American Charities for Reasonable Fundraising Regulation et al v. Olsen

Filing 434

MEMORANDUM DECISION AND ORDER granting 417 Motion for Summary Judgment; denying 418 Motion for Partial Summary Judgment. Signed by Judge Robert J. Shelby on 10/10/17 (alt)

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 scope of Utah’s legislative authority. Plaintiff Rainbow Direct
Marketing is a New York-based company that consults with charitable organizations about how
best to solicit donations. Utah’s Charitable Solicitations Act requires companies like Rainbow
Direct to register with and obtain a permit from the State before performing consulting services
for their clients—a requirement Rainbow Direct contends is unconstitutional. For the reasons
below, the court concludes that under existing Tenth Circuit law, the Act is constitutional as
applied to Rainbow Direct.
BACKGROUND
Utah regulates charitable solicitations in the State through the Charitable Solicitations
Act, which requires charitable organizations to register with and obtain a permit from the State
before soliciting from Utah citizens.1 Not only must charitable organizations register, but so too

1

Utah Code § 13-22-5 (2005).

must any professional fundraising consultant (PFC) who provides services to a charitable
organization.2 PFCs do not themselves solicit contributions in the State, but instead consult with
organizations that do about how best to do so.
Plaintiff Rainbow Direct is one such PFC subject to the Act’s registration requirement.
Rainbow Direct is a New York limited liability company formed to provide fundraising
consulting services to charitable organizations that advocate for gays, lesbians, and bisexuals. In
2007, Rainbow Direct entered into a fundraising consulting contract with Straight Women in
Support of Homos, Inc. (SWiSH). SWiSH wished to solicit charitable contributions in Utah,
among other states. After SWiSH registered with the Utah Division of Consumer Protection, the
Division informed SWiSH that it could not lawfully continue to receive consulting services from
Rainbow Direct because Rainbow Direct was not registered with the State.3
Rainbow Direct then contacted the Division to confirm that it was required to register,
notwithstanding that Rainbow Direct has no clients in Utah, has no offices in Utah, does not
solicit business or contributions in Utah, and has no other direct interaction with Utah. The
Division informed Rainbow Direct that it nevertheless had to register and pay a fee, and warned
that Rainbow Direct would be subject to administrative action if it did not register by the time
SWiSH renewed its registration.4 Rainbow Direct has since refrained from performing any
services for SWiSH on account of the registration requirement.
Rainbow Direct subsequently brought this lawsuit, contending the Act is unconstitutional.
Both parties have moved for summary judgment on Rainbow Direct’s as-applied challenges.5

Id. § 13-22-5(4).
Dkt. 418-1 at 3.
4
Id. at 31.
5
Dkts. 417, 418. The court previously granted summary judgment to the State on Rainbow Direct’s
facial challenges. Dkts. 151, 158.
2
3

2

STANDARDS OF REVIEW
Summary judgment is used to decide pure issues of law and “to isolate and dispose of
factually unsupported claims or defenses.”6 The court will grant summary judgment only if there
is “no genuine dispute as to any material fact” and the movant is “entitled to judgment as a
matter of law.”7 The court will draw any reasonable inferences from the evidence in the light
most favorable to the nonmovant.8
ANALYSIS
Rainbow Direct contends the Act violates: (1) the Due Process Clause; (2) the First
Amendment; and (3) the Dormant Commerce Clause. The State disagrees, and argues that in
any event, Rainbow Direct lacks standing to challenge the Act. The court first addresses the
State’s standing arguments. Finding that Rainbow Direct has standing to pursue its as-applied
challenges, the court then addresses each in turn.
I.

Standing
This is not the State’s first time challenging Rainbow Direct’s standing to sue. In 2012,

Judge Waddoups denied in part the State’s motion for summary judgment, concluding that
Rainbow Direct had standing to litigate its as-applied challenges to the Act.9 Last year, the State
again challenged Rainbow Direct’s standing, and the court declined to reconsider Judge
Waddoups’s ruling.10 In its pending Motion for Summary Judgment, the State once again
challenges Rainbow Direct’s standing, again asking the court to revisit Judge Waddoups’s 2012
ruling.

Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986).
Fed. R. Civ. P. 56(a).
8
Lopez v. LeMaster, 172 F.3d 756, 759 (10th Cir. 1999).
9
Dkts. 151, 158.
10
Dkt. 399.
6
7

3

When a court decides a rule of law, that decision binds the parties for the rest of the case
barring introduction of substantially different evidence, citation to a change in controlling
authority, or demonstration that the court’s prior decision was clearly erroneous.11 The State
contends new evidence and authority compel reevaluation of Judge Waddoups’s ruling, and
argues, alternatively, that the ruling was clearly erroneous. As to new evidence, the State
recently deposed Rainbow Direct’s owner Amy Tripi.12 It contends that new, substantially
different evidence emerged from this deposition—namely, that Tripi was not aware whether
Rainbow Direct had fulfilled various administrative requirements of the State of New York,
including registering there as a PFC, and that Rainbow Direct had not worked with any charities
before SWiSH and has not contracted with any since (the implication, apparently, being that
Rainbow Direct and SWiSH never actually planned to conduct a real fundraising campaign).
The State made no effort to show that this evidence is substantially different than that in its
possession at the time of Judge Waddoups’s (and this court’s) prior rulings. Rainbow Direct, by
contrast, provided evidence that this information is in fact not new and has been known to the
State for some time.13 Moreover, even if the State had demonstrated this evidence was new and
different, it has not explained how the evidence is relevant to the issue of standing.
The State next contends that the Tenth Circuit’s decision in Brown v. Buhman changed
the state of Tenth Circuit standing jurisprudence such that Judge Waddoups’s decision should be
revisited.14 If Brown involved any change in the law, it is not apparent from the panel opinion.

Wessel v. City of Albuquerque, 463 F.3d 1138, 1143 (10th Cir. 2006).
Dkt. 417-1 at 21.
13
See Dkt 424 at 8 (“Defendant knew as early as May 18, 2011 that the RDM-SWISH contract was not
registered in New York because it would have appeared in Mark Mahigian’s search of the New York
Charities Bureau records for Rainbow Direct Marketing, LLC if the contract had been.”); Dkt 417-1 at
194.
14
See Brown v. Buhman, 822 F.3d 1151 (10th Cir. 2016).
11
12

4

Nor does the State provide any indication in its briefing how the law has changed, or what
impact any change has on this case.
Last, the State argues Judge Waddoups’s ruling was clearly erroneous. The court,
however, has already concluded that it was not.15 And nothing in the State’s briefing gives the
court reason to reconsider that conclusion.
In short, the State has not provided any new, substantially different evidence or
controlling authority not before Judge Waddoups in 2012 or this court in 2016, nor has it
convinced the court to reconsider its decision that Judge Waddoups’s ruling was clearly
erroneous. Thus, Judge Waddoups’s ruling remains the law of the case, and Rainbow Direct has
standing to pursue its as-applied challenges.
II.

The Due Process Clause
Turning to the merits, Rainbow Direct first argues the Act, as applied to Rainbow Direct,

violates the Due Process Clause of the Fourteenth Amendment because the Act exceeds Utah’s
legislative authority. It contends that as a New York company operating solely in New York, it
does not have sufficient ties with Utah to be subject to the State’s legislative authority. The
State, on the other hand, argues that Rainbow Direct’s work with SWiSH provides the minimal
contacts necessary to subject Rainbow Direct to the State’s legislative jurisdiction.
The Due Process Clause restricts the State from exercising legislative jurisdiction unless
there is “some minimal contact between [the] State and the regulated subject.”16 The minimum
contacts analysis in the legislative jurisdiction context mirrors the analysis in the context of

