence in
Utah
The district court erred in ignoring the fact that ATA had
no contacts with Utah. While it was "reasonably foreseeable"
that ATA's assistance to Judicial Watch would result in
Judicial Watch's communications to Utah residents,
foreseeability does not meet the "purposeful direction"
requirement of the first prong of the three-part Quill test.
See Asahi, supra, 480 U.S. at 108-112. Nor have ATA's
actions met either of the other two prongs of that
test.
In Quill, the Court ruled that a state
may tax an out-of-state business that has engaged in
"continuous and widespread business within a State" (e.g.,
by sending its "catalogues" or its "drummers" into that
state). ATA has not engaged in any such activity. Judicial
Watch, not ATA, makes the decision to send solicitation
mailings, some of which go to Utah. Judicial Watch sends
those mailings on its own behalf, certainly not as a
"drummer" for ATA. Thus, no evidence exists that ATA has
made any contact whatsoever with the state of Utah, much
less engaged in the "magnitude" of contacts required by the
Quill Due Process test.
Likewise, even though required by Quill,
Utah has introduced absolutely no evidence that it offers
"benefits" to ATA that are related in any way to the burdens
that would be imposed on ATA should it be required to
register under the Utah law. Utah seeks to force ATA to
register, thereby imposing an impermissible extraterritorial
regulatory burden on ATA. In American Oil, the U.S. Supreme
Court struck down Idaho's imposition of an excise tax upon
an out-of-state sale of motor fuel that was later to be
shipped into Idaho. The Court found the imposition of the
tax unconstitutional because "it was applied to a sale made
outside Idaho" and because there were no in-state activities
that "contributed in any way to the procurement or
performance" of the out-of-state sale. American Oil, supra,
380 U.S. at 455, 459.
American Oil applies with equal force in
this case. The contract between Judicial Watch and ATA was
made and performed in Virginia. Neither entity engaged in
activity in Utah that contributed to either the
"procurement" or the "performance" of that contract.
Anticipation that this contract could result in Judicial
Watch determining to mail some of its solicitations to Utah
is not sufficient to establish the required Due Process
nexus. Id., 380 U.S. at 455.
B. ATA Did Not "Purposefully Direct" Solicitations Into
Utah
Even if the Burger King Due Process standard were applied,
Utah still lacks jurisdiction to regulate ATA. The dispute
in Burger King grew directly out of a contract which had a
substantial connection with Florida, the forum state. Burger
King, supra, 471 U.S. at 479. Defendant "entered into a
carefully structured 20-year relationship that envisioned
continuing and wide-reaching contracts with Burger King in
Florida" involving "long-term and exacting regulation of his
business from Burger King's Miami headquarters" and
providing that disputes would be governed by Florida law.
Id. at 480. Defendant thereby "purposefully availed himself
of the benefits and protections of Florida's laws." Id. at
481-82.
By contrast, this case involves a
business relationship between a District of Columbia
corporation (Judicial Watch) and a Virginia corporation
(ATA) which did not involve "continuing and wide-reaching
contacts with" Utah. The relationship between Judicial Watch
and ATA had nothing to do with the State of Utah or with
Utah law. Serving Judicial Watch only in an advisory
capacity, ATA did not control Judicial Watch's mailing of
First Amendment-protected communications to Utah residents.
Thus, the fundraising efforts were those of Judicial Watch,
not ATA. At most, ATA was "merely aware" that some of
Judicial Watch's mailings would end up in Utah mailboxes.
Awareness, standing alone, is not sufficient to meet Burger
King's Due Process standard. Asahi, supra, 480 U.S. at 105,
108-112.
Such is the law of this Circuit. "Mere
foreseeability...is not a sufficient benchmark for
exercising personal jurisdiction.... There must be some act
by which the defendant purposely avails itself of the
privilege of conducting activities within the forum State,
thus invoking the benefits and protections of its laws."
