NOTE: This text was converted to HTML/Web format from a copy of the electronic file used to print the official document that was submitted to the court. This text was not derived from the official printed document itself, and may not be considered a legal copy of the official document. Although the text itself is believed to be identical to that of the originating electronic file, the nature of HTML format makes the exact layout of the text on the page somewhat unpredictable. As a result, this text will not exactly duplicate the appearance of the official printed document, and page numbers in particular should be discounted.
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No. 98-4158 |
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IN THE UNITED STATES COURT OF APPEALS |
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AMERICAN TARGET ADVERTISING, INC., Plaintiff/Appellant,
Defendant/Appellee. |
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On Appeal from the United States District Court The Honorable Dee Benson D.C. No. 2:97 CV 610B |
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BRIEF OF APPELLEE |
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| JEFFREY S. GRAY Assistant Attorneys General 160 East 300 South, 5th Floor P.O. Box 140872 Salt Lake City, Utah 84114-0872 (801) 366-0180 |
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ORAL ARGUMENT REQUESTED |
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TABLE OF CONTENTS
TABLE OF CONTENTS . . . . . . . . . . ii
TABLE OF AUTHORITIES . . . . . . . . . . v
PRIOR OR RELATED APPEALS . . . . . . . . . . 1
STATEMENT OF JURISDICTION . . . . . . . . . . 1
STATEMENT OF THE ISSUES . . . . . . . . . . 1
STATEMENT OF THE CASE . . . . . . . . . . 1
STATEMENT OF RELEVANT FACTS . . . . . . . . . . 2
SUMMARY OF THE ARGUMENT . . . . . . . . . . 4
ARGUMENT . . . . . . . . . . 6
I. THE ACT DOES NOT VIOLATE THE FIRST AMENDMENT
TO THE UNITED STATES CONSTITUTION . . . . . . . .
. . 6
Issue and Applicable Standard of Review . . . . . . . . . . 6
Discussion . . . . . . . . . . 7
A. SUMMARY OF FIRST AMENDMENT ANALYSIS . . . . . . . . . . 8
B. THE ACT IS A CONTENT-NEUTRAL REGULATION SUBJECT
TO INTERMEDIATE SCRUTINY . . . . . . . . . . 141. THE PURPOSE OF THE ACT IS TO PROTECT UTAH
RESIDENTS AND CHARITIES FROM FRAUD AND
OTHER HARMFUL AND INJURIOUS ACTS . . . . . . . . . . 142. THE ACT IS CONTENT NEUTRAL . . . . . . . . . . 15
C. THE ACT IS NARROWLY TAILORED TO A SUBSTANTIAL
STATE INTEREST . . . . . . . . . . 181. PROTECTING THE PUBLIC AND CHARITIES FROM
FRAUD AND OTHER HARMFUL OR INJURIOUS ACTS
IS A SUBSTANTIAL STATE INTEREST . . . . . . . . . . 182. THE REGISTRATION REQUIREMENTS ARE
NARROWLY TAILORED . . . . . . . . . . 213. THE REGISTRATION FEE IS NARROWLY TAILORED . . . . . . . . . . 23
4. THE BOND REQUIREMENT IS NARROWLY TAILORED . . . . . . . . . . 25
D. THE REGISTRATION REQUIREMENT IS NOT AN
UNCONSTITUTIONAL PRIOR RESTRAINT . . . . . . . . . . 271. REVIEW OF PRIOR RESTRAINT ANALYSIS . . . . . . . . . . 27
2. ATA WAIVED ANY CHALLENGE THAT THE ACT DOES
NOT SATISFY THE FREEDMAN SAFEGUARDS BY
FAILING TO RAISE THE ISSUE IN THE DISTRICT COURT . . . . . . . . . . 313. THE ACT NEVERTHELESS SATISFIES PRIOR
RESTRAINT REQUIREMENTS FOR CONTENT NEUTRAL
REGULATIONS . . . . . . . . . . 324. THE ACT DOES NOT GRANT THE DIRECTOR WITH
UNBRIDLED DISCRETION . . . . . . . . . . 33
II. THE ACT DOES NOT VIOLATE THE COMMERCE CLAUSE
TO THE UNITED STATES CONSTITUTION . . . . . . . . . . 37
Issue and Applicable Standard of Review . . . . . . . . . . 37
Discussion . . . . . . . . . . 37
A. OVERVIEW OF COMMERCE CLAUSE ANALYSIS . . . . . . . . . . 37
B. THE ACT DOES NOT VIOLATE THE COMMERCE CLAUSE
UNDER THE PIKE BALANCING TEST . . . . . . . . . . 38
III. THE ACT DOES NOT VIOLATE THE DUE PROCESS CLAUSE OF
THE FOURTEENTH AMENDMENT TO THE UNITED STATES
CONSTITUTION . . . . . . . . . . 43
Issue and Applicable Standard of Review . . . . . . . . . . 43
Discussion . . . . . . . . . . 43
CONCLUSION . . . . . . . . . . 47
STATEMENT REGARDING ORAL ARGUMENT . . . . . . . . . . 47
CERTIFICATE OF COMPLIANCE . . . . . . . . . . 48
CERTIFICATE OF SERVICE . . . . . . . . . . 49
ADDENDUM
Attachment A (Utah Charitable Solicitation Act)
Attachment B (Agency Regulations)
Attachment C (Utah Code Ann. § 63-38-3.2)
TABLE OF AUTHORITIES
FEDERAL CASES
Baltimore Blvd., Inc. v. Prince Georges County, 58 F.3d 988 (4th Cir. 1995) 30
Blue Circle Cement, Inc. v. Board of County Commissioners,
27 F.3d 1499 (10th Cir. 1994) 40-41
Board of Trustees v. Fox, 492 U.S. 469, 109 S. Ct. 3028 (1989) 9, 12, 25
Boos v. Barry, 485 U.S. 312, 108 S. Ct. 1157 (1988) 11, 15, 16
Brown-Forman Distillers Corp. v. New York State Liquor Authority,
476 U.S. 573, 106 S.Ct. 2080 (1986) 38-39
Burger King Corp. v. Rudeicz, 471 U.S. 462, 105 S. Ct. 2174 (1985) 43-44
Cable Communications of California, Inc. v. FCC,
492 U.S. 115, 109 S. Ct. 2829 (1989) 11
Central Hudson Gas & Electric Corp. v Public Service Commission,
447 U.S. 557, 100 S. Ct. 2343 (1980) 8-10, 13
City of Lakewood v. Plain Dealer Publishing Co.,
486 U.S. 750, 108 S. Ct. 2138 (1988) 28
City of Renton v. Playtime Theatres, Inc.,
475 U.S. 41, 106 S.Ct. 925 (1986) 14, 20
Cox v. New Hampshire, 312 U.S. 569, 61 S. Ct. 762 (1941) 23
Dayton Area Visually Impaired Persons, Inc. v. Fisher,
70 F.3d 1474 (6th Cir. 1995) 24, 26
Dorrance v. McCarthy, 957 F.2d 761 (10th Cir. 1992) 39, 41
East Brooks Books, Inc. v. City of Memphis, 48 F.3d 220 (6th Cir. 1995) 30
Edenfield v. Fane, 507 U.S. 761, 113 S. Ct. 1792 (1993) 10
Exxon Corp v. Governor of Maryland, 437 U.S. 117, 98 S. Ct. 2207 (1978) 42
FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 110 S. Ct. 596 (1990) 27-31, 33
Ferndale Laboratories, Inc. v. Cavendish, 79 F.3d 488 (6th Cir. 1996) 40
Freedman v. Maryland. In Freedman v. Maryland,
380 U.S. 51, 85 S. Ct. 734 (1965) 27-30
Gross v. Burgraaf Construction Co., 53 F.3d 1531 (10th Cir. 1995) 36
Heritage Publishing Company v. Fishman, 634 F. Supp. 1489 (D. Minn. 1986) 34-35
International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154 (1945) 43-44
Jews for Jesus, Inc. v. Massachusetts Bay Transportation Authority,
984 F.2d 1319 (1st Cir. 1993) 30, 33
Lanphere & Urbaniak, 21 F.3d 1508 (10th Cir. 1994) 9
Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 100 S. Ct. 2009 (1980) 37
National Awareness Foundation v. Abrams, 50 F.3d 1159 (2nd Cir. 1995) 23
Perry Education Association v. Perry Local Educators' Association,
460 U.S. 37, 103 S.Ct. 948 (1983) 11-12
Phillips v. Calhoun, 956 F.2d 949 (10th Cir. 1992) 41
Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S. Ct. 844 (1970) 5, 38, 40
Quill Corp. v. North Dakota, 504 U.S. 298, 112 S. Ct. 1904 (1992) 37, 46
R.A.V. v. City of St. Paul, 505 U.S. 377, 112 S. Ct. 2538 (1992) 11
Revo v. Disciplinary Board of the Supreme Court, 136 F.3d 683 (10th Cir. 1997) 7
Riley v. National Federation of the Blind of North Carolina,
487 U.S. 781, 108 S. Ct. 2667 (1988) passim
Secretary of State of Maryland v. Joseph H. Munson Co.,
467 U.S. 947, 104 S. Ct. 2839 (1984) 17
Staub v. City of Baxley., 355 U.S. 313, 78 S. Ct. 277 (1958) 34
TKs Video, Inc. v. Denton County, 24 F.3d 705 (5th Cir. 1994) 30
Telco Communications, Inc. v. Carbaugh, 885 F.2d 1225 (4th Cir. 1989) 23
Turner Broadcasting Systems, Inc. v. FCC,
512 U.S. 622, 114 S. Ct. 2445 (1994) 10-14, 20
United States v. OBrien, 391 U.S. 367, 88 S. Ct. 1673 (1968) 18
United States v. Salerno, 481 U.S. 747, 107 S. Ct. 2095 (1987) 5, 38, 43
Village of Schaumberg v. Citizens for a Better Environment,
444 U.S. 620, 100 S. Ct. 826 (1980) 8, 16, 17, 22
Vitkus v. Beatrice Co., 127 F.3d 936 (10th Cir. 1997) 31, 32
Z.J. Gifts D-2, L.L.C. v. City of Aurora, 136 F.3d 683 (10th Cir. 1998) 20
Ward v. Rock Against Racism, 491 U.S. 781, 109 S. Ct. 2746 (1989) 13, 14, 32
Weston Funding Corp. v. Lafayette Towers, Inc.,
550 F.2d 710 (2nd Cir. 1977) 19
Wolf v. Prudential Insurance Co. of America, 50 F.3d 793 (10th Cir. 1995) 7, 37, 42
STATE CASES
Evan v. State, 963 P.2d 177 (Utah 1998) 14
DOCKETED CASES
American Charities for Reasonable Fundraising Regulation, Inc. v.
