Secretary of State of Maryland v. Joseph H. Munson Co., Inc.
467 U.S. 947 (1984)
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Rule of Law:
A state statute that limits the amount a charity can spend on fundraising expenses to a fixed percentage of gross receipts is an unconstitutional infringement on First Amendment free speech rights. This infringement is not cured by a provision that allows for a waiver of the percentage cap, as the statute is fundamentally flawed in its premise that high fundraising costs are a proxy for fraud.
Facts:
- Joseph H. Munson Co., Inc. (Munson) is a for-profit company that provides professional fundraising services to charitable organizations, including various chapters of the Fraternal Order of Police (FOP) in Maryland.
- Maryland state law (§ 103D) prohibited charitable organizations from paying more than 25% of the gross income raised from any single fundraising activity on expenses related to that activity.
- Munson's contracts with its charity clients, such as the FOP, regularly required the charity to pay Munson more than 25% of the gross funds raised.
- The Maryland statute contained a waiver provision, allowing the Secretary of State to permit a charity to exceed the 25% limit if the limitation would 'effectively prevent' the charity from raising contributions.
- The Secretary of State of Maryland (Secretary) informed Munson that it was subject to the 25% expense limitation and would be prosecuted if it did not comply.
- As a result of the statute, the Montgomery County Chapter of the FOP became reluctant to enter into a fundraising contract with Munson.
Procedural Posture:
- Joseph H. Munson Co., Inc. sued the Secretary of State of Maryland in the Circuit Court for Anne Arundel County, Maryland (a state trial court), seeking declaratory and injunctive relief.
- The Circuit Court upheld the statute, concluding its waiver provision made it constitutionally flexible.
- Munson appealed to the Court of Special Appeals of Maryland (the state's intermediate appellate court).
- The Court of Special Appeals affirmed the trial court's judgment.
- Both Munson and the Secretary petitioned the Court of Appeals of Maryland (the state's highest court) for writs of certiorari.
- The Court of Appeals of Maryland reversed, holding that Munson had standing and the statute was unconstitutional on its face.
- The Secretary of State of Maryland petitioned the Supreme Court of the United States for a writ of certiorari, which was granted.
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Issue:
Does a state statute that prohibits a charitable organization from paying more than 25% of the gross receipts from a fundraising campaign on its expenses, even with a waiver provision, violate the First and Fourteenth Amendments?
Opinions:
Majority - Justice Blackmun
Yes, the state statute violates the First and Fourteenth Amendments. Charitable solicitation is protected First Amendment activity because it is intertwined with the advocacy of ideas. A statute that places a fixed percentage cap on fundraising expenses operates on the fundamentally mistaken premise that high solicitation costs are an accurate measure of fraud. Legitimate charities, particularly those engaged in advocacy or public education, may have high fundraising costs because they combine solicitation with the dissemination of information. The statute's waiver provision does not save it because it is too narrow, applying only when the cap would 'effectively prevent' fundraising, and does not accommodate charities that make a policy choice to spend more on advocacy-based fundraising. Even if the waiver were broader, it would create an unconstitutional licensing scheme that gives unguided discretion to a state official, which itself chills protected speech. Because the statute's means are too imprecise and create an unnecessary risk of chilling free speech in all its applications, it is unconstitutionally overbroad on its face.
Dissenting - Justice Rehnquist
No, the state statute does not violate the First and Fourteenth Amendments. The Court misapplies the overbreadth doctrine, which should only be used as a last resort. This statute is primarily an economic regulation targeting the fees charged by professional fundraisers to prevent the excessive diversion of charitable donations to private gain. It is markedly different and more carefully drawn than the ordinance struck down in Schaumburg, as it excludes many administrative and advocacy-related costs from its 25% calculation and contains a waiver provision. The statute has a substantial legitimate sweep in preventing fraud and protecting charities from unscrupulous fundraisers. The majority invalidates the entire law based on speculation about potential unconstitutional applications rather than recognizing its core legitimate purpose. Munson, a for-profit fundraiser, should not be able to strike down a legitimate economic regulation by asserting the hypothetical rights of third-party charities.
Concurring - Justice Stevens
Yes, the statute is unconstitutional. While agreeing with the majority's ultimate conclusion, this opinion focuses on the issue of standing. The question of whether Munson has 'prudential standing' to assert the rights of its charity clients is a judge-made rule that the Supreme Court cannot impose on state courts. Since the Maryland Court of Appeals was willing to hear Munson's third-party claim, that decision should be respected. For purposes of the Supreme Court's own review, Munson is a proper party because its business interests are completely consistent with the First Amendment interests of the charities it represents, ensuring vigorous litigation. On the merits, the state court's authoritative construction of the statute aids the conclusion that it is unconstitutionally overbroad.
Analysis:
This decision solidifies and expands the precedent from Schaumburg v. Citizens for a Better Environment, establishing that fixed percentage limitations on charitable fundraising are constitutionally suspect under the First Amendment. It clarifies that merely adding a 'flexible' waiver provision does not cure the statute's fundamental flaw if that flaw is the incorrect equation of high fundraising costs with fraud. The ruling forces states to regulate charitable fraud through more narrowly tailored means, such as enforcing anti-fraud statutes directly and mandating financial disclosure, rather than using broad prophylactic rules that suppress protected speech. This has the practical effect of protecting advocacy organizations and unpopular causes, which often incur high costs to disseminate their message while soliciting funds.
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