Trierweiler v. Croxton and Trench Holding Corp., 90 F.3d
1523, 1534 (10th Cir. 1996). Purposeful availment "requires
actions by the Defendant which 'create a substantial
connection with the forum state.'" OMI Holdings v. Royal
Insurance, 149 F.3d 1086, 1998 U.S. App. LEXIS 14717 at *11
(10th Cir. 1998) (emphasis added). Under this test, courts
must examine "the quantity and quality" of contacts with the
forum state, a task not undertaken by the court below. As
the Trierweiler court ruled, "'[p]urposeful
availment analysis turns upon whether the defendant's
contacts are attributable to his own actions [and
generally] requires...affirmative conduct by the
defendant which allows or promotes the transaction of
business within the forum state.'" 90 F.3d at 1535.
II. AS APPLIED TO ATA, THE UTAH ACT VIOLATES THE COMMERCE
CLAUSE
The court below misapplied the U.S. Supreme Court's
tests determining whether the Utah Act violates the Commerce
Clause. It found that the Act does not directly regulate
interstate commerce because it subjects ATA "to Utah
regulations only to the extent that it provides consulting
services in connection with charitable solicitations in
Utah" and because that regulation "does not have the
"'practical effect' of... controll[ing]
[professional fund-raisers] in other states." Slip
op. p. 16. It also found that there was no "indirect"
regulation of interstate commerce because the "challenged
provisions" of the Utah Act "are reasonable necessary to
prevent and remedy the effects of fraud" and "[a]ny
resulting burdens on interstate commerce are minimal by
comparison." Slip op. p. 17. Both rulings are
erroneous.
Provision of "consulting services in
connection with charitable solicitations in Utah" does not
give Utah regulatory power over ATA; and just because the
Utah Act does not "control" the acts of ATA in other states,
does not make the Act constitutional. The questions are
whether there is a "substantial nexus" between Utah and ATA
and whether Utah confers benefits upon ATA equivalent to the
burdens imposed upon it. Quill, supra, 504 U.S. at 312,
313.
Even where there are such a nexus and
mutual benefits, the Commerce Clause prohibits application
of the Utah Act to ATA if the burdens placed upon ATA are
excessive in relation to the benefits accruing to Utah from
regulating ATA. Pike v. Bruce Church, Inc., 397 U.S. 137,
142 (1970). To apply this test, courts must weigh the
burdens and benefits with careful attention to the facts.
See, e.g., Kassel v. Consolidated Freightways Corp., 450
U.S. 662 (1981). The court below failed to conduct such an
analysis, offering only conclusions based upon
generalities.
A. The Utah Act is a Direct Tax or Direct Regulation of
Interstate Commerce
Because of the Commerce Clause's "structural concerns about
the effects of state regulations on the national economy"
Quill, supra, 504 U.S. at 312, the U.S. Supreme Court has
always insisted upon both: (1) a "substantial nexus" between
the state and the taxed or regulated entity and (2) "a
relationship between the tax and State-provided service
[or a relationship between the regulation and the
State's local interest] so as to ensure the State
taxation [or regulation] does not unduly burden
interstate commerce." While these concerns may appear
similar to those discussed in the Due Process section above,
the U.S. Supreme Court has ruled that "a corporation may
have the 'minimum contacts' with a taxing [or
regulating] State required by the Due Process Clause,
and yet lack the 'substantial nexus' with that State as
required by the Commerce Clause." Id. at 313.
First, the substantial nexus test
requires proof that the taxed or regulated entity has some
kind of physical presence in the taxing or regulating state.
If that presence is no more than mailing letters into a
state, then there is no "substantial nexus" with that state.
See Quill, supra, 504 U.S. at 311. ATA has not even done
that, for it is Judicial Watch, not ATA, that mails letters
containing solicitations into Utah. By only contributing to
another's communications by mail, ATA is engaged in "a
discrete realm of commercial activity that is free from
interstate taxation" or regulation, because it has not
established a "substantial nexus" with any state, except
Virginia, where it physically conducts its consulting
business. See Quill, supra, 504 U.S. at 315.
