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

PETITIONER:Secretary of State of Maryland
RESPONDENT:Joseph H. Munson Company, Inc.
LOCATION:Clifford Residence

DOCKET NO.: 82-766
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: Maryland Court of Appeals

CITATION: 467 US 947 (1984)
ARGUED: Oct 31, 1983
DECIDED: Jun 26, 1984

ADVOCATES:
Diana Gribbon Motz – on behalf of the Petitioner
Yale L. Goldberg – on behalf of the Respondent

Facts of the case

Question

Audio Transcription for Oral Argument – October 31, 1983 in Secretary of State of Maryland v. Joseph H. Munson Company, Inc.

Warren E. Burger:

We will hear arguments first this morning in Secretary of State of Maryland against Joseph Munson Company.

Ms. Motz, you may proceed whenever you are ready.

Diana Gribbon Motz:

Thank you, Mr. Chief Justice, and may it please the Court:

All of the issues raised in this case can, I believe, be stated in a single question and that is is a state statute which only limits the amounts a charity may spend on some of its fundraising expenses and which provides the charity a complete exemption from even that limitation under certain circumstances overbroad on its face in violation of the First Amendment; that is has the statute been shown to have a substantial number of impermissible applications?

This case comes to this Court on the Secretary of the State of Maryland’s petition for certiorari asking this Court to reverse the decision of the Court of Appeals of Maryland which held such a statute facially overbroad.

Maryland has substantial interest, both because of its parent patria responsibility with regard to charities and because of its obligations to protect its citizens to ensure the integrity of charitable organizations.

The statute, which was invalidated by the Court below, was enacted in response to precisely these concerns as noted in its preamble for prior to its enactment in 1976 Maryland law provided, as it does now, for annual registration and disclosure of certain information by non-exempt charitable organizations and paid solicitors and for strict criminal penalties for fraudulent misrepresentation.

However, the Maryland legislature determined that these measures were not sufficient in light of the activities of some ostensibly charitable organization that had raised millions in contributions but had such excessively high expenses that little of that money had been used for charitable purposes.

William H. Rehnquist:

Ms. Motz, at some point in your argument are you going to discuss the standing question?

Diana Gribbon Motz:

Yes, sir.

I will address the standing question right now, Justice Rehnquist.

William H. Rehnquist:

Whenever you plan to get to it is fine.

I was hoping you would cover something about it.

Diana Gribbon Motz:

Well, Justice Rehnquist, perhaps I can address it right now.

I believe there are really sort of three standing questions here before the Court today.

There is the question of whether there is a case of controversy.

I don’t think that there is really any dispute about that.

It seems to me there clearly is.

This is classically an adverse case.

We have on one side the State, who has its statute declared unconstitutional, and the other side, a party which may be suffer possible criminal prosecution under the statute and which may suffer economic injury if the statute is, in fact, validated by this Court.

The second type of standing… issue here is the jus tertii standing, the opportunity to present the rights of the Fraternal Order of Police by Munson in this case.

It is the State’s position that there is no jus tertii standing here.

However, I am not sure that that issue is terribly important except in one respect and that is because in any event Munson is going to have to demonstrate overbreadth and it is the State’s position that there is no overbreadth standing and there is not an overbreadth challenge on the merits here.

And, the determination of those two questions, it seems to me, are linked to the same kind of considerations.

William H. Rehnquist:

Do you think the Maryland Court of Appeals’ ruling on standing was based on Maryland law or on federal law?

Diana Gribbon Motz:

I believe it was clearly based on federal law, Your Honor.

William H. Rehnquist:

They certainly cited mostly federal cases.

Diana Gribbon Motz:

This is the first case in Maryland in which there was ever found any jus tertii standing, the first case.

And, it was based, I think, quite clearly on Craig versus Boren and a series of cases of this Court and most particularly, of course, the Schaumburg case.

I was talking about the preamble to the legislation that we have at issue here.

Diana Gribbon Motz:

The Maryland legislature determined–

John Paul Stevens:

May I just ask one other question on standing?

Diana Gribbon Motz:

–Yes, sir.

John Paul Stevens:

If you are right on standing, that there is no jus tertii, whatever you call it, standing, what shall we do with the case?

Diana Gribbon Motz:

Well, Your Honor, I think that it is very, very clear that the question of whether… The real question here is whether there is overbreadth standing.

John Paul Stevens:

We don’t even have to reach that if we agree with on jus tertii standing.

Diana Gribbon Motz:

Well, I believe you do because it seems to me that whether or not there is jus tertii standing the Respondent here could make an overbreadth challenge separate and apart from any jus tertii standing.

And, it would be the State’s submission that the overbreadth challenge is not a good challenge, that the merits determination on overbreadth should be a finding by this Court that this statute is not substantially overbroad and this court should do exactly what it did in New York versus Ferber.

That case came to you from the Court of Appeals of New York, the highest Court of the state, and that Court found that the statute was, indeed, overbroad.

This Court reversed and sent it back to the state court for proceedings consistent with that reversal and that is what I submit should be done here.

John Paul Stevens:

So, really there is no difference in your view between the standing issue and the merits issue on the overbreadth question?

Diana Gribbon Motz:

It took us a long time to get there, Justice Stevens, but that is, in fact, our position now, yes, sir.

The General Assembly, recognizing the activities of some ostensibly charitable organizations that have raised millions of dollars in contributions, but have had such excessively high expenses, that little of that money had been used for charitable purposes, enacted reform legislation, of which the statute challenged here was a principal feature, to provide a more effective regulation over fundraising expenses without imposing and intolerable burden on charity and, in the words of the preamble of the statute,

“to assure the contributions will be used to benefit the intended purpose. “

The challenged statute operates as follows: First, it provides that a charity may spend on fundraising expenses no more than 25 percent of the income raised by the fundraising activity.

The statute, however, in no way limits a charity’s administrative expenses, thus, management, overhead and general staff salaries are subjected to no limitation.

