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American Future Systems Inc. v. Pennsylvania State University

December 28, 1984

AMERICAN FUTURE SYSTEMS, INC., STEVEN BRUBAKER, RICHARD J. WINGERT, W. BRUCE DEL VALLE, JOHN D. VARSICS, DENNIS C. HABACHER, JOHN B. SPILLER, KATHY JOHNSON, KEVIN GRAVES, APPELLEES
v.
THE PENNSYLVANIA STATE UNIVERSITY, BOARD OF TRUSTEES OF THE PENNSYLVANIA STATE UNIVERSITY, JOHN W. OSWALD, INDIVIDUALLY AND AS PRESIDENT OF THE PENNSYLVANIA STATE UNIVERSITY, M. LEE UPCRAFT, INDIVIDUALLY AND AS DIRECTOR OF RESIDENTIAL LIFE PROGRAMS OF THE PENNSYLVANIA STATE UNIVERSITY, APPELLANTS



On Appeal from the United States District Court for the Middle District of Pennsylvania

Before: Adams and Becker, Circuit Judges, and Sarokin, District Judge*fn*

Author: Becker

Opinion OF THE COURT

BECKER, Circuit Judge.

This appeal presents an important first amendment question concerning the power of a state university to regulate activities in student dormitories that it operates in conjunction with its educational programs. Specifically, we are confronted with a challenge to the constitutionality of a regulation enacted by Pennsylvania State University ("Penn State") prohibiting group sales demonstrations in students' dormitory rooms. The regulation has operated in this case, now before us for the third time,*fn1 to bar several Penn State students from attending or hosting sales demonstrations conducted by American Future Systems ("AFS"), a corporation that conducts such sales demonstrations as a means of marketing its china and cookware. After trial, the district court held that the regulation was unconstitutional and entered an order enjoining Penn State from continuing to ban AFS sales demonstrations in the dormitories. For the reasons set forth below, we hold that the regulation does not unconstitutionally infringe upon either the right of students to receive commercial information in association with other students or upon the right of AFS to disseminate such commercial information. Accordingly, we reverse the judgment of the district court.

I. FACTS AND PROCEDURAL HISTORY

The plaintiffs-appellees in this action are AFS and a number of Penn State students.*fn2 AFS is in the business of selling cookware, china, crystal, and silverware, primarily to college students.*fn3 Its primary sales device is the on-campus demonstration, which is similar to the well-known Tupperware party. An AFS representative meets with a group of students in their dormitory, gives a presentation extolling the virtues of AFS's merchandise, and attempts to make sales at the end of the presentation. The students are encouraged to sign an installment sales contract at the time they agree to make the purchase.

AFS actively recruits students to host its demonstrations. An AFS sales representative contacts a particular college student, usually a woman, and asks if she will host an on-campus demonstration.*fn4 The student is informed during the initial phone conversation that, if she hosts an AFS demonstration, she will receive a free vacation in Florida or Las Vegas.*fn5 If a student agrees to host a demonstration, she receives a packet of information containing a number of invitations for guests, which she is asked to distribute to other students, and a description of what is involved in the show.

AFS seeks to have about ten to fifteen female students at each demonstration.*fn6 This "target" size is evidently based on AFS's experience that ten to twenty percent of the students at a particular demonstration usually agree to purchase AFS products. If fewer than the optimal number of students are present five minutes before the demonstration is scheduled to begin, the AFS representative asks those in attendance to attempt to round up others. The representative informs them that there will be a "door prize" of a trip to Florida if at least ten women are present,*fn7 and tells them that a donation will be made to "Save the Children" for each person at the show... The AFS representative does not solicit attendance by knocking on doors herself unless permission to do so has been granted by college officials.

Once the students are present, the AFS representative conducts the demonstration, which is set in the context of a discussion of the post-college lifestyle of students. The AFS representative demonstrates the "American Prestige Series" products, compares them with similar merchandise, and explains the advantages of AFS's wares.*fn8 Following the demonstration, the representative asks whether any of the students are interested in purchasing the products, and attempts to get those students to sign purchase agreements at the meeting. If a student agrees to buy, the representative fills out a contract that contains a code describing the student's educational institution, race or national origin, marital status, and type of residence. AFS uses this information to determine the credit terms to be extended to the student.*fn9

When AFS first sought to conduct its demonstrations in Penn State's dormitories in the fall of 1977, the demonstrations were prohibited by the university's general policy against commercial solicitation.*fn10 Nonetheless, Edward M. Satell, president of AFS, directed his sales representatives to begin booking demonstrations at Penn State.*fn11 A number of shows were, in fact, conducted, some being interrupted by Penn State officials who asked the AFS representative to leave. Satell asserted that the university's policy was unconstitutional in letters to Penn State officials.

In response to AFS's actions, Penn State refined its policy on commercial solicitation. The new policy restricted but did not completely prohibit AFS's demonstrations in university dormitories. The district court described the new policy in the following way:

(1) AFS may conduct group demonstrations in specified common areas of each residence hall; (2) following those demonstrations a student may invite an AFS representative to the student's room to purchase AFS goods; (3) AFS is free to solicit invitations to individual student's rooms at the group demonstrations or by telephone or mail; (4) AFS is not permitted to conduct group demonstrations in an individual student's dormitory room; (5) AFS is not permitted to consummate sales in individual dormitory rooms to a purchaser other than the occupant of the room; (6) AFS is not permitted to conduct group solicitations of sales in the common areas of residence halls; and (7) AFS is not permitted to consummate commercial transactions in the common areas of residence halls.

