States may sue firms that solicit contributions to charity if the companies pocket most donations and mislead potential donors about that fact, the Supreme Court ruled. The decision gives states additional leeway to take on misleading telemarketers.
By a unanimous vote, the court ruled that a suit by the Illinois attorney general against two telemarketing firms that solicited funds to help Vietnam veterans — and then kept 85 cents of every dollar for expenses — would not infringe on the charity’s First Amendment right to communicate with the public.
However, the court made clear that its holding applied to cases in which the telemarketer’s alleged wrongdoing included false statements to potential donors, such as the claim, made in this case, that “90 percent or more goes to the vets.”
States have tried for years to crack down on questionable fundraising by charitable solicitation firms. In the case considered by the Supreme Court, just $1.1 million of $7.1 million raised went to VietNow between 1987 and 1995.