STATE v. EVENTS INTERN., INC., 528 A.2d 458 (Me. 1987)

Supreme Judicial Court of Maine.Argued January 12, 1987.
Decided July 16, 1987.

Appeal from the Superior Court, Kennebec County.

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Stephen L. Wessler (orally), Asst. Atty. Gen., Chief, Consumer and Antitrust Div., Augusta, for the State.

Leland N. Chisholm, Kelly, Remmel Zimmerman, Portland, Errol Copilevitz (orally), Kansas City, Mo., for defendants.

Before McKUSICK, C.J., and ROBERTS,[*] WATHEN, GLASSMAN, SCOLNIK and CLIFFORD, JJ.

SCOLNIK, Justice.

The plaintiff, State of Maine, appeals from a judgment entered by the Superior Court, Kennebec County, in favor of the defendants, Events International, Inc. (Events), a professional fundraising corporation, and its president, James Nordmark. The State’s action against the defendants was brought pursuant to 9 M.R.S.A. § 5012 (1980), which requires solicitors of funds for charitable organizations to disclose, at the time of solicitation, the financial allocations of contributions. Finding that section 5012 was unconstitutionally overbroad under the First Amendment to the United States Constitution and void for vagueness under the Fourteenth Amendment, the Superior Court, after a jury-waived trial, entered judgment for the defendants. For the reasons set forth herein, we affirm the judgment.

I.
Events is a Florida-based, for-profit corporation that plans, promotes, and operates fundraising events for its clients. Between 1982 and 1984, Events entered into contracts with a variety of organizations in Maine to sponsor magic shows, circuses, and other events in order to raise money on their behalf.[1] It supervised individuals who promoted ticket sales for these fundraising events over the telephone. During these promotions, Events failed to disclose certain information concerning the allocation of contributions to potential ticket buyers.

In 1983, the State filed a complaint to enjoin Events from continuing to operate in Maine, alleging that its solicitations of charitable contributions through ticket sales violated the disclosure requirements of section 5012 of the Charitable Solicitations Act, 9 M.R.S.A. § 5001-5016 (1980 Supp. 1986).[2] After obtaining consecutive

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temporary restraining orders, the State filed an amended complaint in 1985 seeking to permanently enjoin Events from operating in Maine on the ground that its business activities constituted unfair trade practices.[3] The State also sought the imposition of a constructive trust on a portion of Events’ net proceeds earned in Maine to be set aside for payment to the State or the organizations that had contracted with Events for fundraising. After a three day trial, the Superior Court entered judgment for the defendants. It held that the mandatory disclosure requirements of section 5012 were “unconstitutionally vague, overbroad and burdensome, thereby rendering § 5012 void.” It is from that judgment that the State appeals.

II.
The defendants maintain that section 5012 is unconstitutional on its face because it is overbroad under the First Amendment and “void for vagueness” under the Fourteenth Amendment.[4] By mounting a “facial” challenge to section 5012, the defendants “claim that the law is `invalid in toto — and therefore incapable of any valid application.'” Hoffman Estates v. The Flipside, Hoffman Estates, Inc., 455 U.S. 489, 494 n. 5, 102 S.Ct. 1186, 1191 n. 5, 71 L.Ed.2d 362 (1982) (quoting Steffel v. Thompson, 415 U.S. 452, 474, 94 S.Ct. 1209, 1223, 39 L.Ed.2d 505 (1974)). In assessing such a challenge, we are directed by the Supreme Court to first consider the overbreadth issue before turning to the question of whether the law is “void for vagueness.” See id.
at 1191; CISPES v. F.B.I., 770 F.2d 468, 472 (5th Cir. 1985).

The United States Supreme Court has recognized that the solicitation of funds by charitable organizations is protected speech under the First Amendment. Village of Schaumburg v. Citizens for a Better Environment, 444 U.S. 620, 100 S.Ct. 826, 63 L.Ed.2d 73 (1980). Corporations, like Events, that are hired to solicit funds for charities, have standing to challenge the constitutional validity of statutes that interfere with charitable solicitations. Secretary of State v. Joseph H. Munson Company, Inc., 467 U.S. 947, 959, 104 S.Ct. 2839, 2848, 81 L.Ed.2d 786 (1984).[5]

