Transcript

IN THE SUPREME COURT OF THE UNITED STATES

JOHN R. LARSON, ETC., ET AL., Appellants, v. PAMELA VALENTE, ET AL.

No. 80-1666

December 9, 1981

The above-entitled matter came on for oral argument before the Supreme Court of the United States at 10:01 o'clock a.m.

APPEARANCES:

LARRY SALUSTRO, ESQ., Special Assistant Attorney General of Minnesota, St. Paul, Minnesota; on behalf of the Appellants.

BARRY A. FISHER, ESQ., Los Angeles, California; on behalf of the Appellees.

PROCEEDINGS

CHIEF JUSTICE BURGER: We will hear arguments first this morning in Larson against Valente.

Mr. Salustro, you may proceed whenever you are ready.

ORAL ARGUMENT OF LARRY SALUSTRO, ESQ., ON BEHALF OF THE APPELLANTS

MR. SALUSTRO: Mr. Chief Justice, and may it please the Court, this case involves the narrow issue of the constitutionality under the establishment clause of an exemption provision in Minnesota's Charitable Solicitation Act. The provision in question exempts from the financial disclosure requirements otherwise applicable to charitable organizations in the Act those religious organizations and societies which solicit more than half of their contributions from their members and from their affiliates.

The appeal presents the question whether the establishment clause prohibits a state from tailoring a regulatory program to allow coverage of some religious organizations where the application of the law to religious organizations is based on criteria unrelated to matters of religious belief or dogma.

Plaintiffs in this case are the Holy Spirit Association for the Unification of World Christianity, Incorporated, and four of its members. Defendants are the two state officials in the state of Minnesota responsible for enforcing the provisions of Minnesota's Charitable Solicitation Act.

I will discuss the provisions declared unconstitutional, the procedural history of the establishment clause issue in the court below, and why this Court should reverse the decision of the court of appeals.

QUESTION: Where are the provisions set out completely?

MR. SALUSTRO: The provisions of the --

QUESTION: Minnesota law.

MR. SALUSTRO: -- Minnesota law are set out completely in the jurisdictional statement.

QUESTION: Not just the provision that you are talking about.

MR. SALUSTRO: Provision of the entire Charitable Solicitation law set out as an appendix to the jurisdictional statement.

QUESTION: Thank you.

MR. SALUSTRO: Through financial disclosure, the state of Minnesota seeks to inform charitable contributors of the organizations that are soliciting contributions from them. The state seeks to protect contributors from fraud and from misrepresentation by those organizations as to the identity of the organization, the purpose of the organization, and the use to which funds are put by that organization.

Through a series of six exemptions, Minnesota has determined that disclosure is not always necessary to effectuate the state's objectives. One of these six exemptions is the exemption for religious organizations and societies that solicit more than half of their contributions from their members and affiliates, and the narrow issue here is the application of the establishment clause to that provision. The procedural history here --

QUESTION: Mr. Salustro, what is the rationale for treating religious organizations differently from patriotic and fraternal ones?

MR. SALUSTRO: The criteria used in religious organizations and in fraternal and patriotic organizations, the criteria for exemption is the same, namely, the extent to which they solicit contributions from the general public. The only difference is that the point of the -- the point on the line where the exemption is drawn is different for those organizations.

This has the result of exempting more religious organizations than fraternal and patriotic organizations, so to that extent it is a more --

QUESTION: You think it exempts more religious organizations?

MR. SALUSTRO: Yes, unquestionably. It exempts more religious organizations.

QUESTION: Is that a fact?

MR. SALUSTRO: It's not a fact, but I think it is a mathematical certainty, because the fraternal and patriotic organizations that raise any of their money from the general public outside their membership lose their exemption. The religious organizations can raise up to 50 percent of the money from -- up to 50 percent of the money from the general public and not lose the exemption, so it is a more beneficial, a more hands-off treatment of religious organizations as a class than fraternal and patriotic organizations as a class, although the criteria used is exactly the same.

QUESTION: Counsel, the point raised by Justice Blackmun is one that I would like to pursue with you also, because I don't understand the answer.

What is the reason for the different treatment of these types of organizations? What is the reason that is advanced by the state for that difference?

MR. SALUSTRO: Well, the reason that is advanced by the state is that the state of Minnesota wants to be more careful about extending its regulatory program to religious organizations. Where the state interest in those organizations is small, then it is concerned about extending its regulatory program to fraternal organizations.

There are -- we have a very different interest in religious organizations among themselves in this program. The purpose of the program is to provide information to donors and contributors who don't have that information. There are a wide range of kinds of charitable -- of religious charitable organizations. There are religious charitable organizations that solicit exclusively from members of the public, 100 percent from the general public.

As far as our interest in providing information to donors that don't have it, we have a very great interest in disclosure by those organizations. On the other hand, there are organizations that solicit only from members who are intimately familiar with the finances of the organization, at the other end of the spectrum. We have much less interest in requiring disclosure, public disclosure from those organizations because the members who are the donors of those organizations already have that information available to them or can get it.

QUESTION: Are there not more hurdles to get over when you are dealing with a religious organization? That is, a religious organization has all the protection of the speech and press clauses, I would assume, and in addition to that it has the protection of the religion clauses which are not necessarily available to fraternal and patriotic organizations. Is that not so?

MR. SALUSTRO: Yes, sir, that is correct, Your Honor. What I was trying to explain is that we have a different -- we have a relatively lower interest in some religious organizations and the exemption provision is different because we want to leave organizations alone where our interest is so small. There is no doubt that there are many cases by this Court, many charitable solicitation cases by this Court, and what we are talking about here is solicitation from the general public, and in a number of those cases, the Court has -- the Court has looked at disclosure type programs and distinguished the kind of regulation that disclosure type programs have from prohibitory regulation, and in the Cantwell case and in the Schaumburg case, and in some other cases where the Court has looked at this particular question, it has determined that disclosure kind of regulation does not have to meet the same tests as regulation which has the effect of directly prohibiting organizations and members of organizations from soliciting contributions from the general public.

