American Charities for Reasonable Fundraising Regulation et al v. Olsen

Filing 399

MEMORANDUM DECISION AND ORDER - granting in part and denying in part 365 Plaintiff's Motion for Summary Judgment ; granting in part and denying in part 373 Defendant's Motion for Summary Judgment. Signed by Judge Robert J. Shelby on 9/13/2016. (jds)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION

AMERICAN CHARITIES FOR
REASONABLE FUNDRAISING
REGULATION, INC., and RAINBOW
DIRECT MARKETING, LLC,

MEMORANDUM DECISION AND
ORDER

Plaintiffs,
Case No. 2:08-cv-875
v.
DANIEL O’BANNON, Director of the Utah
Division of Consumer Protection,
Department of Commerce for the State of
Utah,

Judge Robert J. Shelby

Defendant.

This case is about the legislative jurisdiction of Utah’s Charitable Solicitations Act.
Plaintiffs American Charities for Reasonable Fundraising Regulation, Inc. and Rainbow Direct
Marketing, LLC sued Defendant Daniel O’Bannon in his official capacity as the Director of the
Utah Division of Consumer Protection. Plaintiffs seek declarative and injunctive relief, alleging
that the Act as applied to them violates their constitutional rights.
The parties now cross-move for summary judgment on whether Plaintiffs have Article III
standing to litigate this case. Pursuant to Civil Rule 7-1(f) of the United States District Court for
the District of Utah Rules of Practice, the court elects to decide the motions on the basis of the
written memoranda and finds that oral argument would not be helpful or necessary. For the
reasons stated below, the court grants in part and denies in part each Motion.

1

BACKGROUND1
Utah regulates through the Charitable Solicitations Act the solicitation of charitable
contributions in the State.2 The Act requires all professional fundraising consultants (PFCs) that
contractually assist charitable organizations to register with and obtain a permit from the Utah
Division of Consumer Protection before performing services for their clients.3 PFCs do not
solicit contributions, but instead assist and consult with charities that conduct solicitations
themselves.4
American Charities is a Delaware charitable and educational organization that represents
nonprofits and PFCs concerning charitable and fundraising regulations.5 It acts on behalf of its
members by “instituting legal actions as . . . deemed appropriate or necessary by the Board of
Directors.”6
American Charities appears here as a representative of PFCs who have been subject to
the Act. It seeks to represent its PFC members that “have no contact with Utah,” and “have been
injured by Defendant’s policy of requiring PFCs to register even though these consultants have
no contact with Utah and who do not target or direct their clients to solicit in Utah as opposed to
nationally.”7 American Charities also appears as the purported assignee of a claim originally
belonging to New River Direct, Inc. New River is a Florida Corporation that assists its nonprofit

1

Even though the court is evaluating cross-motions for summary judgment, the court treats the cross-motions as if
they are two distinct, independent motions. Cannon v. State Farm Mut. Auto. Ins. Co., 2013 WL 5563303, at *1 (D.
Utah Oct. 7, 2013). Accordingly, the court views the evidence and draws all reasonable inferences in the light most
favorable to the nonmoving party in each motion. Lounds v. Lincare, Inc., 812 F.3d 1208, 1220 (10th Cir. 2015).
2
The court recites the facts here to provide context for the court’s analysis of the parties’ motions for summary
judgment. These facts, however, are not material to the court’s analysis of the issues raised in the motions. As a
result, Defendant’s objections to Plaintiffs’ evidentiary submissions are moot. See Dkt. 389–395.
3
See Utah Code § 13-22-9.
4
See id. § 13-22-2(12)(a).
5
Certificate of Amendment to the Certificate of Incorporation (Dkt. 365, Ex. 1).
6
Id.
7
Dkt. 365 at 5.
2

clients with nationwide charitable solicitation campaigns.8 In 2005, New River entered into a
settlement agreement with the Division after the Division determined that New River provided
consulting services for a charitable client while it was not registered with the Division.9 Even
though New River believed its constitutional rights were being infringed upon by the Division,
New River entered into the settlement agreement to avoid defending against an administrative
enforcement action.10 New River has registered with the Division every year since 2008 under
protest.11 And because New River has no intention of initiating litigation to vindicate its rights,
it executed a written agreement with American Charities purporting to assign its claim against
the Division to American Charities.12
Rainbow Direct, an American Charities member since spring 2008,13 appears here on its
own behalf. Rainbow Direct is a New York limited liability corporation formed to provide
fundraising consulting services to charitable organizations that advocate for gays, lesbians, and
bisexuals.14 In late 2007, Rainbow Direct entered into a fundraising consulting contract with
Straight Women in Support of Homos, Inc. (SWiSH).15 After SWiSH began registering with
states to solicit charitable contributions, SWiSH received a letter from the Division saying, “It is
unlawful for any charitable organization to utilize the services of a . . . professional fund raising
counsel or consultant that is not in compliance with the Charitable Solicitations Act. According
to our records, Rainbow Direct Marketing is not currently registered in the State of Utah.”16
In spring 2008, Rainbow Direct’s President, Amy Tripi, spoke on the telephone with a