Pinellas County, No. 97-2058-CIV-T-17B, 1998 WL 839860
(M.D. Fla. Nov. 12, 1998) 18, 33, 42
FEDERAL STATUTES
Fed. R. App. P. 32 48
Fed. R. Civ. P. 56 6, 18, 37, 42
U.S. Const. amend. I 8
U.S. Const. art. I 37
STATE STATTUTES
Utah Admin. Code R152-22-3 (1997) 1
Utah Admin. Code R152-22-6 (1997) 15
Utah Admin. Code R152-22-4 (1997) 36
Utah Code Ann. § 13-1-1 (1996) 3, 14
Utah Code Ann. § 13-2-5 (1996) 35, 36
Utah Code Ann. § 13-22-1 et seq. (1998 Supp.) 3, 4
Utah Code Ann. § 13-22-5 (1998 Supp.) 7, 14, 27
Utah Code Ann. § 13-22-6 (1998 Supp.) 3
Utah Code Ann. § 13-22-9 (1998 Supp.) 15, 22, 24, 27
Utah Code Ann. § 13-22-12 (1998 Supp.) 34, 35
Utah Code Ann. § 13-22-13 (1996) 8, 15
Utah Code Ann. § 63-38-3.2 (1993) 4
Utah Code Ann. § 63-38-3.2 (1998 Supp.) 24
Utah Code Ann. § 63-46a-1 (1998 Supp.) 36
PRIOR OR RELATED APPEALS
There are no prior or related appeals.
STATEMENT OF JURISDICTION
The Director is satisfied with the Statement of Jurisdiction set forth in the appellant's brief.
STATEMENT OF THE ISSUES
ISSUE I. Was the trial court correct in concluding that the provisions of the Charitable Solicitations
Act relating to the registration of professional fund raising consultants do not violate the First Amendment to
the United States Constitution?
ISSUE II. Was the trial court correct in concluding that the provisions of the Charitable Solicitations Act relating to the registration of professional fund raising consultants do not violate the Commerce Clause of the United States Constitution?
ISSUE III. Was the trial court correct in concluding that the provisions of the Charitable Solicitations Act relating to the registration of professional fund raising consultants do not violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution?
STATEMENT OF THE CASE
The Director is satisfied with the appellant's Statement of the Case except insofar as it alleges Utah Admin. Code
R152-22-3(4) was not in effect until October 15, 1997. Such regulation was in effect no later than December 31,
1996.1
STATEMENT OF RELEVANT FACTS
American Target Advertising, Inc. ("ATA") is a corporation organized and located in Virginia. Aplt. App.
at 226-27. ATA has no offices, employees, directors, agents, bank accounts, or real property in Utah. Aplt. App.
at 227. In 1996, Judicial Watch, Inc., a nonprofit organization in Washington, D.C., entered into an Agreement
with ATA to, in substance, "build a national base of supporters across the country." Aplt. App. at 227,
397 (quoting deposition testimony of ATA vice president).
Pursuant to the Agreement with Judicial Watch, ATA consults and advises the charity regarding its solicitations and other communications to the public. Aplt. App. at 16-17 (§ 1.A). Beyond its consulting services, however, ATA is generally responsible for all direct mail packages. Aplt. App. at 17 (§ 1.B). ATA prepares the creative copy and design of mailings. Aplt. App. at 16-17 (§ 1.A). ATA acts as Judicial Watch's disclosed agent in acquiring production services relevant to direct mail solicitations, including the ordering of services and materials from vendors and suppliers. Aplt. App. at 16-17 (§§ 1.A & 2). Judicial Watch relies on ATA to select lists for potential donors and identify dates when mailings should occur. See Aplt. App. at 16-17 (§ 1.A). Moreover, ATA is Judicial Watch's exclusive list broker for all solicitations performed under the agreement. Aplt. App. at 16-17 (§ 1.A.).
Under the Agreement, all contributions from mailings are deposited into an escrow account administered by an agent and pursuant to an escrow agreement that are approved by both ATA and Judicial Watch. Aplt. App. at 17 (§ 3.A). Contributions must then be disbursed, first, to ATA for cost advances, and second, to vendors and suppliers (including ATA) for the costs associated with the mailings. Aplt. App. at 17-18 (§ 3.B). After the payment of all advances and costs, a portion of the balance is to be held in reserve for the payment of future costs and a portion is to be disbursed to Judicial Watch. Aplt. App. at 17- 18 (§ 3.B). Moreover, payment for ATA's services is dependent on the success of the solicitations. See Aplt. App. at 27 (§ 2 of Memo).
ATA receives 8¢ for each direct mail solicitation (in Utah and any other state) and 7¢ for each newsletter or thank you letter. Aplt. App. at 19 (§ 4.A). ATA also receives $1.00 for every person that participates in a monthly giving program established by the parties up to $5,000.00 per month. Aplt. App. at 19 (§ 4.C). ATA receives 10¢ for each name rented by Judicial Watch from the "Agency Masterfile" other than those names developed under the agreement. Aplt. App. at 21 (§ 5.C).
In accordance with Utah's Charitable Solicitations Act, Utah Code Ann. §§ 13-22-1 to 21 (1998 Supp.) (the "Act"), Judicial Watch is registered with the Utah Division of Consumer Protection ("Division") as a charity that solicits contributions from Utah residents. Aplt. App. at 227. However, ATA has not registered with the Division as either a professional fundraiser or consultant. Under to the Act, Judicial Watch may not solicit contributions from Utah residents through ATA until and unless ATA registers with the Division. Utah Code Ann. § 13-22-6(1)(b)(xiv)(B) (1998 Supp.). Among the interests sought to be advanced by the State under the Act is the protection of Utah residents (and charities who solicit in the State) from harmful or injurious acts, including fraud, by those who participate in the charitable solicitation process, including professional fundraisers and professional fund raising counsel or consultants ("consultants"). Utah Code Ann. § 13-1-1 (1996); Utah Code Ann. §§ 13-22-1 to -21 (1998 Supp.); Aplt. App. at 186 (Affidavit of Director, ¶3).
Approximately twenty-nine professional fundraisers registered with the State during the 1994 fiscal year. In the 1997 fiscal year, ninety professional fundraisers and consultants registered with the State. Aplt. App. at 186-87. The increase in registrations required the Division to devote additional resources to administer the Act relating to professional fundraisers and consultants. Aplt. App. at 187. As a result, and in accordance with Utah Code Ann. § 63-38-3.2 (1993), the Division adopted an increase in the registration fee from $150.00 to $250.00 for the 1997 fiscal year and thereafter to defray the costs of regulating professional fundraisers and consultants. Aplt. App. at 186-87 (¶¶ 6-9).
SUMMARY OF THE ARGUMENT
Issue I: First Amendment. The district court correctly examined and upheld the Act under the standard applied
to content neutral regulations of protected speech, requiring that such regulations be narrowly tailored to a legitimate
or substantial state interest. The Act's purpose to protect the public and charities from fraud and other harmful
and injurious acts is a sufficiently substantial interest to justify a narrowly tailored regulation. The registration
requirement, including the registration fee, and the bonding requirement are narrowly tailored to the State's interest.
ATA's suggestion that any prior restraint of political speech is unconstitutional, regardless of the reasons asserted by the government, is not supported by case law. ATA failed to argue that the Act did not comply with the Freedman procedural safeguards, and therefore, waived its right to raise those issues on appeal. In any case, the Act does, in fact, include the procedural safeguards required in content neutral licensing schemes. Moreover, the "public interest" prong in the Act's revocation provision does not grant undue discretion to the Director. The remaining incidents of undue discretion alleged by ATA were not preserved for appeal and do not otherwise confer the Director with undue discretion.
Issue II: Commerce Clause. The district court correctly examined and upheld the Act under the Commerce Clause. The district court was correct in rejecting ATA's argument that the Act should be examined under the test applied to laws that discriminate against out-of- state business or that impose taxes on out-of-state business. The appropriate test, as held by the district court, was set forth in Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844 (1970). In light of the purpose of the Act to protect the public from fraud, and given the alleged burdens registration imposes on ATA, the Court was correct in concluding that ATA failed to demonstrate that such burdens were clearly excessive in relation to the local benefits. ATA also failed to demonstrate any substantial impact on interstate commerce. In addition, any facial challenge to the Act under the Commerce Clause must fail under United States v. Salerno, 481 U.S. 747, 107 S.Ct. 2095 (1987), because the Act's application to in- state consultants cannot offend the Commerce Clause.
Issue III: Due Process Clause. The district court correctly examined and upheld the Act under the Due Process Clause. ATA plays a substantial and significant role in soliciting contributions on behalf of its client charity. A review of the agreement between ATA and its client charity establishes that ATA's efforts are "purposefully directed" toward residents of Utah and other states, sufficient to put it on fair notice that it may be subject to suit or regulation in Utah. Therefore, the Act's regulation of ATA and other professional consultants is not inconsistent with due process values. Finally, any facial challenge to the Act under the Due Process Clause must also fail under Salerno because the Act's application to in-state consultants cannot offend the Commerce Clause.
ARGUMENT
I.
THE ACT DOES NOT VIOLATE THE FIRST AMENDMENT
TO THE UNITED STATES CONSTITUTION.
Issue and Applicable Standard of Review
American Target Advertising, Inc. ("ATA"), first argues that Utah's Charitable Solicitations Act (the "Act") constitutes an unconstitutional prior restraint in violation of the First Amendment because (1) the Act requires professional fund raising consultants to obtain a permit prior to fundraising (Aplt. Brf. at 9), and (2) the Act accords unbridled discretion with the Director to grant or deny a permit (Aplt. Brf. at 19). In the second issue raised on appeal, ATA argues that the Act's registration requirements, registration fees, and bonding requirements must also be held unconstitutional because they fail to meet the "exacting" scrutiny standard under the First Amendment. Appellant's Brief, pp. 21-39. Because both of these issues challenge the constitutionality of the Act under the First Amendment, the Director will address them as one issue.
The Court of Appeals "review[s] the grant or denial of summary judgment de novo, applying the same legal standard used by the district court pursuant to Fed.R.Civ.P. 56(c). Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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. When applying this standard, [the court] examine[s] the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment. If there is no genuine issue of material fact in dispute, then [the court] next determine[s] if the substantive law was correctly applied by the district court." Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796 (10th Cir. 1995). Moreover, because the issue raised by ATA challenges the Act under the First Amendment, the Court of Appeals "review[s] the district court's findings of constitutional fact and its ultimate conclusions of constitutional law de novo." Revo v. Disciplinary Board of the Supreme Court, 136 F.3d 683, 685 (10th Cir. 1997).
