199 F.3d 1241 (10th Cir. 2000), 98-4158, Am Target Adver., Inc. v Giani

Docket Nº:98-4158
Citation:199 F.3d 1241
Party Name:AMERICAN TARGET ADVERTISING, INC., a Virginia corporation, Plaintiff -Appellant, v. FRANCINE A. GIANI, in her official capacity as Division Director of the Utah Division of Consumer Protection, Department of Commerce for the State of Utah, Defendant - Appellee. BRUCE W. EBERLE & ASSOCIATES, INC.; FREE SPEECH DEFENSE AND EDUCATION FUND, INC., MIKE H
Case Date:January 13, 2000
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

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199 F.3d 1241 (10th Cir. 2000)

AMERICAN TARGET ADVERTISING, INC., a Virginia corporation, Plaintiff -Appellant,


FRANCINE A. GIANI, in her official capacity as Division Director of the Utah Division of Consumer Protection, Department of Commerce for the State of Utah, Defendant - Appellee.


No. 98-4158

United States Court of Appeals, Tenth Circuit

January 13, 2000


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Mark J. Fitzgibbons, American Target Advertising, Inc., Manassas, Virginia (Gifford W. Price, Mackey, Price & Williams, Salt Lake City, Utah, with him on the briefs), appearing for Appellant.

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Jeffrey S. Gray, Assistant Attorney General, Salt Lake City, Utah, appearing for Appellee.

F. Hayden Codding, Codding & Codding, Fairfax Virginia, filed an amicus curiae brief on behalf of Bruce W. Eberle & Associates, Inc.

William J. Olson, John S. Miles, Alan Woll, and John F. Callender, William J. Olson, P.C., McLean, Virginia; Mark B. Weinberg, Weinberg & Jacobs, LLP, Rockville, Maryland; Michael J. Norton, Norton-Lindstone, LLC, Englewood, Colorado; and Herbert W. Titus, Troy A. Titus, P.C., Virginia Beach, Virginia, filed an amicus curiae brief on behalf of the Free Speech Defense and Education Fund, Inc.

Mike Hatch, Attorney General, and Roberta J. Cordano, Assistant Attorney General, State of Minnesota, St. Paul, Minnesota, filed an amicus curiae brief on behalf of Mike Hatch, Minnesota Attorney General, et al.

Before TACHA, HOLLOWAY, and BALDOCK, Circuit Judges.

TACHA, Circuit Judge.

American Target filed this suit against Francine A. Giani in her official capacity as Director of the Utah Division of Consumer Protection. American Target sought declaratory, injunctive, and other relief, asking the district court to hold the Utah Charitable Solicitations Act unconstitutional. On cross motions for summary judgment, the district court granted summary judgment in favor of defendant. American Target filed a timely appeal, and we exercise jurisdiction pursuant to 28 U.S.C. § 1291. We affirm in part and reverse in part.

I. Background

American Target is a Virginia corporation that provides fundraising services to nonprofit organizations. The corporation is under contract to provide such services to Judicial Watch, Inc., a nonprofit organization located in Washington, D.C. Under this contract, American Target helps manage Judicial Watch's national direct mail campaign.

By virtue of its contract with Judicial Watch, American Target is classified as a professional fundraising consultant under the Utah Charitable Solicitations Act. Utah Code Ann. § 13-22-2(11) (Supp. 1999). The Act requires all professional fundraising consultants to register with the state and obtain a permit. Id. §§ 13-22-5, -9. To obtain the required permit, American Target must complete a written application, pay an annual fee of $250 and post a bond or letter of credit in the amount of $25,000. Id. § 13-22-9.

American Target has not complied with the registration requirements and is therefore barred from assisting Judicial Watch with its mailing in Utah. American Target claims that the Act violates several provisions of the U.S. Constitution, including the First Amendment, the Commerce Clause and the Due Process Clause of the Fourteenth Amendment. We address each constitutional challenge.

II. First Amendment

The First Amendment provides that government "shall make no law . . . abridging the freedom of speech." U.S. Const. amend. I. In a facial challenge, American Target argues that the Utah Act operates both as an impermissible abridgement of protected speech and as an unconstitutional prior restraint. Because nothing in the record indicates that the Act will have any different impact upon interests not before this court, we analyze both prongs of the First Amendment challenge as they are presented under the facts of this case. City Council of L.A. v. Taxpayers for Vincent, 466 U.S. 789, 801-02 (1984). If any provision should fail as applied to American Target, we will then decide if the provision is unconstitutional on its face. To find a provision facially unconstitutional,

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we must conclude that "any attempt to enforce such legislation would create an unacceptable risk of the suppression of ideas." Id. at 797.