8

Decl. of Rod Taylor (Dkt. 365, Ex. 30), ¶ 4.
New River Direct Settlement Agreement (Dkt. 365, Ex. 22).
10
Decl. of Rod Taylor (Dkt. 365, Ex. 19), ¶¶ 2–3.
11
Supplemented Responses to Defendant’s Interrogatories on Standing (Dkt. 365, Ex. 35).
12
See Assignment Agreement Between New River and American Charities (Dkt. 365, Ex. 8).
13
See Decl. of Xenia Boone (Dkt. 365, Ex. 32), ¶ 2.
14
Decl. of Amy Tripi (Dkt. 365, Ex. 10), ¶ 2.
15
Affidavit of Amy Tripi (Dkt. 365, Ex. 9), ¶ 2.
16
March 18, 2008 Letter from Utah Division of Consumer Protection to SWiSH (Dkt. 365, Ex. 7).
9

3

licensor for the Division. Tripi asked the licensor whether the Division would require Rainbow
Direct to register.17 The licensor responded that the Division would require Rainbow Direct to
register and pay a fee.18 Tripi told the licensor that Rainbow Direct has no clients in Utah, has
no office locations in Utah, does not solicit business or contributions in Utah, and has no other
contacts with Utah.19 But the licensor maintained that Rainbow Direct must register with the
Division.20 And the licensor stated that the Division would take administrative action against
Rainbow Direct if it did not register by the time SWiSH renewed its registration.21 Rainbow
Direct has since refrained from performing any services for SWiSH under their contract.
American Charities and Rainbow Direct initiated this lawsuit under 42 U.S.C. § 1983 in
late 2008, asserting that the Act is facially unconstitutional under the Commerce Clause and the
First Amendment. They also allege that the Act is unconstitutional as applied to PFCs under the
First Amendment and the Due Process Clause.
Defendant moved in 2009 to dismiss the claims asserted against him, arguing in part that
American Charities has neither associational standing nor standing under the New River
assignment. Judge Dale A. Kimball, the judge to whom this case was assigned at the time,
concluded that Plaintiffs sufficiently alleged that American Charities has associational standing
to litigate the case.22 As a result, Judge Kimball declined to address whether Plaintiffs
adequately alleged that American Charities also enjoys standing under the New River
assignment.23
Defendant later moved in 2011 for summary judgment on Plaintiffs’ claims. At a hearing

17

Affidavit of Amy Tripi (Dkt. 365, Ex. 9), ¶ 8.
Id. ¶ 9.
19
Id. ¶ 10.
20
Id. ¶ 11.
21
Id. ¶ 12.
22
Dkt. 59.
23
Id.
18

4

held in early 2012, Judge Clark Waddoups, the judge to whom this case was assigned at the time,
granted summary judgment in Defendant’s favor on each of Plaintiffs’ facial challenges to the
Act.24 Judge Waddoups also concluded that Plaintiffs’ as-applied challenges to the Act could go
forward, but he declined to rule on them then because the record was insufficiently developed.25
Finally, Judge Waddoups concluded that Rainbow Direct has standing to assert the as-applied
challenges to the Act based on the threat of agency action.26 Judge Waddoups did not rule on
American Charities’ asserted associational standing.27
After engaging in additional discovery and motion practice, the parties filed the current
cross-motions for summary judgment on whether Plaintiffs have standing to litigate this case.
LEGAL STANDARD
The court grants summary judgment when “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”28 The
court “view[s] the evidence and make[s] all reasonable inferences in the light most favorable to
the nonmoving party.”29
ANALYSIS
The court’s analysis proceeds in three parts. The court first addresses whether Rainbow
Direct has standing to litigate this case. Second, the court examines whether American Charities
has associational standing to litigate on behalf of its members. And finally, the court discusses
whether American Charities has standing as an assignee of New River’s claim. In the end, the
24