In addition, the Maryland statute excludes from the fundraising limitation a number of major items which are ordinarily regarded as fundraising expenses.

For example, the cost of all goods, food or drink or entertainment sold or provided to the public, the cost of pre-planning and feasibility studies, and the cost of postage and printing are expressly excluded from the fundraising limitation and so may be freely incurred without limits.

Moreover, a statute can gain… a charity can gain a complete exemption from the 25 percent limitation when the limitation would effectively prevent the charity from raising contributions and this exemption may be applied for even if the charity has already exceeded the fundraising limitation.

Prior to the decision in the court below, the Secretary of State’s records show 14 organizations requested and exemption and 13 waivers from the 25 percent limitation were granted.

If a waiver is granted, then a charity must disclose to the public every time it solicits on the telephone, in the mail, or in person, that it has been granted a waiver from the 25 percent limitation and the amount that it has been authorized to spend or has spent on fundraising expenses.

Of course, any decision denying a waiver is subject to judicial review.

The Respondent, Joseph H. Munson Company, at whose behest, the court below held the statute I have just described unconstitutional, is an Indiana-for-profit corporation whose sole business, according to its amended bill of complaint, is to advise charitable organizations how to go about promoting an entertainment event.

Also according to the bill of complaint, Munson regularly collects from charities for its services more than 25 percent of the income raised by these services.

The firm’s only client in Maryland is the Fraternal Order of Police, one of whose chapters, it has been stipulated, was reluctant to enter into a fundraising contract with Munson because of the 25 percent limitation at issue here.

In this respect it is significant that a number of other chapters of the same charity, the Fraternal Order of Police, have on several occasions applied for a waiver from the 25 percent limitation and on each occasion the waiver has been granted.

Finally, while it has been stipulated that the Fraternal Order of Police engages in the dissemination of information and the advocacy of causes on the behalf of police officers, there is no stipulation and the record shows no connection between such activities and the fundraising activities at which the Maryland statute is directed.

The basis upon which–

Sandra Day O’Connor:

Ms. Motz, may I ask you whether it is your position now that there are… Are there any limits in your view on the circumstances in which the exemption is available to a charity?

Diana Gribbon Motz:

–Yes, ma’am.

Diana Gribbon Motz:

I believe, Justice O’Connor, there are limits.

In our view, the exemption is only available, as it says in the statute, when the charity can show that without the exemption, with the limitation, contributions would… I don’t have exactly the words of the statute here, but in those instances which the limitation would effectively prevent the charitable organization from raising contributions.

In our view and in practice before the Secretary, it is an economic determination.

The Secretary has in front of her the case that the charity makes that the need the exemption for economic reasons.

Now, there are any number of economic reasons for which the charity has granted the exemption, a new organization, an organization with new activities, an organization with a new program, an organization that wants to pursue a program in a different way, a one-time or extraordinary expense, any one of those kinds of things, but they are all economically grounded.

John Paul Stevens:

May I ask what that means, effectively prevent from raising contributions?

Does it mean they couldn’t raise any contributions or they would raise less money without the limitation?

Diana Gribbon Motz:

I think that the practice has been they would raise less money.

They have had an unsuccessful track record.

They haven’t been able to raise–

John Paul Stevens:

As long as they can show that by exceeding the limit they would raise an extra dollar than if they didn’t have the 25 percent they would be exempt.

Diana Gribbon Motz:

–Well, Justice Stevens, I am not sure I would go that far, but the Secretary has been liberal in granting the exemptions and if a charity comes in with a showing–

John Paul Stevens:

How many of these exemptions were granted before this lawsuit was filed?

Diana Gribbon Motz:

–There were 14 organizations that requested exemption and 13 of those were granted.

John Paul Stevens:

How many before this lawsuit was filed?

Diana Gribbon Motz:

Before this lawsuit… The lawsuit was filed in 1978.

For two years nothing happened at all.

John Paul Stevens:

So those are all post-litigation exemptions?

Diana Gribbon Motz:

Post the beginning of this litigation.

John Paul Stevens:

Yes.

Diana Gribbon Motz:

The statute was not enacted until 1976, so the regulations, in fact, were not promulgated until February of ’78.

So, it has taken awhile to get a record, if you will, of the practice here.

Harry A. Blackmun:

Do you feel the regulations are consistent with the statute as interpreted by your highest court?

Diana Gribbon Motz:

I do, Your Honor.

Our highest court said, which, it seems to me, is absolutely true, that regulations can go no further than the statute and the matter that this Court and, indeed, every court I am familiar with has ever held.

And, we believe that the way which those regulations have been interpreted by the Secretary, the practice is entirely consistent with the statute and has gone no further than the statutory authority.

And, indeed, Respondent makes no contention the contrary.

His contention is not that the regulations go further than the statute.

He simply says that the regulations and the statute don’t give enough discretion don’t give enough exemption authority.

Harry A. Blackmun:

I take it you are satisfied with so-called narrow interpretation of the statute.

Harry A. Blackmun:

I guess you have to be.

Diana Gribbon Motz:

I think that is right.

I have The General Assembly has spoken it seems to me.

Lewis F. Powell, Jr.:

Ms. Motz, I would like to ask question about the statute also.

On page eight of brief, you say there is no limit whatever on administrative expenses.

Diana Gribbon Motz:

That is right, Justice Powell.

Lewis F. Powell, Jr.:

Will you tell me about some of normal administrative expenses.

What about salaries personnel who work in the headquarters, say, of the United Fund?

Diana Gribbon Motz:

Those expenses, those salaries are not touched by the Maryland statute.

Lewis F. Powell, Jr.:

Nor is rent?

Diana Gribbon Motz:

Nor is rent, no, sir.

Lewis F. Powell, Jr.:

Nor is travel expense of executives?

Diana Gribbon Motz:

No, sir.

None–

Lewis F. Powell, Jr.:

What is touched?

Diana Gribbon Motz:

–What is touched are what is defined as explicitly fundraising expenses.