15
16

Dkt. 399 at 7.
Am. Target Advert., Inc. v. Giani, 199 F.3d 1241, 1255 (10th Cir. 2000).
5

judicial personal jurisdiction.17 As with personal jurisdiction, the minimal contacts necessary to
assert legislative jurisdiction can be shown through specific jurisdiction (if the subject
“purposefully directed” its activities toward Utah) or through general jurisdiction (if the subject
is “essentially at home” in the state).18 And if minimum contacts are shown, the court must also
assess whether assertion of jurisdiction is otherwise “reasonable in light of the circumstances
surrounding the case.”19 Nobody contends that Rainbow Direct is essentially at home in Utah, so
the question is whether it purposefully directs its activities at Utah such that it is subject to
specific legislative jurisdiction.
The State concedes that Rainbow Direct’s only tie to Utah is its work with SWiSH, a
company, as discussed, that solicits charitable contributions in Utah.20 This work, in relevant
part, consists of helping SWiSH choose national mailing lists to use in its fundraising campaigns
and coordinating with vendors to do the actual mailing.21 When choosing among various
national mailing lists, Rainbow Direct assesses the lists’ past performance with similar charity
groups, reviewing metrics such as the percentage of people who responded to prior mailings and
the average gift amount of those who responded.22 One factor Rainbow Direct does not
consider, however, is geography. In fact, the lists from which Rainbow Direct chooses do not
provide geographic information of potential donors.23

Am. Charities for Reasonable Fundraising Regulation, Inc. v. Pinellas Cty., 221 F.3d 1211, 1216 (11th
Cir. 2000); see also McCluney v. Joseph Schlitz Brewing Co., 649 F.2d 578, 581 (8th Cir. 1981) (noting
that “essentially the same principle should be applied with reference to both situations”).
18
Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014).
19
Bell Helicopter Textron, Inc. v. Heliqwest Int’l, Ltd., 385 F.3d 1291, 1296 n.1 (10th Cir. 2004).
20
Dkt. 423 at vi–vii.
21
Dkt. 418 at 33–38.
22
Id. at 36–37.
23
Id. at 40.
17

6

Nonetheless, the State contends Rainbow Direct’s actions constitute purposeful direction
toward Utah. Because of the size of each national mailing list—which may contain upwards of
40,000 recipients—it is reasonable to assume, the State argues, that any particular list contains at
least one Utah resident.24 Thus, even if Rainbow Direct does not consciously target residents of
Utah, it “knows that the campaign materials it assists in preparing will reach Utah,” and it then
affirmatively recommends those lists to Rainbow Direct, which the State contends is sufficient to
establish legislative jurisdiction.25
Rainbow Direct disagrees. It first contends that it does not know whether any of the lists
it ultimately recommends to SWiSH contain Utah Residents, so it cannot be said to purposefully
target Utah. Rainbow Direct next argues that even assuming Utah residents end up on the lists,
because Rainbow Direct does not choose those lists because they contain Utah residents,
focusing as it does on nongeographic factors, it still does not purposefully direct its activities to
Utah. Last, Rainbow Direct contends that even if soliciting using lists containing Utah citizens
(albeit chosen for nongeographic reasons) is generally sufficient targeting for purposes of
legislative jurisdiction, Rainbow Direct’s activities in this case do not qualify because it merely
recommends lists; SWiSH, it argues, is the party who ultimately directs activities toward Utah by
adopting the lists and sending the mailings.
In support of these competing arguments, the parties rely primarily on two authorities,
both of which come to opposite conclusions, and neither of which is directly on point. The first
is American Target, in which the Tenth Circuit upheld legislative jurisdiction for the same law at
issue here, albeit as applied to a PFC that contracted “to suggest lists of potential Utah donors,”

24
25

Dkt. 417-1 at 88.
Dkt. 417.
7

unlike Rainbow Direct, which suggests lists for nationwide mailings.26 The second is American
Charities, in which the Eleventh Circuit struck down a law similar in function to that at issue
here, but more limited in scope, applying only to charitable solicitations in a particular county,
rather than state wide.27 Both cases rely on the aforementioned standard for assertion of
legislative jurisdiction, assessing whether the regulated party “purposefully directed” its
activities toward residents of the forum state. With this standard in mind, and in view of
American Target (which is binding on this court) and American Charities (which is not), the
court turns to Rainbow Direct’s arguments.
As to Rainbow Direct’s first argument—that it is not necessarily apparent that the lists it
recommends actually contain Utah residents, and therefore, it is not clear that Rainbow Direct’s
activities actually reach Utah—the court is not persuaded. There can be little doubt that a list of
40,000 United States recipients would include one or more Utah residents. Indeed, the
probability that it would not is negligibly small. Rainbow Direct appears (implicitly, at least) to
concede as much. It focuses its briefing not on the argument that the lists it selects do not
contain Utah residents, but rather on the argument that even if the list contains Utah residents,
Rainbow Direct does not choose the list because it has Utah residents.
On this second point—that Rainbow Direct cannot be said to direct its activities at Utah
because it chooses lists based on nongeographic factors, namely, the likelihood potential
recipients will donate—the court is similarly unconvinced. Neither the Supreme Court nor the
Tenth Circuit has been entirely clear on what degree and type of targeting of a forum state is

