Ban on Charitable Solicitations Likely Unconstitutional

Free Speech & Election Law Practice Group Newsletter - Volume 3, Issue 3, Winter 2000

February 1, 2000

Thomas B. Pahl, Maureen K. Ohlhausen

The Federal Trade Commission recently has obtained remedies in four cases that ban defendants from engaging in charitable solicitation, which is fully protected speech under the First Amendment to the United States Constitution. The Commission has justified these prohibitions on fully-protected speech as being necessary to prevent prospective donors from being defrauded. While the prevention of fraud is a substantial state interest and a laudable policy objective, we do not believe that it can be used to justify a ban on charitable solicitation--a prior restraint on fully-protected speech.

The FTC has obtained its bans on charitable solicitation as part of settlement agreements in cases that it has filed in federal district court seeking injunctive relief under Section 13(b) of the FTC Act.I The complaints in these cases allege that the defendants have engaged in deceptive acts and practices in violation of Section 5 of the FTC Act. In Eight Point Communications, Inc., the FTC obtained a permanent ban on charitable solicitation against defendants who allegedly made false claims while engaged in charitable fundraising. In Omni Advertising, Inc., T.E.M.M. Marketing, Inc., and Tri-State Advertising, Inc., the Commission secured permanent bans on charitable solicitation against defendants who were alleged to have made false claims while selling advertising in local civic-minded publications.

The bans that the Commission has obtained in these cases are intentionally designed to prohibit fully protected speech. The Supreme Court has accorded heightened constitutional protection to charitable solicitation because "charitable appeals for funds...involve a variety of speech interests--communication of information, the dissemination and propagation of views and ideas, and the advocacy of causes--that are within the protection of the First Amendment." Village of Schaumburg v. Citizens for a Better Environment, 444 U.S. 620, 632 (1980). Charitable solicitation is not mere commercial speech because it "does more than inform private economic decisions and is not primarily concerned with providing information about the characteristics and costs of goods and services." Id. Any governmental restriction imposed on charitable solicitation thus "must be undertaken with due regard for the reality that 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." Id.

Significantly, charitable solicitation does not lose its status as fully protected speech simply because the speaker is being paid by a charity or others to make the solicitation. In Riley v. National Federation of Blind, 487 U.S. 781 (1988), professional charitable solicitors challenged the constitutionality of a state statute which required that they obtain a license before soliciting donations. The Supreme Court explained that charitable solicitations remain fully protected speech even if the solicitors are being paid: "It is well settled that a speaker's rights are not lost merely because compensation is received; a speaker is no less a speaker because he or she is paid to speak." Id. at 801. Accordingly, charitable solicitation remains fully-protected speech even when engaged in by a professional fundraiser, rather than by an employee of a charity or by a volunteer.

Bans on charitable solicitation are prior restraints on fully protected speech. Prior restraints include 'Judicial orders forbidding certain communications when issued in the advance of the time that such communications are to occur," and "permanent injunctions - i.e., court orders that actually forbid speech activities - are classic examples or prior restraints." Alexander v. United States, 509 U.S. 544, 550 (1993) (citing M. Nimmer, Nimmer on Freedom of Speech § 4.03 at 4-14 and 4-16 (1984)). The FTC's bans on charitable solicitation thus are prior restraints because they are included in permanent injunctions (or a stipulated permanent injunction in the case of a settlement agreement) that the court issues. Courts have recognized that prior restraints on fully-protected speech pass constitutional muster only in "exceptional cases." CBS Inc. v. Davis, 510 U.S. 1315,1317 (Blackmun, Circuit Justice 1994) (citing Near v. Minnesota ex reI. Olson, 283 U.S. 697, 716 (1931)). Specifically, prior restraints on fully-protected speech are unconstitutional unless "the evil that would result from the [speech] is both great and certain and cannot be mitigated by less intrusive measures." CBS Inc., 510 U.S. at 1317; see also Nebraska Press Ass'n v. Stuart, 427 U.S. 539, 556-59 (1976).

Although the Commission has never litigated the issue of the constitutionality of its bans on charitable solicitation because to date they have all been obtained in the context of stipulated permanent injunctions,2 the FTC's bans are unlikely to pass constitutional muster once they are given a hard look by the courts. The Commission's justification for these prior restraints on fully-protected speech likely would be that because defendants have been found to have engaged in deception in the past while soliciting donations, allowing them to continue to engage in such solicitations in the future will result in great and certain harm to donors because the defendants will recommence making deceptive claims.

Even though courts have recognized that the prevention of fraud in charitable solicitation is a substantial govemmental interest, see Riley, 487 U.S. at 792, this is insufficient to support the conclusion that past deception justifies a prior restraint on charitable solicitation. For example, in International Society for Krishna Consciousness of Atlanta v. Eaves, 601 F.2d 809 (5th Cir. 1979), Atlanta, Georgia, had enacted an ordinance imposing a variety of restrictions on charitable solicitations at city airports, including requiring that solicitors obtain a permit before seeking donations. Solicitors also were specifically prohibited from making particular misrepresentations while soliciting donations. The International Society for Krishna Consciousness of Atlanta sought a preliminary injunction against this permit revocation provision on the ground that it violated the First Amendment, but the district court refused to grant the injunction.