And, the way the Maryland statute directs that a charity… that these be allocated is consistent with standards of–

Lewis F. Powell, Jr.:

Could you give some illustration?

Printing is not included.

Diana Gribbon Motz:

–Printing of materials that are mailed is not included.

Printing of other materials is included.

The cost of telephone solicitors is included.

Lewis F. Powell, Jr.:

What about radio?

Diana Gribbon Motz:

Radio cost, advertising cost, yes, sir, all of those are limited by the exemption… by the limitation.

Lewis F. Powell, Jr.:

Yes.

Diana Gribbon Motz:

But, none of what would be thought of as administrative costs, attorney’s fees, bookkeeping, the salaries of people that are at headquarters, researchers, none of that is touched by the Maryland statute.

Byron R. White:

What if the organization just hired a fundraiser and the fundraiser charges a fee or percentage?

I suppose that would be covered.

Diana Gribbon Motz:

That would be covered, Justice White, except if the fundraiser was doing a feasibility or preplanning study, the professional fundraiser.

If they were doing that kind of study, that expense is expressly excluded from the fundraising limitation.

Thurgood Marshall:

What about expense accounts of the staff?

Diana Gribbon Motz:

The staff of the charity–

Thurgood Marshall:

The expense accounts.

Diana Gribbon Motz:

–Of the United Fund, for example, the charities’ expense accounts, the administrative expense accounts?

Thurgood Marshall:

I am talking about unlimited expense accounts–

Diana Gribbon Motz:

Sir, if–

Thurgood Marshall:

–where you raise money for somebody and you don’t charge any fee, but your expense accounts run about twice what you raise?

Diana Gribbon Motz:

–I don’t think that problem… Well, if all that this person does–

Thurgood Marshall:

You evidently don’t have some of the sharp ones around here then.

[Laughter]

Diana Gribbon Motz:

–Well, I don’t suggest, Justice Marshall, that this statute covers every problem.

I think if that person is only working on soliciting contributions, then the expense account money would, indeed, be covered by this limitation.

If that person is working in the central staff office on administration, his expense account would not be.

Byron R. White:

Let’s assume in this case there was a specific case for an exemption which was denied and then this suit is brought.

I suppose you would say the State’s interest in enforcing this statute is sufficient to override whatever First Amendment interest there is here.

Diana Gribbon Motz:

Well, in point of fact, we don’t have… We don’t have any showing here–

Byron R. White:

I know.

I said, let’s assume, let’s assume, assume there is no overbreadth issue whatsoever, just that this charity says this is what it does to me.

And, I would suppose your position has to be that the State’s interest in that is sufficient to warrant the statute.

Diana Gribbon Motz:

–Well, Justice White, if we assume further that the group that is denied the waiver is an advocacy organization, then I think we… I don’t necessarily think that the Maryland statute can be applied constitutionally.

I don’t think it necessarily would be applied unconstitutionally.

I think that would be a matter for case-by-case determination.

We are talking about an advocacy group–

Byron R. White:

Well, if you say that… If the statute is applied to some advocacy groups would be unconstitutional I take it you are saying it might be.

Diana Gribbon Motz:

–I am saying–

Byron R. White:

If an exemption were forbidden or if there was a prosecution for raising money without a permit of some advocacy organizations, the statute would be unconstitutional, is that right?

Diana Gribbon Motz:

–I am not sure of that, Your Honor.

I think it, Your Honor.

I think that may be possible.

Byron R. White:

Well, you are not… I take it then we should judge the case as though that were the case, unless you want to take a position on it.

Diana Gribbon Motz:

Let me try to articulate my position on it.

I think the position I would take, Justice White, is there has been no showing here.

I think it is highly unlikely that this statute is ever going to be applied unconstitutionally against any group.

Byron R. White:

Well, you say that you can imagine some advocacy groups which would… to which the statute could not be applied constitutionally.

Diana Gribbon Motz:

No, sir.

I thought that I was taking your hypothetical which was an advocacy group that had been denied the exemption.

Byron R. White:

All right, I will take that.

I will take that.

An advocacy group denied the exemption and without the permit they cannot raise money.

You would say that in some circumstances the statute could not be applied.

Diana Gribbon Motz:

I think it is arguable that the statute would be unconstitutional.

I think it is highly unlikely that the advocacy group is ever going to be denied the exemption.

Byron R. White:

On your submission then we must assume that in some circumstances the statute could not be constitutionally applied.

Diana Gribbon Motz:

I think that one can assume here, as one did in Broadrick, that it is possible the statute may have a limited number of impermissible applications.

Byron R. White:

How do you avoid the overbreadth argument then?

Diana Gribbon Motz:

Well, it seems to me that we avoiding it exactly as it was avoided in Broadrick, that the chance of… The likelihood of that happening is so infinitesimal that we would reserve that case to a case-by-case determination.

If there was ever a statute built for a case-by-case determination, I submit, Justice White, it is this one.

Byron R. White:

Well, did your court agree with your assessment?

Diana Gribbon Motz:

Well, no, sir, that is why we are here before you.

Byron R. White:

Well, I know, but don’t they know more about the possibilities in the great State of Maryland than we do?

Diana Gribbon Motz:

Well, I think, Justice White, what they did was try to apply the Schaumburg analysis in a mechanistic way and not look at the true and substantial differences between this case and Schaumburg.

It is the State’s submission that the Schaumburg holding does not require invalidation of the Maryland statute.

William H. Rehnquist:

You are not suggesting that the author of Broadrick and the author of Schaumburg disagree with one another, are you?

Diana Gribbon Motz:

Well, I would certainly hope not, Justice Rehnquist.

I am dismayed that there might be a chance of that and that is why I have tried to address that point right now.

That is because, we submit, there are substantial, significant differences between the statute we have here and the ordinance in Schaumburg.

Perhaps the most obvious one is that while the Schaumburg ordinance was a direct regulation of door-to-door solicitation, conduct which has been recognized as often so intertwined with advocacy as to be protected under the First Amendment.