QUESTION: You also have a category in your law of charitable organizations generally.

MR. SALUSTRO: Charitable organizations, yes.

QUESTION: Different from fraternal and patriotic.

MR. SALUSTRO: They are different --

QUESTION: Well, it says charitable organizations are exempt if they didn't receive more than $10,000 from the public.

MR. SALUSTRO: Charitable organizations as far as that exemption is concerned includes the entire list of organizations. It includes religious organizations. It includes fraternal organizations. It includes all organizations soliciting contributions for charitable purposes. A $10,000 limitation -- or exemption is available to all organizations. It is available to religious ones who are not exempted by the other provision. It is available to fraternal and patriotic ones who are not.

So, any of the organizations --

QUESTION: But charitable organizations generally can raise up to $10,000 from the public without registering. Is that it? And fraternal organizations can't raise any from the public without registering it?

MR. SALUSTRO: Fraternal -- any organization, charitable, fraternal, religious, can raise $10,000 from the public without registering.

QUESTION: That isn't what Subparagraph D says about fraternal and patriotic organizations.

MR. SALUSTRO: Fraternal and patriotic organizations have two different criteria for being exempt. One criteria is that they raise all of their money from their members. The other criteria is, and completely independent, that they raise less than $10,000. The same is true with religious organizations. There are two different possibilities of being exempt. One is raising most of their money from their membership or affiliates. Two, raising up to $10,000.

QUESTION: In any event, you suggest that you treat religious societies the most favorably. They get the most favorable treatment as compared to charitable organizations generally?

MR. SALUSTRO: They are treated better than fraternal or patriotic organizations --

QUESTION: Or charitable.

MR. SALUSTRO: -- even though the --

QUESTION: Or charitable generally.

MR. SALUSTRO: Yes, or charitable, even though the criteria for the exemption in question is the same, and has nothing to do with religion. We think that based on -- well, there are two different parts of the analysis of the exemption provision. One is the decision that there is going to be an exemption provision for religious organizations. That kind of decision takes -- takes into consideration that the state has some leeway in treating religious organizations somewhat better, somewhat more liberally, somewhat more at a distance than other kinds of organizations, and the Court said in the Walz case and the Court said in some other cases that there is some leeway for the state to do that without necessarily violating the establishment clause. So, that criteria of religious organization is there.

The second question is, once it is determined that there will be a religious exemption, how should the exemption be structured, and in Minnesota's case, what we have done here is used a secular criteria to structure the exemption. The criteria has nothing to do with religion, with religious values, with the content of free speech. The value is purely secular, whether the organization solicits from the general public. It is not only secular, it is tied to the purposes of the Act, which is providing information to people that don't have information that receive solicitations from charitable organizations.

QUESTION: May I ask you a question right on that point? Suppose you have two religious organizations, each of which raises $500,000 every year, and for one of them that is substantially all they raise; for another, they also raise internally $600,000. Why should the state interest be different for those two organizations? It is the same amount of solicitation of funds from the public.

MR. SALUSTRO: The state's interest is different in this exemption, and your question is correct. One of those organizations will be exempt and one not, and that is the way --

QUESTION: Isn't the state interest the same for the two? There is precisely the same amount of solicitation from the public.

MR. SALUSTRO: No, we think that there is a difference in that one organization is raising most of its money from the general public. One organization is raising most of its money internally, and that goes to the extent to which the organization can raise money from the public and take advantage of the opportunity if it chooses to to engage in misrepresentation.

It is very correct that if dollar --

QUESTION: Don't they both have the same opportunity to misrepresent?

MR. SALUSTRO: If dollar figures, if dollar criteria would be different, then you could ask me, what about the dollars here and the dollars there, and doesn't that mean that one organization raises 95 percent of its funds internally and another raises 5, and it doesn't make any sense.

It is our position that this is a reasonable way to do it. There are other reasonable ways to do it, but the standard that we have to find with this particular criteria is whether the line we have chosen is not rational, whether it is arbitrary, whether it is invidious, and that comes out of the United States versus Gillette test, United States versus Gillette case, and it is not arbitrary, and it is not invidious merely because there are other ways it could have been done, but had one of those other ways been chosen, the dollar way, then you would have exactly the same opportunity to ask me that kind of question.

QUESTION: In other words, your answer, as I understand it, is, you've got to draw the line some place, and so this is as good as any other line. That is the only reason for drawing this particular line, as I understand your argument.

MR. SALUSTRO: No, I think the line can be -- the line is justified as being drawn here because it is the place where a charitable organization relies primarily on public funding rather than primarily on internal funding, and whether primarily public funding is a tiny amount of money or whether it is a large amount of money, that fact remains that now this organization relies more on the general public to raise its funds than it does internally.

QUESTION: When you say internal funding, you mean members or communicants or whatever it may be?

MR. SALUSTRO: We mean members and we mean affiliated organizations.

We are not saying that the state does not care about fraud committed by organizations on the members of the organization. That is not the question. But this legislative solution goes to providing information to people that don't have it and don't have the opportunity to get it. Without public disclosure, the general public does not have the opportunity to get that information. That is why it is important that it be supplied as far as the general public is concerned. With members, members have the opportunity to get it, and it is not that we are not concerned about fraud --

QUESTION: That was not my question. I understand your argument about members. I am talking about non-members who contribute $500,000 every year to an organization that gets $600,000 from its own membership. They don't have any different access to information than if they were in the other category, do they?