February 2, 2012 Hearing Tr. (Dkt. 158), at 5–6; see also Dkt. 151, ¶ 1 (“The court grants summary judgment in
favor of Defendant on each of Plaintiffs’ facial challenges.”).
25
Dkt. 151, ¶ 3.
26
February 2, 2012 Hearing Tr. (Dkt. 158), at 56:7–11; see also Dkt. 151, ¶ 2 (“The court finds that the threat of
agency action against Rainbow Direct Marketing, LLC (‘Rainbow Direct’) is sufficient to afford Rainbow Direct
standing to challenge the Charitable Solicitations Act.”).
27
See February 2, 2012 Hearing Tr. (Dkt. 158), at 57:2–5 (stating that “I think it has been acknowledged that
American Charities has only associational standing on behalf of its members and no separate standing”).
28
Fed. R. Civ. P. 56(a).
29
N. Natural Gas Co. v. Nash Oil & Gas, Inc., 526 F.3d 626, 629 (10th Cir. 2008).
5

court concludes that Rainbow Direct has standing, but that American Charities does not.
I.

Rainbow Direct’s Standing
The “case” or “controversy” requirement of Article III of the United States Constitution

requires a plaintiff seeking judicial relief to establish three elements: “(1) an injury in fact, (2) a
causal relationship between the injury and the challenged conduct, and (3) a likelihood that the
injury will be redressed by a favorable decision.”30 The injury-in-fact requirement “ensure[s]
that the plaintiff has a personal stake in the outcome of the controversy.”31 A plaintiff seeking
injunctive relief must show that the injury is “concrete and particularized,” and that any threat is
“actual and imminent, not conjectural or hypothetical.”32 The plaintiff must show that standing
existed at the time it filed suit.33
Here, Judge Waddoups concluded in 2012, when evaluating Defendant’s earlier motion
for summary judgment, that Rainbow Direct has standing to litigate its as-applied challenges to
the Act.34 The court declines to revisit this legal ruling under the law-of-the-case doctrine.35 The
doctrine “generally provides that when a court decides upon a rule of law, that decision should
continue to govern the same issues in subsequent stages in the same case.”36 The doctrine is
subject to three narrow exceptions: “(1) when the evidence in a subsequent trial is substantially
different; (2) when controlling authority has subsequently made a contrary decision of the law
applicable to such issues; or (3) when the decision was clearly erroneous and would work a

30

United Food & Commercial Workers Union Local 751 v. Brown Grp., Inc., 517 U.S. 544, 551 (1996).
Susan B. Anthony v. Driehaus, 134 S. Ct. 2334, 2341 (2014) (citation omitted) (internal quotation marks omitted).
32
Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009).
33
Brown v. Buhman, 822 F.3d 1151, 1164 (10th Cir. 2016).
34
Dkt. 151, ¶ 2.
35
See Stewart v. Kempthorne, 554 F.3d 1245, 1254 (10th Cir. 2009) (recognizing that standing is a legal question
the court of appeals reviews de novo).
36
Musacchio v. United States, 136 S. Ct. 709, 716 (2016) (citation omitted) (internal quotation marks omitted).
31

6

manifest injustice.”37 None of the exceptions apply here: the evidence currently before the court
is not substantially different than the evidence that was before Judge Waddoups when he ruled;
controlling authority has not changed; and Judge Waddoups’s ruling was not clearly erroneous.
Rainbow Direct has standing to pursue its as-applied challenges to the Act.
II. American Charities’ Associational Standing
The court now turns to whether American Charities has associational standing to litigate
the as-applied challenges to the Act on behalf of its PFC members. While a “plaintiff generally
must assert his own legal rights and interests,”38 it is well settled “that even in the absence of
injury to itself, an association may have standing solely as the representative of its members.”39
American Charities must satisfy three elements to have associational standing: “(a) its
members [must] otherwise have standing to sue in their own right; (b) the interests it seeks to
protect [must be] germane to the organization’s purpose; and (c) neither the claim asserted nor
the relief requested requires the participation of individual members in the lawsuit.”40 “This test
takes into account both the constitutional dimension of standing and also the concern that the
association properly represent its members in the particular suit.”41
Here, American Charities lacks associational standing because it cannot satisfy the test’s
third requirement. Plaintiffs argue that individual participation is usually unnecessary where, as
here, “the association seeks a declaration, injunction, or some other form of prospective relief.”42
But “the relief sought is only half of the story.”43 And an association has standing on behalf of