The Maryland statute is not directed to door-to-door solicitation, but rather at charitable fundraising expenses.

Fundraising, as you know, may be conducted in a variety of ways that has nothing to do with advocacy like dances, garden tours, bingo games, things like this, and, of course, the entertainment shows which are the speciality of the Respondent here.

Now, true, fundraising may include solicitation intertwined with advocacy.

Diana Gribbon Motz:

This is the point we were getting at earlier.

But, there is no showing here that any solicitation intertwined with advocacy has been or will be or is likely to be threatened by the Maryland statute or that any group engaging in any solicitation intertwined with advocacy has even needed to apply for a waiver from the fundraising limitation, let alone been denied one.

The second important difference, I think, between the statute and the ordinance in Schaumburg is the situation I was discussing with Justice Powell a few minutes ago and that is the fact that the Schaumburg ordinance limited a charity to… limited its administrative as well as fundraising expenses; that is general staff salary, rents, telephones, attorney’s fees.

All of those general expenses were limited by the Schaumburg ordinance as well as fundraising expenses.

The Maryland statute does not attempt to limit the administrative expenses, rather it attempts to strike at the heart of the problem of excessive fundraising without unduly intruding into the internal affairs of a charitable organization by limiting only fundraising expenses.

Thirdly, the Schaumburg ordinance required a charity, prior to any solicitation, to obtain a permit and in order to obtain the permit the charity had to prove that at least 75 percent of its income in the previous year had been used directly for charitable purposes, thus, there was no way a charity could, in the words of this Court, alter its spending patterns in the short term to comply with the 75 percent requirement.

The Maryland statute imposes neither of these serious burdens on a charity.

First, it does not require a charity to prove compliance with the percentage limitation prior to engaging in fundraising activities.

And, second, the Maryland statute allows a charity to apply the limitation retrospectively on an annual or a campaign-by-campaign basis.

So that even in a short run, a charity can, indeed, alter its spending patterns to comply with the Maryland statute.

Fourth, the Schaumburg ordinance flatly bans the solicitation by charities that spent more than a certain percentage on non-program expenses.

In contrast, the Maryland statute simply subjects expenses in excess of the percentage limitation to scrutiny.

If a charity can demonstrate the limitation effectively prevents it from raising funds, it can obtain a complete exemption from the waiver, something that was simply impossible under the Schaumburg ordinance.

John Paul Stevens:

May I ask a question that is based on something you said earlier?

You said “complete exemption”.

When they get the exemption and then they thereafter solicit, are they required by the terms of the exemption to disclose the fact that over… So it is really not a complete exemption.

Diana Gribbon Motz:

It is not a… Well, it is a complete exemption, but–

John Paul Stevens:

It is subject to disclosure.

Diana Gribbon Motz:

–there is a disclosure requirement.

John Paul Stevens:

And, I take it the thought behind the disclosure requirement is that would avoid any danger of fraudulent–

Diana Gribbon Motz:

Well, it would let the prospective donor know.

John Paul Stevens:

–Know what was happening.

Diana Gribbon Motz:

Yes.

John Paul Stevens:

Why would not such a blanket requirement of disclosure, whenever over 25 percent is used for administrative expenses, why would that not adequately serve the State’s interest in avoiding fraud?

Diana Gribbon Motz:

Well, I think there are two reasons, Justice Stevens.

First, and probably the one that is most persuasive to us is that I am not just sure disclosure really works.

In a variety of situations, from cigarette packs to securities regulations, disclosure, no matter how full it is, no matter when it is given, just simply doesn’t really do the trick all the time.

Now, it is a part of our statute.

It is hoped that it does inform–

John Paul Stevens:

How can you say it doesn’t do the trick?

John Paul Stevens:

Maybe it doesn’t prevent people from buying cigarettes, but they are not being defrauded if they know the risks involved in the purchase.

Diana Gribbon Motz:

–Well, the problem–

John Paul Stevens:

And that is your only interest, to avoid the risk of fraud as I understand it.

Diana Gribbon Motz:

–Well, the problem here though is it raises… We are telling people we spend 10 percent on fundraising expenses… raises more questions than it answers.

It tells people that and then it immediately invites questions.

And, the person who is often doing the soliciting is either a volunteer, who doesn’t know very much about the innerworkings of the charity or why the 10 percent is high or the 10 percent is low, or a paid solicitor paid at a minimum wage rate whose in the same situation, although for different reasons, and it is the charities themselves who have almost across-the-board… I notice they don’t say it in their amici briefs to this Court, but they have, for example, testified before the Maryland General Assembly that disclosure requirements, point of solicitation disclosure requirements raise more questions than they answer and, therefore, put an undue burden on the charity and don’t give the public the real story.

Now I think there is some truth in that, Your Honor.

I think they tell you something.

They don’t tell you everything and they are not… It seems to us they are not as protective of Maryland’s interest as the statute we have here.

And, we believe the statute we have here does not impose very much burden, more burden on charities than that would.

Finally, it is the State’s position that the court below not only erred in failing to recognize the substantive differences between the ordinance struck down in Schaumburg and the statute involved here, but it also failed to apply the correct test of validity, the test that was applied by this Court in Schaumburg, the substantial overbreadth test.

In Schaumburg this Court held the ordinance bad because it constituted a substantial limitation on protected activity.

Subsequent to the decision in Schaumburg, this Court has reiterated the test of substantiality in New York versus Ferber where it said that a statute would be stricken as overbroad under the First Amendment only if it were shown to have a substantial number of impermissible applications.

There is no showing in this case that the Maryland statute has had, will have, or is likely to have any impermissible applications.

Byron R. White:

Except in the opinion of your court.

Diana Gribbon Motz:

The Court of Appeals’ decision, Justice White, rests entirely upon conjecture.

There is neither the Respondent nor the Fraternal Order of Police nor any of the amici who have presented a point of view to this Court has shown that this statute has limited or threatens to limit the dissemination of information or the advocacy of ideas.