MR. SALUSTRO: No, that's correct. That's correct, Your Honor. That's correct.

QUESTION: Well, what is the explanation? I haven't heard it quite yet. Why shouldn't the same public that is without that information, why shouldn't they have it with respect to the $500,000, that is less than half of what the organization raises?

MR. SALUSTRO: The point is drawn at the place that it is drawn.

QUESTION: I know. That is restating your position, but you haven't said why, or what the justification is.

MR. SALUSTRO: We have a continuum. It is clear that at one end of the continuum organizations raise their money solely from members, and it's our position that we can stay away from that end as far as extending this regulatory program because we don't have a sufficient interest arguably to reach that end of the spectrum. As we move up this way --

QUESTION: Well, why don't you have? I know you keep saying that, but --

MR. SALUSTRO: Because --

QUESTION: Suppose two organizations raise $500,000 from ten people, from ten people. The same ten people give the same amount of money to two organizations. And in the one case you will say those ten people must have information about the organization and in the other case they aren't told a thing. They don't have to be told a thing, as long as the money they give is less than half of the organization's funding.

MR. SALUSTRO: That result comes out of the particular criteria that are used. We don't think, although the result appears unusual, we don't think it is arbitrary. We don't think it is invidious, and we don't think it is drawn on any basis of religion.

QUESTION: I know that. I grant you -- I understand your assertion, but you haven't explained why you distinguish between those two organizations yet. But I guess you have said about as much as you can. Is that it?

QUESTION: Well, aren't you also saying that where you are talking about any organization that receives a certain percentage of its funding from members or communicants that it is more likely to be controlled or -- I can't think of the exact word I want to use, but subjected to internal discipline by its own membership than, say, an organization which gets 1 percent of its funding from its own members and solicits 99 percent from the outside?

MR. SALUSTRO: Yes, Your Honor, exactly. This is a charitable solicitation law. We are worried about matching representations about what is going to be done with funds contributed to what actually is done with the funds that are contributed. Members are going to be aware of what is done with the funds contributed, and members are not going to be in the same position of vulnerability as far as representations made, this is what I am going to do with your money, as are strangers to the organizations. Members have controls. Members have the ability to see books. Members can ask questions. Members have a general idea of whether the people that are running the organization are trustworthy.

QUESTION: Well, Mr. Salustro, presumably those same reasons apply to non-religious charitable groups, right?

MR. SALUSTRO: Yes. Yes, they do.

QUESTION: And yet you apply a different standard to those entirely. So it is just difficult to understand how the state can justify the 50 percent line within the religious charitable organization category but not the others, because your arguments would apply equally well to the other types of charitable organizations, would they not?

MR. SALUSTRO: They would, Your Honor, and it is the position of the state that it can, as far as requiring information from organizations, it is the position of the state that it can be more liberal with religious organizations, that it can keep its distance somewhat from religious organizations where the state interest is not as pronounced, and that comes out of the Walz case, among other cases.

The state can accommodate religious values. It comes out of the religion clauses. It doesn't necessarily come out of the First Amendment. We think we could do the same thing with other First Amendment organizations, and in fact we do with the $10,000 limitation. We don't treat them identically. They can both have First Amendment rights; if one organization raises less than $10,000, it is exempt.

And that is a discrimination that is made on the same kind of criteria we use here. It is a reasonable criteria. The lines are not drawn arbitrarily or invidiously, and we can treat those kinds of organizations differently. We don't have to put them all in one boat. And that is what we do with religious organizations, but it happens that a little bit some more of them are going to be exempt because we are not interested in extending regulatory programs to religious organizations where we don't think we have that interest, and we don't think that the establishment clause requires us to extend regulatory programs to religious organizations, to increase the contact with religious organizations where we don't think we have a sufficient interest, certainly not the establishment clause requiring that we do that.

So that is why the line is drawn differently for religious organizations.

QUESTION: You might be in trouble, might you not, under cases like Sherbert against Verner and Indiana -- Thomas versus Indiana Employment Security Commission, if you were to get too close to a religious organization?

MR. SALUSTRO: Yes, Your Honor. I agree with that. We would have some difficulty, and we -- there are two questions. One is, would we have difficulty, would that be unconstitutional under the religion clauses as in some cases it might have been under those cases. The second question is, even if we don't reach the limit or the point of unconstitutionality, can the state nonetheless draw back somewhat from that? And it is clearly stated in the Walz case, I think, that the point at which the state can accommodate religious organizations is not the same point at which the religion clause, the free exercise clause requires that the state do that.

QUESTION: Would you say it would be permissible for the state to have precisely the same requirements with respect to all charitable and religious organizations insofar as registering and disclosure is concerned?

MR. SALUSTRO: Yes, Your Honor.

QUESTION: You could just have across the board -- is there some case like that? You are saying that you may regulate religious solicitations in the identical way you may regulate non-religious charitable solicitation.

MR. SALUSTRO: Yes, I am saying we may do that. And we do make distinctions between First Amendment -- the $10,000 limit applies to First Amendment free speech type organizations and religious ones, and we could do that across the board.

QUESTION: And it would be valid if you just eliminated Subsection -- the religious -- the particular religious provision here?

MR. SALUSTRO: The legislature could have -- the legislature could have made the decision to do that, yes.

QUESTION: Is there some case you rely on that you can treat -- that you can regulate religious solicitations?

MR. SALUSTRO: We can regulate religious solicitations? Well, Cantwell versus Connecticut certainly concerned a religious organization. Village of Schaumburg didn't concern a religious organization, but I am not clear that this Court has held that there is a hierarchy of First Amendment values, that religious organizations have more First Amendment protection than other free speech type organizations. So I think we can treat them identically as charitable organizations, as a group of charitable organizations, as the Court did in Walz. It included the whole group of charitable organizations for the purpose of tax exemption.

