## Facts

- A charitable nonprofit, VietNow National Headquarters, hired Telemarketing Associates, Inc. and related for-profit entities to solicit charitable donations in Illinois.
- Under the contracts, the telemarketers kept 85% of gross receipts from Illinois donors and remitted 15% to VietNow.
- The Illinois Attorney General alleged the telemarketers told donors that a significant amount of each donation would go to VietNow for identified charitable purposes, while knowing that only a small portion would reach the charity.
- Illinois did not challenge high fundraising fees as such; it alleged common-law-style fraud based on materially false statements and deceptive nondisclosure made for the telemarketers’ pecuniary benefit.
- The Illinois trial court dismissed the fraud counts on First Amendment grounds; the Illinois appellate court and Illinois Supreme Court affirmed, treating the complaint as an impermissible attempt to regulate fundraising by a percentage-based limitation.

## Issues

1. Whether the First Amendment permits a state to pursue fraud actions against charitable fundraisers for intentionally false or misleading representations designed to deceive donors about how contributions will be used or allocated.

## Decision

- The Supreme Court unanimously reversed and remanded.
- The Court held that the First Amendment does not bar generally applicable antifraud actions targeting deliberate deception in charitable solicitations.
- The Court ruled that Illinois’s complaint, construed as alleging intentional and material misrepresentations (not a percentage-cap regime), stated a claim that should not have been dismissed at the pleadings stage.

## Legal Principles

- Charitable solicitation is protected speech, but intentional fraud and material misrepresentation are not protected by the First Amendment.
- Prior decisions invalidating across-the-board percentage limits on fundraising costs do not prevent states from enforcing generally applicable antifraud laws against specific deceptive statements.
- A bare failure to disclose a fundraiser’s fee or retained percentage, standing alone, does not establish fraud; nondisclosure coupled with intentionally misleading affirmative representations may.
- Antifraud enforcement must focus on what fundraisers misleadingly convey rather than imposing fee-percentage restrictions; requiring proof of material falsity, knowledge, intent to mislead, and actual deception provides sufficient protection for lawful solicitation speech.

## Conclusion

The Court held that a state may maintain fraud claims against charitable fundraisers who intentionally make materially false or misleading statements to deceive donors about the use or allocation of donated funds, and it reinstated Illinois’s complaint for further proceedings.


Illinois ex rel. Madigan v. Telemarketing Assocs., Inc., 538 U.S. 600 (2003)