Secretary of State of Maryland v. Joseph Munson Company, Inc

• Decision Date: 26 June 1984
• Docket Number: No. 82-766,82-766
• Parties: SECRETARY OF STATE OF MARYLAND, Petitioner v. JOSEPH H. MUNSON COMPANY, INC
• Court: U.S. Supreme Court

467 U.S. 947

104 S.Ct. 2839

81 L.Ed.2d 786

SECRETARY OF STATE OF MARYLAND, Petitioner

v JOSEPH H. MUNSON COMPANY, INC.

No. 82-766.

Supreme Court of the United States

Argued Oct. 31, 1983.

Decided June 26, 1984.

Syllabus

A Maryland statute prohibits a charitable organization, in connection with any fundraising activity, from paying expenses of more than 25% of the amount raised, but authorizes a waiver of this limitation where it would effectively prevent the organization from raising contributions. Respondent is a professional fundraiser whose Maryland customers include various chapters of the Fraternal Order of Police, at least one of whom was reluctant to contract with respondent because of the statute's percentage limitation. Respondent brought suit in a Maryland Circuit Court for declaratory and injunctive relief, alleging that it regularly charges an FOP chapter in excess of the 25% limitation, that petitioner Secretary of State had informed it that if it refused to comply with the statute it would be prosecuted, and that the statute violated its right to free speech under the First and Fourteenth Amendments. Without addressing petitioner's argument that respondent lacked standing to assert its claims, the Circuit Court upheld the statute, and the Maryland Court of Special Appeals affirmed. The Maryland Court of Appeals reversed, holding that respondent had standing to challenge the statute's facial validity, that the statute was unconstitutional, and that its flaws were not remedied by the waiver provision.

Held:

1. Respondent has standing to challenge the statute. Not only does respondent satisfy the "case" or "controversy" requirement of Art. III, because it has suffered both threatened and actual injury as a result of the statute, but there also is no prudential reason against allowing respondent to challenge the statute. Where the claim is that the statute is overly broad in violation of the First Amendment, the Court has allowed a party to assert the rights of another without regard to the ability of the other to assert his own claim. The activity sought to be protected is at the heart of the business relationship between respondent and its customers, and respondent's interests in challenging the statute are completely consistent with the First Amendment interests of the charities it represents. Petitioner's concern that respondent should not have standing to challenge the statute as overbroad because it has not demonstrated that the statute's overbreadth is "substantial," is more properly reserved for the determination of respondent's challenge on the merits. Pp. 954-959.

2. Regardless of the waiver provision, the statute is unconstitutionally overbroad, its percentage restriction on charitable solicitation being an unconstitutional limitation on protected First Amendment solicitation activity. Schaumburg v. Citizens for a Better Environment, 444 U.S. 620, 100 S.Ct. 826, 63 L.Ed.2d 73. Pp. 959-970.

(a) The waiver provision does not save the statute. Charitable organizations whose high solicitation and administrative costs are due to information dissemination, discussion, and advocacy of public issues, rather than to fraud, remain barred by the statute from carrying on those protected First Amendment activities. Pp. 962-964.

(b) This is not a "substantial overbreadth" case where the plaintiff must demonstrate that the statute "as applied" to him is unconstitutional. Here there is no core of easily identifiable and constitutionally proscribable conduct that the statute prohibits. The statute cannot distinguish organizations that have high fund-raising costs not due to protected First Amendment activities from those that have high costs due to protected activity. The flaw in the statute is not simply that it includes some impermissible applications but that in all its applications it operates on a fundamentally mistaken premise that high solicitation costs are an accurate measure of fraud. Where, as here, a statute imposes a direct restriction on protected First Amendment activity and where the statute's defect is that the means chosen to accomplish the State's objectives are too imprecise, so that in all its applications the statute creates an unnecessary risk of chilling free speech, the statute is properly subject to facial attack. Pp. 964-968.

(c) Whether the statute regulates before- or after-the-fact is immaterial. Whether the charity is prevented from engaging in protected First Amendment activity by lack of a solicitation permit or by knowledge that its fundraising activity is illegal if it cannot satisfy the percentage limitation, the chill on the protected activity is the same. The facts that the statute restricts only fundraising expenses and not other expenses and that a charity may elect whether to be bound by its fundraising percentage for the prior year or to apply the 25% limitation on a campaign-by-campaign basis, do nothing to alter the fact that the significant fundraising activity protected by the First Amendment is barred by the percentage limitation. And the fact that the statute regulates all charitable fundraising and not just door-to-door solicitation, does not remedy the fact that the statute promotes the State's interests only peripherally. Pp. 968-970.