If I could compare the Court of Appeals–

Byron R. White:

Do you think the overbreadth argument must always be supported by evidence in the record?

Diana Gribbon Motz:

–Sir, if I… No, I don’t think it need be supported by evidence in the record.

I think in order to show substantial overbreadth one must find that it is realistic to expect the statute will, in fact, be overbroad.

Here, I submit, it is not realistic to expect that.

I think what one–

Byron R. White:

So, what do we say… If we agree with you, what do we say about the conclusion of the Court of Appeals about the substantiality of the overbreadth?

You say it is wrong because we know more about… We have got better judicial notice than they have.

Diana Gribbon Motz:

–I think what you say is… While in Schaumburg it was likely, it was almost inevitable.

Indeed, this Court found it was a group to which this statute could not constitutionally be applied.

I think it is impossible, particularly with the waiver provision, to ever find that about this statute; that there is a group to which it cannot constitutionally be applied.

It simply isn’t here.

That is a question of federal constitutional law I submit.

Diana Gribbon Motz:

If there are no further questions, I think I will try to reserve my remaining time.

Thank you.

Warren E. Burger:

Very well.

Mr. Goldberg?

Yale L. Goldberg:

Mr. Chief Justice Burger, with the Court’s permission:

First, if I may, let me say that notwithstanding the remarks contained in the reply brief filed by the Petitioner, neither the Respondent nor any of the amici suggests to this honorable Court or to anyone else that the state doesn’t have a right to regulate in this area because truly, surely it does.

Nor shall I come before you today to reargue Schaumburg case.

I don’t think it needs rearguing.

I think your findings in the Schaumburg case were quite clear.

I would submit to you that if you look at statute in the Schaumburg case, that is that portion which sets up in that case 75 percent formula, and in case of the State of Maryland, the 25 exemption, I think you will find them substantially the same.

You will find some allocations of costs slightly different, but their intrusiveness on First Amendment rights are almost equal and I say the word “almost”, because it is my contention that the Maryland statute is not, in fact, less intrusive of First Amendment rights, but, in fact, more intrusive of First Amendment rights.

Warren E. Burger:

Now, going back to your statement that the states do have the power to regulate, constitutional power–

Yale L. Goldberg:

Yes, sir.

Warren E. Burger:

–do you mean by that if the states… at least 50 percent of the money must go to the charitable organization… that the expenses can’t exceed 50 percent that might be satisfactory?

Yale L. Goldberg:

No, no, indeed, Mr. Chief–

Warren E. Burger:

How about 75–

Yale L. Goldberg:

–Mr. Chief Justice–

Warren E. Burger:

–Wait a minute.

Yale L. Goldberg:

–I am sorry, sir.

Warren E. Burger:

If 25 percent must go to the principal, that expenses can’t exceed 75 percent?

What about that?

Yale L. Goldberg:

Your Honor, respectfully I would suggest that any percentage, any, whether the percentage were 25, 50, 75 or–

Warren E. Burger:

Even 90?

Yale L. Goldberg:

–Even 90, yes, sir.

In fact, raise a point that was raised in the court below when it was asked of me suppose 90 percent was the determinative factor?

And, I said to the court below, the Court of Appeals of Maryland, that any percentage that takes away the right of the public to makes it own decision whether or not to contribute to a particular organization or cause or whatever advocacy group, such a percentage would be invalid, period.

Why do I say that?

Because the purpose of these statutes, all of them, the Schaumburg statute, by the evidence of counsel here this morning, this statute, they are designed to help prevent fraud.

William H. Rehnquist:

Mr. Goldberg, what if a legislature were to say that our statute is not only designed to prevent fraud, but we think it is against public policy for charitable solicitors to make 90 percent of what they take.

So, even if they completely disclose it, we are not going to let them operate in Maryland.

William H. Rehnquist:

Do you think that would be unconstitutional?

Yale L. Goldberg:

Yes, I do, Your Honor.

I think that would be just as intrusive, and with your permission, Justice Rehnquist, I would like to tell you why.

William H. Rehnquist:

What do you mean by intrusive?

Is there something in the Constitution that says an ordinance can’t be intrusive?

Yale L. Goldberg:

Well, no, Your Honor, but if it is, it has to be minimally intrusive of a First Amendment right of freedom of speech.

And, I would suggest to this Court an example of what I am talking about.

I would suggest to this Court if this year, as an example, the particular charity succeeded in raising $10,000 for a particular advocacy group and they did it right within the 25 percent limitation that was provided by the Maryland statute and everybody was happy, and the next year they decided, well, we want to bring our message across to a greater number of people, we want to raise more money, and instead of using the mail as we had done before and perhaps a few speeches around town… The Super Bowl is coming up and we want to take some time and buy some advertisement and we want to raise a quarter of a million dollars.

Well, our cost on there looks like is going to be about $750,000.

Well, we will pay the $750,000 because we are going to raise $250,000.

So, as a result, we have gone far beyond the Maryland statute, but what we haven’t done, Your Honor, is committed any fraud.

And, there is no implication of fraud.

William H. Rehnquist:

But, you seem to insist that only fraud can be a permissible motive, legislative motive, for a statute like this.

Certainly a state can regulate the fees charged by employment agencies, can it not, regardless of how much the employment agency discloses?

It can say, whatever you disclose, you still can’t collect a referral fee of more than 10 percent.

Isn’t that so?

Yale L. Goldberg:

Your Honor, that is so, but I don’t think it is applicable in the area in First Amendment and freedom of speech.

William H. Rehnquist:

But, what if a state said that we think literary agents are just getting too much money from authors, so we are going to forbid any literary agent from collecting more than 10 percent by way of a commission from an author’s royalties on a book?

Now, supposing you could make all the showing that the agent had been getting kind of grabby, the same sort of thing you make for an employment agency, do you think there is anything wrong under the Constitution with that statute?

Yale L. Goldberg:

I think, Your Honor, that it conceivably could be challenged, yes.

