Combating excessive regulation of nonprofits and fundraising by means of litigation.
The American Charities for Reasonable Fundraising Regulation is a 501(c)(3) public foundation sometimes informally known as the "Nonprofit Litigation Coalition." It is a coalition of nonprofit organizations, their national associations and their supporters.
What is American Charities for Reasonable Fundraising Regulation ("ACFRFR")?
It is a coalition of nonprofit organizations, their national associations and their supporters formed for the purpose of combating excessive regulation of nonprofits and of fundraising by means of litigation.
How and why was it formed?
Legitimate, reputable charities have found it increasingly difficult to express their concerns about excessive and fruitless regulation and to have those concerns seriously considered by those responsible for charitable and fundraising regulation. Thus, a number of nonprofits decided several years ago, in order to have the charitable communities' views taken seriously, some of the most excessive and costly regulation should be challenged in court. Thus they formed a coalition that operates as a 501(c)(3) public foundation under the name American Charities for Reasonable Fundraising Regulation, Inc. (also known informally as the "Nonprofit Litigation Coalition").
Doesn't this coalition duplicate the work of other organizations such as the Association of Fundraising Professionals, The DMA Nonprofit Federation or the fund-raisers' trade associations?
No. Most of these organizations are not equipped to nor do they wish to engage in litigation. Several very fine "umbrella" groups have attempted and will continue to attempt to negotiate with government officials and lobby to resolve differences regarding charitable regulation. Most, nevertheless, support ACFRFR when litigation is thought to be necessary. ACFRFR encourages such negotiations and believes litigation is a last resort. ACFRFR has sought the support of these umbrella organizations in its own formation to insure that their viewpoints are well represented on ACFRFR's Board of Directors.
Unfortunately, several states and localities have resisted efforts for compromise, have refused to listen to reason, and consistently engage in regulation that is not only unreasonable and unnecessary but in some cases clearly and blatantly unconstitutional. In a one case, an Attorney General admitted in a Federal District Court that he had advised his state's governor that a proposed regulation was unconstitutional but the governor had signed it anyway. It is this type of irresponsible regulation that can and should be challenged in court when all efforts at persuasion and negotiation have failed.
ACFRFR's Board of Directors, comprised of managers of nonprofit organizations must approve each and every lawsuit. If some early victories in the worst cases of overbearing and illegal regulation produce a climate whereby other states are willing to negotiate to improve their regulatory schemes without litigation, then ACFRFR will have been a success.
Given that there are known "frauds" in the charitable and fundraising community isn't it appropriate to have government consumer protection and law enforcement activity and shouldn't nonprofits be seen as encouraging such law enforcement activity?
Legitimate nonprofits and fund-raisers applaud appropriate law enforcement activity aimed at fraudulent charity scams. ACFRFR does not defend organizations or individuals charged with fraud in fundraising or with mismanagement of nonprofits. ACFRFR will only challenge regulations which are unnecessary, excessive, duplicative, and expensive when those jurisdictions, which promulgate such regulations, refuse to listen to reason. Examples are the requirement that nonprofits engaged in nationwide direct response fundraising must register both with state authorities and numerous city and county authorities within that state in order to, for example, mail a single letter to a prospective donor into a county within the state. Such dual registration does not deter or prevent fraud and operates as a significant barrier to charitable fundraising activities.
Is the ACFRFR Board opposed to all regulation? Are ACFRFR members simply professional fund-raisers seeking an "open field" in which to have more freedom to make money-raising funds?
Neither. In its initial statement of purpose, ACFRFR specifically indicated that it was not opposed to all regulation but only to unreasonable regulation. ACFRFR is a nonprofit corporation recognized by the IRS as a 501(c)(3) charity. Under its by-laws a Board of Directors elected by nonprofit members controls it. Voting members join by paying dues of $1,000 or more. Non-voting members join by paying dues of less than $1,000. To serve on the Board one must represent a nonprofit corporation or a nonprofit coalition or association (e.g. DMA Nonprofit Federation, Association of Fundraising Professionals, Association of Direct Response Fundraising Counsel, National Catholic Development Council, etc.). Board Members are elected if they have five votes (i.e. they represent $5,000 or more of voting members dues). Fund-raisers and other vendors to nonprofits are encouraged to and do support ACFRFR financially but can only be directly represented on the board through their nonprofit umbrella groups.
Won't the public perceive litigation against state regulatory agencies as an effort by illegitimate charities to perpetuate their illicit activities?
Increasingly the public seems to perceive some bureaucratic government regulatory activity with suspicion. Our litigation efforts will be accompanied by public relations efforts explaining that the costs of excessive and irresponsible regulation is paid by our donors and that we are seeking to reduce these costs of regulation and ultimately increase the level of compliance by eliminating unnecessary regulation. Even the regulator community seems to agree with this objective and is moving toward electronic filing and other ways to reduce the burden of compliance.
Isn't the Nonprofit Litigation Coalition simply a lawyer driven way for certain attorneys to foment litigation for their own benefit?
No. The Nonprofit Litigation Coalition was initially conceived of and formed by representatives of nonprofits and fundraisers when they grew frustrated with the attitude of certain state regulators who said they were "not interested in the viewpoints of the charities being regulated."
