(The Return of) Ignatz, by Sam Heldman

Thursday, February 27, 2003

Supreme Court predictions
The second case to be argued Monday is Ryan v. Telemarketing Assoc., about the First Amendment rights of charity telemarketers. You know, those people who call you and say "we're soliciting money for such-and-such a worthy cause," but you sort of have the sneaking suspicion that it's a scam and most of the money is going to wind up in the telemarketer's pocket? There oughta be a law requiring them to tell you how much money actually goes to charity, right? And it's pretty fraudulent if they tell you that they're raising money for charity, but really the great majority of the money is going to the telemarketing firm that's doing the calling, right?

That's what the Illinois Attorney General thought, too, so he brought a fraud suit against the company that was raising money for a veterans' organization but was (pursuant to its contract with the charity) really keeping about 85% of the amount collected. But the Illinois Supreme Court said that, given the First Amendment right to free speech, such a fraud suit cannot proceed. The Illinois Supreme Court relied on a series of U.S. Supreme Court decisions striking down various states' attempts to regulate charitable fundraising. Most on point was a case called Riley, which struck down a law requiring charitable solicitors to disclose what percentage of the amount collected was actually going to charity (rather than to the solicitors).

Eugene Volokh, who certainly knows his stuff, predicts with "high" confidence that the Supreme Court will affirm based on those earlier cases. Where do I get off disagreeing with Prof. Volokh, you may ask? Good question. The differences in our predictions may have to do with the differing perspectives between academics and practicing lawyers. In any event, I think that the case is likely to come down to what the facts are, and more precisely what we have to take the facts as being, at this procedural step of the case.

Go with me here. Fraud is quite obviously not protected by the First Amendment. Everyone on the Supreme Court, I trust, would agree that if a charitable solicitor says "100% of your donation will go those lovely veterans," but really the true figure is 15%, then that's actionable fraud and is not protected by the First Amendment. And the Supreme Court in Riley even said, in paraphrase, "instead of passing a law like this, a state ought to just vigorously enforce its fraud and deceptive-practices laws against any fundraisers that engage in misleading activities."

But without such a blatant lie as in my hypothetical above, is there any real difference between this lawsuit and a law requiring the fundraiser to disclose that it's keeping 85% of the money? If there's no difference, then the telemarketers will win; and my inference is that Prof. Volokh thinks that the Court won't see a material difference. But I think that the Court will believe that there is at least possibly a difference between those two things, that there is at least an arguable difference between this case and Riley, because the Illinois Attorney General apparently wants to prove deceptive practices going well beyond "they should have volunteered that they were keeping 85% of the money." The AG wants to prove that there was an intent to mislead, and that there were at least some misleading statements beyond the "mere" failure to volunteer the percentage of money being pocketed. My bet is that the Court will say that the AG ought to get a chance to prove those things, in order to prove that this was real fraud and not just a Riley regulation in the guise of a lawsuit. At least, I bet, the Court will explain that there is a difference, and will remand the case to the state court to let it figure out whether the AG has adequately alleged that sort of facts under the state's procedural rules. In any event, my bottom line is "REVERSE".

posted by sam 6:58 AM 0 comments


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