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A statute is overbroad “if in its reach it prohibits constitutionally protected conduct.” State v. State of Maine Troopers Association, 491 A.2d 538, 543 (Me. 1985) (citin Grayned v. Rockford, 408 U.S. 104, 114, 92 S.Ct. 2294, 2303, 33 L.Ed.2d 222 (1972)). To invalidate a statute on grounds that it is overbroad, however, challenging parties must generally show that the statute sweeps within its ambit a substantial amount of protected speech. State v. State of Maine Troopers Association,
491 A.2d at 543 (citing New York v. Ferber, 458 U.S. 747, 767, 102 S.Ct. 3348, 3360, 73 L.Ed.2d 1113 (1982)).[6] “Substantial overbreadth” need not be shown, however, in a situation where a statute is unconstitutional on its face because it “does not employ means narrowly tailored to serve a compelling governmental interest” and directly restricts protected First Amendment activity “in all of its applications.” Munson, 104 S.Ct. at 2852 n. 13. See Schaumburg, 444 U.S. at 637-39, 100 S.Ct. at 836-37 See also Schultz v. Frisby, 807 F.2d 1333, 1349 (7th Cir. 1986) (applying “the per se type” of overbreadth analysis of Munson). We find section 5012 facially unconstitutional under this latter standard.

The State argues that section 5012 furthers two “compelling” governmental interests: the prevention of fraudulent solicitations and the provision of information to prospective donors so that they understand how effectively their donations will serve the charitable purposes of organizations soliciting funds. It contends that the mandatory disclosures of section 5012 place a check on continued solicitations by organizations or corporations that fraudulently pocket contributions for purposes other than charitable causes and, at the same time, allow the public to assess the “efficiency” of charitable organizations.

The financial allocations specified in section 5012, need only be disclosed, however, when less than 70 percent of the amount contributed by a prospective donor will be expended for program services of the recipient organization.

Implicit in the statute’s 70 percent triggering device for these disclosures is an assumption, on the part of the Legislature, that when less than 70 percent of a charitable contribution is allocated to the “program services” of a recipient charitable organization, the organization’s “efficiency” and its purported charitable purpose are both suspect, and it should therefore be required to disclose its financial inner-workings to prospective contributors. Based on the Supreme Court’s pronouncements concerning similar legislative assumptions and the evidence in this record, we conclude that these premises upon which section 5012 is predicated are untenable and, as a result, the statute, in all of its applications, unnecessarily intrudes upon rights protected by the First Amendment. It is on this basis, discussed in more detail below, that the statute should be

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struck down as unconstitutional. See Munson, 104 S.Ct. at 2853 Schaumburg, 444 U.S. at 637, 100 S.Ct. at 836; First National Bank of Boston v. Bellotti, 435 U.S. 765, 786, 98 S.Ct. 1407, 1421, 55 L.Ed.2d 707 (1978).

Evidence presented at trial reveals that many charities operate below the 70 percent threshold during the early years when they are engaged in building a substantial donor base. Their financial allocations to “program services” may be low simply because they are just getting operations under way and attempting to fulfill a need that is unmet by other organizations. Charities or non-profit groups may also expend more on fundraising or management costs relative to program services because they serve unpopular causes. In either case, it cannot be said that the organization is either fraudulent or less “efficient” in meeting charitable purposes than others with relatively low fundraising or management costs and consequently higher percentage allocations to program services.[7] See Munson, 104 S.Ct. at 2852-53 n. 15 (charitable activities may require high costs but still serve charitable purposes or high costs may simply be result of charity’s unpopularity); Schaumburg, 444 U.S. at 637 n. 10, 100 S.Ct. at 836 n. 10 (“The costs incurred by charitable organizations conducting fund-raising campaigns can vary dramatically depending upon a wide range of variables, many of which are beyond the control of the organization.”). More importantly, however, the very organizations most deserving of First Amendment protections — those involved in the dissemination of information, discussion, and advocacy of public issues, see supra. note 5, — are likely to have relatively high solicitation or fund-raising costs (and therefore lower percentages of donations allocated to program services), not because they are fraudulent or any less efficient in furthering their causes than other non-profit or charitable organizations, but because the very nature of their activities cause those costs to be high Munson, 104 S.Ct. at 2850-51; Schaumburg, 444 U.S. at 635, 100 S.Ct. at 835.

Given these fundamental flaws in the design and operation of section 5012, it is only fortuitous that, in some of its applications, this statute might accomplish the State’s goals of preventing fraud and providing information to prospective donors about the effectiveness of their contributions in furthering charitable purposes. See Munson, 104 S.Ct. at 2852-53 (state’s ability to prevent fraud through percentage limitation on amounts charity can spend on expenses in fundraising activity fortuitous at best); see also Black United Fund of N.J. v. Kean, 593 F. Supp. 1567, 1578 (D.N.J. 1984). This lack of logical congruency between the statute’s design and the State’s interest that it seeks to further makes inescapable the conclusion that the statute, in all of its applications, is an unacceptable and unnecessary intrusion upon First Amendment rights. See Munson, 104 S.Ct. at 2852-53. As a result, it is unconstitutional on its face. See id.; Schaumburg, 444 U.S. at 637-39, 100 S.Ct. at 836-37.

The entry is:

Judgment affirmed.

All concurring.