Illinois Ex Rel. Lisa Madigan, Attorney General of Illinois v. Telemarketing Associates, Inc.
The Court ruled that Illinois can pursue a fraud lawsuit against professional fundraisers who told donors their contributions would fund specific charitable programs while the fundraisers knew almost none of the money would actually go toward those programs.
The decision draws a line between laws that automatically cap how much fundraisers can keep -- which the Court has already struck down -- and lawsuits targeting specific lies fundraisers tell donors, which the First Amendment does not protect.
“Consistent with our precedent and the First Amendment, States may maintain fraud actions when fundraisers make false or misleading representations designed to deceive donors about how their donations will be used.”
The Court's core holding that fraud lawsuits against deceptive fundraisers can proceed.
How it got here: A state trial court dismissed the fraud claims on First Amendment grounds, and the Illinois Appellate and Supreme Courts affirmed before the Attorney General sought Supreme Court review.
The Case in Depth
What happened
A charity called VietNow hired for-profit telemarketing companies to solicit donations for Vietnam veterans, agreeing the fundraisers would keep 85 percent of what they collected. The Illinois Attorney General sued, alleging the fundraisers told donors specific amounts would go to veterans' programs like food baskets and job training, while knowing only 15 cents or less of every dollar would actually be available for those purposes.
The question before the Court
Could Illinois sue for-profit fundraisers for fraud after they told donors their money would fund specific veterans' programs while secretly keeping 85 percent of every dollar for themselves?
The Court's answer
Yes — the Court ruled that Illinois's fraud lawsuit against the fundraisers can move forward, at least as to the parts of the complaint alleging specific, knowing lies. States cannot ban solicitation just because fundraising costs are high, and fundraisers don't have to disclose their fee up front. But when a complaint alleges that fundraisers affirmatively told donors specific amounts would go toward named programs while knowing that almost none of the money actually would, that crosses into unprotected fraud.
The Court distinguished this from its earlier rulings striking down laws that automatically capped fundraising fees, because those laws punished high costs regardless of any lie, while Illinois's suit targets actual deceptive statements and requires the state to prove intentional deception by clear and convincing evidence. Portions of the complaint based only on the fee percentage itself, however, could not survive.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
State attorneys general nationwide retain a tool to sue telemarketers and professional fundraisers who lie to donors about how contributions will be used, even though states cannot simply cap fundraising fees. Charities and fundraisers must be careful that specific promises about where money goes are truthful, while donors gain reassurance that misleading pitches can still be prosecuted as fraud.
What changes now
The case returns to the Illinois state courts, where the Attorney General's fraud claims against the fundraisers can proceed past the motion-to-dismiss stage. The state will still need to prove at trial, by clear and convincing evidence, that the fundraisers knowingly made false statements intended to and actually deceiving donors. This is a final ruling on the constitutional question, though the underlying fraud allegations remain to be litigated on the merits.
What this does not decide
The Court did not hold that high fundraising fees alone can support a fraud claim, nor that fundraisers must disclose their fee percentage during every call. It confined its ruling to complaints alleging specific, knowing misrepresentations about how donations would be used, leaving fee-based-only theories subject to dismissal.
Concurrences and dissents
Concurrence — Justice Scalia
Justice Scalia agreed with the Court's opinion but stressed a narrower reading: if the only representation were a generic promise that donations would go to charitable purposes, and the only evidence were that the fundraiser kept 85 percent of funds, that alone would not be enough to prove fraud, since donors should expect legitimate expenses to be deducted. He emphasized the ruling instead rests on a 'solid core' of specific misrepresentations going beyond mere high expenses.
How the Court got there
The legal reasoning, step by step
- The Court distinguished two different kinds of government action against fundraisers: laws that automatically ban solicitation once fundraising costs exceed a set percentage, and individual fraud lawsuits targeting specific lies -- only the first kind had been struck down in three earlier cases.
- Those earlier cases left open a corridor for fraud suits because they worried about broad rules that ban speech based purely on cost percentages, not about lawsuits over actual lies to donors, so a fraud claim survives only if it targets deceptive statements rather than fee levels themselves.
- The Court found that simply failing to volunteer a fundraiser's fee, or complaining that a fee is too high, cannot support a fraud claim under its precedent, and portions of Illinois's complaint resting only on that theory would fail.
- But other parts of the complaint alleged the fundraisers affirmatively told donors specific amounts would fund veteran programs while knowing the true share available for those programs was minimal, which is a distinct claim about an active misrepresentation rather than a fee dispute.
- The Court noted that Illinois fraud law requires clear and convincing proof of a knowing false statement made with intent to mislead that actually deceived the listener, placing the full burden on the state rather than on the fundraiser, which gives protected speech enough breathing room.
- Because the complaint, read favorably to the state at the dismissal stage, described such affirmative misrepresentations rather than a bare percentage-based objection, it stated a fraud claim that could go forward.
Doctrinal impact
Cases affected by this decision
Distinguishes Schaumburg v. Citizens for a Better Environment (444 U.S. 620)
Distinguished as striking down a percentage-based fee cap, unlike this individualized fraud claim over specific lies.
Distinguishes Munson (467 U.S. 947)
Distinguished as invalidating a categorical fee-percentage law, not a targeted fraud action like this one.
Distinguishes Riley (487 U.S. 781)
Distinguished because Riley barred forced fee disclosure and percentage-based fraud presumptions, not tailored fraud suits over actual lies.