Riley v. National Federation of Blind of North Carolina, Inc.
108 S.Ct. 2667, 101 L. Ed. 2d 669, 1988 U.S. LEXIS 3031 (1988)
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Rule of Law:
A state law regulating charitable solicitations violates the First Amendment if it defines the reasonableness of a professional fundraiser's fee based on the percentage of gross receipts collected, compels the fundraiser to disclose the percentage of gross receipts turned over to charity in prior campaigns, or requires a license to solicit without providing for a prompt decision.
Facts:
- A North Carolina state study revealed that the state's largest professional fundraisers retained over 50% of the gross revenues they collected for charities.
- In 1985, North Carolina amended its Charitable Solicitations Act in response to the study's findings.
- The amended Act established a three-tiered fee schedule, where a fee over 35% of gross receipts was presumed 'unreasonable,' a fee between 20-35% could be deemed unreasonable if it didn't involve public advocacy, and a fee under 20% was deemed reasonable.
- The Act required professional fundraisers, prior to any solicitation, to disclose to the potential donor the average percentage of gross receipts that they had actually turned over to charities in North Carolina during the previous 12 months.
- The Act mandated that professional fundraisers must apply for and receive an approved license before they could solicit funds.
- In contrast to professional fundraisers, volunteer fundraisers were permitted to begin soliciting immediately after submitting a license application.
Procedural Posture:
- A coalition of professional fundraisers, charitable organizations, and donors filed suit against North Carolina officials in the U.S. District Court for the Eastern District of North Carolina, seeking declaratory and injunctive relief.
- The District Court granted summary judgment for the plaintiffs, holding that the challenged provisions of the Act were unconstitutional.
- The defendants appealed to the U.S. Court of Appeals for the Fourth Circuit.
- The Fourth Circuit affirmed the District Court's judgment.
- The U.S. Supreme Court noted probable jurisdiction to review the case.
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Issue:
Does a state law violate the First Amendment's protection of free speech by (1) establishing a three-tiered, percentage-based schedule for determining whether a professional fundraiser's fee is reasonable, (2) requiring professional fundraisers to disclose to potential donors the percentage of gross receipts they retained in the prior year, and (3) mandating that professional fundraisers obtain a license before soliciting while allowing volunteers to solicit immediately upon application?
Opinions:
Majority - Justice Brennan
Yes, the North Carolina law violates the First Amendment. Charitable solicitation is fully protected speech, and regulating fundraiser fees using a percentage-based scheme is not narrowly tailored to the state's interest in preventing fraud. Such a scheme chills protected speech because high fundraising costs do not necessarily indicate fraud, especially for unpopular or new charities, or those whose solicitations also serve to disseminate information. The compelled disclosure of past fundraising percentages is an unconstitutional, content-based regulation because the financial information is inextricably intertwined with the protected speech of the solicitation itself; it is not narrowly tailored and less burdensome alternatives exist. Finally, the licensing requirement operates as an unconstitutional prior restraint because it allows for an indefinite delay in granting a license, effectively silencing the professional fundraiser without the required procedural safeguard of a prompt decision.
Dissenting - Chief Justice Rehnquist
No, the North Carolina law does not violate the First Amendment. The Court should distinguish between the incidental fundraising of advocacy groups and the purely commercial activities of for-profit, professional fundraisers, which deserve less First Amendment protection. The statute's fee provisions are merely economic regulations that are less burdensome than those struck down in prior cases, as they allow a fundraiser to prove the 'reasonableness' of the fee based on various factors. The compelled disclosure of factual information is analogous to permissible disclosure requirements in commercial contexts like securities, and it serves the state's interest in informing donors. The licensing scheme is a rational occupational regulation justified by the greater risk of fraud posed by professional solicitors compared to volunteers.
Concurring - Justice Scalia
Yes, the law is unconstitutional. Charitable solicitation is the dissemination of ideas, which cannot be regulated by the government to prevent it from being 'unfair' or 'unreasonable.' He joins the majority's opinion and reasoning for striking down the fee schedule, disclosure requirement, and licensing scheme. However, he writes separately to express his disagreement with a dictum in a footnote suggesting the state could require fundraisers to disclose their professional status, arguing that even such a requirement is a prophylactic rule that is not narrowly tailored to prevent fraud and wrongly assumes the government is better equipped than the public to make judgments about speech.
Concurring-in-part-and-dissenting-in-part - Justice Stevens
Yes, as to the fee and disclosure provisions, but No, as to the licensing provision. He joins the majority in finding the percentage-based fee schedule and the compelled disclosure requirement unconstitutional. However, he dissents from the part of the opinion striking down the licensing provision, agreeing with the Chief Justice that this requirement does not impose a significant burden on charities' speech and that there is no evidence the state would be dilatory in processing applications.
Analysis:
This case solidified the precedent from Schaumburg and Munson, making it exceptionally difficult for states to regulate the fees of professional charitable fundraisers through percentage-based caps. The Court's decision established that even flexible, rebuttable presumptions tied to percentages are unconstitutional because they create a chilling effect on protected speech. Furthermore, the ruling extended strong protection against compelled speech in the context of charitable solicitations, treating mandatory factual disclosures that are intertwined with an appeal as content-based regulations subject to strict scrutiny. This holding significantly limits the state's ability to dictate the content of a fundraiser's message, even for the purpose of informing the public.