A. Protected Speech

We review de novo challenges to the constitutionality of a statute. United States v. Hampshire, 95 F.3d 999, 1001 (10th Cir. 1996). In addition, where expressive activity is arguably protected by the First Amendment, this court must make an independent examination of the entire record. Bose Corp. v. Consumers Union of United States, Inc., 466 U.S. 485, 499 (1984). After such review, we conclude that all but three of the challenged provisions are consistent with the First Amendment.

Charitable solicitations qualify as protected speech for First Amendment purposes. Village of Schaumburg v. Citizens for a Better Env't, 444 U.S. 620, 632 (1980). Content neutral regulation of protected speech is subject to "an intermediate level of scrutiny." Turner Broad. Sys., Inc. v. Federal Communications Comm'n, 512 U.S. 622, 642 (1994). The "principal inquiry in determining content neutrality . . . is whether the government has adopted a regulation of speech because of disagreement with the message it conveys." Ward v. Rock Against Racism, 491 U.S. 781, 791 (1989). A measure designed not to "suppress the expression of unpopular views" but rather to control the "secondary" effects of speech will generally be deemed content neutral. Renton v. Playtime Theatres, Inc., 475 U.S. 41, 47-48 (1986).

The Utah Act targets the secondary effects of professional solicitations, i.e., increased fraud and misrepresentation. The Act does not authorize a content-based review of the charitable mailings. It simply facilitates oversight of the mailers' backgrounds and methods. Therefore, the Act is content neutral, and we accordingly subject it to intermediate scrutiny. The state must demonstrate that the Act (1) serves a substantial governmental interest and (2) is "narrowly drawn" to serve that interest "without unnecessarily interfering with First Amendment freedoms." Village of Schaumburg, 444 U.S. at 636-37.1

"The interest in protecting charities (and the public) from fraud is, of course, a sufficiently substantial interest to justify a narrowly tailored regulation." Riley v. National Fed'n of the Blind, 487 U.S. 781, 792 (1988). The stated purpose of the Utah Act is "to protect . . . citizens from harmful and injurious acts." Utah Code Ann. § 13-1-1 (1996). The registration and permit provisions require applicants to make detailed disclosure about past activities, including descriptions of any injunction, judgment or administrative order entered against them. Utah Code Ann. § 13-22-9 (Supp. 1999). The grounds for denying a permit center on findings of fraud and misrepresentation. Id. § 13-22-12. The Act's general declarations and specific prohibitions clearly target fraud. The Act therefore serves a substantial government interest.

All of the Act's provisions must be narrowly drawn to serve this recognized governmental

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purpose. We review those statutory provisions construed by the district court to determine whether the state has narrowly tailored them to prevent fraud.

1. Registration and Disclosure Requirements

The Act requires professional fundraising consultants like American Target to meet certain registration and disclosure requirements. Consultants must identify those involved in the solicitation process, disclose the purpose and method of solicitation, declare the existence of any injunctions, judgments, administrative orders, or criminal convictions involving moral turpitude, and provide copies of all agreements concerning fundraising. Id. § 13-22-9.

The Supreme Court has indicated that registration and disclosure provisions do not raise First Amendment problems. In Secretary of State v. Munson, 467 U.S. 947, 968 n.16 (1984), the Court recognized that "concerns about unscrupulous professional fundraisers, like concerns about fraudulent charities, can and are accommodated directly, through disclosure and registration requirements and penalties for fraudulent conduct." In Riley, the Court stressed that the state "may constitutionally require fundraisers to disclose certain financial information." Riley, 487 U.S. at 795. The Riley court further found that "the State may itself publish the detailed financial disclosure forms it requires professional fundraisers to file." Id. at 800.

Mandatory registration and disclosure enable Utah citizens to make informed decisions concerning their charitable donations. These requirements directly promote Utah's legitimate interest in combating fraud while not unnecessarily interfering with solicitors' protected speech. We find that the registration and disclosure provisions of the Utah Act are narrowly tailored to serve the state's substantial interest in fighting fraud.

2. Registration Fee

The Utah Act also requires fundraising consultants to pay an annual registration fee. The fee imposed must be "reasonable, fair and reflect the cost of services provided." Utah Code Ann. § 63-38-3.2(2)(a) (Supp. 1999); Utah Code Ann. § 13-22-9(1)(a) (Supp. 1999). Prior to fiscal year 1997, the state assessed a fee of $150. The Utah Division of Consumer Protection raised the fee to...

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