Discussion
At the outset, it is important to clarify the reach of the Act. In its argument, ATA characterizes the Act as a licensing requirement imposed on charitable organizations (hereafter referred to as "charities") that simply wish to mail letters into Utah. Aplt. Brf. at 10. The Act is not this far reaching. Indeed, if all that ATA does is mail letters into Utah on behalf of its client charity-whether the letters address social, religious, or political topics, and whether their purpose is to inform or persuade-neither the charity nor ATA would be required to register with the state. The registration requirements are triggered only if the charity, or the fund raising consultant on its behalf, solicits contributions in Utah. Utah Code Ann. § 13-22-5 (1998 Supp.). Accordingly, the Act is not a blatant attempt by the State to license core political speech as suggested by ATA, but rather a means to regulate those who solicit charitable contributions from Utah residents. With this in mind, we may proceed with an analysis of the Act.
A. SUMMARY OF FIRST AMENDMENT ANALYSIS.
The First Amendment, which applies to the states through the Fourteenth Amendment, provides that "Congress shall make no law . . . abridging the freedom of speech." U.S. Const. amend. I; see Central Hudson Gas & Electric Corp. v Public Service Comm'n, 447 U.S. 557, 561, 100 S.Ct. 2343, 2349 (1980). Accordingly, the threshold inquiry in any review of laws that affect speech is a determination of whether or not the speech subject to regulation is protected under the First Amendment. Aside from prohibiting fraudulent or misleading solicitations (see Utah Code Ann. § 13-22-13(3) (1996)), which are not protected speech, the Act also regulates those who are in the business or profession of soliciting charitable contributions. It is the regulation of those who solicit charitable contributions to which ATA objects.
The Director acknowledges that charitable solicitations that do not mislead or otherwise concern unlawful activity enjoy First Amendment protection. See Village of Schaumberg v. Citizens for a Better Environment, 444 U.S. 620, 632, 100 S.Ct. 826, 833 (1980) ("[C]haritable appeals for funds, on the street or door to door, involve a variety of speech interests . . . that are within the protection of the First Amendment."); Riley v. Nat'l Federation of the Blind of North Carolina, 487 U.S. 781, 789, 108 S.Ct. 2667, 2673 (1988).
Notwithstanding its protected status under the First Amendment, "[s]oliciting financial support is undoubtedly subject to reasonable regulation ." Schaumberg, 444 U.S. at 632, 100 S.Ct. at 833-34. There is an abundance of case law addressing the appropriate standard by which laws should be judged for reasonableness under the First Amendment. The degree of First Amendment protection is generally a function of the nature of the speech that is restricted. Accordingly, the Supreme Court has examined laws restricting speech under different levels of scrutiny based on the nature of the speech subject to regulation-applying "exact" or "strict" scrutiny in some cases and "intermediate" scrutiny in others. While the plethora of decisions have not always been entirely consistent in this regard, certain well- settled principles have emerged. A review of the case law reveals that the following two issues are at the heart of almost all First Amendment analyses: (1) the importance of the governmental interest sought to be advanced, and (2) the degree to which the law has been tailored to that interest. In one form or another, these two issues form an integral part of almost every test used in assessing the constitutionality of laws regulating protected speech.
Regulations of Commercial Speech. The general test applied in assessing the validity of restrictions on commercial speech is that set forth in Central Hudson Gas & Electric Corp. v. Public Service Comm'n, 447 U.S. 557, 100 S.Ct. 2343 (1980). See Lanphere & Urbaniak, 21 F.3d 1508, 1513-14 (10th Cir. 1994). Under Central Hudson, a law regulating commercial speech survives scrutiny if (1) the law directly advances a substantial state interest, and (2) the law is in proportion to that interest. Central Hudson, 447 U.S. at 564, 100 S.Ct. at 2350. In describing the limits to which government can regulate commercial speech under Central Hudson, the Supreme Court has "repeatedly stated that government restrictions upon commercial speech may be no more broad or no more expansive than 'necessary' to serve its substantial interests." Board of Trustees v. Fox, 492 U.S. 469, 476, 109 S.Ct. 3028, 3032 (1989) (citations omitted). Notwithstanding this language, the Court has not interpreted Central Hudson as imposing a least restrictive means requirement.
In order to satisfy the "narrow tailoring" requirement under the Central Hudson standard, the Supreme Court requires "a 'fit' between the legislature's ends and the means chosen to accomplish those ends-a fit that is not necessarily perfect, but reasonable; that represents not necessarily the single best disposition but one whose scope is 'in proportion to the interest served.'" Id. at 480, 109 S.Ct. at 3035; accord Edenfield v. Fane, 507 U.S. 761, 767, 113 S.Ct. 1792, 1798 (1993). This test has been characterized as imposing an "intermediate" level of scrutiny. Id; Central Hudson, 447 U.S. at 573, 100 S.Ct. at 2355 (Brennan, J., concurring).
Other Protected Speech, Including Political Speech. Speech relating to matters of political or social
concern and other forms of expression have traditionally enjoyed greater protections under the First Amendment
than that accorded commercial speech. This is so because "[a]t the heart of the First Amendment lies the principle
that each person should decide for himself or herself the ideas and beliefs deserving of expression, consideration,
and adherence." Turner Broadcasting Systems, Inc. v. FCC, 512 U.S. 622, 641, 114 S.Ct. 2445, 2458 (1994)
(hereinafter cited as "TBS"). Of greatest concern to First Amendment principles is "[g]overnment
action that stifles speech on account of its message, or that requires the utterance of a particular message favored
by the Government." Id. On the other hand, laws regulating protected speech for reasons unrelated to
the message do not foster as great a concern. See id. at 642, 114 S.Ct. at 2459. Accordingly, the Supreme
Court has applied different tests or levels of scrutiny depending on the risk they pose to core First Amendment
values.
Content-Based Regulations. "[C]ontent-based restriction[s] on political speech in a public forum .
. . must be subjected to the most exacting scrutiny." Boos v. Barry, 485 U.S. 312, 321, 108 S.Ct. 1157,
1164 (1988). Accord TBS, 512 U.S. at 642, 114 S.Ct. at 2459; Riley, 487 U.S. at 798, 108 S.Ct. at
2678. This level of scrutiny has also been referred to as "strict" scrutiny. See TBS, 512 U.S.
at 658, 114 S.Ct. at 2467. Laws regulating speech based on its content are presumed invalid. See R.A.V. v. City
of St. Paul, 505 U.S. 377, 382, 112 S.Ct. 2538, 2542 (1992). To survive scrutiny under this standard, "the
State [must] show (1) that the 'regulation is necessary to serve a compelling state interest[,] and [2] that it
is narrowly drawn to achieve that end.'" Boos, 485 U.S. at 321, 108 S.Ct. at 1164 (quoting Perry
Education Association v. Perry Local Educators' Association, 460 U.S. 37, 45, 103 S.Ct. 948, 955 (1983)).
The "narrow tailoring" requirement under this test, unlike that used in the context of commercial speech, requires the State to "choose[ ] the least restrictive means to further the articulated interest." Cable Communications of California, Inc. v. FCC, 492 U.S. 115, 126, 109 S.Ct. 2829, 2836 (1989). The Supreme Court has applied strict or exacting scrutiny to content-based restrictions of speech because they strike at the very core of First Amendment concerns. "Laws of this sort pose the inherent risk that the Government seeks not to advance a legitimate regulatory goal, but to suppress unpopular ideas or information or manipulate the public debate through coercion rather than persuasion." TBS, 512 U.S. at 641, 114 U.S. at 2458 (citations omitted).
Content-Neutral Regulations. "In contrast, regulations that are unrelated to the content of speech are subject to an intermediate level of scrutiny because in most cases they pose a less substantial risk of excising certain ideas or viewpoints from the public dialogue." Id. at 642, 114 U.S. at 2459. Accordingly, content-neutral restrictions survive First Amendment scrutiny if (1) they serve a legitimate or substantial government interest, and (2) they are narrowly tailored to that interest. Ward, 491 U.S. at 798, 109 S.Ct. at 2757-58;2 accord TBS, 512 U.S. at 662-63, 114 S.Ct. at 2469; see Riley, 487 U.S. at 792, 108 S.Ct. at 2675.
Addressing the test applied to content neutral restrictions, the Supreme Court in Fox observed:
We have refrained from imposing a least-restrictive-means requirement-even where core political speech is at issue-in assessing the validity of so-called time, place, and manner restrictions. . . . Similarly with respect to government regulation of expressive conduct, including conduct expressive of political views. In requiring that to be "narrowly tailored" to serve an important or substantial state interest, we have not insisted that there be no conceivable alternative, but only that the regulation not "burden substantially more speech than is necessary to further the government's legitimate interests." And we have been loath to second-guess the Government's judgment to that effect.
492 U.S. at 477-78, 109 S.Ct. at 3033-34 (citations omitted) (emphasis added); accord Ward, 491 U.S. at 798, 109 S.Ct. at 2757-58; TBS, 512 U.S. at 662, 114 S.Ct. at 2469. Therefore, the Supreme Court has not applied a strict scrutiny standard to content-neutral restrictions of political speech, imposing instead an intermediate level of scrutiny to time, place, or manner restrictions as well as other content-neutral regulations that impose an incidental burden on speech. See TBS, 512 U.S. at 662, 114 S.Ct. at 2469; Ward v. Rock Against Racism, 491 U.S. 781, 797-98, 109 S.Ct. 2746, 2757 (1989) (observing that the test for content-neutral regulations of expressive conduct "'is little, if any different from the standard applied to time, place, or manner restrictions.'").
Although characterized as an intermediate level of scrutiny, the Supreme Court has described the "narrow
tailoring" requirement for content-neutral restrictions in a different manner than it has under the Central
Hudson test. In Ward, the Supreme Court held that to satisfy this standard, the government need not
show that the regulation is the least restrictive means of advancing its interest, but "[r]ather, the requirement
of narrow tailoring is satisfied 'so long as the . . . regulation promotes a substantial government interest that
would be achieved less effectively absent the regulation.'" Ward, 491 U.S. at 799, 109 S.Ct. at
2758 (quoting United States v. Albertini, 472 U.S. 675, 689, 105 S.Ct. 2897, 2906 (1985)) (emphasis added).
Determining the Basis of Regulation.
In deciding whether a law regulating protected speech is content-neutral or content- based, the Supreme Court in Ward v. Rock Against Racism held:
The principal inquiry in determining content neutrality, in speech cases generally and in time, place, or manner cases in particular, is whether the government has adopted a regulation of speech because of disagreement with the message it conveys. The government's purpose is the controlling consideration.
491 U.S. at 791, 109 S.Ct. at 2754 (citations omitted). Consequently, "laws that by their terms distinguish favored speech from disfavored speech on the basis of the ideas or views expressed are content based." TBS, 512 U.S. at 643, 114 S.Ct. at 2459. On the other hand, "[a] regulation that serves purposes unrelated to the content of expression is deemed neutral, even if it has an incidental effect on some speakers or messages but not others." Ward, 491 U.S. at 791, 109 S.Ct. at 2754 (citing City of Renton v. Playtime Theatres, Inc. 475 U.S. 41, 47-48, 106 S.Ct. 925, 929-30 (1986)).
