Illinois Ex Rel. Madigan v. Telemarketing Associates, Inc.

538 U.S. 600 (2003)

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Nature of the Case

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Facts

D was retained by VietNow, a charitable nonprofit corporation, to solicit donations to aid Vietnam veterans. D would retain 85 percent of the gross receipts from donors within Illinois, leaving 15 percent for VietNow. The donor lists would remain under D's 'sole and exclusive' control. D brokered contracts on behalf of VietNow with out-of-state fundraisers; under those contracts, out-of-state fundraisers retained between 70 percent and 80 percent of donated funds, Telemarketers received between 10 percent and 20 percent as a finder's fee, and VietNow received 10 percent. D collected approximately $7.1 million, keeping slightly more than $6 million for themselves, and leaving $1.1 million for the charity. P filed a complaint against D asserting fraud and breach of fiduciary duty. It alleged, that the 85 percent fee was 'excessive' and 'not justified by expenses paid.' P had evidence that showed D misleadingly represented that 'funds donated would go to further VietNow's charitable purposes.' Ds told prospective donors their contributions would be used for specifically identified charitable endeavors; 'food baskets given to vets and their families for Thanksgiving,' paying 'bills and rent to help physically and mentally disabled Vietnam vets and their families,' and 'job training,' and 'rehabilitation [and] other services for Vietnam vets.' D outright lied and stated that 90% or more of the funds raised go to the vets. Another was told her donation would not be used for 'labor expenses' because 'all members are volunteers.' P asserted, 'representations made to donors that a significant amount of each dollar donated would be paid over to VietNow were knowingly deceptive and materially false, constituted a fraud and were made for the private pecuniary benefit of D.' D moved to dismiss the fraud claims, urging that they were barred by the First Amendment. The trial court granted the motion. The Illinois Supreme Court affirmed and held that 'in essence, an attempt to regulate D's ability to engage in a protected activity based upon a percentage-rate limitation.' It held that 'fraud cannot be defined in such a way that it places on solicitors the affirmative duty to disclose to potential donors, at the point of solicitation, the net proceeds to be returned to the charity.' The Supreme Court granted certiorari.