Am. Target Advert., Inc. v. Giani, 199 F.3d 1241, 1255 (10th Cir. 2000) (emphasis added).
Am. Charities for Reasonable Fundraising Regulation, Inc., v. Pinellas Cty., 221 F.3d 1211, 1215–18
(11th Cir. 2000).
26
27

8

required before the state may assert legislative jurisdiction.28 What is clear is that something
more than foreseeability is required; that is, the mere knowledge that an entity’s actions will
reach a forum state, without more, is not sufficient to establish legislative jurisdiction.29 The
Supreme Court and Tenth Circuit have not, however, examined in any depth just what this
“something more” is. In addressing this question, district courts in this circuit have relied on
factors from other circuits, including “the [entity’s] direction or control over the flow of the
product into the forum, the quantity of the [entity’s] particular product regularly flowing into the
forum, and the distinctive features of the forum that connect it with the product in question.”30
These factors all focus on the extent to which an entity’s actions reach a forum state, and
the degree to which the entity (as opposed to a third party) caused them to do so. By contrast, no
court, as far as this court is aware, has concluded that legislative jurisdiction turns on an entity’s
purpose for directing activities toward a forum state. There is no indication in Supreme Court or
Tenth Circuit authority that the reason a party targets a particular state is relevant to the
jurisdictional inquiry. In other words, whether an entity directs activities at Utah citizens
because they are likely to give, because they like to ski, because they are Mormon, or for the
mere reason that they reside between Nevada and Colorado, the entity has nonetheless directed
its activities toward citizens of the State. And it can therefore “reasonably anticipate being haled
See, e.g., Eaves v. Pirelli Tire, LLC, No. 13-1271-SAC, 2014 WL 1883791, at *9–14 (D. Kan. May 12,
2014) (detailing the history and current state of Supreme Court jurisprudence related to purposeful
direction under the stream of commerce theory). As the court noted in Eaves, the Supreme Court has
spoken on the issue of purposeful direction since American Target and American Charities, though no
majority opinion emerged. See J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 878 (2011). In the
wake of McIntyre, most courts have construed Justice Breyer’s McIntyre opinion as the narrowest, and
therefore as the holding of the court. See Johnson v. Chrysler Canada Inc., 24 F. Supp. 3d 1118, 1133
(N.D. Ala. 2014) (collecting cases). And most courts have concluded that Justice Breyer’s opinion did
not change the state of the law. Id. Thus, American Target and American Charities remain good law
after McIntyre.
29
See Bell Helicopter Textron, Inc. v. Heliqwest Int’l, Ltd., 385 F.3d 1291, 1297 (10th Cir. 2004); Eaves,
2014 WL 1883791, at *9–14.
30
Eaves, 2014 WL 1883791, at *14.
28

9

into court” in the State, regardless of the purpose motivating its contacts with the State.31 Thus,
the argument that Rainbow Direct does not choose to target Utah citizens because they live in
Utah does not insulate it from Utah’s legislative jurisdiction.32
But Rainbow Direct’s third argument—that it does not purposefully direct activities at
Utah because SWiSH, not Rainbow Direct, ultimately adopts the recommended lists and
conducts the mailings—carries more weight. Indeed, Rainbow Direct does not actually control
whether its activities ever reach Utah—SWiSH does. Rainbow Direct recommends lists it thinks
will work well, and SWiSH then makes an executive decision about whether to send mailings (or
not) to the recipients on the list. In the vernacular of jurisdiction, any mailing that actually
reaches Utah will be a result of “unilateral actions taken by someone else.”33 But legislative
jurisdiction, according to the Tenth Circuit, “must be based on actions by the [regulated party],”
not on “unilateral actions taken by someone else.”34 Rainbow Direct does not meet this standard.
It does not solicit in Utah, nor can it by law. In fact, Rainbow Direct could fully perform its
obligations under its contract and no mailing may ever reach Utah. Whether one does is up to
SWiSH. And because SWiSH makes the ultimate, unilateral decision to contact Utah, Rainbow
Direct should not be subject to legislation by the State.