B. THE ACT IS A CONTENT-NEUTRAL REGULATION SUBJECT TO INTERMEDIATE SCRUTINY.
1. The Purpose of the Act is to Protect Utah Residents and Charities from Fraud and Other Harmful and Injurious Acts.
Under the Act, charitable organizations and those who solicit contributions on their behalf, must register with the Division prior to soliciting in Utah. Utah Code Ann. § 13-22-5 (1998 Supp.). The express purpose of the Act, and of all other laws in Title 13, is "to protect [Utah] citizens from harmful and injurious acts by persons offering or providing essential or necessary goods or services to the general public." See Utah Code Ann. § 13-1-1 (1996). In interpreting state statutes, Utah courts will first look to a statute's plain language to determine its purpose, and will not look beyond the plain language unless some ambiguity is identified. See Evan v. State, 963 P.2d 177, 184 (Utah 1998). No ambiguity exists in the statute and ATA has not submitted any facts to indicate otherwise.
A review of the Act's provisions reveals that, consistent with the legislative declaration in Section 13-1-1, the primary purpose of the Act is to protect the public (as well as charities) from fraud and other misleading and deceptive practices by those who solicit charitable contributions. The information submitted by applicants when they register, discussed in more detail below, infra at pp. 21-23, enables potential donors to verify the representations made by those who solicit their donation and enables them to assess the reliability and trustworthiness of those who seek their donation.
Moreover, a permit may be denied, revoked, or suspended if the consultant is subject to a court injunction or an administrative order on a finding or admission of fraud, breach of fiduciary duty, or material misrepresentation, or if the consultant materially misrepresents the purpose and manner in which contributions will be used or otherwise commits fraud in connection with a charitable solicitation. Id. §§ 13-22-12(1)(b) (i), (ii), and (v); Utah Code Ann. § 13-22-13(3) (1996). Finally, the Act requires professional fundraisers and consultants to post a $25,000 bond or letter of credit to provide a source from which to draw in the event a consumer or charity suffers loss due to an unscrupulous fundraiser or consultant. Utah Code Ann. § 13-22-9(4) (1998 Supp.); Utah Admin. Code R152-22-6 (1997). These provisions demonstrate the Act's purpose is to protect the public and charities from fraud.
2. The Act is Content Neutral.
Referring to its decision in Playtime Theatres-which considered a zoning ordinance prohibiting adult motion picture theaters from locating within 1,000 feet of a residential zone-the Court in Boos v. Barry observed that "[s]o long as the justifications for regulation have nothing to do with content, i.e., the desire to suppress crime has nothing to do with the actual films being shown inside adult movie theaters, we concluded that the regulation was properly analyzed as content neutral." 485 U.S. at 320, 108 S.Ct. at 1163. Likewise, the justifications for the Utah Act have nothing to do with content, but rather the desire to protect Utah residents from fraud and other harmful and injurious acts. The registration and bonding requirements have nothing to do with the underlying messages or causes for which the solicitations are being made. Therefore, the Act is properly analyzed as a content neutral regulation with an incidental impact on speech." See Boos, 485 U.S. at 320, 108 S.Ct. at 1163. Other laws regulating charitable solicitations have been examined under this standard.
In Schaumberg, the Court considered a village ordinance that prohibited solicitations by charities that do not apply at least 75% of the proceeds to the charitable purpose. Schaumberg, 444 U.S. at 622, 100 S.Ct. at 829. After observing that charitable "solicitation is characteristically intertwined with informative and perhaps persuasive speech seeking support for particular causes or for particular views on economic, political, or social issues," the Court held that "[t]he Village may serve its legitimate interests, but it must do so by narrowly drawn regulations designed to serve those interests without unnecessarily interfering with First Amendment freedoms." Id. at 632, 637, 100 S.Ct. at 834, 836. As explained above, supra at pp. 12-13, this is the test applied to content-neutral regulations.
In Riley, the Supreme Court considered several provisions in the North Carolina Charitable Solicitations Act, including a "fee limit," creating a rebuttable presumption that fees greater than 35% of gross revenues are unreasonable and could not be legally charged, and a "disclosure" provision, requiring fundraisers to notify potential donors at the point of solicitation the revenue percentage retained by the charity.3 Riley, 487 U.S. at 784, 108 S.Ct. at 2671.
Although the Court did not expressly address content neutrality, the Court clearly examined the fee requirement under the test for content neutral regulations. The Court observed that in Schaumberg, it "determined that the ordinance [which set limits on fundraising fees] was not narrowly tailored to achieve the village's principal asserted interest: the prevention of fraud." Id. at 788, 108 S.Ct. at 2673. In applying that same standard to the fee requirement, the Court acknowledged that "[t]he interest in protecting charities (and the public) from fraud is, of course, a sufficiently substantial interest to justify a narrowly tailored regulation." Id. at 792, 108 S.Ct. at 2675.
However, the Riley Court concluded that the fee requirement was not narrowly tailored, but not because it was not the least restrictive means as ATA suggests. Adhering to its holding in Secretary of State of Maryland v. Joseph H. Munson Co., 467 U.S. 947, 104 S.Ct. 2839 (1984), the Court held that the fee requirement was not narrowly tailored because "there is no nexus between the percentage of funds retained by the fundraiser and the likelihood that the solicitation is fraudulent." Riley, 487 S.Ct. at 793, 108 S.Ct. at 2675. The Court was quick to observe that its holding should not be read to "suggest that States must sit idly by and allow their citizens to be defrauded," noting that North Carolina could enforce its antifraud statute and "require fundraisers to disclose certain financial information to the State, as it has since 1981." Id. at 795, 108 S.Ct. at 2676. Clearly, therefore, the Court did not apply the standard applied to content-based regulations, but instead analyzed the fee provision as a content neutral regulation.
That such is the case is further evidenced by the Riley Court's express application of the "exacting scrutiny" standard for content-based regulations in its examination of the disclosure requirement. The Court observed that "[m]andating speech that a speaker would not otherwise make [at the point of solicitation] necessarily alters the content of the speech," and, as result, the Court reviewed the disclosure requirement "as a content-based regulation of speech" subject to exacting First Amendment scrutiny. Id. at 795, 798, 108 S.Ct. at 2677- 78. See also American Charities for Reasonable Fundraising Regulation, Inc. v. Pinellas County, No. 97-2058-CIV-T-17B, 1998 WL 839860 at *14 (M.D. Fla. Nov. 12, 1998) (county licensing ordinance applicable to professional solicitors is content neutral).
C. THE ACT IS NARROWLY TAILORED TO A SUBSTANTIAL STATE INTEREST.
Having concluded that the Act is a content neutral regulation, the appropriate inquiry is a determination of whether or not the challenged provisions are narrowly tailored to a substantial state interest. If so, the district court was correct in holding that the Act does not violate the First Amendment.
1. Protecting the Public and Charities from Fraud and Other Harmful or Injurious Acts is a Substantial State Interest.
ATA argues that the record does not support a finding of a "paramount" interest to justify the Act. Aplt. Brf. at 30. Although the Director disagrees with this assertion, the Director need only establish that the government interest is substantial. As explained above, supra at pp. 14-15, the purpose of the Act is to protect both the public and charities from fraud and other harmful and injurious acts. In the Court below, ATA failed to "set forth specific facts showing there is a genuine issue for trial," and therefore, this issue is deemed uncontested. See Fed.R.Civ.P. 56(e). Clearly, ATA has not demonstrated, or even offered any evidence to suggest, any improper purpose of the Act. "It is a familiar principle of constitutional law that th[e] Court will not strike down an otherwise constitutional statute on the basis of an alleged illicit legislative motive." United States v. O'Brien, 391 U.S. 367, 383, 88 S.Ct. 1673, 1682 (1968) (citations omitted).
The question, then, is whether protection of the public and charities from fraud and other harmful or injurious acts is a substantial interest to justify a narrowly tailored regulation. The Supreme Court has conclusively answered this question in the affirmative, holding that "[t]he interest in protecting charities (and the public) from fraud is, of course, a sufficiently substantial interest to justify a narrowly tailored regulation." Riley, 487 U.S. at 792, 108 S.Ct. at 2675 (emphasis added). Protecting the public from fraud is inherent in the police powers of the state. See Weston Funding Corp. v. Lafayette Towers, Inc., 550 F.2d 710, 714 (2nd Cir. 1977) (acknowledging the state's police power to protect the public from fraud, misrepresentation, incompetence and sharp practice).
In its brief, ATA argued that the interests asserted by the Director, unlike those considered in other First Amendment cases, do not involve the need to keep the streets safe, or "homeowners mistaking violent thugs for late-night canvassers," or loud speakers playing music at excessive levels. Aplt. Brf. at 15. The interests of Utah, however, do involve the need to keep Utahns safe from crime, including fraud. The interests involve Utahns mistaking con artists and unscrupulous opportunists for philanthropists. The interests involve matters of even greater concern than loud music in a park. In a commercial transaction, consumers can readily verify whether or not they have been defrauded by an examination of the product itself. However, in a charitable contribution, consumers will likely never know whether or not their donation was actually used for the intended purpose. The risk of fraud and misrepresentation is much greater.
ATA argues that the Director failed to establish that the challenged provisions under the Act actually serve the interest asserted by the Director. Aplt. Brf. at 29-30. Chief among ATA's objections is the failure of the Director to establish the existence of fraud in fundraising or among those involved in fundraising. Aplt. Brf. at 29. While it is true that no evidence was submitted indicating the extent to which Utahns suffer from fraudulent solicitations, the State need not sit idly by and act only when crime occurs.
In Z.J. Gifts D-2, L.L.C. v. City of Aurora, 136 F.3d 683 (10th Cir. 1998), this Court examined a city zoning ordinance requiring a business that sold sexually-oriented materials to move to an industrial zone. Although the district court found that the city had "demonstrated 'the legitimacy of its concern' regarding adult uses which provide on-site adult entertainment," it concluded that the city had not so demonstrated with respect to "those which provide adult materials for off-site consumption." Id. at 688. This Court concluded that the "distinction is constitutionally irrelevant in determining whether Aurora's interests are important or substantial, particularly in light of the Court's strong statements regarding the government's interest in regulating such businesses in Young and Renton." Id. (emphasis added). The Tenth Circuit further explained as follows:
To the extent Z.J. Gifts argues that the city has not "demonstrate[d] that the recited harms are real, not merely conjectural," Turner, 512 U.S. at 664, 114 S.Ct. at 2470, we disagree. Aurora need not wait for sexually oriented businesses to locate within its boundaries, depress property values, increase crime, and spread sexually transmitted diseases before it regulates those businesses. It may rely on the experience of other cities to determine whether the harms presented by sexually oriented businesses are real and should be regulated. See Renton, 475 U.S. at 51-52, 106 S.Ct. at 930-31. In other words, the city may control a perceived risk through regulation. The Court has long held, and we agree, that Aurora's stated governmental interests in circumscribing the adverse secondary effects of sexually oriented businesses "must be accorded high respect." Renton, 475 U.S. at 50, 106 S.Ct. at 930 (quoting Young, 427 U.S. at 71, 96 S.Ct. at 2453); ILQ Investments, 25 F.3d at 1416.