QUESTION: Well, what if a religious organization as a part of their doctrine -- suppose part of their doctrine is the duty to raise money?

MR. SALUSTRO: We are not prohibiting them from the duty to raise money. The right that they would have to assert would be the right -- the right to raise money from the general public, from strangers, and the right to refuse to tell the general public what they have done with the money. They have to assert those two rights. Now, it is theoretically possible that there could be such a religious organization that asserts those rights, but I think the proper remedy there would be to create an exemption for that particular organization on religious rights grounds, and not to throw out the entire statute here because there is some possible application in the future that is going to conflict with religious doctrine.

QUESTION: What bearing do you think the Krishna Consciousness case that the Court decided last spring has on this?

MR. SALUSTRO: Well, it is a case concerning solicitation, and it is a case concerning -- well, a case concerning raising funds and state regulation. In that case, the Krishnas could be treated as other First Amendment groups were. The notion that religious organizations have more First Amendment protection as far as raising money is concerned than other First Amendment organizations do, that seems to have been rejected in that case.

The other issue that is before the Court is the issue of whether plaintiffs have standing to invoke the jurisdiction of the Court to declare this exemption provision unconstitutional on establishment clause grounds. This argument is set out in our brief. The cases say that the proper inquiry is whether plaintiffs have a personal stake in the outcome of the action and suffer an injury which will be redressed by a favorable decision.

The procedural posture of this case in the court below is crucial. This is plaintiff's motion for summary judgment that is on appeal here. On plaintiff's motion for summary judgment, the disputed facts are resolved against the plaintiffs. One of the disputed facts in the district court and the circuit court, and plaintiffs acknowledge it here, is whether they are a religious organization.

Because summary judgment is involved, as a matter of law on this motion, plaintiffs are not a religious organization. This appeal concerns only the exemption provision for religious organizations. Only religious organizations are affected by it. Plaintiffs are not a religious organization. They don't suffer injury from it.

QUESTION: Counsel, did the state treat the plaintiffs as a religious organization originally by initiating some kind of action? Was it not --

MR. SALUSTRO: This action was initiated by plaintiffs in federal court. The action that we started in state court we alleged that they were a charitable organization and that they did not register, and therefore --

QUESTION: But did the state take the position that it was a charitable religious organization governed by the 50 percent?

MR. SALUSTRO: No, our pleading in state court says that it is a charitable organization, and naturally it is up to them if they decide that they are exempted because of the religious exemption, it is up to them to raise that point.

If this Court should strike down the exemption provision for religious organizations, it will not as a matter of law do plaintiffs any good in this case. We think this is a clear case that there is no injury, there is no redressability, and there is no standing.

I reserve whatever time I have.

CHIEF JUSTICE BURGER: Very well.

Mr. Fisher.

ORAL ARGUMENT OF BARRY A. FISHER, ESQ., ON BEHALF OF THE APPELLEES

MR. FISHER: Mr. Chief Justice, may it please the Court, after 17 years with a charitable solicitation statute like other states, categorically, neutrally, evenhandedly exempting all churches, Minnesota amended its statute, taking that exemption away from some but not other churches, subjecting them to the statute's comprehensive regulatory and licensing requirements, including extensive recordkeeping, CPA certification, substantial record filings, expenditure limitations, access, disclosure, and publication of church documents, and an open-ended nationwide investigation, all provisions, I think, which comrephensively facilitate a sustained, detailed enforcement audit as to what are bona fide religious expenditures, solicitations and religions.

And the statute, Your Honors, arms the licenser with broad investigative powers and provides for license suspension, revocation, receivership, criminal prosecution for enforcing this law and this regulatory scheme which surely imposes burdens, substantial burdens on churches, burdens which simply aren't remote or de minimis.

QUESTION: Mr. Fisher?

MR. FISHER: Yes, Your Honor.

QUESTION: You don't contend that a state couldn't require some disclosure from all religious organizations which seek to solicit funds, do you?

MR. FISHER: That is certainly not this case. I think that it may, if it were evenhandedly applied to all churches, may, depending on how it is done, pose some entanglement problems possibly. But it is certainly not this case, Your Honor.

QUESTION: Suppose the Exemption B, which is the one that is at issue here, 309.515(b), suppose that were just not in the law, and that all religious organizations were covered under the charitable provision.

MR. FISHER: Again, then there would be evenhandedness. There would not be a problem of neutrality and evenhandedness, and there would be, I think, the problems of entanglement that are addressed in --

QUESTION: You would say arguably then religious organizations could not be treated the same as charitable ones? Is that it?

MR. FISHER: I think also there would be the problem that has been addressed by some of the questions this morning respecting unequal treatment of churches vis-a-vis other charitable organizations. Yes.

QUESTION: Don't you agree, though -- as I understand it, churches can either --they can raise -- any church can raise up to $10,000 without registering.

MR. FISHER: Yes.

QUESTION: But then they can also raise up to one-half, up to 49.9 percent of their funding.

MR. FISHER: Correct.

QUESTION: Which other charitable organizations can't do.

MR. FISHER: That's correct.

QUESTION: So they are given a better break.

MR. FISHER: Some churches are, and I think --

QUESTION: Well, some churches are, but they all get the charitable -- all other churches are at least given $10,000 exemption.

MR. FISHER: That's correct. That's correct. I think that this legislation which dose impose burdens on those churches that it does apply to deserves the Court's scrutiny, both as to the substantiality of the reason for drawing any line at all treating churches unequally, saying that some have to bear the onus of regulation and others don't and the substantiality of the reason for drawing the line where it is, and this close scrutiny, I suggest, is called for by the establishment clause's core, most essential principle of scrupulous intersectarian evenhandedness between churches.