William H. Rehnquist:

Well, all statutes conceivably could be challenged.

Yale L. Goldberg:

Yes.

William H. Rehnquist:

What do you think would be the outcome of the challenges?

Yale L. Goldberg:

I frankly, Your Honor, would feel that perhaps the outcome of the statute, I think, would be declared perhaps unconstitutional as an unjustified intrusion into the right to deal freely in business in the absence of any suggestion of fraud or wrongdoing.

We have a market place system here in our society–

William H. Rehnquist:

If that analysis is true, the cases of holding of regulation on employment agency fees must be wrong if it is just a market place analysis.

Yale L. Goldberg:

–Your Honor, I don’t stand before this Court and suggest that I would be a sage in suggesting that I would agree or disagree with all past holdings of this Court or any other court and hope that what my position is with respect to a particular issue is the correct one.

I address myself to those issues this morning that have to do with a statute which is baldly on its face overly broad and that it reaches out and sweeps in organizations who have a right of freedom of speech and presentation.

We are dealing with a percentage statute and I know the statement that I have made in response to the Chief Justice’s statement is a rather strong one, but, nonetheless, when you are talking about First Amendment rights, I think it has been the tradition of this Court to be very, very strong in its protection of those rights.

I would suggest that not only is the statute in Maryland stronger than that… stronger in the sense that it violates First Amendment rights to a greater extent.

Yale L. Goldberg:

If you compare the Village of Schaumburg statute, it only really related to door-to-door solicitations, though the court didn’t rest its opinion on the door-to-door permit requirement.

In the Maryland statute, may I draw your attention to the fact that the solicitation is any form of solicitation, whether it be by radio broadcast, whether it be by telephone, whether it be by mail or whatever media–

Warren E. Burger:

Maryland wasn’t attempting to tell them how to do it.

It wasn’t addressing specific methods as in Schaumburg.

But, going back to your statement that the state has a constitutional authority to regulate, could you give some examples of what you think would be reasonable or constitutional regulations?

Yale L. Goldberg:

–Certainly, Your Honor.

I don’t have the statute here before me, but I am quite sure it is the statute which is in effect in Indiana that I had occasion to take a look at which is a very strict disclosure statute which requires an organization to present a statement of its financial affairs in connection with all contributions made to it.

I would further suggest to the Court that as this Court stated in its Schaumburg decision there are many, many, very, very strong penal statutes that can be drawn, and some have been drawn already, which deal with fraud.

If fraud is the thing that raises the concern of the state, as well it should–

Warren E. Burger:

Let me put this hypothetical to you.

Suppose Maryland has provided in its statute that during the period of the solicitation the soliciting organization and the ultimate beneficiary must publish once a week in the local newspaper the record of the last previous solicitation as to how much it cost to raise the money, how much of it was going to the charitable organization and how much was going to the promoters.

Would that be a valid regulation?

Yale L. Goldberg:

–I would suggest to the Court, if I understood your question correctly, and I think it was whether or not if they required them to do it on a weekly basis, would that be a fair statute.

Warren E. Burger:

So that the people being solicited would understand where their money was going.

Yale L. Goldberg:

I would suggest to the Court, Your Honor, that in that form, in that form, such a disclosure law might be considered overburdensome in that not knowing what funds that they were going to be able to obtain, to expend the monies necessary to effectively publish, I would suppose, in a local paper on a weekly basis might be in itself such a heavy obligation as to be prohibitive.

On the other hand, to require an organization to give out to a perspective donor a statement of what it has done with its money, I see no problem with that whatsoever.

I think it is entirely within the proper realm for a state to so regulate and doesn’t on its face, at any rate, appear that there would result in any infringement of First Amendment rights.

Thurgood Marshall:

Well, how much publication would you have to give?

Yale L. Goldberg:

Your Honor, in the statute in effect–

Thurgood Marshall:

I mean on your statement… You have just said it would be perfectly all right to compel them to make a public disclosure.

Is that what you said?

Yale L. Goldberg:

–Yes, sir.

Thurgood Marshall:

How often and how detailed?

Yale L. Goldberg:

Your Honor I wouldn’t suggest that I know the answer to that question, however, I would suggest this.

Some jurisdictions, that is some states, I have been advised, though I don’t know the particular states, publish this information as a public service on behalf of–

Thurgood Marshall:

That is not my question.

My question is the statute compels the organization to disclose it.

You said you agreed with that.

Yale L. Goldberg:

–Yes, I do.

Thurgood Marshall:

Well, how often, once every thousand years?

Yale L. Goldberg:

No, sir, absolutely not.

I would suggest, Your Honor, if you had such a statute, that if they were compelled to forward a copy of their financial statement of the preceding year, I think that would certainly be fair and adequate.

Thurgood Marshall:

I thought you said to the public.

Yale L. Goldberg:

Sir?

Thurgood Marshall:

I thought you said they could be compelled to report to the public not some agency.

Yale L. Goldberg:

If they were compelled to report to the public, Your Honor, I would suggest that once a year would not be unreasonable.

Thurgood Marshall:

In how much detail?

For example, unlimited expense accounts, would that be included?

Yale L. Goldberg:

Your Honor, I honestly can’t address that to you, because how detailed a statute… a state ultimately comes–

Thurgood Marshall:

You really didn’t mean what you said, to give it to the public, did you?

You meant to give it to the public on your terms.

Yale L. Goldberg:

–No, sir.

No, sir, that is not what I meant at all, not what I meant at all.

I am not a legislator.

I have seen statutes such as the Indiana statute which requires the information to be given at the time a solicitation is made and a donor agrees to give money.

That would appear to me–

Thurgood Marshall:

Did you ever look at the New York statute?

Yale L. Goldberg:

–Sir?

Thurgood Marshall:

Did you ever look at the New York statute?

Yale L. Goldberg:

No, sir, I have not.

Thurgood Marshall:

I don’t know how you ever got to the Indiana one.

[Laughter]

Yale L. Goldberg:

Well, it was forwarded to me, Your Honor, if the Court please.