Second, the "burden/benefit" test is
designed to protect interstate business from state
regulations and taxes that, in effect, project a state's
taxing or regulatory power outside its boundaries into other
states and, thereby, unconstitutionally burden interstate
commerce. As for the imposition of a tax, there must be some
corresponding benefit conferred by the state upon the taxed
entity; otherwise, the state is simply taking advantage of
that entity to increase its revenues. See discussion of
Complete Auto Transit v. Brady, 430 U.S. 274 (1977) in
Quill, supra, 504 U.S. at 313. In this case, the Utah Act
seeks to impose a registration/licensing fee &emdash; in
practical effect a tax &emdash; upon ATA, which derives no
benefit whatsoever from the State of Utah because it has no
presence and does no business whatsoever in that state.
B. The Utah Act is an Indirect Regulation of Interstate
Commerce
Even when a state has a substantial nexus permitting a
tax or regulation, the tax or regulation cannot impose an
excessive burden on interstate commerce without a
countervailing legitimate local benefit. There can be no
question that the Utah Act unnecessarily burdens ATA's
interstate commercial activities. Indeed, under the Act, ATA
(and every professional fundraising consultant in the
country) must either register in Utah, pay a $250 license
fee, and obtain a $25,000 bond from a Utah surety (or a
$25,000 line of credit) for Utah's benefit. The alternative
is to forego completely advising clients on national
fundraising drives that might potentially include even a
minimal number of Utah residents as potential donors. Since
it is unlikely that any charitable organization would want
to purge all Utah residents from owned or rented lists, or
to develop a different solicitation (designed by a
Utah-licensed fundraising consultant) to Utah than is sent
to residents of the other 49 states, the Utah Act serves to
regulate and impose a single state's standards on an entire
national industry. There can be no question that the
requirements of the Utah Act unnecessarily burden interstate
commerce. See, e.g., Lewis v. BT Investment Managers, Inc.,
447 U.S. 27, 42-44 (1980).
Utah, however, is not alone. At least 41
states, plus the District of Columbia and an unknown number
of counties and municipalities, require annual licensing and
registration of nonprofit organizations soliciting funds
from the public. Licensure, registration, or other
regulation of professional fundraising counsel is presently
required by at least 28 states, and additional counties and
cities, where such advisors are obligated to pay
registration fees (license taxes) and meet further bonding
requirements. See Appendices A, B and C. Such state and
local regulation of fundraising solicitations has become
pervasive, burdensome, and financially confiscatory. The
financial burdens of licensure and registration are daunting
for both nonprofits and professional fundraising counsel.
The financial and administrative burdens imposed by these
statutes impede and restrain nonprofits' communication with,
and dissemination of information and ideas to, the American
people. Because Judicial Watch, and thousands of other
nonprofit organizations in this country, address political,
public policy issues of national interest, unduly burdensome
state and local regulation can have a devastating cumulative
effect on such communications. Registration fees (license
taxes) cost charitable organizations and their professional
fundraising counsel several thousand dollars annually.
Additionally, various states, including Utah, impose
requirements upon professional fundraising counsel, such as
to post bonds or lines of credit, totaling at least
$130,000. See Appendices B and C. The administrative costs
of compliance with these statutes are also substantial, and
often are coupled with the need to hire professionals to
address the dozens of state registration and licensing
procedures.
The cumulative effect of these laws on
nonprofit/charitable organizations is clearly substantial.
Before even a single letter is mailed, start-up
organizations, like Judicial Watch &emdash; seeking to
educate or mobilize Americans on national policy issues
&emdash; require significant initial capital just to comply
with the state law requirements. The net effect of such
parochial laws is to "Balkanize" America, imposing
burdensome licensure and regulatory requirements that
isolate American citizens in a particular state from their
fellow citizens.