And what is the reason here for this disparate treatment, this gerrymandering of churches? Your Honors, absolutely no facts, no logic or reason I think explain this disparate treatment. There is no mention whatsoever of any reason for this in the legislative history, and strikingly, absolutely, there is not a single mention whatsoever of any purpose or reason for this law mentioned by appellants to the court of appeals. Nothing. There is nothing in their briefs, nothing in their argument.

It wasn't until the eleventh hour of this litigation before this Court that in their briefs they start positing possible explanations for this law, and it really changes. If you look at the jurisdictional statement and their opening brief and the reply brief, and particularly Footnote 6 of their reply brief, you see changes. They are grappling. There really isn't a purpose. There wasn't one.

QUESTION: Is there anything unusual about lawyers going on in litigation and losing a case the first two rounds and then deciding that they had better change their approach to the problem?

MR. FISHER: Well, some would call that admirable. I don't know. But I mean it underscores the problem here of --

QUESTION: Admirable or not, it might be sensible, might it not?

MR. FISHER: It might be, but I think it doesn't work here. I think that the shifting around and the search for a reason for this unequal treatment just doesn't work. The premise of the reason which they give now, which is member control, isn't supported by any logic, reason, or facts here.

QUESTION: Mr. Fisher, how do you distinguish the Gillette case?

MR. FISHER: Your Honor, I don't think that this is the same as Gillette, nor -- even if it were --

QUESTION: Well, why?

MR. FISHER: Even if it were, Gillette's depth of analysis, I think, would decide this statute's unconstitutionality. The analysis in that case was substantial, and not the appellant's proposed test here of some one-dimensional application of a mechanical test, just looking to see if you can find any secular purpose whatsoever and then that is the end of the inquiry. That isn't what the Court did, and if it was, or if the Court were to adopt such a test, it would eliminate two-thirds of the tripartite test in Lemon, a test which was -- brought together all the extant strands of establishment clause cases at that time and discussed them, didn't even mention Gillette, nor has Gillette ever been mentioned by any establishment clause case of this Court in the ten years since decided.

It is just -- there is a complete analysis there as to the justification for the underinclusiveness in Gillette, including that the Congress went as far as it could, accommodating free exercise, that the -- to go any further would pose entanglement problems, and it would be impossible to administer, and that the Court was deferring to the government's overriding Article 1, Section 8 interests that were the basis of that legislation.

This legislation here is legislation regulating churches on its face, directly. In Gillette, the Court also pointed out that that was a law not on its face with disparate de facto impacts. This is legislation saying that some churches should be regulated, some shouldn't. The legislature absolutely understood that there were churches on both sides of the line or they wouldn't have amended the law after 17 years.

QUESTION: I suppose you would make the same argument if instead of 49.9 it was 90 percent.

MR. FISHER: There would still be --

QUESTION: If it exempts any church from registration if it raises 90 percent of its funds from its members.

MR. FISHER: I would be making the argument that the differential treatment must be closely examined to see what the reason is, whether it is 90 percent, 10 percent, or 50 percent.

QUESTION: Well, suppose the reason is that the state thinks it is a good enough guarantee against fraud because there is -- if it raises that much money from its members who really know what is going on, that is a decent enough safeguard.

MR. FISHER: Well, the problem there, Your Honor --

QUESTION: Well, that is a judgment, that is an argument.

MR. FISHER: Yes, it's an argument, here not supported, I think, by any logic, reason, or facts. I mean, plainly, members of churches on one side of the line, those supported by 50 percent member contributions, have no more power and are no more likely to protect the public by scrutinizing public solicitations and expenditures of moneys collected from the public than are those churches on the other side of the line.

QUESTION: What if the legislature had made findings to that effect? I know you probably wouldn't agree with them, but at least it would have been a legislative judgment.

MR. FISHER: It would depend on what they were, but here there is nothing. It just doesn't follow. Many churches, as the Court well knows, are hierarchically structured, non-democratic kinds of organizations, and just mere membership accords nothing, and of course membership isn't even defined in the statute. We don't know if this is occasional congregants, true believers, card-carriers, or what. I mean, there is no reference in here.

QUESTION: Well, would you agree that the legislature would be entitled to think that most churches, most churches raise their funds from within their own membership? Would that be a reasonable starting point?

MR. FISHER: I don't know. Frankly, I don't think so.

QUESTION: Don't you know whether that is a fact?

MR. FISHER: It isn't my belief.

QUESTION: No, do you know whether -- do you suggest you don't know whether that is the fact?

MR. FISHER: I don't believe that it is.

QUESTION: Well, suppose the legislature started with that premise, then, without respect to subjective relief. Suppose the legislature said that.

MR. FISHER: Well, again, it would be a matter of careful scrutiny. If there was just a categorical statement, as there is an argument today, that this is a fact, I think that the Court should examine that, and --

QUESTION: Well, now, I have changed it from fact to premise. If that was the premise of the legislature, that most churches raise their money from their members, and as Justice White suggested, then the members are going to conduct their own surveillance of the use of that money, but that they are looking at people who claim religion clause exemptions where perhaps they have 1 or 2 percent raised from the membership and the balance raised from doing what was done in the Hari Krishna case last year in this Court, soliciting on the street and in public places.

Do you think the legislature would not be entitled to address that problem?

MR. FISHER: Well, it is certainly entitled to address the problem, but again, when it draws lines, putting churches into different categories, we have to look to the premise and the facts that support this differential treatment, and if there was proof that there was self-regulation, that satisfies part of the problem, but there is another problem with this. There is no explanation whatsoever for this odd gerrymander line that is tied to an abstract proportion, that isn't related to the degree of the effect on the Minnesota public at all.

