November 26, 2008
Coalition Challenges Utah Fund-Raising Law in Federal Court
By Grant Williams
A Utah law that requires out-of-state fund-raising consultants to register with Utah authorities has been challenged in federal court.
The lawsuit was filed by American Charities for Reasonable Fundraising Regulation, a coalition of fund-raising consultants and nonprofit organizations, and Rainbow Direct Marketing, a fund-raising consultant in Highland, N.Y.
The complaint said the Utah requirement is burdensome, unconstitutionally stifles free speech, and is unnecessary because it duplicates federal rules.
The lawsuit said many consultants that support the court filing are required by Utah to register and pay annual filing fees because charities for which they perform services send mail solicitations and educational materials to residents of the state.
But, the lawsuit said, the consultants “do not have offices in Utah, do not perform services for any charity located in Utah, and do not solicit business in Utah.”
If the consultants “have any contact at all with Utah, it is indirect: The charities for which they perform services may send materials into Utah,” the lawsuit said. Yet the consultants “are not always made aware of all locations to which their charitable clients ultimately decide to mail educational and fund-raising materials.”
Since consultants do not control the activities of their charitable clients, a consultant that does not register with Utah “must take the extraordinary step of refusing to work with any charitable client who either insists on soliciting in Utah or who is unsure whether they will,” the lawsuit said.
“This prophylactic measure,” it said, “would include any charitable organization which intends to employ broadcast or electronic media such as television, radio, the Internet, etc., to communicate their message and seek support for their programs.”
‘Under Protest’
The lawsuit said that Rainbow Direct Marketing, which has an office only in New York, was told by the Utah Division of Consumer Protection that because a client charity had registered with the state to solicit charitable contributions, the company also would be required to register or face “administrative action” by the state.
Because of this threat, the lawsuit said, Rainbow Direct Marketing has been unable to assist the charity with a solicitation it is contemplating.
The lawsuit said that other consultants that belong to or support American Charities for Reasonable Fundraising Regulation have gone ahead and registered with Utah authorities, “sometimes under protest, in order to serve their clients, despite the fact that they do not solicit charitable contributions in Utah and have no other contacts with Utah whatsoever.”
Jennifer Bolton, public information officer for the Utah Department of Commerce — which oversees charitable solicitations — said her department does not comment on pending litigation.
Florida Victory
American Charities for Reasonable Fundraising Regulation was formed more than a decade ago to oppose laws that its supporters believe to be unreasonably onerous or restrictive.
In 2001 a federal court in Florida sided with the coalition in a closely watched lawsuit it had filed against a county fund-raising law.
A federal district judge in Tampa rejected a portion of Pinellas County’s charitable-solicitations ordinance that required fund-raising consultants that work with charities seeking donations from county residents to register with local officials.
The judge said the county did not have jurisdiction over consultants who “are not sufficiently involved” in the actual solicitations. “Consultants,” the judge said, “are not aware of where solicitations are mailed, they do not advise charities on where to send solicitations, and they do not control where solicitations are sent.”
Geoffrey W. Peters, general counsel for American Charities for Reasonable Fundraising Regulation, said in a statement that the coalition was pressing other states to exempt out-of-state fund-raising consultants from registration requirements.
“Filing costly and meaningless paperwork, paying state registration fees, and in some cases undergoing intrusive fingerprinting and bonding requirements simply because you are providing advice to a charity regarding their national fund-raising program is unnecessary, burdensome, and does not advance any effort toward the prevention, detection, or prosecution of fraud,” Mr. Peters said.
In a statement, the American Charities for Reasonable Fundraising Regulation said its goal “is to reduce the burdens of registration on both charities and fund raisers and thereby reduce the costs to both.”
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