Vol. VI, No. 4 • September - October 1998 ATA Appeals District Court Decision in Giani Case FREE SPEECH readers will remember American Target Advertising, Inc.'s ("ATA") suit against the state of Utah: ATA v. Giani is a Constitutional challenge to the Utah Charitable Solicitations Act, originally filed in U.S. District Court (District of Utah). This suit arose after a Washington, D.C. nonprofit retained ATA, a Virginia corporation, to assist it in preparing nationwide mailings. When the nonprofit attempted to register with Utah, Francine A. Giani, who directs the office enforcing the Utah Charitable Solicitations Act, demanded that ATA also register before the nonprofit could mail into Utah. ATA had no contact whatsoever with Utah and refused to register and pay the required fees. As a result, the nonprofit was prohibited from mailing any solicitations prepared with ATA into Utah. In response, ATA filed suit. The Free Speech Defense & Education Fund, Inc. (FSDEF) and 26 other nonprofits and companies filed an Amicus Curiae brief which argued that the Utah Act is unconstitutional &emdash; violating the First Amendment, due process of law guaranteed by the 14th Amendment, and the Commerce Clause. After FSDEF filed its amicus brief, 16 state attorneys general, two secretaries of state, and one county attorney sent a joint Amici Curiae Memorandum in defense of the statute. On August 24, 1998, the District Court entered an order granting Utah's motion for summary judgment. The District Court's decision characterized the Utah statute as narrowly written, and serving a substantial government interest. Philanthropy Monthly described the decision as a "frontal blow" to the First Amendment. ATA filed its appeal to the U.S. Court of Appeals for the Tenth Circuit on September 21, 1998. Mark Fitzgibbons, Esquire, attorney for ATA, notes that the District Court's decision should be vulnerable on appeal. First, the decision did not address long-standing Supreme Court cases that prohibit governmental licenses for First Amendment activity without regard to time/place/manner of the activity. The decision did not address the Supreme Court decision in Quill and other key Commerce Clause cases. Additionally, the decision did not discuss Utah's failure to present evidence regarding the need for its Charitable Solicitations Act (above and beyond existing fraud law). Finally, the decision contained factual errors. Mr. Fitzgibbons believes that the Tenth Circuit's decision in this case is likely to be reviewed eventually by the U.S. Supreme Court, because the case will greatly affect future discussions of public policy issues in America. He anticipates that the Court will recognize that this case is one of the most important First Amendment cases in a long time, as Utah's statute, and similar statutes by other states, are having a significant impact on the right of Americans to receive public policy information &emdash; core political speech &emdash; from nonprofits. The states have continued to grow more and more bold by adding more and more conditions each year to nonprofit communications. Mr. Fitzgibbons observes that one fearful consequence (if ATA eventually were to lose this case) would be the further encouragement of additional bureaucratic burdens on nonprofit communications. Certainly, the Amici Curiae Memorandum by the state attorneys general suggests wide governmental interest in the further expansion of state bureaucratic burdens. By contrast, a win by ATA might chill state regulators' aggression against Constitutionally-protected expression. FSDEF, joined by dozens of other nonprofit organizations, is currently planning to file an amicus brief with the Court of Appeals. Mr. Fitzgibbons observed that it is important for the appeals court to see the nonprofit community's interest in this case &emdash; for the appeals court to be aware that the resolution of the Giani case will affect every nonprofit that communicates through the mail. Nonprofits need to be aware that the final decision in this case could be critical to their survival, and that, unless the First Amendment rights of nonprofits are vindicated, they can expect to be subjected to further restrictions on their right to communicate with Americans. If states are not stopped from requiring licenses in the first place, they will continue to make it more difficult and more expensive for nonprofits to comply with their registration laws. Nonprofits and fundraisers are strongly encouraged to participate in any FSDEF amicus brief to the court of appeals. Senate Silences Congressional Effort To Censor Issue Advocacy On September 10, 1998, the McCain-Feingold campaign finance reform bill failed to overcome a filibuster in the U.S. Senate. The vote to end the filibuster was 52-48, 8 votes short of the 60 votes needed. February 1998 efforts to end a filibuster of this bill failed by the same margin. The McCain-Feingold bill was the Senate version of the Shays-Meehan bill which passed the House in August, as discussed in the August 1998 FREE SPEECH. This bill, if enacted, would have prohibited incorporated nonprofits from broadcasting issue advocacy which reports the stance of a clearly-identified federal candidate on any or every issue unless certain conditions were met. After the September 10 vote, Sen. McCain (R-AZ) stated that he had abandoned his efforts to pass the bill during this session of Congress. He noted the difficulty of raising public pressure on Republican senators to pass the bill: "Everybody's diverted by the President's problems. All the oxygen has been sucked out of the room by this firestorm." Nevertheless, Sen. Feingold (D-WI) stated that he would continue to offer the bill as an amendment to appropriations acts. (FSC takes no position with regard to campaign reform legislation except where it restricts advocacy organizations' exercise of their Constitutional rights.) Update on United Cancer Council Case According to the scheduling order in the United Cancer Council's appeal before the Seventh Circuit, the IRS brief is due on October 20, 1998. United Cancer Council's reply brief is due November 3, 1998. Thus, it will undoubtedly be 1999 before an appellate decision is made in this important case. Bill Offers Judicial Review of FASB Accounting Principles Currently, the Financial Accounting Standards Board ("FASB") establishes financial accounting principles, which have the full force and effect of Securities and Exchange Commission ("SEC") regulations. However, unlike regulations drafted by the SEC, there is no defined process for obtaining judicial review of FASB accounting principles. As a result, the FASB can "promulgate regulations" that are immune from review. To correct such unfairness, Rep. Baker (R-LA) has introduced HR 3165, which would "amend the Securities Exchange Act of 1934 to provide an opportunity for judicial review concerning the adoption of accounting principles applicable to issuers of federally-registered securities." HR 3165 would provide for the establishment of a public record, including all written comments or statements filed with the FASB with respect to the proposed accounting principle and all written communications between the FASB and any person relating to the proposed accounting principle. Additionally, after the FASB accounting principles have been approved by the SEC, they would become rules of the SEC, and therefore subject to judicial review. This bill is of interest to FSC members as they consider methods of challenging the American Institute of Certified Public Accountants' ("AICPA") Statement of Position ("SOP") 98-2. Like FASB's accounting principles, the AICPA accounting principles and standards enjoy the force of law, without any defined process for receiving judicial review. If HR 3165 were to serve as the model for a bill ensuring public access and judicial review of the AICPA's process for developing accounting principles and standards, such a bill &emdash; if enacted &emdash; could serve to check improper pressure on the AICPA from pressure groups such as the National Association of Attorneys General ("NAAG") and the National Association of State Charitable Officers ("NASCO"). Public exposure and judicial accountability could help to prevent such "indirect government regulation" and help to prevent future abuses. FSDEF Selects Two New Board Members Edyth Ledbetter, President of FSDEF, retired from her duties with the Center for Marine Conservation, and likewise submitted her resignation from the FSDEF board of directors. Mike Beard had previously submitted his resignation from the FSDEF board to become president of the Free Speech Coalition. At the July FSDEF board meeting, these two vacancies were filled by Harriet Trudell of the Feminist Majority and Josh Horwitz, Esquire, of the Educational Fund to End Handgun Violence. They join Ron Robinson of Young America's Foundation and Richard Dingman of America's Voice. Voting Rights Institute Seeks to Overturn First Amendment Protection of Political Speech In April 1998, the U.S. Court of Appeals for the Sixth Circuit struck down a Cincinnati campaign ordinance as unconstitutional. This decision has been appealed to the U.S. Supreme Court and would be litigated by the National Voting Rights Institute, which openly states that its intent is to have the Court overturn its 1976 decision in Buckley v. Valeo. Buckley recognizes some First Amendment protection for political speech, including contributions to political candidates. Among the creative allegations of the Institute is an assertion that permitting contributions to candidates violates the principle of "one person/one vote." Appeals Court Finds City Violated Nonprofit’s First Amendment Rights On September 3, 198, the U.S. Court of Appeals for the Fifth Circuit determined, in Citizen Action Fund v. City of Morgan City, that a city ordinance restricting solicitations during certain hours was unconstitutional as applied to a nonprofit. Citizen Action canvasses individuals door-to- door for the purpose of "disseminating information of public importance to citizens, building support for various legislative proposals and policies, obtaining signatures and memberships, and raising funds to further its informational and public-interest purposes." In 1994, a Morgan City, Louisiana ordinance prohibited solicitation between 5:30 p.m. and 8:30 a.m. for "the purpose of soliciting orders for the sale of goods, wares and merchandise." That year, an officer of the Louisiana affiliate of Citizen Action contacted the Morgan City mayor, police chief, and city attorney to find out whether the prohibition on solicitation would be applied to canvassing by Citizen Action &emdash; and was informed that the ordinance would apply to Citizen Action. In response, Citizen Action sued the city, without conducting any door-to-door canvassing. In a telephone status conference with the parties, the federal district court judge suggested that the ordinance might not apply to Citizen Action's proposed activities, and told counsel that the city may amend its ordinance to include such activities. The city amended its ordinance in November 1996 to prohibit noncommercial canvassing between 5:30 p.m. and 8:30 a.m. Citizen Action then filed a supplemental complaint, and the suit was expanded to challenge the constitutionality of both the original and the amended ordinance as written, as well as the original ordinance as applied. The district court judge ruled for the city on all issues. Citizen Action appealed the ruling that the original ordinance was constitutional as applied. The court of appeals found that Citizen Action's proposed contact with residents on environmental and consumer issues is speech protected by the First Amendment. Since threats of unconstitutional enforcement of laws against individuals can chill speech, the court concluded that Citizen Action's constitutional rights had been infringed by the threat to enforce the city ordinance &emdash; "an unlawful application of that law to intentionally deter and prevent the exercise of free speech in violation of the First Amendment." The Free Speech Coalition, Inc. is a nonpartisan, nonprofit 501(c)(4) organization which educates, lobbies, and litigates to defend the rights of advocacy organizations and their members. FSC needs your support to continue its fight to protect the rights of citizens to associate together and exercise their First Amendment right to petition their government for redress of their grievances. Contributions to the Free Speech Coalition, Inc. are not tax-deductible. However, contributions to the Free Speech Defense & Education Fund, Inc., a 501(c)(3) public charity, are tax-deductible.