On appeal, the Fifth Circuit reversed the district court's refusal to enjoin the permit revocation provision. In support of the provision, Atlanta argued that even though it was a prior restraint, it was constitutional under the rationale "once a sinner always a sinner; [that is,] anyone who has violated the ordinance once is likely to violate it again." Id. at 833. The Fifth Circuit, however, rejected Atlanta's argument and held that the provision was unconstitutional because "no prior restraint may be based on this broad generalization." Id. Indeed, the court stated that the provision "presents no difficult issues; it is simply a recipe for an unlawful prior restraint." Id. at 832.

The court's refusal in Eaves to allow a prior restraint on charitable solicitation based on the government's once-a-sinner-always-a-sinner argument is consistent with the extreme reluctance of the federal courts to impose broad occupational bans even on those who have been guilty of federal crimes, including wire fraud and mail fraud. See United States v. Doe, 79 F.3d 1309, 1319-20 (2d Cir. 1996) (the courts of appeals "carefully scrutinize unusual and severe conditions, such as one requiring the defendant to give up a lawful livelihood") (quoting United States v. Cutler, 58 F.3d 825, 838 (2d Cir. 1995)). Notwithstanding the fact that the defendants have been found guilty of crimes, courts have subjected such bans to "careful review" because occupational restrictions "affect fundamental rights such as freedom of speech and freedom of association." United States v. Peete, 919 F.2d 1168, 1181 (6th Cir. 1990). In particular, courts have required a proven history of disobeying court orders in addition to a proven crime before determining that an occupational ban is needed to protect the public. Cutler, 58 F.3d at 839; see also Doe, 79 F.3d at 1322.

Courts similarly are likely to reject an argument by the Commission that a prior restraint on charitable solicitation is warranted to prevent renewed deception simply because a defendant has engaged in past deception in violation of Section 5 of the FTC Act. Courts have not accepted this broad generalization when rejecting the government's request that prior restraints be imposed in response to criminal violations, including wire fraud and mail fraud. Courts are likely to be even less receptive to this broad generalization in response to mere civil violations, including deception in violation of Section 5 of the FTC Act.

Moreover, even if a court were to give some credence to the broad generalization that the defendants are likely to mislead donors in the future because the defendants have misled them in the past, it is unlikely to impose a broad ban on all charitable solicitation. Harm to donors, of course, does not arise from all charitable solicitation; it only arises if the defendant makes false or misleading claims while doing so. An obvious, less-intrusive means for the government to address this prospect of harm is by directly prohibiting only false or misleading claims while soliciting donations. Village of Schaumburg, 444 U.S. at 637-38 (penal laws prohibiting fraudulent misrepresentations in door-to-door and on-street solicitation are "measures less intrusive than a direct prohibition on [these types] of solicitation" to prevent fraud). To the extent that courts are willing to countenance any prior restraint on charitable solicitation, they are likely to impose a direct prohibition on misrepresentation rather than an overbroad prohibition on all charitable solicitation.

In seeking bans on charitable solicitation, the Commission doubtless will be motivated by the sincere desire to prevent donors from being harmed by fraud. But, as Justice Brandeis explained long ago, "Experience should teach us to be most on our guard to protect liberty when the government's purposes are beneficent." Olmstead v. United States, 277 U.S. 438, 479 (1928) (Brandeis, J., dissenting). A considered application of fundamental principles reveals that the FTC's broad bans on charitable solicitation are unconstitutional prior restraints on fully-protected speech and unwarranted restrictions on the freedom of Americans to exercise their rigbts under the First Amendment to the United States Constitution.

* Mr. Pahl and Ms. Ohlhausen are attorney advisors for Commissioner Orson Swindle at the Federal Trade Commission. The views expressed in this article do not represent the views of the Federal Trade Commission or any individual Commissioner.

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  1. FTC v. Eight Point Communication, Civ No. 98-74855 (E.D. Mich.); FTC v. Omni Advertising, Inc., No. 98CV0301 (N.D. Ind.); FTC v. T.E.M.M. Marketing, Inc., No. 98CV0300 (N.D. Ind.); FTC v. Tri-State Advertising Unlimited, Inc., No. 98CV0302 (N.D. Ind.). Commissioner Orson Swindle dissented from the bans on charitable solicitation contained in the orders in each of these four cases.
  2. All of the bans on charitable solicitation that the Commission has obtained have been in the context of settlement agreements. While settlement agreements technically become the orders of the issuing court once they are approved, see Pope v. United States, 323 U.S. 1, 12 (1944); United States v. Ling-Temco- Vought, Inc., 315 F. Supp. 1301, 1309 (W.D. Pa. 1970), some courts do not conduct an extensive analysis before approving such agreements, especially because the defendants may have waived their constitutional rights.