The Board of Directors of ACFRFR selects which cases to pursue. It also selects which lawyers to hire to pursue these cases based on the experience, competence, price, and location of the lawyer. Lawyers who have been involved with the coalition to date have donated countless hours to help nonprofits and others create this vehicle. Everything from staff time to postage to office space to printed letterhead to a telephone line has been donated. The Coalition is run by and for nonprofit organizations seeking to put some balance back into the regulatory equation. With the annual costs of compliance for national nonprofits engaged in direct response fundraising now exceeding $23,000 per year and in many organizations costing as much as $50,000 or more, many nonprofit managers feel it is their fiduciary duty to their donors and other supporters to refuse to cooperate with unconstitutional, illegal, unnecessary, and excessive regulation.
Has ACFRFR engaged in any litigation?
Yes. After extensive discussion in 1996, the Board unanimously agreed that the first lawsuit should be against the City and County of Los Angeles and focus upon the compelled speech requirement of the Los Angeles mandatory disclosure form. It was further agreed that the second lawsuit should be against either the City of Columbus, Ohio or Pinellas County, Florida and focus upon the requirement of dual registration in a state and a city or county as well as the issue of the necessary "nexus" between a city or county acting as a regulator of an out of state charity or fund-raiser. In 1997 another lawsuit against Los Angeles successfully struck down major portions of the Los Angeles ordinance and the decision was made to proceed immediately with the suit against Pinellas County.
On August 25, 1997, the litigation coalition filed suit in Federal District Court for the Middle District of Florida against Pinellas County, Florida. Joining ACFRFR were a full service direct mail fundraising agency and a copywriter, both based in Virginia. ACFRFR sued both in its own name (having been assigned the rights of a fundraiser) and in a representative capacity. The Pinellas County Attorney represented the defendant. The lawsuit alleged that the requirement of registration in Pinellas County by all charitable fundraisers was unconstitutional for several reasons. In summary they were because:
1. fundraisers without offices, business dealings, or other connections to Pinellas County are forced to submit to the jurisdiction of the county and to regulation of their out-of-state transactions. This is a violation of the Commerce clause and due process clause of the U.S. Constitution; and
2. the regulation is unnecessary, burdensome, redundant with the State of Florida, and not narrowly tailored to accomplish legitimate municipal governmental interests. This is a violation of the 1st Amendment rights of the charities with which the fundraisers work, as well as the 1st Amendment rights of the citizens of Pinellas County.
This lawsuit was won by ACFRFR after it successfully won an appeal and reversal in the Federal 11th Circuit Court of Appeals and on November 13, 2001 an order granting summary judgment to ACFRFR was entered. Litigation then continued to force Pinellas County to pay the costs of the litigation including attorneys fees. Lead counsel in the case was ACFRFR's General Counsel, Geoff Peters, who donated his time. When attorney's fees for Peters' time were collected from Pinellas County those funds were donated to ACFRFR by Peters.
A second lawsuit was brought against Pinellas County on behalf of charities objecting to the intrusiveness and burden of the Pinellas County regulation as well as the lack of jurisdiction of Pinellas County to regulate Internet solicitations. This challenge was made under the First Amendment and the commerce clause of the U.S. Constitution. Our goal to eliminate what we viewed as redundant regulation by local jurisdictions that can cripple any national efforts at direct response fundraising simply due to the number of such jurisdictions (estimated at in excess of 14,000).
The case was won, in part, on ACFRFR's motions for summary judgment which were briefed in July 2002. The federal court entered an injunction against Pinellas County prohibiting the County from enforcing the internet provisions of their ordinance, strking certain portions of their regulation and awaiting attorney fees to ACFRFR and other plaintiffs. Pinellas County subsequently abandoned their entire charity regulation scheme.
Madigan v. Telemarketing Associates (formerly known as Ryan v. Telemarketing Associates)
This case was argued in the Supreme Court of the United States after the Attorney General of Illinois appealed an adverse decision by the Supreme Court of Illinois. It was described as the most significant legal case affecting nonprofits and fundraising in the past decade. ACFRFR coordinated the filing of three amicus curiae ("Friend of the Court") briefs. The first brief was signed by 176 nonprofit organizations. It focused primarily on the 1st Amendment free speech rights of nonprofits and the importance of the precedent set 14 years ago in the Riley case. The second brief was signed by "umbrella" organizations in the nonprofit and fundraising community. These organizations represent tens of thousands of individual working in the nonprofit sector, hundreds of charities, and dozens of fundraisers. This brief focused on problems with using the "cost of fundraising ratio" as the measure of either fraud or the efficiency of a charity. The third brief was signed by 29 commercial fundraising organizations. It focused on how fundraising actually works and the complications of various media and methods and why the solution proposed by the Attorney General will chill the rights of nonprofit organizations.
The Supreme Court unanimously endorsed the viewpoints expressed in our briefs that no amount or percentage of fundraising costs or expenses were per se fraudulent or misleading in and of themselves.
Will the Litigation Coalition undertake other litigation as well?
ACFRFR does and will continue to entertain requests to embark on litigation in its own name (thus allowing charities to remain anonymous) when it serves the overall interests of the nonprofit community and can be undertaken with funding that will not endanger financial resources from the main ACFRFR agenda which is to eliminate the most egregious, unnecessary, excessive and burdensome state and local regulations of charitable fundraising. It is currently engaged in litigation against regulations in Utah and elsewhere..
How can my organization join ACFRFR?
Your nonprofit organization can directly join ACFRFR or it can make a restricted gift to any cooperating "umbrella" organization and ask that your gift be kept confidential. Simply indicate that your gift is designated to be used to support ACFRFR.
Where can I get more information about ACFRFR?
Call or write to:
American Charities for Reasonable Fundraising Regulation
9112 Tetteron Avenue, Vienna, Virginia 22182
Tel. (703) 938-1809 | Fax (703) 938-2207
Or, feel free to contact any member of the Board of Directors.