Id.
Likewise, in this matter, the State of Utah need not wait for fraudulent charities, fundraisers, or consultants
to solicit contributions from Utah residents, make misrepresentations or omit material facts, and otherwise defraud
consumers of their charitable dollars before it regulates the charitable fundraising industry. Moreover, as noted
above, the Supreme Court has already concluded that a state's interest in protecting the public and charities
"from fraud is, of course, a sufficiently substantial interest to justify a narrowly tailored regulation."
Riley, 487 U.S. at 792, 108 S.Ct. at 2675 (emphasis added). In short, the [State] may control a perceived
risk through regulation." Id. In 1995 alone, Utah residents reported approximately one billion dollars
in charitable contributions in their tax returns. Aplt. App. at 145-46 (Director's Summary Judgment Memo, pp. 7-8)
(citing Giving Usa 1997, Update 3: Across America, A Report on Regional and Statewide Contributions, p.
17 (Ann Kaplan ed., 1997)). This is a substantial amount of money, and while it is hoped that most of those contributions
are made to legitimate organizations, the State need not await the gathering of data to determine the extent of
the problem before it acts to protect the residents of the State. Indeed, the Federal Trade Commission has estimated
that of the $143 billion dollars in charitable contributions made nationally in 1995, $1.43 billion of that amount,
or 10%, may have been misused or ended up in the pockets of fraudulent solicitors. Charitable Donation$: Give
or Take, Publication of the Federal Trade Commission (April 1997).
2. The Registration Requirements Are Narrowly Tailored.
ATA asserts that the Director failed to establish that the registration requirements are not narrowly tailored to its interest. Aplt. Brf. at 34. As observed by the district court, however, the registration requirements "appear to be consistent with the provisions upheld in Riley. Aplt. App. at 554. While the observation in Riley in this regard may, or may not be dicta, a review of the context in which the Court made the statement is enlightening. As discussed earlier, supra at pp. 17-18, the Supreme Court in Riley examined the North Carolina disclosure requirement as a content-based restriction by compelling speech at the point of solicitation. Although the Court applied exacting scrutiny to the provision, which requires the least restrictive means, it nevertheless observed:
In contrast to the prophylactic, imprecise, and unduly burdensome rule the State has adopted to reduce its alleged donor misperception, more benign and narrowly tailored options are available. For example, as a general rule, the State may itself publish the detailed financial disclosure forms it requires professional fundraisers to file. This procedure would communicate the desired information to the public without burdening a speaker with unwanted speech during the course of a solicitation. Alternatively, the State may vigorously enforce its antifraud laws to prohibit professional fundraisers from obtaining money on false pretenses or by making false statements. These more narrowly tailored rules are in keeping with the First Amendment directive that government not dictate the content of speech absent compelling necessity, and then, only by means precisely tailored.
Riley, 487 U.S. at 800, 108 S.Ct. at 2679-80 (citations omitted). Likewise, the Court in Schaumberg, applying the intermediate standard, also observed that registration requirements are one way the state can narrowly tailor its law to promote its interest in preventing fraud. Schaumberg, 444 U.S. at 637-38, 100 S.Ct. at 836-37.
Under the Act, applicants are required to (1) identify those involved in the solicitation process, (2) describe the purpose of the solicitations, how contributions will be used and otherwise distributed, (3) disclose the existence of any injunctions, judgments, administrative orders, or criminal convictions involving moral turpitude, and (4) provide copies of the agreements for fundraising. See Utah Code Ann. § 13-22-9 (1998 Supp.). This information is invaluable to the public in protecting itself against fraud and misrepresentation. "A donor can use this information to determine if a particular solicitation is bona fide by ascertaining whether the solicitor [including fundraisers and consultants] is registered. A donor might also use this information to learn further about a solicitor's operations. . . . When comparative information is available, inaccuracies in inducements are less likely to occur. If they do occur, they are more likely to be discovered.." See Telco Communications, Inc. v. Carbaugh, 885 F.2d 1225, 1231-32 (4th Cir. 1989).
In short, the registration requirement is narrowly tailored to the state's interest in protecting the public from fraud and misrepresentation-providing a reliable means to assess the legitimacy of the charitable solicitation "without burdening a speaker with unwanted speech during the course of a solicitation." Riley, 487 U.S. at 800, 108 S.Ct. at 2679.
3. The Registration Fee Is Narrowly Tailored.
ATA also challenges the propriety of the $250.00 annual registration fee. Aplt. Brf. at 36. As with any law that regulates speech in a content neutral manner, registration fees affecting speech must be narrowly tailored to the state's interest. See Cox v. New Hampshire, 312 U.S. 569, 61 S.Ct. 762 (1941). The Second Circuit Court of Appeals observed:
"[W]hile the exercise of [c]onstitutionally protected activities may not be taxed, it may be regulated, provided the regulation is narrowly tailored to achieve a legitimate governmental interest, is content-neutral in terms and effect, and does not unduly burden speech." Thus, fees that serve not as revenue taxes, but rather as means to meet the expenses incident to the administration of a regulation and to the maintenance of public order in the matter regulated are constitutionally permissible.
National Awareness Foundation v. Abrams, 50 F.3d 1159, 1164-65 (2nd Cir. 1995) (quoting Center for Auto Safety, Inc. v. Athey, 37 F.3d 139, 144 (4th Cir.1994)) (citations omitted); see also Dayton Area Visually Impaired Persons, Inc. v. Fisher, 70 F.3d 1474 (6th Cir. 1995) (upholding a $200 registration fee for professional solicitors). Therefore, the provisions under Utah law are permissible so long as they serve not as revenue taxes, but as a means to defray the costs associated with the administration and enforcement of the Act.
In her affidavit, the Director stated that the $250 registration fee was set in order to defray the costs of regulating professional fundraisers and consultants. Aplt. App. at 186-87 (¶¶ 6-9). Indeed, that such a fee was adopted to cover administrative expenses is mandated by Utah law which requires the Division to set an application fee that is "reasonable, fair, and reflect[s] the cost of services provided." Utah Code Ann. § 63-38-3.2(2) (1998 Supp.); Utah Code Ann. § 13-22-9(1)(a) (1998 Supp.). In its Motion to Strike, ATA challenged the director's statement on the grounds that she did not know why the legislature adopted the Division's proposal. Aplt. App. at 5. However, she did, and can testify as to why the Division adopted the particular fee-to defray the costs of administration. See Aplt. App. at 186-87 (¶¶ 6-9). Although the Court did not rule on the Motion to Strike, it is apparent that it rejected ATA's arguments. The Director did have personal knowledge regarding the Division's participation in the fee adoption process. Such is sufficient under the rules.
Therefore, the application fee, in accordance with legislative mandate, was related to the costs of administering and enforcing the Act. ATA submitted no evidence to indicate that the fee was anything other than a fee to cover the costs of administration and enforcement of the Act. Moreover, ATA offered no evidence to suggest that the fee was unreasonable. Accordingly, no genuine issue of material fact exists and the district court was correct in concluding that the registration fee is narrowly tailored.
4. The Bond Requirement Is Narrowly Tailored.
ATA also asserts that the bond requirement is not narrowly tailored to the state's interest. Aplt. Brf. at 37-39. ATA does not challenge the Director's assertion that the bond provides a fund from which draw for those who are defrauded in a charitable appeal. ATA instead argues that the Director failed to establish that the bond actually deters fraud. However, the First Amendment does not require such a factual showing-indeed, such a requirement would be akin to requiring the Director to prove a negative. The only way the Director could establish such a fact is to gather data relating to fraud loss when the state did not require a bond and then compare that data to data gathered when the state required a bond. Under ATA's theory, however, the state could never require a bond-even to compare data-because in order to do so, it would first have to establish that a bond prevented fraud. Such a "catch 22" is not required under the First Amendment. As observed by the Supreme Court in Fox, in requiring that a law be narrowly tailored, the Court has "not insisted that there be no conceivable alternative, but only that the regulation not "burden substantially more speech than is necessary to further the government's legitimate interests. And we have been loath to second-guess the Government's judgment to that effect." Fox, 492 U.S. at 478, 109 S.Ct. at 3033-34 (citations omitted).
Clearly, the district court and this court can reasonably conclude that the bond will act as a deterrent to fraudulent or other unlawful acts-if the bond or letter of credit is drawn upon as a result of the consultant's violation of the Act, the consultant likely will then be obligated to repay the insurer or bank. This very issue was addressed by the Sixth Circuit Court of Appeals in 1995. In upholding Ohio's $20,000 bonding requirement, the Sixth Circuit Court of Appeals concluded that "because the bonding requirement imposed upon professional solicitors also attempts to deter fraud and to provide a fund from which to compensate charities for moneys lost or misappropriated by the professional solicitors, the district court [correctly] concluded that the requirement was narrowly tailored to serve a legitimate state interest." Dayton Area, 70 F.3d at 1486.
So too are the bonding requirements at issue here narrowly tailored to serve the substantial interest of the State in protecting charities and Utah residents from harmful and injurious acts. The State has not required consultants to deposit the entire $25,000 with the State or in an escrow account. Instead, the State has imposed the substantially less burdensome requirement that the consultant obtain, at its option, either a bond from a surety company or a letter of credit from the consultant's financial institution. While a consultant may be required, in some situations, to post collateral to secure a bond, that collateral may be in a form that will not substantially hamper the consultant. See Affidavit of Gary Christensen, Aplt. App. at 223-25. While it is true that the burden on some consultants may be greater than it is on others, due to the absence of a prior relationship with the bank or to bad credit or otherwise, the First Amendment does not require the state to enact laws that will accommodate every organization. Given the heightened risks associated with charitable appeals, as discussed supra at p. 19, the bonding requirement, as found by the Second Circuit is narrowly tailored.
D. THE REGISTRATION REQUIREMENT IS NOT AN UNCONSTITUTIONAL PRIOR RESTRAINT.
Section 13-22-5 requires a professional fund raising counsel or consultant ("professional consultant") to register with the State before fundraising in Utah. Utah Code Ann. § 13-22-5 (1998 Supp.); see also Utah Code Ann. § 13-22-9 (1998 Supp.). ATA suggests that any regulation requiring a license or permit before someone can distribute literature or mail letters containing core political speech is unreasonable and constitutes an unconstitutional prior restraint-regardless of the reasons for the law. Aplt. Brf. at 9-10, 25. However, a review of applicable prior restraint decisions does not support ATA's contention.
