BISMARCK, N.D. North Dakota's telemarketing restrictions are legal, and a state law limiting sales calls helps safeguard privacy and does not violate the free-speech rights of charities, a federal appeals court has ruled.
The 2-1 decision by the 8th U.S. Circuit Court of Appeals, made public yesterday, reverses a decision by U.S. District Judge Ralph Erickson of Fargo, who concluded in October 2003 that the state law was unfair to nonprofit groups.
The law "significantly furthers the state's interest in residential privacy," Judges Roger Wollman and J. Leon Holmes wrote in the court's majority opinion in Fraternal Order of Police v. Stenehjem. "The (state law) does not substantially limit charitable solicitations, and is not unconstitutionally overbroad."
Judge Gerald Heaney dissented, calling the law "overly restrictive."
"The regulation prevents potentially willing listeners from engaging in discourse about charitable contributions," Heaney wrote, adding, "North Dakota has failed to demonstrate that its ban on telefunders' calls will restore, or even significantly improve, residential privacy."
The North Dakota branches of the Fraternal Order of Police and the Veterans of Foreign Wars sued to overturn the law shortly after it was approved by the 2003 Legislature.
Grant Benjamin, a Fargo police officer who is president of the North Dakota FOP, said using professional fundraisers to call potential donors has been the organization's most effective way of raising money.
It is too expensive for the police organization to hire employees to solicit money, Benjamin said. The North Dakota law "hampers our fundraising for our law enforcement community," he said. "We may have to look at other ways to raise funds."
Attorneys general from 15 states supported North Dakota's appeal, while 184 organizations based in 43 states, mostly representing firefighters, police officers and veterans, asked the appeals court to uphold Erickson's ruling.
North Dakota's law bars most organizations from making telephone sales calls to homes if the phone number is listed on a state "do-not-call" list.
Charities may make fundraising calls to people who have joined the no-call list, but only if they use employees or volunteers. Professional telemarketers are not allowed to call people on the list.
The appeals court concluded the volunteers-versus-pros distinction was legal.
"We are reluctant to second-guess the North Dakota Legislature's judgment that professional charitable solicitors intrude more regularly on residents' privacy than volunteers or employees, and that the act is a necessary means of enabling its citizens to halt these intrusions," the majority opinion says. "The act does not foreclose all means of charitable solicitation directed at these residents."
Errol Copilevitz, a Kansas City, Mo., attorney for the two North Dakota nonprofit groups, said the ruling might be appealed to the U.S. Supreme Court.
North Dakota's law has some provisions that discriminate against nonprofit groups while favoring commercial interests, Copilevitz said yesterday. A sales call by a nonprofit employee or volunteer is no less intrusive than one placed on the nonprofit's behalf by a hired telemarketer, he said.
"It's a tremendous blow against a lot of nonprofits that rely on grassroots fundraising," Copilevitz said of the decision. "What (the law) is forcing charities to do ... is to adopt in-house telemarketing, and that's not what we want from nonprofit organizations. We want them to pursue their mission. We don't want them to go into the telemarketing business."
The state law allows businesses to make unsolicited calls to former customers, even if the number is on the no-call list. It also exempts calls made by political parties and candidates.
Attorney General Wayne Stenehjem said the decision was a victory for North Dakotans who want to avoid being pestered by telephone sales calls.
Some North Dakota charities that have hired telemarketers for fundraising have ended up paying most of their collections to the telemarketer, Stenehjem said. By giving charities an incentive to use volunteers or employees to raise money over the phone, the law assures donors that the charity is getting most of what they contribute, he said.
"We have examples of some (telemarketers) ... collecting 87 percent to 90 percent of the money, and that's what they keep, and only a small portion of the donation actually goes to the charity," the attorney general said. "I think that's unconscionable."
The appeals court also overturned Erickson's award of $21,654 in attorneys' fees to the Fraternal Order of Police and the Veterans of Foreign Wars. The two organizations had appealed that part of Erickson's earlier ruling, claiming the fee award was too low.