Bell Helicopter, 385 F.3d at 1296 (requiring that “the defendant’s conduct and connections with the
forum State [be] such that he should reasonably anticipate being haled into court there”).
32
Not only is the practical effect the same regardless of Rainbow Direct’s motive—whether it selects
residents because they reside in Utah or for some other factor, the mailings still get there—another
consideration convinces the court that this distinction makes no difference: it seems unwise, as a matter of
justiciability, to determine that jurisdiction turns on the mindset of a party. Granted, here, it seems to be
undisputed that Rainbow Direct does not intend to take geography into account when choosing which
people to target. But in future cases this may not be so apparent. Lest jurisdictional analyses turn into
complicated evidentiary questions related to a party’s state of mind, it seems prudent to keep a party’s
intentions out of the analysis and focus on the objective question of whether the entity’s activities reached
the target forum.
33
Bell Helicopter, 385 F.3d at 1296.
34
Id.
31

10

The court, however, nonetheless concludes it is bound to find legislative jurisdiction in
this case. Notwithstanding related Tenth Circuit law discussing unilateral actions of third
parties, the Tenth Circuit in American Target concluded—with no analysis on this point—that a
PFC like Rainbow Direct could establish the requisite minimum contacts with a state merely
through its advising activities, even if a third party actually controls the ultimate decisions
related to the mailings. For the reasons stated above, the court believes that part of the decision
to be in tension with Supreme Court and Tenth Circuit authority regarding unilateral activity. It
is also in tension with American Charities, where the Eleventh Circuit engaged in reasoned
analysis on facts similar to those in this case, acknowledging that PFCs “themselves do not send
mailings to the public . . . do not solicit, do not handle the funds, and are not paid on a percentage
of the contributions basis.”35 On this basis, in part, the Eleventh Circuit concluded American
Charities was not subject to the County’s legislative jurisdiction.36 This court believes Tenth
Circuit and Supreme Court authority—namely, Bell Helicopter and World Wide Volkswagen,
from which the “unilateral action” standard derives—dictates that same result here.37
Nonetheless, American Target is directly on point on this issue, so, as discussed above,
the court is bound by its conclusion that the actions of consulting and recommending mailing
lists suffice to establish purposeful direction of activities toward Utah. And Rainbow Direct has
not otherwise demonstrated “the presence of some other considerations [that] would render

Am. Charities for Reasonable Fundraising Regulation, Inc., v. Pinellas Cty., 221 F.3d 1211, 1215–18
(11th Cir. 2000).
36
The Eleventh Circuit also relied on its understanding that the PFC recommended national lists, not lists
directed at the county in question. It is not clear from the court’s analysis whether its decision turned on
the fact that the PFC did not itself solicit, that it recommended national (rather than local) lists, or some
combination of both.
37
See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 298 (1980); Bell Helicopter, 385 F.3d at
1296. These cases were not the first to use the phrase “unilateral action” in the jurisdiction context, but
they are widely cited on that point.
35

11

jurisdiction unreasonable.”38 Under existing Tenth Circuit law, legislative jurisdiction is
therefore proper.
III.

