Fed. Dist. Court of NE Finds Likelihood that Plaintiffs will Prevail on First Amendment Challenge to Local Zoning Ordinance Addressing Donation Drop-Boxes

The March of Dimes, a non-profit charity, contracted with Linc-Drop, Inc., a for-profit corporation to construct and maintain donation boxes at certain locations on behalf of the March of Dimes. The donation boxes resembled a small shed with a sign attached soliciting “the donation of clothing, accessories, linens, housewares, and small household goods.” Although the March of Dimes owned the donated items contained in the donation boxes, Linc-Drop owned the actual donation boxes. As part of Linc-Drop’s responsibilities for the donation boxes it would transport the goods, either to a location chosen by the March of Dimes, or a location of its own choice, and then pay the March of Dimes a fee. The March of Dimes had never exercised its right to choose the location, thus, Linc-Drop would sell “the donated clothing to used clothing graders and recyclers at 20¢ per pound . . . and then [paid] the March of Dimes 2¢ per pound, which [amounted] to about $25,000-30,000 per year to the March of Dimes form donation boxes in Lincoln.”

In response to Linc-Drop’s conduct with the March of Dimes the City of Lincoln, Nebraska enacted an ordinance governing the use of charitable donation boxes in Lincoln. The primary purpose of the ordinance was to prevent deception or the confusion of the public with regard to what their donations were actually be used for. The two provisions of the ordinance that were at issue stated, in relevant part, that (1) donation boxes for charitable contributions of clothing or household items could be placed in public, “unless at least 80% of the gross proceeds from the sale” went to charitable purposes, and (2) such a donation box required a permit. Violation of the ordinance was a misdemeanor and would punish not only the owner of the donation box, but also the owner of the property where the donation box was located.

Linc-Drop challenged the ordinance prior to its enactment suing the City and several officials asking the court to enjoin the enforcement of the ordinance. Linc-Drop claimed the ordinance violated its right to Free Speech under the First Amendment and the Equal Protection Clause of the Fourteenth Amendment. The court first discussed the ordinance 80% requirement and looked to several United States Supreme Court cases for guidance. All of the laws at issue in the Supreme Court cases contained percentage requirements that were found to be unconstitutional because they were not sufficiently tailored to the governmental interest, noting that “the Court invalidated laws that prohibited charitable organizations or fundraisers from engaging in charitable solicitation if they spent high percentages of donated funds on fundraising,” instead of charity. Finding that the percentage requirement would likely go against Supreme Court precedent and that there was a potential injury suffered, the court found that Linc-Drop had standing to challenge the ordinance because it also challenged the permit requirement. Thus, Linc-Drop had standing regardless of the fact that it was merely the owner of the donation box, and not the charitable organization. Because the court had already found that there was a clearly established history of the courts rejecting percentage requirements such as this one, the court simply stated that “under the Supreme Court’s binding precedent, there is no doubt that the 80-percent requirement of the Ordinance is unconstitutionally overboard.” And as such, Linc-Drop had a substantial likelihood of success on the merits.

With regard to the permit requirement, the court stated, “mandatory application for a license or permit is a prior restraint typically disfavored in First Amendment cases . . . and the permit requirement is an impermissible prior restraint on the First Amendment rights of any person or organization wishing to place a donation box, whether or not they are eligible for such a permit.” Therefore, for the same reasons the 80-percent requirement was unconstitutionally sound Linc-Drop also had success on the merits of its permit requirement challenge.

The court did not address Linc-Drop’s other claims because it already found it had a strong likelihood of success on the merits on its challenge of the two main provisions of the ordinance. Based on that determination the court found that Linc-Drop med its burden for a preliminary injunction and enjoined the enforcement of the ordinance in its entirety. The court even went on to note that it was surprised the case reached the level it did in the courts because it was so plainly contrary to Supreme Court precedent, but at that juncture was only going to enforce the enjoinment of the ordinance and not official declare its unconstitutionality.

Linc-Drop, Inc. v. City of Lincoln, 2014 WL 595545 (D. Nebraska 2/18/2014)

The opinion can be accessed at: http://docs.justia.com/cases/federal/district-courts/nebraska/nedce/4:2013cv03133/63470/63