37

Wessel v. City of Albuquerque, 463 F.3d 1138, 1143 (10th Cir. 2006) (citation omitted) (internal quotation marks
omitted).
38
Kan. Health Care v. Kan. Dep’t of Soc. & Rehab. Servs., 958 F.2d 1018, 1021 (10th Cir. 1992) (quoting Warth v.
Seldin, 422 U.S. 490, 499 (1975)).
39
Int’l Union, UAW v. Brock, 477 U.S. 274, 281 (1986) (citation omitted) (internal quotation marks omitted).
40
Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 343 (1977).
41
Kan. Health Care, 958 F.2d at 1021.
42
Warth, 422 U.S. at 515.
43
Rent Stabilization Ass’n of New York v. Dinkins, 5 F.3d 591, 596 (2d Cir. 1993).
7

its members only if the claims asserted do not require the participation of individual members.44
This means the court must examine whether Plaintiffs’ as-applied constitutional challenges to the
Act “will require individualized participation by the members” of American Charities.45 In
undertaking this analysis, the court expresses no opinion on the merits of Plaintiffs’ claims.
Plaintiffs contend in part that Defendant applies the Act to confer legislative jurisdiction
in a manner inconsistent with due process. In circumscribing the limits on a state’s legislative
jurisdiction, “the Supreme Court has employed language reminiscent of that used in the personal
jurisdiction caselaw.”46 The Court has stated that “[t]here must be at least some minimal contact
between a State and the regulated subject before it can, consistently with the requirements of due
process, exercise legislative jurisdiction.”47 In the personal jurisdiction context, a party has
“minimum contacts” with the jurisdiction if its conduct “create[s] a substantial connection with
the forum State.”48 Courts often ask whether the party “‘purposefully directed’ its activities at
the forum state,” or whether it “‘purposefully availed’ itself of the privilege of conducting
activities or consummating a transaction in the forum state.”49
Because “[t]his analysis is fact specific,”50 and because Plaintiffs here assert as-applied
challenges to the Act, the court must review evidence concerning each affected PFC members’
contacts with Utah. For example, the court must examine the specific actions each member has
taken in its consulting work, and then determine whether those actions are sufficient to bring the

44

Hunt, 432 U.S. at 343.
Kan. Health Care, 958 F.2d at 1022.
46
Am. Target Adver., Inc. v. Giani, 199 F.3d 1241, 1255 (10th Cir. 2000).
47
Id. (quoting Hellenic Lines, Ltd. v. Rhoditis, 398 U.S. 306, 315 n.2 (1970) (Harlan, J., dissenting)); accord Am.
Charities for Reasonable Fundrasing Regulation, Inc. v. Pinellas Cnty., 221 F.3d 1211, 1216 (11th Cir. 2000);
Adventure Commc’ns Inc. v. Ky. Registry of Election Fin., 191 F.3d 429, 436 (4th Cir. 1999).
48
Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014).
49
Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1071 (10th Cir. 2008).
50
ClearOne Commc’ns, Inc. v. Bowers, 643 F.3d 735, 763 (10th Cir. 2011) (citation omitted) (internal quotation
marks omitted).
45

8

member within the legislative jurisdiction of the Act.51 The court cannot determine whether the
Act as applied violates those PFC members’ due process rights “without delving into individual
circumstances.”52 Plaintiffs’ claim that American Charities’ members have insufficient contacts
with Utah for Defendant to exercise legislative jurisdiction over them “will necessarily require
individual participation of [American Charities’] members.”53
To be sure, the individual participation element of the associational standing test
articulated above arises out of prudential considerations, not Article III’s case or controversy
requirement.54 And it “is best seen as focusing on . . . matters of administrative convenience and
efficiency.”55 But in view of the fact-specific nature of the as-applied claims here asserted, the
court concludes that administrative convenience and efficiency are best served by requiring each
affected PFC member to participate in this suit so the court can adequately assess the individual
contacts of each with the State.
American Charities lacks associational standing to assert its PFC members’ as-applied
challenges to the Act.56
III.

American Charities’ Standing as an Assignee of New River’s Claim
Having concluded that American Charities does not have associational standing, the court

now turns to whether American Charities has standing as the purported assignee of New River’s
51

See Dkt. 151, ¶ 5 (stating that because Plaintiffs’ “‘as-applied’ challenges are necessarily specific to the member
that is challenging the Act,” Plaintiffs must “detail what actions each member has taken in its consulting work and
[explain] why those actions are insufficient to bring the member within the legislative jurisdiction of the Act”).
52
Dinkins, 5 F.3d at 597.
53
Kan. Health Care, 958 F.2d at 1023. Compare Brock, 477 U.S. at 287 (holding that the association’s claims did
not require individual participation by its members because “[t]he suit raise[d] a pure question of law”), with
Dinkins, 5 F.3d at 596 (concluding that the association’s takings claims required individual participation because the
court “would have to engage in an ad hoc factual inquiry for each landlord [member] who alleges that he has
suffered a taking”), and Kan. Health Care, 958 F.2d at 1022–23 (holding that an association of nursing homes did
not have standing because the necessary determination of whether certain rates were “reasonable and adequate”
would require the court “to examine evidence particular to individual providers”).
54
United Food & Commercial Workers Union, 517 U.S. at 555.
55
Id. at 557.
56
Because the court concludes that individual participation is required, the court does not address the first two
requirements of the three-part associational standing test.
9