AFS, 553 F. Supp. at 1275; see also American Future Systems, Inc. v. Pennsylvania State University, 522 F. Supp. 544, 547 (M.D. Pa. 1981); American Future Systems, Inc. v. Pennsylvania State University, 510 F. Supp. 983, 985 (M.D. Pa. 1981). In addition, Penn State did not limit in any way the availability of other methods of communication between AFS and the students. AFS was free to solicit students directly by telephone and mail, and indirectly by advertising in the student newspaper and on the student radio station.*fn12 The company was also able to hold its demonstrations at the Nittany Lion Inn -- a motel on the Penn State campus -- or elsewhere in State College, Pennsylvania.*fn13

Dissatisfied with Penn State's interpretation of its regulations, AFS filed suit, alleging that Penn State's regulations infringed its constitutional right to free speech, and the right of students to hear that speech. The focus of AFS's challenge was on those aspects of the regulations permitting it to conduct demonstrations in the common areas of the dormitories but prohibiting it from consummating sales at the end of these presentations. The district court, after a trial, concluded that AFS could not raise the constitutional rights of the students, who were not then parties to the litigation, see supra note 2,*fn14 and that Penn State's regulations did not violate AFS's first amendment rights.*fn15 The court's decision turned on the availability of other channels for AFS to communicate product information to the students, including demonstrations that did not involve attempts to consummate immediate sales, and on the distinction between "commercial speech" and "soliciting sales."*fn16 The court held that Penn State's interests in protecting the privacy of dormitory residents, and in protecting students against "deceptive or potentially coercive practices," justified regulations that made it "more difficult for students to obtain the type of information about commercial products which [AFS] seeks to distribute." AFS, 464 F. Supp. at 1262.

In American Future Systems, Inc. v. Pennsylvania State University, 618 F.2d 252 (3d Cir. 1980) ("AFS I"), we affirmed the district court. We concluded that the common areas of the Penn State dormitories are not "public forums" for first amendment purposes, and that "Penn State has articulated a legitimate interest" -- the presservation of the educational and residential atmosphere of the dormitories -- "which support[s] its ban on group sales activity in the dormitories." Id. at 257. We also held that Penn State's distinction between group political speech, which it permitted, and "group commercial speech," which it restricted, was not "arbitrary, capricious, or invidious," and thus was constitutional. Id. at 258-59.

Following our decision in AFS I, AFS requested permission from Penn State to hold demonstrations in individual students' rooms; its position, apparently, was that the constitutionality of Penn State's regulations regarding activities in the students' own rooms was left open by the AFS I ruling. Penn State denied AFS's request on the basis of its regulations... AFS then proposed that it be permitted to present group demonstrations in the common areas of the residence halls, although it agreed that, after AFS I, it had to abide by the University's requirement that actual sales be consummated only on a one-on-one basis in each student's room. The company forwarded to Penn State the printed text of its proposed group presentation. The University objected to certain parts of the presentation, characterizing these parts as "outright group commercial solicitation." Penn State insisted that the parts of the presentation outlining the terms on which the AFS merchandise was being offered be excised from the show.*fn17

Now joined by a group of Penn State students, AFS filed a new complaint, asserting that AFS had a right to conduct its entire demonstration, including those portions aimed at conveying information directly relevant to the sale of its goods, in the dormitory common areas, and to make sales to students other than the resident of a particular room at the end of those demonstrations. The students contended that they had a right to hold sales demonstrations in their individual dormitory rooms.*fn18 Two of the students who lived in the dormitories also asserted constitutional privacy rights, and state law rights under the Pennsylvania Landlord and Tenant Act. The district court granted summary judgment for Penn State, rejecting the first amendment claims of both the students and AFS primarily on the basis of AFS I; it also rejected the students' other claims. AFS, 522 F. Supp. 544.

In American Future Systems, Inc. v. Pennsylvania State University, 688 F.2d 907 (3d Cir. 1982) ("AFS II"), we reversed. We held that Penn State's attempt to prohibit AFS from including certain information in its sales demonstration was prohibited by the first amendment. We explicitly declined to address the question whether Penn State could ban commercial sales activity in the dormitories altogether, but, relying on the test for commercial speech set out by the Supreme Court in Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557, 65 L. Ed. 2d 341, 100 S. Ct. 2343 (1980), we held that the university's attempt to censor the presentation was a content-based regulation not based on a substantial government interest.*fn19 688 F.2d at 912-13. We also concluded that the district court had failed to consider the students' associational rights and their rights to hear the "commercial speech" in their rooms independently of their rights to conduct the same activity in the common areas. After reviewing the record, we concluded that the university had not introduced any evidence to support its contention that the holding of AFS demonstrations in the students' rooms would interfere with its attempts to preserve a study atmosphere and that the summary judgment was, therefore, inappropriate.*fn20 We remanded the case to the district court for the factfinding made necessary by our opinion.*fn21

The district court thereupon held a trial on the constitutionality of Penn State's restrictions on group sales demonstrations in individual rooms. AFS and the students presented expert testimony on the educational and social value of the AFS demonstrations, and student testimony concerning the reasons why particular students attended the demonstrations. Penn State's evidence consisted primarily of the testimony of Dr. Lee Upcraft, Director of Residential Life Programs, who explained a number of asserted justifications for the school's regulations, including that:

(a) Such activity could invade the privacy of students;

(b) Such activity could disrupt students while studying or sleeping;

(c) Such activity could disrupt the educational and personal development programs of the Office of Residential Life Programs;

(d) Such activity could disrupt the activities of student government;

(e) Such activity could disrupt organized and informal and social and recreational activities of students;

(f) Disruptions, to the extent that they occur, would be for a purpose unrelated to the purpose for which residence halls are dedicated;

(g) The greater the frequency of the solicitation of money and sales of products and sales of service, the more ...


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