The Denver-based federal appeals court rejected a constitutional challenge to part of Colorado state law governing the payment of nonprofit lawyers, ruling Friday that the lawsuit against Secretary of State Jena Griswold is now moot.
The Colorado legislature passed the Charitable Solicitations Act after determining that fraudulent fundraising solicitations in the name of charities were a “widespread practice” that drained money from legitimate organizations. The law requires the Secretary of State to annually review paid fundraising solicitation registration applications and determine whether an application meets the requirements.
Akron, Ohio-based InfoCision Management Corporation claimed that part of Colorado’s Charitable Solicitations Act violated its free speech rights because the company pays for fundraising appeals. The dispute began in 2018, when a federal judge in Ohio fined InfoCision $250,000 and barred the company from making false statements to the public in response to Federal Trade Commission allegations of deceptive practices.
In response, Griswold’s office rejected InfoCision’s attempt to renew its registration. Under the Charitable Solicitations Act, no one can operate as a paid solicitor in Colorado unless, among other things, another state or the U.S. government has prohibited them from engaging in fraudulent conduct within the past five years.
FILE PHOTO: Colorado Secretary of State Jena Griswold, a Democrat, answers a question during a candidate debate Oct. 11, 2022, on the University of Denver campus in southeast Denver.
U.S. District Court Chief Judge William J. Martínez sided with InfoCision in its suit, which led to an appeal. During oral arguments last year before the U.S. Court of Appeals for the 10th Circuit, a three-judge panel expressed some concern that Colorado’s law was too broad. But there was a more pressing issue: The five-year deadline on InfoCision’s preliminary injunction had expired, and Griswold’s office recently allowed InfoCision to re-register.
The panel returned the case to Martínez and asked him to assess whether the case was now moot. In a ruling on May 14, it concluded that the courts could do nothing further for InfoCision.
“While it is true that other states are monitoring this litigation,” Martínez acknowledged, “InfoCision has not provided any evidence that any other state is considering revoking or denying the company’s registration based on Colorado’s previous denial of registration.”
Returning to the 10th Circuit, InfoCision insisted that its rights were still at risk because other states could restrict its advertising activities due to Colorado’s five-year ban. It cited a statement from Mississippi’s deputy secretary of state confirming that she would deny InfoCision registration unless Colorado issued an order “revoking the denial.”
However, the 10th Circuit panel agreed with Martínez and Griswold that Mississippi had not actually committed to blocking InfoCision’s registration based on Griswold’s initial opposition. In fact, Mississippi appeared to take the opposite position after being informed of all the circumstances.
“It is undisputed that InfoCision successfully re-registered as a paid charity solicitor in Colorado. Ordering the Secretary to register InfoCision is therefore futile,” Judge Carolyn B. McHugh wrote in the Aug. 9 order. She added that InfoCision’s fear that other states could use Colorado’s 5-year-old denial to impose their own sanctions was “pure speculation.”
The panel majority, consisting of McHugh and Judge Scott M. Matheson Jr., declined to overturn Griswold’s original denial. Although McHugh acknowledged the “general practice” of vacating trial judges’ orders when cases become moot, she noted that there appears to be no precedent for doing the same with a state agency’s decision.
Judge Harris L Hartz dissented only on the question of whether Griswold’s decision should be placed on the record. He believed that the continued existence of InfoCision’s denial, as the company argued, could have negative effects on the company in other states, even if InfoCision could no longer challenge it in court.
“When a judicial challenge to a decision of a federal administrative agency has become moot on appeal, the standard practice of the United States Supreme Court is to order the agency to reverse and vacate its decision,” Hartz wrote. “I see no reason why the same practice should not apply to state administrative agencies that have been properly appealed to federal court to challenge the agency’s decision. After all, had the case not become moot, we would certainly have had full authority to order the state agency to vacate its order.”
The case is InfoCision Management Corp. v. Griswold.