First Amendment

Rainbow Direct next argues the Act violates its First Amendment rights. Initially,
Rainbow Direct argued the Act was facially unconstitutional as an impermissible abridgment of
speech and as an unconstitutional prior restraint. Judge Waddoups in 2012 ruled that Rainbow
Direct’s facial challenges on both grounds were foreclosed by American Target.39 Given that
ruling, Rainbow Direct agrees the only issue before the court today is its as-applied challenge to
the Act as an impermissible abridgment of speech (it does not reassert a prior restraint
argument).40 Thus, the court addresses Rainbow Direct’s as-applied challenge, and, specifically,
whether that challenge is similarly foreclosed by American Target.
Charitable solicitations undoubtedly qualify as protected First Amendment speech.41
Thus, the Act’s restrictions on this speech are subject either to intermediate scrutiny (if the Act is
content neutral) or strict scrutiny (if it is content based).42 The Tenth Circuit has already
concluded the Act is content neutral and subject to intermediate scrutiny.43 Thus, Rainbow

Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1080 (10th Cir. 2008).
Dkt. 158 at 29.
40
See Dkt. 424 at 26 (“Defendant’s arguments regarding prior restraint are unnecessary because Judge
Waddoups ruled against Plaintiff’s facial challenges to the Act in in 2012.”).
41
Am. Target Advert., Inc. v. Giani, 199 F.3d 1241, 1247 (10th Cir. 2000). The speech in question is that
of SWiSH, not Rainbow Direct, but in the First Amendment context, “a litigant whose own activities are
unprotected may nevertheless challenge a statute by showing that it substantially abridges the First
Amendment rights of other parties not before the court.” Vill. of Schaumburg v. Citizens for a Better
Env’t, 444 U.S. 620, 634 (1980). It is not entirely clear that this doctrine applies in the context of an asapplied challenge, but because the State argued the issue only cursorily, and because Rainbow Direct’s
First Amendment argument fails on other grounds, the court need not address the issue.
42
Am. Target, 199 F.3d at 1247.
43
Id.
38
39

12

Direct must show the Act serves a substantial government interest and is narrowly drawn to
serve that interest without substantially interfering with First Amendment freedoms.44
The Tenth Circuit has similarly already concluded that protecting the public against fraud
in charitable solicitations is a substantial government interest, and Rainbow Direct does not
dispute that element.45 It does, however, contest that the Act actually serves that interest and that
it is narrowly tailored to do so.46 The first argument, however—that the Act does not actually
serve a substantial government interest—is foreclosed by American Target’s conclusion that
“[t]he Act’s general declarations and specific prohibitions clearly target fraud” and that “[t]he
Act therefore serves a substantial government interest.”47 In other words, Rainbow Direct’s
argument that in reality the Act does nothing to prevent fraud is best directed toward the Tenth
Circuit as a request to reconsider its precedent, by which this court is bound.
As to narrow tailoring, the Tenth Circuit has concluded that “the registration and
disclosure provisions of the Utah Act are narrowly tailored to serve the state’s substantial interest
in fighting fraud.”48 This conclusion came in the context of a facial challenge, and Rainbow
Direct’s argument here appears to be that notwithstanding this facial ruling, Rainbow Direct’s
individual situation is sufficiently unique that the Act is not narrowly tailored as applied to
Rainbow Direct. The question, then, is whether this case falls within “the core fact situation
intended to be covered” by the statute and whether it involves “the same type of fact situation
that was envisioned by [the Tenth Circuit] when the facial challenge was denied” in American
Target.49 In addressing this question, Rainbow Direct focuses on two burdens on its speech it

Id.
Id.; Dkt. 418 at 39.
46
Dkt. 418 at 39.
47
Am. Target, 199 F.3d at 1247.
48
Id. at 1248.
49
McGuire v. Reilly, 386 F.3d 45, 61 (1st Cir. 2004).
44
45

13

contends were not considered by the Tenth Circuit in American Target: its expert’s opinion that
the total cost of registering in every state exceeds $13,000 annually, and its belief that it must
contact the Division of Consumer Protection daily to confirm compliance of each of its charity
clients, lest it subject itself to administrative action for providing services to a client whose
registration has lapsed.
Neither factor compels the conclusion that the Act burdens Rainbow Direct in a way not
contemplated by the Tenth Circuit when it concluded the Act was facially constitutional. As to
cost, it is not clear why the cost of complying with other states’ registration requirements can be
considered a burden imposed by Utah’s Act. The Tenth Circuit already concluded the then-$250
fee (now-$100 fee) imposed by Utah was reasonable and not unduly burdensome. What
Rainbow Direct pays to other states is irrelevant.
With regard to Rainbow Direct’s belief that it has to check daily the status of all its
clients, that is not a requirement of the Act. Rainbow Direct concedes as much; it does not argue
the Act explicitly requires daily checkins, but instead contends it is “the only conceivable
compliance strategy.”50 The court disagrees. Rainbow Direct could, for example, contract with
its clients to require that they provide notice when they fall out of compliance with the Act or
indemnify Rainbow Direct if they fail to do so. Because the Act imposes neither the burden of
paying fees in states other than Utah nor calling to check compliance daily, Rainbow Direct’s
First Amendment argument fails.
IV.

