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AMERICAN ASSN. OF STATE TROOPERS, INC. v. PREATE

June 17, 1993

AMERICAN ASSOCIATION OF STATE TROOPERS, INC., and TELCOM TELEMARKETING SERVICES OF NORTH CAROLINA, INC., Plaintiffs
v.
ERNEST D. PREATE, JR., as he is Attorney General of the Commonwealth of Pennsylvania, Defendant



The opinion of the court was delivered by: JAMES F. MCCLURE, JR.

 June 17, 1993

 BACKGROUND:

 Plaintiffs instituted this action on October 5, 1992, with the filing of a complaint for declaratory relief, i.e., for a judgment by this court that the Pennsylvania Solicitation of Funds for Charitable Purposes Act, 10 Pa. Stat. Ann. §§ 162.1 et seq. ("the Charities Act"), deprives Plaintiffs of their rights to free speech under the First Amendment and their right to equal protection under the Fourteenth Amendment. Plaintiffs contend that the Charities Act is unconstitutional both on its face and as applied to them.

 Eight days after the filing of the complaint in this court, defendant filed suit against plaintiffs in the Commonwealth Court of Pennsylvania, alleging violations of both the Charities Act as well as the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 Pa. Stat. Ann. §§ 201-1 et seq. ("the Consumer Protection Law"). Plaintiffs have filed with this court a motion for a preliminary injunction, seeking to stay the proceedings in the Commonwealth court pending disposition of the instant case.

 Before the court are plaintiffs' motion for a preliminary injunction, and defendant's motion to dismiss or for summary judgment, and motion for sanctions.

 DISCUSSION:

 As a preliminary matter, we would note that nowhere in the complaint or in any subsequent pleading or motion is there an allegation that the Consumer Protection Law is unconstitutional. Therefore, there is no reason to enjoin that portion of the proceedings in the commonwealth court instituted by defendant regarding allegations that plaintiffs have violated the Consumer Protection Law.

 Also, defendant has argued that he is not the proper party to defend this action, since his liability would be based upon a theory of respondeat superior which is inapplicable to § 1983 actions. However, defendant is being sued in his official capacity for prospective relief, i.e., to prevent enforcement of an allegedly unconstitutional statute. A state official who has statutory responsibility for enforcement is a proper defendant in an action for prospective relief under § 1983. Will v. Mich. Dept. of State Police, 491 U.S. 58, 71 n. 10, 109 S. Ct. 2304, 105 L. Ed. 2d 45 (1989) (citing Kentucky v. Graham, 473 U.S. 159, 105 S. Ct. 3099, 87 L. Ed. 2d 114, (19--); Ex parte Young, 209 U.S. 123, 52 L. Ed. 714, 28 S. Ct. 441 (1908)). See also Chaloux v. Killeen, 886 F.2d 247, 252 (9th Cir. 1989).

 I. STATEMENT OF FACTS

 Following the filing of plaintiffs' complaint, defendant filed a motion to dismiss and/or for summary judgment, with an accompanying statement of undisputed material facts. In response, plaintiffs filed a counterstatement of material facts. The following represents a combination of those statements.

 Defendant Ernest D. Preate, Jr., is Attorney General of the Commonwealth of Pennsylvania and is charged with enforcement of the Charities Act and the Consumer Protection Law. *fn1" Plaintiff American Association of State Troopers ("AAST") is a not-for-profit corporation incorporated under the laws of the State of Florida. AAST is registered with the Commonwealth of Pennsylvania, Department of State, Bureau of Charitable Organizations as a charitable organization pursuant to 10 Pa. Stat. Ann. § 162.5. Plaintiff Telcom Telemarketing Services of North Carolina, Inc. ("Telcom") is a for-profit corporation incorporated under the laws of the State of North Carolina. Telcom is registered with the Bureau of Charitable Organizations as a professional solicitor pursuant to 10 Pa. Stat. Ann. § 162.9.

  On November 20, 1991, plaintiffs entered into a written agreement whereby Telcom agreed to conduct fundraising activities on behalf of AAST by soliciting contributions from Pennsylvania residents. Under the terms of the written agreement: (a) forty percent (40%) of gross revenues goes to the local telephone boiler room *fn2" manager; (b) the telephone boiler room manager pays the telemarketer's salaries from this money; (c) all other expenses, i.e., rent, utilities, printing, taxes, advertising, processing and accounting contributions are paid from the remaining sixty percent (6O%); if there are any remaining proceeds, they are split equally between Telcom and AAST; and (d) Telcom guarantees AAST one percent (l%) of gross revenue.

 Prior to the start of the telemarketing campaign, James P. Williams, Jr., President of Telcom, contacted the Pennsylvania Office of Attorney General (OAG) requesting information about the Charities Act. He was told that § 162.9(h)(1) requires the telemarketer to disclose the name of the professional solicitor as registered with the Bureau of Charitable Organizations and to disclose that the telemarketer is a paid professional. He was also informed that a common problem with solicitations for police organizations is that potential contributors are misled into believing that they are being called by a local police officer, and that the most effective way to overcome that problem was to disclose affirmatively and conspicuously at the beginning of each telephone solicitation the true identity of the caller. *fn3"

 On March 3, 1992, a certified letter was sent by OAG to Buddy L. Tinney, President of AAST, confirming the discussion between OAG and Mr. Williams of Telcom and reiterating the oral and written disclosure requirements of the Charities Act. On March 16, 1992, Telcom filed a solicitation notice pursuant to § 162.9(e). Telcom hired individuals as telemarketers and opened two telephone boiler rooms, one in Springfield, Pennsylvania, and the other in Robinson Township, Pennsylvania.