1. Review of Prior Restraint Analysis.
Freedman v. Maryland. In Freedman v. Maryland, 380 U.S. 51, 85 S.Ct. 734 (1965), the Supreme Court reviewed a Maryland censorship statute wherein a board was required to pass judgment on the content of films-to determine whether they were obscene, or that, in the judgment of the Board, tended to debase or corrupt morals or incite to crimes-before they were sold, rented, or exhibited. Id. at 53, 85 S.Ct. at 736 n.2. No time limits were imposed on the Board to make a decision, nor did there exist any "statutory provision for judicial participation in the procedure which bar[red] a film, nor assurance of prompt judicial review." Id. at 55, 85 S.Ct. at 737.
In analyzing the statute, the Court recognized that prior restraints may offend the First Amendment in two related ways: (1) by granting excessive administrative discretion to the censor, or (2) by failing to impose sufficient procedural safeguards to confine a censor's action-as to substance and time. See id. at 57, 85 S.Ct. at 738; see also FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 225-27, 110 S.Ct. 596, 604-05 (1990) (plurality opinion of J. O'Connor). Both situations create a risk of "vest[ing] unbridled discretion in a government official over whether to permit or deny expressive activity." See City of Lakewood v. Plain Dealer Publishing Co., 486 U.S. 750, 755, 108 S.Ct. 2138, 2143 (1988).
After reviewing the Maryland censorship scheme, the Court struck down the statute for offending the First Amendment under the second evil-failing to impose sufficient procedural safeguards to confine the censor's action. The Court held "that a noncriminal process which requires the prior submission of a film to a censor avoids constitutional infirmity only if it takes place under procedural safeguards designed to obviate the dangers of a censorship system." Id. at 58, 85 S.Ct. at 738-39. In its decision, the Court held that the following three procedural safeguards must be included in a censorship system to survive scrutiny: (1) any restraint prior to judicial determination must be for a specified brief period of time, (2) prompt judicial review must be available, and (3) the censor must initiate judicial review and must bear the burden of proof once in court. Id. at 58-59, 85 S.Ct. at 738-39. However, extension of the Freedman analysis to licensing schemes, like Utah's Charitable Solicitations Act, does not necessarily follow.
Riley v. Nat'l Federation of the Blind of North Carolina. In Riley, the Supreme Court addressed North Carolina's Charitable Solicitation's Act requiring professional fundraisers to obtain a license before soliciting contributions. 487 U.S. at 801, 108 S.Ct. at 2680. The Court observed that North Carolina's "power to license professional fundraisers carries with it (unless properly constrained) the power directly and substantially to affect the speech they utter." Id (emphasis added). Citing Freedman, the Court concluded that the North Carolina statute was not properly constrained because it did not impose a time limit within which the state was required to act on a license application. Id. at 802, 109 S.Ct. at 2680. However, as noted by Justice O'Connor's plurality opinion in FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 228, 110 S.Ct. 596, 606 (1990), the Court in Riley "did not address the proper scope of procedural safeguards with respect to a licensing scheme." Therefore, the import of Riley for prior restraint purposes is not clear.
FW/PBS, Inc. v. City of Dallas. In FW/PBS, a Dallas zoning and licensing scheme for sexually oriented businesses was held invalid in an opinion delivered by Justice O'Connor. However, a rationale for striking the ordinance under prior restraint analysis could not be reached by a majority. Justice O'Connor, joined by Justices Stevens and Kennedy, concluded that because a licensing scheme "does not present the grave 'dangers of a censorship system,'. . . the full procedural protections set forth in Freedman are not required." Id. Accordingly, Justice O'Connor opined that the Dallas licensing scheme-which did not pass judgment on the content of any speech-need only satisfy the first two procedural safeguards set forth in Freedman. Id. Justice O'Connor concluded that because of the differences in a licensing scheme from a censorship system, the First Amendment does not require the licensor to either bear the burden of going to court or the burden of proof once in court. Id. at 230, 110 S.Ct. at 607.
Justice Brennan, joined by Justices Marshall and Blackman, argued that Riley did require application
of all three procedural safeguards set forth in Freedman. Id. at 238-39, 110 S.Ct. at 611 (concurring
in the judgment). On the other hand, Justice White, joined by Chief Justice Rehnquist, argued that Riley
was a straightforward application of the "undue discretion" line of cases under prior restraint analysis,
noting that the licensors had the power to affect the content of the speech without restraint (no time limits thereby
compelling silence indefinitely). Id. at 247, 110 S.Ct. at 616. Justice White concluded that the Dallas
licensing scheme should instead be scrutinized as a content-neutral regulation and that application of the Freedman
analysis applicable to content-based restrictions was not appropriate. Id. 244- 46, 110 S.Ct. At 614-15.
In reviewing the differing opinions in FW/PBS decision, it appears that the third safeguard set forth in
Freedman-that the censor must initiate judicial review and must bear the burden of proof once in court-is
clearly not applicable to content-neutral licensing schemes like that under consideration here. Other circuits
that have addressed this issue have agreed. The First Circuit Court of Appeals held that "where the prior
restraint is content neutral, the regulations must limit the time for issuing authorization and must permit prompt
judicial review." Jews for Jesus, Inc. v. Massachusetts Bay Transportation Authority, 984 F.2d 1319,
1327 (1st Cir. 1993) (reviewing guidelines of the transit authority prohibiting noncommercial expressive activity
in certain areas in and around subway stations); accord TK's Video, Inc. v. Denton County, 24 F.3d 705,
707-08 (5th Cir. 1994) (reviewing licensing scheme for adult businesses); East Brooks Books, Inc. v. City of
Memphis, 48 F.3d 220, 224 (6th Cir. 1995); but see Baltimore Blvd., Inc. v. Prince George's County,
58 F.3d 988, 996 n.12 (4th Cir. 1995) ("The splintered opinion of the FW/PBS Court leaves the continued
application of the third Freedman factor subject to some speculation.").
2. ATA Waived Any Challenge that the Act Does Not Satisfy the Freedman Safeguards By Failing to Raise the Issue in the District Court.
The case law, therefore, makes clear that a licensing scheme requiring a licensee to register before engaging in expressive activity is not necessarily unreasonable and does not constitute an unconstitutional prior restraint regardless of the reasons for the law. Under Freedman, censorship laws which pass judgment on speech based on its content must include three procedural safeguards to ensure that the censor's discretion is not unbridled. However, under FW/PBS and subsequent circuit court decisions, content-neutral licensing laws must meet only the first two procedural safeguards enunciated in Freedman. Therefore, the Act is not, by definition, unreasonable, nor is it an unconstitutional prior restraint, simply because it requires professional consultants to register before they solicit Utah residents on behalf of their client charity. Accordingly, the district court did not err in upholding the Act on this ground. See Memorandum Opinion and Order, Aplt. App. at 555 n.1.
ATA objects to the district court's conclusion, accusing the court of "relegat[ing] this significant issue to a footnote." Aplt. Brf. at 11. ATA argues that the administrative rule requiring the division to process all registration applications within 10 business days fails to satisfy the first procedural safeguard recognized in both Freedman-requiring the licensor to make a decision whether to issue the license within a specified and reasonable time period during which the status quo is maintained. Aplt. Brief, pp. 13-18. However, ATA failed in the proceedings below to challenge the Act on the ground that the 10-day time limit was insufficient to meet the first procedural safeguard. It is well-settled that where an appellant did not raise or argue an issue in the district court, he waives the issue on appeal. See Vitkus v. Beatrice Co., 127 F.3d 936, 946-47 (10th Cir. 1997) ("As a general rule, a federal court of appeals will not consider an issue not passed upon below."). Accordingly, ATA cannot challenge the provision now.4
ATA also attempts, for the first time, to argue that the Act is an unconstitutional prior restraint because it requires the applicant, rather than the Director, to seek judicial relief from a decision denying a permit. Aplt. Brf. at 16. Again, however, ATA's failure to raise this argument in the district court constitutes a waiver of the issue and it cannot be raised for the first time on appeal. Beatrice Co., 127 F.3d at 946-47.
3. The Act Nevertheless Satisfies Prior Restraint Requirements for Content Neutral Regulations.
Even had ATA argued these issues below, its contentions would nevertheless fail. With regard to ATA's contention that the administrative regulation cannot save the Act from a facial challenge, it should be noted that "[a]dministrative interpretation and implementation of a regulation are, of course, highly relevant to our analysis, for "[i]n evaluating a facial challenge to a state law, a federal court must . . . consider any limiting construction that a state court or enforcement agency has proffered." Ward, 491 U.S. at 795-96, 109 S.Ct. at 2756. See also Riley, 487 U.S. at 802, 108 S.Ct. at 2680 (noting that the North Carolina "statute on its face does not purport to require when a determination must be made, nor is there an administrative regulation or interpretation doing so.").
The 10-day limit amply satisfies the first procedural safeguard, enabling the Division to fairly review the application materials, while preserving the First Amendment rights of the professional consultant and its client charity by assuring a prompt decision. In a decision addressing nearly identical issues as those posed in this case, the United States District Court in Florida upheld a county ordinance that imposed a 30-day time limit. Pinellas County, 1998 WL 839860 at *19.
In regard to ATA's contention that the Division must bear the burden of going to court, as discussed, supra at pp. 29-30, courts have not required that content-neutral licensing schemes impose the burden on the licensor to seek judicial review. See FW/PBS, 493 U.S. at 230, 110 S.Ct. at 607; Jews for Jesus, 984 F.2d at 1327. The reason that the third Freedman safeguard is not required under these circumstances is that unlike laws that pass judgment on the content of speech, a licensor of a profession or business, does not "engag[e] in direct censorship of particular expressive material," but instead acts in a ministerial capacity that is not presumptively invalid. See FW/PBS, 493 U.S. at 229-30, 110 S.Ct. at 606-07.
4. The Act Does Not Grant the Director with Unbridled Discretion.
As noted above, a licensing scheme that grants excessive administrative discretion to the licensor may also constitute an unconstitutional prior restraint. See supra at p. 27. In its appeal, ATA argues that the Act grants the Director unbridled discretion by authorizing the Director to deny an application upon a finding that any one of a number of specified events has occurred and that the denial would be in the public interest. Aplt. Brf. at 19. ATA supports its argument by citing to Staub v. City of Baxley, wherein the Supreme Court struck down an ordinance permitting the city mayor and council to reject a license application (for solicitation of paid memberships in an organization) "after considering 'the character of the applicant, the nature of the * * * organization for which members are desired to be solicited, and its effects upon the general welfare of (the) citizens of the City of Baxley.'" 355 U.S. 313, 321, 78 S.Ct. 277, 281-82 (1958). In that case, the Court concluded that the criteria to consider under the ordinance were "without semblance of definitive standards or other controlling guides," and, as a result, the grant or denial of a license was left to the "uncontrolled discretion" of the mayor and council. Id. at 322, 78 S.Ct. at 282.
The public interest prong in the Act is distinguishable. The Director may deny, suspend, or revoke an application only upon a finding that "the order is in the public interest," and any one of 13 designated grounds exists. Utah Code Ann. § 13-22-12(1) (1998 Supp.). The Director is not free to deny an application solely because she believes doing so is in the public interest. Her discretion is restrained by the enumerated grounds set forth under the Act as well as the purpose of the Act.