Surely, the free flow of mailings on
public policy matters on the nation's "information highways"
is as vital to the nation as the free flow of truck traffic
on its asphalt highways. With respect to the latter, the
U.S. Supreme Court has consistently offered constitutional
relief to truck traffic when disrupted by state "safety"
regulations, upon finding that such disruption is not
justified by the claimed safety benefits. See, e.g., Raymond
Motor Transport, Inc. v. Rice, 434 U.S. 429 (1978); Bibb v.
Navajo Freight Lines, Inc., 359 U.S. 520 (1959). Likewise,
the Utah Act should be struck down since the claimed
benefits from preventing fraud do not justify the disruption
that it creates in the interstate traffic of ideas.
Utah has made no effort to show why it
must require ATA to register and post a bond in order to
protect its residents from fraud. Any such alleged purpose
is already served by its requirement that Judicial Watch
register. Nor has Utah shown why its residents need access
to information about ATA when Utah authorities have access
to information about Judicial Watch. Nor has Utah shown that
the information which it requires from ATA could not easily
be found on the Internet or secured from Virginia, where ATA
is registered.
In short, Utah need not &emdash; indeed,
it cannot &emdash; project its regulatory power across the
country, and well beyond Judicial Watch which sent the
letters, especially in an effort to force ATA and Judicial
Watch to alter a contractual relationship consummated and
completed wholly outside the state of Utah. See Brown-Forman
Distillers Corp. v. New York State Liquor Authority, 476
U.S. 573, 583-84 (1986).
III. THE UTAH ACT VIOLATES THE FIRST AND FOURTEENTH
AMENDMENT GUARANTEES OF FREEDOM OF SPEECH, ASSOCIATION, AND
PETITION
The court below apparently assumed that the only
constitutional measure applicable to a First Amendment
challenge to a charitable solicitation statute is the rule
established by the U.S. Supreme Court in Village of
Schaumburg v. Citizens for a Better Environment, 444 U.S.
620 (1980). Slip op. pp. 5-13. This is not true. The Court
in Schaumburg also reviewed and commented favorably on
decisions involving charitable solicitations which had
applied traditional First Amendment standards, including
"prior restraint." Id., 444 U.S. at 628-32. The Court's
decision in Schaumburg did not discard those rules, but
merely added to them. Hence, contrary to the assumption of
the court below, the Schaumburg formula is not the only
relevant First Amendment standard protecting charitable
solicitations.
Further, the court below failed to apply
correctly the Schaumburg test itself. The Utah Act requires
the Director of the Division of Consumer Protection to deny
or revoke a license only when the Director finds that such
action is in the "public interest." By granting the Director
such power to act in the "public interest" and without
defining that term, the Utah Act has conferred upon the
Director the very kind of impermissible discretion that
Schaumburg and its progeny sought to prevent. See, e.g.,
Riley v. National Federation of the Blind, 487 U.S. 781, 801
(1988).
A. The Utah Act is an Unconstitutional Prior
Restraint
Utah law imposes requirements on direct mail to the
public that contains charitable solicitations, but not on
direct mail to the public that contains commercial
solicitations. This is pure content-based regulation of
protected speech, favoring one kind of speech over another.
This Utah cannot do. As the U.S. Supreme Court ruled in
Rosenberger v. University of Virginia, 515 U.S. 819, 132
L.Ed 2d 700, 714-15 (1995), citing Simon & Schuster,
Inc. v. N.Y. Crime Victims Bd., 502 U.S. 105, 115, (1991):
"In the realm of private speech or expression, government
regulation may not favor one speaker over another....
Discrimination against speech because of its message is
presumed to be unconstitutional...."