 On March 30, 1992, Senior Financial Investigator Steven C. Arter visited the telephone boiler room in Springfield and observed a second-floor room, the furnishings of which are in dispute but which are not particularly relevant to the disposition of this case. Arter spoke with a man identifying himself as the office manager of the Springfield boiler room and once again explained the provisions of the Charities Act regarding oral and written disclosures. Arter obtained a copy of the script used by Telcom's telemarketers and a copy of the written materials sent to contributors.

 According to defendant, though disputed by plaintiffs, between March 26, 1992, and October 13, 1992, OAG received sixty-one (61) written and oral complaints or inquiries from residents of Pennsylvania who were concerned about telephone solicitation for contributions for AAST. *fn4" Each of the sixty-one consumer complainants was interviewed by OAG and reports were prepared on each interview. *fn5" Defendant has provided several examples of reports received by the Pennsylvania State Police and OAG regarding alleged telephone solicitations by Telcom telemarketers which, if proven, would constitute violations of the Charities Act and/or the Consumer Protection Law.

 Telcom opened at least two additional telephone boiler rooms in Pennsylvania from which solicitations are being conducted, one in King of Prussia and the other in Dickson City.

 At no time prior to initiating this lawsuit did either Telcom or AAST question representatives of OAG as to whether they were required to register or whether they were entitled to an exemption pursuant to 10 Pa. Stat. Ann. § 162.3. AAST voluntarily registered as a charitable organization. *fn6"

 A statement consistently made on written solicitation materials throughout Telcom's Pennsylvania campaign and continuing to the present time is that AAST assists the Children's Wish Foundation. Statements consistently made in oral solicitations are that contributions will assist state troopers by increasing awareness of drunk driving and the need to use seat belts.

 In July, 1992, a representative of OAG discussed in detail with counsel for Telcom the number and the nature of the consumer complaints received by OAG. Thereafter, counsel for Telcom and AAST repeatedly contacted OAG to schedule a meeting in order to discuss and to negotiate a settlement of the numerous complaints made against their clients.

 On September 9, 1992, representatives of all parties met to negotiate a settlement of the matter. Defendant contends that, at that meeting, plaintiffs were presented with a suggested Assurance of Voluntary Compliance. Plaintiffs contend that the Assurance of Voluntary Compliance was received by a later FAX transmission. Apparently, plaintiffs objected to the Assurance of Voluntary Compliance on the ground that it called for disclosure prior to solicitation beyond that required by the statute, in violation of plaintiffs' First Amendment rights.

 Despite counsel for Telcom's repeated representations that he wanted to negotiate a settlement on behalf of his client, Telcom and AAST initiated this lawsuit without ever making a counter-offer to the Assurance of Voluntary Compliance drafted by OAG.

 Plaintiffs add, in concluding their counterstatement of material facts, that they are exempt by statute from the disclosure requirements of the Charities Act. This is a conclusion of law which will not be accepted by the court.

 Finally, plaintiffs contend that all funds raised in their Pennsylvania campaign were used or will be used to benefit members of AAST or in accordance with the stated purposes of AAST.

 II. MOTION FOR PRELIMINARY INJUNCTION

 A. PRELIMINARY INJUNCTION STANDARD

 Fed. R. Civ. P. 65 provides for the issuance of preliminary injunctions. In this Circuit,

 
At the trial level, the party seeking a preliminary injunction bears the burden of producing evidence sufficient to convince the court that (1) the movant has shown a reasonable probability of success on the merits; (2) the movant will be irreparably injured by denial of relief; (3) granting preliminary relief will not result in even greater harm to the other party; and (4) granting preliminary relief will be in the public interest. . . .

 ECRI v. McGraw-Hill, Inc., 809 F.2d 223, 226 (3d Cir. 1987) (citation omitted).

 Regarding the element of irreparable injury, the harm must be imminent and of such a nature that money damages alone cannot atone for it. Id.

 B. FIRST AMENDMENT ANALYSIS

 The crux of plaintiffs' complaint is that the Charities Act, by compelling disclosure of certain information prior to solicitation of funds on behalf of a charity, unduly restricts plaintiffs' right of free speech under the First Amendment. The right to free speech applies to state action through the Due Process Clause of the Fourteenth Amendment. City of Cincinnati v. Discovery Network, Inc., 123 L. Ed. 2d 99, 61 U.S.L.W. 4272 n.1, 113 S. Ct. 1505 n.1 (U.S. March 24, 1993) (citing Stromberg v. California, 283 U.S. 359, 75 L. Ed. 1117, 51 S. Ct. 532 (1931); Lovell v. Griffin, 303 U.S. 444, 82 L. Ed. 949, 58 S. Ct. 666 (1938)).

 Charitable solicitation involves a variety of speech interests protected by the First Amendment; therefore, it is not purely "commercial speech," and is subject to traditional "strict scrutiny" under the First Amendment. Riley v. Nat'l Fed'n of the Blind of N.C., Inc., 487 U.S. 781, 787-788, 108 S. Ct. 2667, 101 L. Ed. 2d 669 (1988). A restriction subject to strict scrutiny must be narrowly tailored to achieve a compelling state interest. Int'l Soc. for Krishna Consciousness, Inc. v. Lee, 120 L. Ed. 2d 541, 112 S. Ct. 2701 (1992).

 While commercial speech is protected by the First Amendment, "the government may ban forms of communication more likely to deceive the public than to inform it, . . ." Central Hudson Gas & Electric Corp. v. Public Service Comm'n of N.Y., 447 U.S. 557, 563, 65 L. Ed. 2d 341, 100 S. Ct. 2343 (1980) (citations omitted). In other words, false speech is not protected by the First Amendment. ...


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