294 Md. 160, 448 A.2d 935, affirmed.

Diana Gribbon Motz, Asst. Atty. Gen., Baltimore, Md., for petitioner.

Yale L. Goldberg, Rockville, Md., for respondent.

Justice BLACKMUN delivered the opinion of the Court.

In Schaumburg v. Citizens for a Better Environment, 444 U.S. 620, 100 S.Ct. 826, 63 L.Ed.2d 73 (1980), this Court, with one dissenting vote, concluded that a municipal ordinance prohibiting the solicitation of contributions by a charitable organization that did not use at least 75% of its receipts for "charitable purposes" was unconstitutionally overbroad in violation of the First and Fourteenth Amendments. The issue in the present case is whether a Maryland statute with a like percentage limitation, but with provisions that render it more "flexible" than the Schaumburg ordinance, can withstand constitutional attack. The Court of Appeals of Maryland concluded that, even with this increased flexibility, the percentage restriction on charitable solicitation was an unconstitutional limitation on protected First Amendment solicitation activity. We agree with that conclusion and affirm the judgment of the Court of Appeals.

I

Joseph H. Munson Co., Inc. (Munson), an Indiana corporation, instituted this action in the Circuit Court for Anne Arundel County, Md., seeking declaratory and injunctive relief against the Secretary of State of Maryland (Secretary). Munson is a professional for-profit fundraiser in the business of promoting fundraising events and giving advice to customers on how those events should be conducted. Its Maryland customers include various chapters of the Fraternal Order of Police (FOP).

Section 103A et seq., Art. 41, Md.Ann.Code (1982),¹ concern charitable organizations. Section 103D prohibits such an organization, in connection with any fundraising activity, from paying or agreeing to pay as expenses more than 25% of the amount raised.² Munson in its complaint alleged that it regularly charges an FOP chapter an amount in excess of 25% of the gross raised for the event it promotes. App. 4. Munson also alleged that the Secretary had informed it that it was subject to § 103D and would be prosecuted if it failed to comply with the provisions of that statute. App. 5.

In its initial complaint, filed March 7, 1978, Munson took the position that its contracts with the FOP should not be subject to § 103A et seq. The Circuit Court dismissed that challenge for failure to exhaust administrative remedies. The court concluded, however, that Munson could attack the statutes as an improper delegation of legislative authority, in violation of the Maryland Constitution. App. 13. Munson then amended its complaint to allege that the statutes effected an unconstitutional infringement on its right to free speech and assembly under the First and Fourteenth Amendments of the United States Constitution. Id., at 26.

The Secretary questioned Munson's standing to assert its claims. He urged that § 103D is directed to acts of charitable organizations and, therefore, that only an organization of that kind can challenge the statute's constitutionality. The Secretary also urged that Munson's claims presented no actual controversy, because Munson had failed to exhaust its administrative remedies and, consequently, there had been no binding determination that the statute would apply to Munson's contracts. App. 29.

The Circuit Court did not address the standing argument, but upheld the statute on the merits. App. to Pet. for Cert. 38a. It concluded that because the statute included a provision authorizing a waiver of the percentage limitation "in those instances where the 25% limitation would effectively prevent a charitable organization from raising contributions," it was sufficiently flexible to accommodate legitimate First Amendment interests. Id., at 46a. The court also rejected Munson's state-law claim that the statute was an impermissible delegation of legislative authority.

Munson appealed to the Court of Special Appeals of Maryland. The Secretary did not take a cross-appeal. The Court of Special Appeals affirmed the judgment of the Circuit Court. 48 Md.App. 273, 426 A.2d 985 (1981).

Both Munson and the Secretary then petitioned the Court of Appeals of Maryland for writs of certiorari. Munson challenged the validity of the statute and the Secretary challenged Munson's standing. The court granted both petitions and, by a unanimous vote, reversed the judgment of the Court of Special Appeals. 294 Md. 160, 448 A.2d 935 (1982). It expressed doubt about the Secretary's ability to challenge Munson's standing when the Secretary had not taken an appeal from the Circuit Court's judgment, but, assuming that the issue...