Thurgood Marshall:

Oh !

Yale L. Goldberg:

And, I would take a few moments at this time to further try to distinguish the two statutes.

It is our position that, of course, the Maryland statute is truly overbroad and stands foursquare along side that statute in the Schaumburg case and it is our position–

Sandra Day O’Connor:

Mr. Goldberg, what about the exemptions that are allowed under the Maryland statute.

Isn’t that a substantial difference?

Yale L. Goldberg:

–Thank you, Justice O’Connor.

I was just coming to that very point and I would suggest to you that these or this “limited exemptions” provision doesn’t cleanse this statute of any overbreadth.

Yale L. Goldberg:

In fact, this exemption further burdens this statute to a point that I would suggest is, based on the law of this Court in the past, is just totally unacceptable.

It leaves a clear-cut discretion in the hands of the Secretary of the State of Maryland.

You know, they can say as frequently as they might like that we have given 14 exceptions.

All someone has to do is come in and apply.

Well, that is what has been done today and that is what was done yesterday.

But, what we don’t know is and what we cannot allow to be speculated upon is what is going to be done tomorrow.

Perhaps tomorrow an organization will come in who is not particularly favored by this particular Secretary of State and then we go–

Sandra Day O’Connor:

But, you say the Maryland Statute would be fine under Schaumburg if the exemption provision set forth some standards.

Yale L. Goldberg:

–Your Honor, I would suggest to this Court that any attempt at curing the overbreadth by way of an exemption provision, which in itself leaves a discretion in the administrative body, that is a secretary of state or other administrative officers, not withstanding that there may be an appeal to a judicial body, is no less offensive, in fact, perhaps more offensive of First Amendment Rights as anything could possible be, because you are talking about leaving discretion… I refer now to Justice Rehnquist’s dissent in the Schaumburg case in which he so eloquently pointed out that it is almost academic that if you have a First Amendment right involved you cannot have discretion.

The Maryland courts have interpreted the statute which, as the Court pointed out earlier, the State unfortunately is bound with, that it is much too narrow so that it does not at all clear up the issue of overbreadth which is so terribly apparent in the other portion of the statute.

John Paul Stevens:

Mr. Goldberg, may I ask you a question right there?

Yale L. Goldberg:

Yes, sir.

John Paul Stevens:

If your position is the statute is overbroad and the exemption doesn’t help, I take it you are arguing that even if you had applied for an exemption and you had received the exemption and you were able to solicit on behalf of this organization, you would still have this lawsuit that you would be able to maintain?

Yale L. Goldberg:

I am sorry, sir, I didn’t hear.

John Paul Stevens:

You would still make your overbreadth attack on this statute even if you had applied for an exemption and obtained an exemption, is that correct?

Yale L. Goldberg:

Of course.

John Paul Stevens:

Why didn’t you ask for an exemption then?

Yale L. Goldberg:

Because, Your Honor, we didn’t feel that the statute was constitutional.

We didn’t feel that–

John Paul Stevens:

But, you wouldn’t have lost your right to challenge it.

Yale L. Goldberg:

–That is very true, Your Honor, but then again–

John Paul Stevens:

You might have been able to solicit in the meantime.

Yale L. Goldberg:

–You don’t have to… When a statute is being challenged on First Amendment group you don’t have to have a violation of that statute, we have what is generally referred to in these cases a chilling effect which gives us the right to come in and test these statutes.

Here, Your Honor, as an example, an advocacy group… An advocacy group doesn’t want to run the risk of challenging that statute.

They don’t want to have stigma of fraud pointed in their face because they have violated the statute, have now come back and have now asked–

John Paul Stevens:

I understand all that, but it does not explain to me why you wouldn’t have applied for the exemption.

Maybe you don’t have to, but I am just curious.

Yale L. Goldberg:

–Well, Your Honor, we didn’t apply for the exemption, because frankly, sir, we didn’t feel we had to.

We felt that the statute was wrong, the statute was unconstitutional, and, therefore, we did not apply for the exemption on those grounds.

We weren’t required to apply for that exemption, and, in fact, did not, no more than one would have to apply for a permit when they were out in the street canvassing books in connection with particular types of religious beliefs.

Yale L. Goldberg:

I believe, if my memory serves me, a case comes to mind, the Cantwell case… No, a more recent case, the Hynes case versus Oradell.

Mr. Hynes could have gone and sought a permit, but he didn’t.

He went out door to door and solicited for his particular campaign because that statute, he felt, was overly broad and facially unconstitutional and, therefore, he wasn’t required to do so.

And, Your Honor, that is exactly the position in this particular matter.

Now, I think perhaps I have… by Your Honor’s questions… I have covered most of the ground that I intended to try and cover here this morning.

Lewis F. Powell, Jr.:

Mr. Goldberg, may I ask a question?

Yale L. Goldberg:

Certainly, sir.

Lewis F. Powell, Jr.:

The stipulation states that the Fraternal Order of Police that you represent is engaged in advocating causes.

I am generally familiar with the Orders of Police and in my State of Virginia they serve their useful purpose.

Tell me specifically what causes your client–

Yale L. Goldberg:

Well, Your Honor, the Fraternal Order of Police has evolved in the past two years, I would suppose, in as much as a voice of the police officers in connection with work-related activities that is almost in the form of a union chapter, if you will, expressing the views of the police officers as to working conditions, as to benefits that might be obtainable by them, and in an area that is terribly important–

Lewis F. Powell, Jr.:

–So the cause is to improve employment conditions of police?

Yale L. Goldberg:

–Not entirely, Your Honor.

Also, they spend a good deal of time in connection with the field of relations between the Police Department and the public establishing better relationships, working together so that the police officer is not looked upon as this onerous person in a blue uniform, but really as he had been looked upon in years gone by.

Lewis F. Powell, Jr.:

As a public relations program?

Yale L. Goldberg:

Sir?

Lewis F. Powell, Jr.:

As a public relations program?