In Heritage Publishing Company v. Fishman, 634 F.Supp. 1489 (D.Minn. 1986), the district court upheld a professional fundraiser regulation that included a similar revocation provision. In upholding the statute, the district court observed that "the Supreme Court has stated that its '. . . cases have consistently held that the use of the words 'public interest' in a regulatory statute is not a broad license to promote the general public welfare. Rather, the words take meaning from the purposes of the regulatory legislation." Heritage Publishing Company v. Fishman, 634 F.Supp. 1489, 1500 (D.Minn. 1986) (quoting NAACP v. Federal Power Comm'n, 425 U.S. 662, 669, 96 S.Ct. 1806, 1811 (1976)). The Minnesota court concluded that the purpose of the fundraising regulation was "to protect the public from fraud and misrepresentation in charitable solicitations and to insure that prospective contributors are adequately informed about the nature of particular solicitations." Id. at 1500-01. Having so concluded, the court held that "[t]his approach to the "public interest" determination narrows the statute sufficiently to meet the requirements of the First Amendment." Id. at 1501. In like manner, the "public interest" provision in Utah's law is sufficiently narrow when read in light of the Act's purpose to protect the public and charities from fraud.
ATA also alleges that the Act grants the Director undue discretion by (1) allowing her to deny an application
if it is incomplete or misleading (Aplt. Brf., p. 19), and (2) allowing the division to require additional information.
Aplt. Brf., pp. 17, 20. Again, however, ATA failed to argue in the court below that these grants of authority conferred
the Director with undue discretion. Accordingly, ATA has waived these issues on appeal. See Beatrice Co.,
127 F.3d at 946-47. In any case, these provisions do not grant undue discretion to the Director. As Director necessarily
has the authority to review applications and determine whether or not they are complete and accurate. It is important
to note that denial or revocation may not occur upon a simple finding that the application is incomplete or misleading.
The Act specifically provides that revocation or denial may occur only if the application "is incomplete or
misleading in any material respect." Utah Code Ann. § 13-22- 12(1)(a) (1998 Supp.) (emphasis added).
This is the sort of objective criteria that the First Amendment requires. Moreover, the "additional information"
requirement must be read so as to be consistent, as far as possible, with the Constitution. Pursuant to Section
13-2-5, the Director is given authority to issue rules to administer and enforce the Act. See Utah Code
Ann. § 13-2-5(1) (1996). Accordingly, any additional information required by the Division must be by rule.
As evidence that the Director may request additional information without restraint, ATA points to the Director's
testimony indicating that she used her discretion in requesting the applicant's social security number. However,
Rule 152-22-4(2)(g) specifically grants that authority to the Director-requiring the applicant to provide either
his social security number or driver license number. Utah Admin. Code R152-22-4(2)(g) (1997). The Director cannot
go beyond the scope of the rules which are issued pursuant to her authority under Utah Code Ann. § 13-2-5(1)
(1996) and the Administrative Rulemaking Act, Utah Code Ann. §§ 63-46a-1 to -16 (1998 Supp.).
Finally, ATA alleges other examples of the Division "wielding unconstitutional discretion." However,
ATA fails to explain the reasons or otherwise argue why such examples constitute unconstitutional discretion. Having
failed to explain the reasons these instances constitute undue discretion by the Director, ATA waives these issues
on appeal. See Gross v. Burgraaf Construction Co., 53 F.3d 1531, 1547 (10th Cir. 1995) (holding that it
is not sufficient to simply state in the brief that the party is appealing an issue without argument as to the
grounds for appeal).
II.
THE ACT DOES NOT VIOLATE THE COMMERCE CLAUSE
OF THE UNITED STATES CONSTITUTION
Issue and Applicable Standard of Review
ATA also challenges the decision of the district court on the grounds that the court erred in concluding that the Act does not violate the Commerce Clause of the United States Constitution. ATA first argues that the district court failed to apply the "bright line rule" established in Quill Corp. v. North Dakota, 504 U.S. 298, 112 S.Ct. 1904 (1992). Aplt. Brf. at 42-44. ATA also argues that even if the applicable test is Pike balancing test, the Court failed to correctly apply that test. Aplt. Brf. at 45-46.
The Court of Appeals "review[s] the grant or denial of summary judgment de novo, applying the same legal standard used by the district court pursuant to Fed.R.Civ.P. 56(c)." Wolf, 50 F.3d at 796; see discussion of appropriate summary judgment standard supra at pp. 6-7.
Discussion
A. OVERVIEW OF COMMERCE CLAUSE ANALYSIS.
The Commerce Clause provides that "Congress shall have Power . . . [t]o regulate commerce . . . among the several States." U.S. Const. art. I, § 8. "Although the Clause thus speaks in terms of powers bestowed upon Congress, "it also limits the power of the States to erect barriers against interstate trade." Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 35, 100 S.Ct. 2009, 2015 (1980). However, this limitation on state power, referred to as the "negative" or "dormant" Commerce Clause, "is by no means absolute. In the absence of conflicting federal legislation, the States retain authority under their general police powers to regulate matters of 'legitimate local concern,' even though interstate commerce may be affected." Id. at 36, 100 S.Ct. at 2015.
It should be noted at the outset that any facial challenge to the Act under the Commerce Clause cannot succeed unless it meets the appropriate burden set forth in United States v. Salerno, 481 U.S. 747, 107 S.Ct. 2095 (1987). In that case, the Supreme Court observed that "[a] facial challenge to a legislative Act is, of course, the most difficult challenge to mount successfully, since the challenger must establish that no set of circumstances exists under which the Act would be valid." Id. at 745, 107 S.Ct. at 2100. The Supreme Court then held that the fact that a statute "might operate unconstitutionally under some conceivable set of circumstances is insufficient to render it wholly invalid, since we have not recognized an 'overbreadth' doctrine outside the limited context of the First Amendment." Id. Therefore, any facial challenge by ATA to the Act based on the Commerce Clause must fail because the Act regulates both in-state and out-of-state consultants alike. ATA has not and cannot establish that "no set of circumstances exists under which the Act would be valid" under the Commerce Clause. Salerno, 481 U.S. at 745, 107 S.Ct. at 2100. Clearly, the Commerce Clause does not prohibit the State of Utah from regulating in-state consultants.
B. THE ACT DOES NOT VIOLATE THE COMMERCE CLAUSE UNDER THE PIKE BALANCING TEST.
ATA argues that the district court erred in failing to apply the "bright line rule" under Quill. Aplt. Brf. at 47-49. However, under dormant Commerce Clause analysis, the courts apply a virtual per se rule of invalidity only to statutes which discriminate by "favor[ing] in- state economic interests over out-of-state interests." Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573, 579; 106 S.Ct. 2080, 2084 (1986). For example, in Brown-Forman, the Court struck down the challenged law because it had the effect of projecting its legislation into other states, and thus, directly regulated commerce in other states. Id. at 584, 106 S.Ct. at 2087. Laws that discriminate against out-of-state businesses are "subject to the strictest scrutiny." Dorrance v. McCarthy, 957 F.2d 761, 763 (10th Cir. 1992). As the district court correctly concluded, the law challenged in this matter does not favor in-state consultants over out-of-state consultants, and, therefore, the per se rule of invalidity does not apply. Aplt. App. at 562-63. The Act in no way favors in-state consultants over out-of-state consultants, nor does it have the effect of projecting its requirements into other states.
ATA's reliance on Quill is misplaced for another reason. In Quill, the Supreme Court examined the validity of a North Dakota law that taxed the activities of an out-of-state mail order house. In its analysis, the Supreme Court applied a four-part test that included a requirement that a state may not tax the activities of an out-of state business unless it has a substantial nexus to the taxing state. The test in Quill, however, has only been applied by the Supreme Court to tax cases. No "substantial nexus" requirement has been imposed where the state is merely regulating activities affecting matters of local concern. A similar challenge was rejected by the Sixth Circuit:
We also agree with the defendants that Quill does not mandate a separate finding of a substantial nexus as a requirement for upholding a state statute that does not attempt to tax interstate transactions, but merely has an incidental impact on such trade. Quill involved a tax that directly burdened interstate commerce, and virtually every precedent relied upon by the Court in deciding Quill was concerned with attempts by states to tax interstate commerce directly. In contrast, § 4729 is a statute passed by Ohio under its police powers; it aims to protect Ohio's citizens from mislabeled or adulterated prescription drugs rather than simply trying to collect a tax.
Ferndale Laboratories, Inc. v. Cavendish, 79 F.3d 488, 494 (6th Cir. 1996). As in the Ohio law, the Utah Act is an exercise of the State's police powers, aimed at protecting both the public and charities from harmful or injurious acts. As discussed above, supra at pp. 23-24, the $250 registration fee is not a tax, but a fee imposed to cover the costs of administration of the Act. Therefore, because the registration fee is not fairly characterized as a tax, but a fee to cover the costs of administering the Act, the district court correctly concluded that the "substantial nexus" test set forth in Quill is not applicable.
In Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844 (1970), the Supreme Court enunciated a balancing test applicable to laws that do not discriminate against out-of-state business:
Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities.
397 U.S. at 142; 90 S.Ct. at 848; accord Blue Circle Cement, Inc. v. Board of County Commissioners, 27 F.3d 1499, 1511 (10th Cir. 1994). Therefore, under the Pike balancing test, the court examines: (1) the nature of the putative local benefits advanced by the Act, (2) the burden the Act imposes on interstate commerce, (3) whether or not the burden is clearly excessive in relation to the local benefits, and (4) whether the local interests can be promoted as well with a lesser impact on interstate commerce. Blue Circle, 27 F.3d at 1512.
As discussed above, supra at pp. 14-15, the local benefit advanced by the Act is the protection of charities and the public from fraud and other harmful or injurious acts. ATA argues that the burdens on interstate commerce include (1) the annual application fee of $250.00, (2) the $25,000 bonding requirement, and (3) the information ATA must submit in the application. Aplt. Brf. at 40-41. Given the foregoing, the issue to be decided is whether ATA met its burden in establishing that the Act is clearly excessive in relation to the local benefits, and, in so assessing, whether the local interest can be promoted as well with a lesser impact on interstate commerce.
Unlike laws that discriminate against interstate commerce, the party challenging a neutral statute "bears the burden of showing that the incidental burden on interstate commerce is excessive compared to the local interest." McCarthy, 957 F.2d at 763. ATA argues that because of the free speech interests involved in this case, the Director should bear the burden of so demonstrating. Aplt. Brf. at 45. ATA's argument cannot prevail-ATA has cited to no authority supporting this proposition which is clearly contrary to established Commerce Clause analysis. See Phillips v. Calhoun, 956 F.2d 949, 953 (10th Cir. 1992). Accordingly, the Court was correct in holding that ATA bears the burden of showing that the incidental burden on interstate commerce is excessive compared to the local interest. Aplt. App. at 564.