You could raise tens of millions of dollars from the Minnesota public, and there could be an enormous impact on the public, but that church could be exempt, but one collecting merely $10,000 unmatched by member contributions would be regulated, and there is just no correlation --

QUESTION: What about the procedural posture of the case --

MR. FISHER: Yes, Your Honor.

QUESTION: -- where the state comes in and files a complaint and says, we don't think this is a church at all, it is a bucket shop operation, and you are just making a lot of phone calls from a basement trying to raise money, and you say, no, we are a religion, and we want summary judgment on that basis. Do you think you are entitled to summary judgment?

MR. FISHER: If we are talking about with respect to this statute, which I assume we are, there is such an allegation, it would depend on the normal rules of summary judgment and their application to what is before that Court. However, assuming that there was a dispute on that fact, then on the establishment clause issue, I should underscore that what Your Honor is suggesting is precisely what the case is here.

The Eighth Circuit vacated summary judgment below, and they remanded the case for a factual determination of that merits issue as to whether the appellee is entitled to an injunction. The case stands before this Court without final order. It is an interlocutory matter at this time. That determination will be made, and we don't disagree with the making of that determination, and it might have been a more expeditious thing if that is what appellants wanted had they gone back to the district court then.

There is no question that the appellees have had standing at every -- every proceeding of this case. So far it has been properly alleged. There was even a preliminary determination as a matter of fact on that very issue when the court granted the preliminary injunction below.

QUESTION: What factors will be open on review in the district court?

MR. FISHER: The factors open will be with respect to the standing, and that is just one of some seven different constitutional attacks to the statute that were raised below, the district court finding it only necessary to reach establishment clause, but the fact determination will be a -- for the district court to make a final determination of that which he may preliminarily, that is, whether appellee is a church organization.

QUESTION: And if it is, then the statute is invalid under the Eighth Circuit's --

MR. FISHER: Well -- if once that determination is made a final order may issue in the case dealing both with the law, which has been the matter of a determination by the district court in the Eighth Circuit, and this question of whether an injunction should issue with respect to this particular organization.

QUESTION: Well, won't it just mean that that particular exemption is unconstitutional?

MR. FISHER: That's correct.

QUESTION: So you will still be subject to registration and disclosure.

MR. FISHER: Well, with this additional fact determination, which the matter was remanded for the Court depending on its ruling, assuming that it finds this appellee a church organization --

QUESTION: Well, suppose it does.

MR. FISHER: -- will -- could enter an injunction saying in addition this law cannot be applied.

QUESTION: Well, just that particular -- just (d). Just Exemption (d). That is the one that distinguishes between one church and another.

MR. FISHER: Right, but assuming that that is held unconstitutional --

QUESTION: Yes.

MR. FISHER: -- then there will not be provisions with respect to churches.

QUESTION: Why not? I thought the state says that -- and I thought you conceded that a church, like anybody else, can raise up to $10,000. Exemption (a) exempts any charity up to $10,000.

MR. FISHER: Well, the holding of the --

QUESTION: But any charity that raises more than that from the public has to register.

MR. FISHER: Well, the holding of the district --

QUESTION: Why doesn't that apply to a church?

MR. FISHER: Well, the holding of the district court and the court of appeals was to find this statute constitutionally inapplicable to churches, to any church, because of the disparate treatment. It didn't extend the statute taking away the exemption so that it applied.

QUESTION: The only thing at issue was Exemption (d).

MR. FISHER: Well, but that exemption -- Exemption (b).

QUESTION: (d).

MR. FISHER: The exemption that was --

QUESTION: Yes, (b). Excuse me. I am sorry, (b).

MR. FISHER: Yes, (b). The exemption --

QUESTION: That is the only one that is at issue, isn't it?

QUESTION: But the relief granted was to extend the exemption rather than to --

MR. FISHER: Yes, rather than make the determination that the legislature would have if faced with the option have taken away the exemption as to any church, they -- it held that the statute could not be applied constitutionally to any church.

QUESTION: Why isn't the validity of that relief at issue here too?

MR. FISHER: Well, it isn't. It certainly hasn't been raised in any pleading, and I don't believe it is.

QUESTION: Well, the judgment below is challenged.

MR. FISHER: It is challenged, but no one for appellants has mentioned that in brief or in --

QUESTION: Well, isn't that needlessly destructive of this statute --

MR. FISHER: No, I think to the contrary.

QUESTION: -- to say that no part of the statute may apply to any church?

MR. FISHER: To take the exemption, I mean, to go the other way and to take the exemption away from all churches, making them all subject to this law, I think, would even heighten, greatly heighten the entanglement problems, and I think it --

QUESTION: Well, at least it would be treating churches evenhandedly with all other charitable organizations.

MR. FISHER: Well, I think that with all due respect it may be better for a legislature to make the determination that all churches are going to be regulated than for a court to do that, and I think the legislative history, scant as it is, and it is before the Court, makes clear that the legislature did not want to, in the words of one legislator, did not want to "mess around" with some churches, and they were careful to make sure that this was written in a way that would exclude the Catholic Archdiocese, but on the other hand make sure that the exemption was taken away from others. There are references in the legislative history to that.

I don't think they intended to bring in the Catholics and the Lutherans and the Protestants and the other groups, but perhaps the Court could enter such an order, but it would not be popular.

QUESTION: In the case of a federal court reviewing a state statute, do you think it is entirely at liberty if it concludes one portion of a statute is unconstitutional to either strike down that provision or to extend the provision in a way that it believes would make the whole statute constitutional?