Yale L. Goldberg:

Public relations program.

Lewis F. Powell, Jr.:

How is that put on, by radio, television, newspaper ads, or what?

Yale L. Goldberg:

Your Honor, each chapter does it, I would presume, in their own way.

They promote certain local affairs.

They go out and participate in local affairs.

I believe that is how it is done.

With any particularity I am sure I cannot answer as for each chapter.

Lewis F. Powell, Jr.:

Mr. Goldberg, are any of the funds used directly to benefit aged police or police whose disability benefits are not adequate to take care of them?

Yale L. Goldberg:

Yes, Your Honor, that is another area.

Lewis F. Powell, Jr.:

Tell me this.

Do you have to file any report at all of how the money is expended?

Yale L. Goldberg:

As of this time, whether or not the Montgomery County Chapter has filed such report, I cannot answer, because–

Lewis F. Powell, Jr.:

I am asking about Maryland law.

Yale L. Goldberg:

–Sir?

Lewis F. Powell, Jr.:

Does Maryland law require the filing of any report to anyone?

Yale L. Goldberg:

I can tell you that my client, the Respondent, the Munson organization, has not filed such a report.

Lewis F. Powell, Jr.:

But you don’t know what Maryland law provides?

Yale L. Goldberg:

As to the filing of a report?

Lewis F. Powell, Jr.:

Yes.

Yale L. Goldberg:

Absolutely I do.

The filing of a report–

Lewis F. Powell, Jr.:

I am not talking about this statute.

I am thinking, for example, about reports that corporations have to file, certain corporations that have listed stock, that disclose their assets and liabilities and their income each year and a vast amount of information.

I was wondering whether, in Maryland, for example, that is a stated issue, any report of any kind is required to be filed by a charitable organization?

Is the answer no?

Yale L. Goldberg:

–Well, Your Honor, the answer… I am not saying the answer is no, but what I am saying is that I am not familiar with it.

Lewis F. Powell, Jr.:

You don’t know.

Yale L. Goldberg:

I do know that under the statute which we have here before us there is a requirement of filing of complete financial information, yes.

Lewis F. Powell, Jr.:

Would you object to that?

Yale L. Goldberg:

No, absolutely not.

Lewis F. Powell, Jr.:

And, do you know, for example, what percentage of the funds raised by your client go to the direct benefit of police who are needy or otherwise need the money?

Yale L. Goldberg:

Sir, I am–

Lewis F. Powell, Jr.:

I am thinking about the distinction between advocating causes and providing relief for needy policemen.

Yale L. Goldberg:

–Your Honor, I don’t know what the variation is, what the percentage is between how much goes to the policeman who is incapacitated and how much goes to the public relations or just where the line is or what percentage on what part of the line.

Lewis F. Powell, Jr.:

So, you are not able to tell us with any figures or even with any rough estimates as to what extent this organization is a cause advocacy organization?

I am talking now in terms of percent of money raised.

Yale L. Goldberg:

Your Honor, I–

Lewis F. Powell, Jr.:

If you don’t know, just say so.

Yale L. Goldberg:

–I don’t now, sir, and I don’t want to speculate, sir.

Thurgood Marshall:

Mr. Goldberg–

Yale L. Goldberg:

Yes, sir.

Thurgood Marshall:

–The one thing clear is that your client is not a charitable organization.

Yale L. Goldberg:

The Munson organization?

Thurgood Marshall:

That is right.

Yale L. Goldberg:

No question about it, sir.

Thurgood Marshall:

It is not?

Yale L. Goldberg:

It is not, sir, that is quite correct.

But, I would suggest, Your Honor, that not only does this statute reach advocacy organizations such as the FPO, but reaches all advocacy organizations.

We are not here today merely talking about or seeking the assistance of this Court in connection with the Fraternal Order of Police.

Our whole position is that this statute sweeps so broadly that it sweeps into it all advocacy organizations just as did the Schaumburg case and that the “limited exception” or the exception limitation doesn’t cleanse it and once more, not only does it not cleanse it… Again, I refer to Justice Rehnquist’s dissent in the Schaumburg case… it makes it worse, because it leaves discretion in a place where discretion should be when you are testing the constitutionality of a statute to the First Amendment standards.

It simply cannot be there.

The… I would–

Warren E. Burger:

Your time has expired, Mr. Goldberg.

Yale L. Goldberg:

–Thank you.

Warren E. Burger:

Do you have anything further, Ms. Motz?

Diana Gribbon Motz:

I have just one point, Your Honor.

Warren E. Burger:

You have two minutes remaining.

Diana Gribbon Motz:

I would like to make one point about the interests that the State is asserting here and I feel that I maybe unfortunately mislead the Court.

The interests we are asserting here are somewhat different, I think, than the interests that were asserted in the Schaumburg case.

You will remember in Schaumburg, the Village asserted that defraud interest, and they asserted that those people who spent more than 25 percent on non-charity expenses were fraudulent in representing themselves as a charity.

The State of Maryland makes no such contention.

Indeed, what this statute is trying to reach is the use of charitable contributions for non-charitable purposes, something which may not necessarily be and which probably in many instances is not criminal, fraudulent misrepresentation under an ordinary fraud statute.

What it is, we submit, is something which entitles the state to be on notice as to the activities of the organization and to scrutinize those activities when their fundraising expenses are more than 25 percent.

And, that is precisely what the Maryland statute does.

It does not assume that those activities are fraudulent.

What it does is assume that they are entitled to be scrutinized by the state and if the charity makes a showing that, indeed, those expenses are reasonable, it may go out and continue to solicit provided it discloses that to the public.

And, if it does not make that showing then it is not entitled to solicit.

Of course, that decision goes to judicial review.

We believe in that way, without imposing any great burden on the charity, we have protected the potential donor, the intended beneficiary, and we have, in general, benefited charity by insuring the appearance as well as the reality of integrity charitable organizations.

Thank you very much.

Warren E. Burger:

Thank you, counsel.

The case is submitted.