ILLINOIS ex rel. LISA MADIGAN, ATTORNEY GENERAL OF ILLINOIS v. TELEMARKETING ASSOCIATES, INC., et al.

Legal Principle at Issue

Whether the state attorney generals complaint operates to limit defendants ability to engage in solicitation-an activity protected by the first amendment. General issue: how much First Amendment protection should be given to the business of charitable solicitation, including telemarketers?

Action

Reversed and remanded. Petitioning party received a favorable disposition.

Facts/Syllabus

Respondents, Illinois for-profit fundraising corporations and their owner (collectively Telemarketers), were retained by VietNow National Headquarters, a charitable nonprofit corporation, to solicit donations to aid Vietnam veterans. The contracts between those parties provided, among other things, that Telemarketers would retain 85 percent of the gross receipts from Illinois donors, leaving 15 percent for VietNow. The Illinois Attorney General filed a complaint in state court, alleging, inter alia, that Telemarketers represented to donors that a significant amount of each dollar donated would be paid over to VietNow for specifically identified charitable endeavors, and that such representations were knowingly deceptive and materially false, constituted a fraud, and were made for Telemarketers' private pecuniary benefit. The trial court granted Telemarketers' motion to dismiss the fraud claims on First Amendment grounds. In affirming, the Illinois Appellate and Supreme Courts placed heavy weight on Schaumburg v. Citizens for a Better Environment, 444 U. S. 620, Secretary of State of Md. v. Joseph H. Munson Co., 467 U. S. 947, and Riley v. National Federation of Blind of N. C., Inc., 487 U. S. 781. Those decisions held that certain regulations of charitable solicitation barring fees in excess of a prescribed level effectively imposed prior restraints on fundraising, and were therefore incompatible with the First Amendment. The state high court acknowledged that this case involved no such prophylactic proscription of high-fee charitable solicitation. Instead, the court noted, the Attorney General sought to enforce the State's generally applicable antifraud laws against Telemarketers for specific instances of deliberate deception. However, the Illinois Supreme Court said, Telemarketers' solicitation statements were alleged to be false only because Telemarketers contracted for 85 percent of the gross receipts and failed to disclose this information to donors. The court concluded that the Attorney General's complaint was, in essence, an attempt to regulate Telemarketers' ability to engage in a protected activity based upon a percentage-rate limitation-the same regulatory principle rejected in Schaumburg, Munson, and Riley.