Dormant Commerce Clause

Rainbow Direct’s final challenge arises under the Dormant Commerce Clause. A
corollary of the Commerce Clause, the Dormant Commerce Clause restricts a state from enacting

50

Dkt. 418 at 42.
14

legislation that burdens interstate commerce if it has insufficient offsetting local benefits.51
Dormant Commerce Clause challenges come in three flavors: the typical case, which involves a
balancing of the effect on interstate commerce with the offsetting local benefits (the Pike line),
and two varieties in which the balance of these interests is so skewed toward unconstitutionality
that the regulation in question is deemed per se unconstitutional (the Philadelphia and HealyBaldwin lines).52
The Tenth Circuit has already addressed the constitutionality of the Act under the Pike
and Philadelphia lines, determining it passes muster under both.53 Recognizing this, Rainbow
Direct concedes its only pending challenge is under the Healy-Baldwin line.54 Under this line of
cases, any “price control [or] price affirmation laws that control ‘extraterritorial’ conduct”
(meaning conduct outside the state’s borders) are “deemed almost per se invalid.”55
But the Healy-Baldwin line applies only to “price control or price affirmation statues that
link in-state prices with those charged elsewhere and discriminates against out-of-staters.”56 The
Act challenged here has none of these characteristics. And for that reason, Rainbow Direct’s
Dormant Commerce Clause challenge under the Healy-Baldwin line of cases fails.
Rainbow Direct doesn’t directly argue that any of these characteristics are present, but
instead cites broad language from Healy suggesting that a court should strike as per se
unconstitutional any law that regulates commerce occurring wholly outside a state’s borders
(rather than cabining the doctrine solely to situations involving price control regulations).57 The

See Energy & Env’t Legal Inst. v. Epel, 793 F.3d 1169, 1171 (10th Cir. 2015).
Id. at 1171–72.
53
Am. Target, 199 F.3d at 1254.
54
Dkt. 424 at 27 (“Plaintiff’s Commerce Clause challenge is premised upon the Healy
jurisprudence . . . .”).
55
Epel, 793 F.3d at 1172.
56
Id. at 1174.
57
Dkt. 418 at 34–37.
51
52

15

Tenth Circuit, however, has already addressed and dismissed this very argument, concluding that
while some language in Healy could in theory be read quite broadly, in practice, “the Court’s
holdings have not gone nearly so far and have turned instead on the presence of [the] three
[aforementioned] factors” (i.e. that the statute is (1) a price control statute that (2) links in-state
prices with those charged elsewhere and (3) has the effect of raising costs for out-of-state
consumers).58 The court made clear that notwithstanding Healy’s broad dicta suggesting
otherwise, “Healy and Baldwin are not applicable to a statute that does not dictate the price of a
product and does not tie the price of its in-state products to out-of-state prices.”59 Because the
Act in question does neither, Rainbow Direct’s Dormant Commerce Clause argument fails.
CONCLUSION
In sum, the Act does not violate Rainbow Direct’s Due Process, First Amendment or
Dormant Commerce Clause rights. The State’s Motion for Summary Judgment is GRANTED.60
Rainbow Direct’s Motion for Summary Judgment is DENIED.61
The Clerk of Court is directed to close the case.
SO ORDERED this 10th day of October, 2017.
BY THE COURT:

__________________________________
ROBERT J. SHELBY
United States District Judge

Epel, 793 F.3d at 1174.
Id. at 1175.
60
Dkt. 417.
61
Dkt. 418.
58
59

16