Secretary of State of Maryland v. Joseph H. Munson, Inc.

Brief Fact Summary.

The constitutionality of a state statute that prohibited a charitable organization from soliciting donations unless the organization applied no less than seventy five percent of its fundraising receipts to charitable purposes is questioned. The state court of appeals held that the statute was void for being unconstitutionally overbroad. Defendant petitioned the United States Supreme Court for review.

Synopsis of Rule of Law.

A statute that prohibits a charitable organization from engaging in fundraising through solicitation unless a specified percentage of the organization’s income is applied to charitable purposes is unconstitutional when it does not promote a substantial governmental interest.

Facts.

Munson (Plaintiff) was a professional fundraiser for non-profit organizations. After being threatened with prosecution, Munson filed suit in state court against the Secretary of State of Maryland (Defendant) to challenge the constitutionality of a state statute that prohibited a charitable organization from soliciting donations unless the organization applied no less than seventy five percent of its fundraising receipts to charitable purposes. The statute provided an exemption to the prohibition for organizations that could demonstrate that the limitation would defeat their ability to effectively raise funds. The state court of appeals held that the statute was void for being unconstitutionally overbroad. Defendant petitioned the United States Supreme Court for review.

Issue.

Whether a statute that prohibits a charitable organization from engaging in fundraising through solicitation unless a specified percentage of the organization’s income is applied to charitable purposes  is unconstitutional when it does not promote a substantial governmental interest.

Held.

Yes. The court of appeals’ ruling is affirmed. A statute that prohibits a charitable organization from engaging in fundraising through solicitation unless a specified percentage of the organization’s income is applied to charitable purposes is unconstitutional when it does not promote a substantial governmental interest.

Dissent.

(Rehnquist, J.): The Maryland statute is substantially different from the ordinance at issue in Schaumberg. The majority opinion is influenced not by charitable organizations, but by an organization representing professional fundraisers. Munson is not a charitable organization. Munson is a professional fundraiser complaining about regulation limiting the fees he can charge. Fee regulations are subject to the analysis of minimum rationality we apply to any economic regulation. While fee regulation might have some restrictive effect on free speech, that effect would not be significant enough to demand the strict scrutiny analysis we apply to regulations that directly constrain constitutional rights.

Discussion.

Any regulation that limits constitutional rights must be narrowly tailored to promote the governmental interest with the minimum possible infringement upon constitutional rights. In Schaumberg v. Citizens for a Better Environment, 444 U.S. 620 (1980), we held that an ordinance similar to the Maryland statute at issue violated the First and Fourteenth Amendments because it was unconstitutionally overbroad. The only difference between the ordinance we invalidated in Schaumberg and the Maryland ordinance is the fact that the Maryland ordinance offers an exemption to organizations that can demonstrate an inability to effectively generate contributions if subjected to the percentage requirement. In Schaumberg, we concluded that the freedom to solicit contributions is inexorably tied to First Amendment free speech interests. While we recognized that a restrictive ordinance may promote governmental interests in assuring the legitimacy of fundraising entities, thereby protecting the public from fraud, we invalidated the ordinance because it was not sufficiently narrow in its scope as to promote the government interest without excessively infringing upon First Amendment rights. We opined that the government has no interest in restricting the exchange of ideas and political discourse that goes hand-in-hand with solicitation activities. We did not address in Schaumberg whether a waiver provision might save a similar regulation from unconstitutionality. The state court of appeals concluded that the waiver provision of the Maryland ordinance only applied to organizations that could demonstrate that its percentage requirement would have a detrimental financial impact. The waiver provision would not benefit an organization that incurs high fundraising expenses as a result of its decisions about how to apply its funds. As such, organizations that incur high fundraising expenses due to internal decisions to expend funds on the propagation of information would not qualify for the waiver. Those organizations effectively face a limitation upon First Amendment rights to free speech. We typically apply the analysis of overbreadth to situations in which a regulation, on its face, would generally not violate the Constitution but which, under certain circumstances, may be unconstitutional as applied to a particular individual or group of individuals. The Maryland statute represents the opposite situation. It suffers a fundamental flaw in its premise that the percentage of income an organization spends on fundraising represents a bright line indicator of fraud. No matter how the statute is applied, it threatens to infringe on free speech. The statute is unconstitutionally overbroad.