In this case, Utah has prohibited
Judicial Watch (or any other nonprofit) from mailing public
policy information into the state with fundraising
solicitations developed with advice and counsel from ATA (or
any other professional fundraising counsel) &emdash; unless
the professional fundraising counsel agrees to register, to
pay Utah's registration fee, to put up a bond, and to
subject itself to Utah's jurisdiction. No comparable
requirements apply to any type of commercial enterprise that
ATA (or any other professional fundraising counsel) may have
advised. To the extent that a commercial enterprise may have
sought counsel from ATA on the use of direct mail to engage
in grass roots lobbying to affect the outcome of a public
policy debate, or to advertise merchandise for sale, the
Utah Act would not apply. Thus, a nonprofit organization
soliciting money to oppose a state initiative establishing
off-track betting would be governed by the Act, but a
commercial gaming interest's communications soliciting
support for the very same state initiative would not. There
is no Constitutional basis for such content-based
discrimination. See Police Dept. Of Chicago v. Mosley, 408
U.S. 92, 94-97 (1972) (striking down an anti-picketing
statute that exempted labor picketing).
Nor is there any Constitutional basis for
Utah's requirement that charities register and pay a license
fee before making mailings disseminating ideas which contain
incidental solicitations for donations when there is no such
requirement for commercial enterprises making similar
mailings. Thus, if Judicial Watch should offer a particular
book as a premium for a contribution to support its free
speech activities, the Utah Act requires it to be licensed
and to pay the registration fee. On the other hand, if a
commercial seller should offer to sell the same book, it
need not be licensed or pay a registration fee. As was the
case with the New York law in Simon & Schuster, supra,
the Utah law "singles out income derived from expressive
activity for a burden the State places on no other income,
and it is directed only at works with a specified content,"
thereby "establish[ing] a financial disincentive to
create or publish works with a particular content." Id., 502
U.S. at 116, 118. The requirements and burdens imposed by
the Utah Act are therefore purely content-based, are
discriminatory, and are unlawful.
Not only does the Utah Act place a prior
discriminatory restraint upon Judicial Watch as a
disseminator of ideas, it places a prior restraint on the
receipt of ideas by Utah residents. The U.S. Supreme Court
has clearly "established that the Constitution protects the
right to receive information and ideas." Stanley v. Georgia,
394 U.S. 557, 564 (1969). In the area of free speech, "the
protection afforded is to the communication, to its source
and to its recipients both." Virginia Pharmacy Board v.
Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 756
(1976). Significantly, the Court in Stanley accorded First
Amendment protection to the possession of obscene matter,
394 U.S. at 559, and in Virginia Pharmacy Board protected
speech that "does 'no more than propose a commercial
transaction,'" 425 U.S. at 762. The core political speech at
issue in the instant case should receive even greater
Constitutional protection than the speech at issue in either
of those cases.
The Utah Act violates the First Amendment
rights of Utah residents. It has chilled Judicial Watch's
communication with them. But for the Utah Act, Judicial
Watch would have included Utah residents in its nationwide
mailings on matters of public policy. The First Amendment
does not permit governments to interject themselves as
intermediaries between door-to-door solicitors of financial
support for the promulgation of ideas and the occupier of a
home. Martin v. City of Struthers, 319 U.S. 141, 146-47
(1943). Nor can Utah place itself between the U.S. mails and
its residents, for the "householder [must be] the
exclusive and final judge of what will cross his
threshold...." Rowan v. Post Office Dept., 397 U.S. 728
(1970). By preventing First Amendment-protected
correspondence from entering Utah households, the Utah Act
unconstitutionally interposes itself upon the flow of
Constitutionally-protected speech, and deprives not just the
senders, but also the receivers, of their First Amendment
freedom of speech and press. And because the subject matter
of Judicial Watch's mailings concern matters of national
importance, Utah's interference with those mailings deprives
Utah's residents of their freedom of assembly, a privilege
and immunity of United States citizenship. See Hague v. CIO,
307 U.S. 496, 512-14 (1939).
B. The Utah Act is Not Narrowly Tailored to Meet a
Compelling State Interest
Because the Utah Act also substantially encumbers
protected speech, it must be narrowly tailored to meet a
compelling state interest. Schaumburg, supra, 444 U.S. at
633-38; Secretary of State v. Munson, 467 U.S. 947, 959-68
(1984); and Riley, supra, 487 U.S. at 784-803. To meet this
standard, the language of the Act must be carefully examined
to determine whether its provisions have been narrowly drawn
to further the purpose of protecting the people from
fraud.