§ 1983 claim.
As an initial matter, Defendant maintains that § 1983 claims are not assignable. Section
1983 provides no direct guidance on whether an individual may transfer her right to sue under
the provision. Where the federal civil rights laws do not provide rules of decision on specific
points, courts are instructed to consider the application of “state common law, as modified and
changed by the constitution and statutes of the forum state.”57 Courts are further instructed to
apply state law if it is not inconsistent with the goals of the civil rights laws.58 Accordingly, the
court must look to Utah state law for guidance.
“[Section] 1983 claims are best characterized as personal injury [tort] actions.”59 Tort
claims arising out of personal injury are not assignable under Utah law.60 Applying this rule of
non-assignability to § 1983 claims is not inconsistent with “the central objective of the . . . civil
rights statutes . . . to ensure that individuals whose federal constitutional or statutory rights are
abridged may recover damages or secure injunctive relief.”61 While an individual whose federal

57

Wilson v. Garcia, 471 U.S. 261, 267 (1985) (citation omitted) (internal quotation marks omitted); see also 42
U.S.C. § 1988(a) (stating that “in all cases where [the federal laws] are not adapted to the [goal of protecting all
persons in the United States in their civil rights], or are deficient in the provisions necessary to furnish suitable
remedies and punish offenses against law, the common law, as modified and changed by the constitution and
statutes of the State wherein the court having jurisdiction of such civil or criminal cause is held, so far as the same is
not inconsistent with the Constitution and laws of the United States, shall be extended to and govern the said courts
in the trial and disposition of the cause”); Pony v. Cnty. of Los Angeles, 433 F.3d 1138, 1143 (9th Cir. 2006)
(“Section 1988 also provides that courts should resolve ambiguities in the federal civil rights laws by looking to the
common law, as modified by the laws of the state in which they sit.”).
58
Wilson, 471 U.S. at 267; see also Felder v. Casey, 487 U.S. 131, 139 (1988) (“Any assessment of the applicability
of a state law to federal civil rights litigation . . . must be made in light of the purpose and nature of the federal
right.”).
59
Wilson, 471 U.S. at 280; see also City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 709
(1999) (stating that “there can be no doubt that claims brought pursuant to § 1983 sound in tort”); id. at 729 (Scalia,
J., concurring) (“In Wilson v. Garcia, we explicitly identified § 1983 as a personal-injury tort, stating that a violation
of § 1983 is an injury to the individual rights of the person, and that Congress unquestionably would have
considered the remedies established in the Civil Rights Act of 1871 to be more analogous to tort claims for personal
injury than, for example, to claims for damages to property or breach of contract.” (citation omitted) (internal
quotation marks omitted)); Baker v. Bd. of Regents of Kan., 991 F.2d 628, 630 (10th Cir. 1993) (“Section 1983
claims are best characterized as personal injury actions.”).
60
State Farm Mut. Ins. Co. v. Farmers Ins. Exch., 450 P.2d 458, 459 (Utah 1969); see Gilbert v. DHC Dev., LLC,
2013 WL 4881492, at *11 (D. Utah Sept. 12, 2013).
61
Felder, 487 U.S. at 139 (citation omitted) (internal quotation marks omitted).
10

constitutional or statutory rights have been abridged may not assign her § 1983 claim to someone
else, she may still personally recover damages or secure injunctive relief on her own behalf.
Section 1983 claims are not assignable in Utah, and American Charities does not have
standing under the assignment to pursue its PFC members’ as-applied challenges to the Act.62
CONCLUSION
For the reasons stated, the court concludes that Rainbow Direct has standing to pursue its
as-applied challenges to the Act. American Charities, however, does not have standing to pursue
those claims. Plaintiffs’ Motion for Summary Judgment (Dkt. 365) and Defendant’s Motion for
Summary Judgment (Dkt. 373) are GRANTED IN PART and DENIED IN PART.
SO ORDERED this 13th day of September, 2016.
BY THE COURT:

__________________________________
ROBERT J. SHELBY
United States District Judge

62

See Pony, 433 F.3d at 1143 (recognizing that a “plaintiff cannot assign her Section 1983 action”).
11