MR. FISHER: I think that the Court perhaps would have that option. I think, though, in selecting an option of relief, both the district court and the court of appeals were correct in treating it the way they did, which put it to a status quo, leaving the entire Charitable Solicitation Act intact as it was extant until 1978, when this amendment came in.

It also, I think, was perhaps judicious of the district court to rule just on this one issue, because this law was also challenged on free speech, standardless licensing, vagueness, and many other issues challenging the law across the board in its application to any charity or religion or non-profit organization, and the court ruled just very narrowly on the establishment clause issue, leaving the rest of the statute intact and enforceable as to others.

So, I mean, there are options.

QUESTION: Until they attack it.

MR. FISHER: Excuse me?

QUESTION: Until they attack it.

MR. FISHER: Yes, Your Honor. Yes. I just don't think that there is any necessary correlation, as I was saying before, between the amount of money that a given organization collects from the public and the percentage of that organization's total that comes from the public. A million dollars can be 10 percent, 80 percent, 5 percent. There is just no correlation. Your Honor, I think that --

QUESTION: No correlation with what?

MR. FISHER: There is no correlation between the abstract proportion, this member-public contributions, and correlation with the amount of money that is collected from the public. In other words, looking at the ratio, if you saw that it was 40, 60 percent or whatever, wouldn't tell you anything about what the impact on the public is.

QUESTION: Well, I thought you had conceded in response to Justice White's questions ten minutes ago, more or less, that there is a certain assurance to the public that if a large part, without putting a fixed figure on it, if a large part of the support comes from the membership, that then there is reasonable assurance that the surveillance of the church's, the organization's activities is ongoing. Do you suggest that is not a reasonable subject of inquiry now?

MR. FISHER: No, I did not -- that may be a reasonable subject of inquiry, to see if that is really true, or you know, if it logically follows, or it follows as a matter of fact. It is certainly not here. It is not presented here. It is something that was thought of -- There just isn't anything in this case that --

QUESTION: It can be advanced in support of the legitimacy of the legislation, may it not?

MR. FISHER: Yes, and I think that if it stands on logic or reason, on its own, without requiring any facts, then maybe the Court, you know, is free to embrace that, but here it is completely speculative. I suggest that it isn't true, that there is no reason to believe that a 49 percent membership group as opposed to a 51 will have any more power or access, any more inclination, any more desire, or will be just more likely to have access to anything -- we are talking about mere members -- than those on the other side of the line.

I think it is interesting, too, that there was an amendment, you could see, following the legislative history, to, one, the treatment of groups other than religious, and one regarding religious. The one regarding other than religions said that to be exempt you have to have 100 percent come from members, but not just any members. They must be real control members. They must be voting members. And there was a provision for voting members in an early draft of the religion one, and you know, that was taken out, and it was taken out during a colloquy that said, you know, if we leave that in as to voting members, that is going to mean that the Catholic Archdiocese and other hierarchical, non-democratically organized groups are going to lose theirs, and we don't want to mess around with them, so we had better take that voting requirement out.

So we know that it is just rank members, and we don't even know, again, what that means in the context of this statute. And I think that there is a -- this legislative history gives particular reason for the Court's close scrutiny, because I think there is an inherent potential risk that by fashioning legislation that focuses on churches, taking into account differences in membership, organizational structure, funding sources, and what have you, all matters, by the way, I think, which are constitutionally sensitive inquiries, because they are often dependent on church doctrine or how churches perceive their mission, and what have you --

QUESTION: Mr. Fisher --

MR. FISHER: Yes, sir.

QUESTION: -- this statute wasn't aimed at churches, period, was it?

MR. FISHER: This amendment --

QUESTION: It was aimed at charitable -- raising funds for charity.

MR. FISHER: That's right. When it was enacted --

QUESTION: Well, I just -- I thought you had forgotten that.

MR. FISHER: No. I mean, when it was initially enacted 17 years before the amendment, it focused on charities, just like other states have charitable solicitation statutes. It is this amendment, which is unprecedented in the country, save for the North Carolina amendment, which was found unconstitutional by the North Carolina Supreme Court in the Heritage Village case recently. It is unprecedented, and I don't think there has been a case before this Court where a legislature actually sits down and decides that some churches are going to be regulated and others aren't, and setting out some very substantial regulatory burdens that some, but not others, are going to have -- be saddled with.

QUESTION: You would agree, though, would you not, that a state can properly pass a reasonable disclosure law applicable to all churches who solicit funds from the public? Would you agree with that?

MR. FISHER: Well, I agree that this is possible. I suspect that it could very well raise potential free exercise problems, some entanglement problems or what have you, depending on what that disclosure is and to whom and what have you. Certain things obviously are more sensitive than others. Internal church documents regarding doctrine, membership lists, and this sort of thing, depending on what follow-up is attached to the disclosure -- there could be substantial problems.

QUESTION: What about if the statute were confined strictly to a church-sponsored retirement community?

MR. FISHER: Well, I think that when you are talking about the jugular of the lifeblood flow of funds for the church's support, you are talking about one thing, as this statute talks about. When you are talking about the charitable kinds of activities that churches often are involved in, I think that that perhaps is another question, and the -- this law, though, goes to the question of regulating the church support fund question itself. Does that answer the question?

QUESTION: Yes.

MR. FISHER: Again, I think that the legislative history dramatically illustrates the potential risk when there is line drawing that the legislature may be subject to kind of -- more likely to be influenced by the result or the effect of where they draw the line, and I think that there are some seven references in the legislative history to let's make sure about the Catholic Archdiocese. On the other hand, let's make sure that we get the people at the airports, and -- and there is one comment that I think is right on, the heart of the matter, by a Senator Celoff, who says, let's make sure -- I mean, that this applies to those institutions that are not substantial institutions in our state, and there is also a reference to something like, why are we so hot to get the Moonies? I mean, there -- and there isn't anything else. I mean, there is nothing that tells you the reason for the legislation or anything, but when it gets down to where to draw the line, there is some concern, and I think that that just is more reason why the Court should give this close scrutiny.