The district court found that the Act
authorized the Director of Consumer Affairs to deny or
revoke a license to solicit charitable donations upon
finding one or more of eight statutorily defined acts of
wrongdoing if such denial or revocation is found to be in
the "public interest." Slip. op. pp. 11-13. The Act does not
even attempt a definition of the "public interest," thereby
opening the door to discriminate among applicants based upon
factors totally unrelated to the purpose of the statute.
Courts have consistently struck down statutes that grant
licensors such broad discretion without clearly and
specifically defined legal standards. See, e.g., Lovell v.
City of Griffin, 303 U.S. 444 (1938), and cases cited in
Schaumburg, supra, 444 U.S. at 628-32.
As for the specified eight acts of
wrongdoing, only four are tailored to limit discretion. The
other four fail to place adequate rein on that discretion.
For example, the Director may reject an application for
registration if it is "incomplete or misleading in any
material respect"; or if "an injunction or administrative
order" has been entered against the applicant "based on a
finding of a lack of integrity, dishonesty, or mental
incompetence of the applicant"; or if the applicant "has
materially misrepresented or caused to be misrepresented the
purpose and manner in which contributed funds and property
will be used in connection with any solicitation"; or that
the applying "consultant has failed reasonably to supervise
its agents or employees."
These provisions appear to grant the
Director authority as broad as that granted to regulators in
the North Carolina statute, which was struck down in Riley,
supra. In Riley, the Court found that the state of North
Carolina could not, even for the purpose of deterring fraud,
impose a standard of "reasonableness" upon a professional
fund raiser, ruling that "the State's generalized interest
in unilaterally imposing its notions of fairness on the
fundraising contract is constitutionally invalid." Riley,
supra, 487 U.S. at 792.
The Utah Act allows the Director to
impose her "notion of fairness" upon a license applicant.
She may deny the application because she finds it
"incomplete or misleading"; because she finds the applicant
lacks "integrity" or honesty; because she finds a
"misrepresentation [of] the purpose and manner in
which contributed funds and property will be used"; and even
if she believes the applicant "has failed reasonably to
supervise its agents or employees." Such grants of authority
smack of unconstitutional paternalism and censorship, easily
susceptible of abuse. They are not genuine efforts to
protect the public from fraud. See Riley, supra, 487 U.S.
790-91.
The Act makes government officials
unsupervised gatekeepers of First Amendment-protected
speech. Such standardless power violates the rule of
Schneider v. State, 308 U.S. 147, 163-64 (1939), that
door-to-door canvassing cannot be subjected to government
assessment of "good character" or "absence of fraud." The
government cannot "in the name of preventing fraudulent
appeals, subject door-to-door advocacy and communication of
views to [such a] discretionary permit requirement."
Schaumberg, supra, 444 U.S. at 629, quoting
Schneider.
CONCLUSION:
For the foregoing reasons, these amici curiae support
the Appellant in seeking the reversal of the opinion of the
District Court below, and a ruling that the Utah Act, both
facially and as applied to ATA and Judicial Watch, should be
stricken as unconstitutional.
Respectfully submitted,
William J. Olson
John S. Miles
Alan Woll
John F. Callender
WILLIAM J. OLSON, P.C.
8180 Greensboro Drive, Suite 1070
McLean, Virginia 22102-3860
(703) 356-5070
Michael J. Norton
NORTON-LINDSTONE, LLC
5445 DTC Parkway, Suite 850
Englewood, Colorado 80111-3053
(303) 221-5522
Mark B. Weinberg
WEINBERG & JACOBS, LLP
One Central Plaza, Suite 1200
Rockville, Maryland 20852
(301) 468-5500
Herbert W. Titus
TROY A. TITUS, P.C.
5221 Indian River Road
Virginia Beach, Virginia 23464
(757) 467-0616
Attorneys for Amici Curiae, Free Speech Defense and
Education Fund, Inc., et al.
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