Secretary of State of Md. v. Joseph H. Munson Co.

Background

A for-profit professional fundraiser, Munson, sued Maryland’s Secretary of State after being told that a state law would make it illegal for charities to pay more than 25% of funds raised toward fundraising expenses. Munson said its contracts with local chapters of the Fraternal Order of Police often required fees above that limit. The Maryland statute (§103D) capped fundraising-related expenses at 25%, required registration and filing, and allowed a narrow waiver. State courts split but the Maryland Court of Appeals ruled the cap unconstitutional and Munson had standing; the Supreme Court agreed.

Reasoning

The Court addressed whether a flat 25% cap, even with exceptions and a waiver, is a permissible regulation. The majority said charitable fundraising is closely tied to speech, and a percentage cap directly restricts how charities can solicit and fund advocacy. Because the cap cannot reliably distinguish legitimate speech-related expenses from problematic ones, and the waiver and exclusions were too limited, the law risked chilling protected expression and so was facially invalid under the First Amendment. The Court therefore affirmed the state court’s judgment striking the cap.

Real world impact

The ruling removes Maryland’s 25% ceiling on fundraising expenses and leaves charities free to choose fundraising methods without that blanket cap. Professional fundraisers can continue contracts that exceed 25% unless unlawful fraud or other narrow rules apply. States that use percentage limits must rely on narrower tools—disclosure, fraud penalties, or case-by-case review—rather than an across-the-board cap. The decision is final on this statute and could influence similar laws elsewhere.

Dissents or concurrances

Justice Stevens concurred, stressing standing and the special posture of a state-court case. Justice Rehnquist (joined by three Justices) dissented, arguing the law mainly regulated fees and protected donors from excessive diversion, pointed to exclusions and waiver procedures, and would have upheld the statute.