QUESTION: In your view, is there any line that could be drawn by the legislature that would sustain the constitutionality of the Act?

MR. FISHER: I think that if --

QUESTION: In place of the 50 percent.

MR. FISHER: Well, the problem with the 50 percent is that there is just nothing that supports it in fact or logic. If there were, if there were findings and studies where it really was shown that there was control by the public, then it would be a harder case if and only if there was some sort of real tying of the line to the impact on the public. In other words, here you have an abstract proportion that doesn't -- really isn't correlated, doesn't really relate to how much money is really being taken from the public, because your interest is the public. If it did have some sort of a figure, and there were findings that some kinds of groups would take care -- that would be able to self-police, to self-manage their solicitation practices and their uses of --

QUESTION: Let me get back to the question. Is there a line that would be constitutional, in your view?

MR. FISHER: Well, there might be. There might be. I am not --

QUESTION: Ten percent, 25 percent, 33 and a third percent?

MR. FISHER: Well, again, I am saying it is possible, but it would depend on a real showing of, you know, a meaningful line drawing that -- where there is a legitimate reason for distinguishing. I think in many of the Court's cases where such line drawing may have been allowed -- I mean, Gillette allowed some under inclusiveness. I mean, there was analysis. There were reasons for upholding this, and I just don't think that there are here, and that is really the crux of the matter. I mean, there is just nothing that really supports a lack of evenhandedness. In the Krishna case, in Hefron, I mean, that was evenhandedness. That was treating -- the problem there was that the Krishnas perhaps were seeking some special treatment.

QUESTION: Wasn't the argument made when that Minnesota case was here?

MR. FISHER: Well, no. But that would have been perhaps the effect, and it was conceded, I think, in that case by counsel, that they really didn't -- in that particular case they shouldn't have a claim of special treatment, but that would have been the effect, I think, of a ruling, and the Court said this was a rule being evenhandedly applied to everyone, the Booth requirement.

QUESTION: Well, I get back to Justice O'Connor's question. Suppose there weren't any 50 percent limitation here at all, just a complete requirement of reporting by every church. Would you object?

MR. FISHER: Well, first of all, there is more than just reporting here, but assuming that there was evenhanded treatment, neutral treatment, then I think that there would not be a neutrality problem, as we have argued, but there would be an entanglement problem. There would be, I think --

QUESTION: In what respect? All they have to do is file reports, period.

MR. FISHER: Well, that is not this --

QUESTION: Forget about all the other fringe material which is in the statute.

MR. FISHER: Right. Okay. Well, that fringe material makes it plenty more than just disclosure. If it did, I think it would be obviously a much more difficult case.

QUESTION: Well, I would like you to address Justice O'Connor's question, which I think you still haven't answered.

MR. FISHER: Yes, Your Honor.

QUESTION: And that is, as I recall it, whether you would find unconstitutional a neutral reporting statute without any percentage limitation in it.

MR. FISHER: Without seeing it, but giving an answer, a yes or no, I would say I would not find that constitutional. I would still have a problem with that, even that type of law.

QUESTION: Well, the court below indicated that it would uphold exempting any organization, including a church, if it raised all of its money from its members.

MR. FISHER: That also would be a more difficult case.

QUESTION: But that would distinguish between churches, those that raise all their money from members and churches that don't raise all their money from members.

MR. FISHER: That's correct. That's correct.

QUESTION: So you would disagree with the court below in that respect?

MR. FISHER: I have problems with that, yes.

QUESTION: Well, but if the court below, though, it seems to me, would have sustained the law if it distinguished between churches on that basis, and yet they disagreed if the legislature made it 50 percent.

MR. FISHER: I think the court was grappling for what is an answer in this area, and it is a difficult question.

Thank you.

CHIEF JUSTICE BURGER: Mr. Solicitor, you have one minute left.

ORAL ARGUMENT OF LARRY SALUSTRO, ESQ., ON BEHALF OF THE APPELLANT - REBUTTAL

MR. SALUSTRO: The argument has been made here that our provision, the criteria has to be supported by a factual inquiry. What was done below was, on summary judgment, this provision was declared facially unconstitutional as to all religious organizations. It is not up to us on their motion for summary judgment to supply facts that support our criterion and the 50 percent part of it.

Furthermore, in their brief, they have acknowledged that this statute has a rational basis, on Page 23 of their brief. That is the standard that comes out of Gillette. If there is a secular criteria, if there is no religious gerrymandering in the exemption, all we need is a rational basis. There is a secular criterion here. There is no gerrymander here. And there isn't a gerrymander because of these references to legislative history and what the Catholics thought and what the Moonies were doing.

In fact, if you go through that material you will find there was a Catholic organization, the Pallatine Mission, that was the reason for this legislation, because they were a direct mail organization. There is no attempt here to separate organizations by who is controversial and who is not, who is traditional and who is not. Controversial organizations like the Church of Scientology, the Jonestown Peoples' Temple, those organizations are exempt. Traditional organizations like the Pallatines or Billy Graham Crusade, those organizations are not exempt.

This does not cut across controversy. This is not a religious gerrymander. We only need a rational basis.

Thank you very much.

CHIEF JUSTICE BURGER: Thank you, gentlemen. The case is submitted.

(Whereupon, at 11:04 o'clock a.m., the case in the above-entitled matter was submitted.)