ATA contends that it successfully established the excessive burden, noting its evidence that it will be required to (1) post 100% collateral to secure a bond, (2) pay a $250 fee, and (3) complete an inordinate amount of paperwork. Aplt. Brf. at 46. This, however, falls far short of the mark required under Commerce Clause jurisprudence. In Exxon Corp. v. Governor of Maryland, a number of oil companies challenged a Maryland statute that prohibited oil producers from operating retail service stations within the State and required that they extend all "voluntary allowances" uniformly to all service stations they supply. 437 U.S. 117, 119-20, 98 S.Ct. 2207, 2211 (1978). Notwithstanding evidence produced by the oil companies that three refineries would be forced to cease selling in Maryland, the Supreme Court upheld the law, holding that "the [Commerce] Clause protects the interstate market, not particular interstate firms, from prohibitive or burdensome regulations. Id. at 127-28, 98 S.Ct. at 2215 (emphasis added). The Court observed that while "[s]ome refiners may choose to withdraw entirely from the Maryland market, [ ] there is no reason to assume that their share of the entire supply will not be promptly replaced by other interstate refiners." Id. at 127, 98 S.Ct. at 2214.
Likewise, even if ATA decides that it cannot continue in the Utah market, there is no reason to assume that its share of the fundraising market will not be promptly replaced by other interstate fundraisers or consultants. Accord Pinellas County, 1998 WL 839860 at *10 (rejecting nearly an identical argument challenging a Florida county ordinance regulating professional solicitors). ATA also alleges that the Act is a per se burden on interstate commerce because ATA cannot mail into the State. Again, however, there is no support for such a proposition. Accordingly, the district court was correct in concluding that the Act does not violate the Commerce Clause.
III
THE ACT DOES NOT VIOLATE THE DUE PROCESS CLAUSE OF THE FOURTEENTH AMENDMENT TO THE UNITED STATES CONSTITUTION
Issue and Applicable Standard of Review
ATA also contends that the district court erred in holding that the Act does not violate the Due Process Clause of the Fourteenth Amendment. Aplt. Brf. at 47-49. The Court of Appeals "review[s] the grant or denial of summary judgment de novo, applying the same legal standard used by the district court pursuant to Fed.R.Civ.P. 56(c)." Wolf, 50 F.3d at 796; see discussion of appropriate summary judgment standard supra at pp. 6-7.
Discussion
Initially, the Court should note that any facial challenge requires ATA to establish that "no set of circumstances exists under which the Act would be valid" under the Due Process Clause. Salerno, 481 U.S. at 745, 107 S.Ct. at 2100. ATA cannot meet that burden. As noted above, the Act does not differentiate between a consultant who is located outside the state of Utah from a consultant who is located in Utah, all must register. Requiring local consultants, who maintain offices and employees in the state, certainly does not violate the Due Process Clause. Accordingly, any facial challenge on due process must fail.
Notwithstanding ATA's objections to the district court's reliance on Burger King Corp. v. Rudeicz, 471 U.S. 462, 105 S.Ct. 2174 (1985), the principles set forth in that case are as valid today as they were when the decision was first rendered. In International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154 (1945), the Supreme Court observed that "due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Id. In Burger King, the Supreme Court unequivocally rejected the notion that due process requires physical presence in the forum state as ATA contends. The Court held:
Jurisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum State. Although territorial presence frequently will enhance a potential defendant's affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are "purposefully directed" toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.
Id. at 476, 105 S.Ct. at 2184. Later, in Quill, the Supreme Court concluded "that if a foreign corporation purposefully avails itself of the benefits of an economic market in the forum State, it may subject itself to the State's in personam jurisdiction even if it has no physical presence in the State." 504 U.S. at 307, 112 S.Ct. at 1910.
Therefore, the question before the district court was whether or not ATA's efforts are purposefully directed toward Utah residents or whether ATA has purposefully availed itself of the benefits of an economic market in Utah such that the company is on fair notice it may be subject to suit or regulation in Utah. A review of ATA's Agreement with Judicial Watch reveals that ATA plays a substantial role in the solicitation of contributions from the public, purposefully availing itself of the benefits of an economic market in Utah. The charity, on the other hand, plays a more passive role, relying on the expertise and services of ATA to successfully garner contributions on its behalf. See Aplt. App. at 398.
The district court noted that ATA "(1) prepares the creative copy and design of the mailings, (2) plans and manages the productions services relevant to direct mail solicitations, (3) selects lists of potential donors and identifies dates when mailings should occur, and (4) generally advises Judicial Watch regarding the solicitations." Aplt. App. at 565. See Agreement, §§ 1-2 (Aplt. App. at 16-17). Based on this information, the district court correctly concluded, that ATA "is not only Judicial Watch's fund-raising consultant, it is primarily responsible for 'build[ing] a [ ] base of supporters across the country' and within Utah." Aplt. App. at 565 (quoting ATA vice president from deposition).
In light of ATA's substantial role in soliciting contributions from the public, the district court was correct in concluding that ATA's efforts are "purposefully directed" toward the residents of Utah. It is ATA that is relied upon to select lists of potential donors. Direct mail solicitations are then purposefully sent to Utah residents included on those lists seeking their contributions and support. It is ATA that prepares the creative copy and design of the mailings, it is ATA that identifies those to whom mailings will be made, and it is ATA that arranges for the production of these mail packages and their mailing into Utah.
Moreover, ATA has as much control over funds raised as does its client charity. Contributions are deposited into an escrow account, administered by an agent and under the terms of an escrow agreement that must be approved by both ATA and the charity. Aplt. App. at 17 (§3). Contributions are disbursed under a stringent order of priority-in fact, the charity is the last to see the funds and must await disbursements for advances, fees, costs, and cash reserves. Aplt. App. at 17-18. Prior to any disbursement to the charity, ATA receives from the escrow account 8¢ for each direct mail solicitation (in Utah and any other state) and 7¢ for each newsletter or thank you letter. Aplt. App. at 19 (§4). ATA also receives $1.00 for every person that participates in a monthly giving program established by the parties up to $5,000.00 per month. Id..
In this manner, ATA avails itself of the benefits of the "economic market" of Utah. For each solicitation into Utah, ATA is receives an economic benefit. These mailings seek the contributions of Utah residents, and payment for ATA's services is dependent on the success of those solicitations, for, as stated in the Memorandum of Understanding incorporated in the Agreement, "[t]he contract provides no financial risk to JW. JW pays only for bills incurred under its direct mail program but only to the extent that money comes in from mailings under the ATA contract or from contributors or other respondents developed under the ATA contract." Aplt. App. at 27. ATA seeks to minimize the impact of direct mail solicitations and its role therein. However, "[i]n modern commercial life' it matters little that such solicitation is accomplished by a deluge of catalogs rather than a phalanx of drummers: The requirements of due process are met irrespective of a corporation's lack of physical presence in the taxing State." Quill, 504 U.S. at 308, 112 S.Ct. at 1911.
The relationship between ATA and its client charity is not analogous to the examples offered by ATA in its brief. Aplt. Brf. at 47-48. Unlike the marketing firm hired by the New York Times or the attorney hired to prepare contracts between a Utah client and a Florida based company operating in 50 states, ATA is not simply paid a fee for its services, but maintains as much control if not more over the funds generated from the solicitations as does its client charity. Accordingly, the district court did not err in concluding that the Act does not violate the Due Process Clause.
CONCLUSION
Now, therefore, the Director respectfully requests the Court to affirm the decision of the district court.
STATEMENT REGARDING ORAL ARGUMENT
The Director requests oral argument because the issues presented have not yet been specifically addressed by the Tenth Circuit Court of Appeals and may aid in the Court's examination of the issues. Moreover, the issues raised in this matter are of interest to parties outside this action as evidenced by the amicus briefs that have been and will be filed.
DATED this 8th day of January, 1999.
JAN GRAHAM,
UTAH ATTORNEY GENERAL
Jeffrey S. Gray
Assistant Attorney General
Attorneys for Appellee, Francine A. Giani
CERTIFICATE OF COMPLIANCE
I, Jeffrey S. Gray, attorney for the appellee, Francine A. Giani, do hereby certify that, in compliance with Fed.R.App.P. 32(a)(7)(B), this brief contains no more than 14,000 words, not including the Table of Contents, Table of Authorities, Statement Regarding Oral Argument, the Addendum, and any certificates of counsel. This certification is based on the word count of Corel WordPerfect 8.0, the word-processing system used to prepare the brief.
Jeffrey S. Gray (Bar No. 5852)
Assistant Attorney General
Attorneys for Appellee, Francine A. Giani
CERTIFICATE OF SERVICE
I hereby certify that on the 8th day of January, 1999, I caused to be filed the original and seven (7) copies of the Appellee's Answer Brief, as required by 10th Cir. R. 31.5, by mailing the same via certified mail, return receipt requested, in accordance with Fed.R.App.P. 25(a)(2)(B), to the United States Tenth Circuit Court of Appeals, Bryon White U.S. Courthouse, 1823 Stout Street, Denver, CO 80257.
I further hereby certify that I caused to be served two (2) copies each of the Appellee's Answer Brief upon the respective parties by mailing the same via certified mail, return receipt requested, to the following:
Mark J. Fitzgibbons
American Target Advertising, Inc.
9625 Surveyor Court, Ste. 400
Manassas, Virginia 20110
Gregory N. Jones
Mackey, Price & Williams
170 South Main Street, Ste. 900
Salt Lake City, Utah 84101-1655
Jeffrey S. Gray (#5852)
Assistant Attorney General
ADDENDUM
ATTACHMENT 1
ATTACHMENT 2
ATTACHMENT 3
1The copy of the regulations attached to the fundraising application indicate a date of 1996. Aplt. App. at 218-22.
2Courts have also indicated that content-neutral time, place, or manner restrictions must leave open ample alternative channels of communication. Perry Education Ass'n, 460 U.S. 37, 45, 103 S.Ct. 948, 955 (1983). This requirement, however, appears to be a factor considered under the "narrow tailoring" prong which requires that "the means chosen are not substantially broader than necessary to achieve the government's interest." See Ward, 491 U.S. at 800, 109 S.Ct. at 2758.
3The Court also considered a licensing requirement, the analysis of which is discussed below, infra at pp. 28-29.
4In the Director's Memorandum in support of Summary Judgment, she addressed ATA's argument that the Act was an unconstitutional prior restraint by noting that the flaw in the North Carolina solicitation statute examined in Riley (failing to impose a time limit on the licensor) was not present in this case because agency regulations promulgated under the Act require processing within 10 business days. App. 146-47 (Director's Summary Judgment Memo, pp. 8-9). Although ATA reiterated its position that a licensing scheme affecting protected speech is "presumptively invalid and may be sustained only under the most extraordinary circumstances," ATA did not thereafter argue that the 10-day limit was not sufficient. See Aplt. App. at 275-277; see also Aplt. App. at 123-26.