Fundraisers Beat Utah Again

December 28, 2009       Mark Hrywna      

A judge has rejected the state of Utah’s request to dismiss a lawsuit challenging its jurisdiction over professional fundraisers who do not do business in the state. The ruling was from Dale Kimball, United States District Court Judge for the District of Utah, Central Division.

The American Charities for Reasonable Fundraising Regulation (ACFRFR) and Highland, N.Y.-based Rainbow Direct Marketing (RDM) filed suit in November 2008 against the Utah Division of Consumer Protection, Department of Commerce, alleging burdensome registration requirements for out-of-state fundraisers.

The state argued, among other things, that neither ACFRFR nor RDM suffered injury because the threatened enforcement was “hypothetical and speculative.” The administrative action against RDM was dependent on its client renewing a permit, something the state argued was not a certainty.

Despite RDM not having any clients or any connection to Utah, the state required the company to register in Utah because its client, Straight Women in Support of Homos, Inc. (SWiSH), registered to solicit in the state. RDM planned to make list recommendations to SWiSH but never actually knew where donors or prospective donors were located.

Plaintiffs argue that the failure to register could bring administrative action by the state against RDM when SWiSH renewed its registration. The firm has been forced to refrain from providing consulting services to SWiSH.

Geoffrey Peters, pro bono counsel to the ACFRFR and president of Bowie, Md.-based CDR Fundraising Group, said the coalition will wait to see if litigation against Utah goes forward before expanding the fight to other states. “If things go smoothly and quickly we will engage another state. If, however, everything we do in Utah is as it has been in the past, we will simply focus on Utah and win the case, collect attorney’s fees for ACFRFR and then start on another state after notifying all of the attorneys general that rather than litigate again we prefer they concede that they don’t have out-of-state jurisdiction,” he said.

The state now must answer ACFRFR’s complaint before the discovery phase of the case begins. Normal litigation could take six to nine months for an entire case, Peters said, adding that he expects an appeal and that Utah seems to be ready to “fight for some time.”

Peters hopes that another five to 10 states might concede to the lack of out-of-state jurisdiction after a victory in Utah. “That would allow us to focus on the recalcitrant states and push them along,” he said.

When the lawsuit against Utah was filed last year, ACFRFR also engaged other states about their registration requirements. The coalition was able to get assurances from Oregon and North Dakota that they would not enforce requirements on fundraisers who do no direct business within the state. ACFRFR is ready to file suit in two other states, Peters said, but just doesn’t have the resources to file three pieces of litigation simultaneously.

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This article is from NPT Weekly, a publication of The NonProfit Times.

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