NE Federal District Court finds donation box regulation not sufficiently narrowly tailored to prevent fraud
by Rachel Greifenkamp and Gary Taylor
(Federal District Court for the District of Nebraska, February 18, 2014)
In Lincoln, Nebraska the company Linc-Drop (a for-profit corporation) is contracted by the Nebraska chapter of the March of Dimes (a non-profit charity) to maintain donation drop boxes for secondhand clothing that is donated to them. The March of Dimes contracts with landowners for locations to place the donation boxes. The clothing that is donated is technically owned by the March of Dimes but Linc-Drop owns the donation drop boxes. The contract between March of Dimes and Linc-Drop provides that Linc-Drop can be directed to deliver the donated clothing to a location chosen by the March of Dimes; however, this has never happened. Instead, Linc-Drop sells the donated clothing for 20¢ per pound and pays the March of Dimes 2¢ per pound (totaling about $25,000-30,000 per year).
In response to this situation, the City of Lincoln enacted an Ordinance that contained two critical provisions. First, the Ordinance provides that no person may “place or hold out to the public any donation box for people to drop off articles of unwanted household items, clothing or other items of personal property, unless at least 80% of the gross proceeds from the sale of such items shall be utilized for charitable purposes.” (Charitable purposes is not defined in the Ordinance.) Second, the Ordinance requires a permit from the city to legally place a donation box. Only organizations that are tax exempt under Section 501(c)(3) or a school may obtain a permit. The Ordinance also requires that a donation box must clearly identify the charitable organization responsible for maintaining it. Violation of the Ordinance is punishable by a fine of up to $500 or up to 6 months imprisonment, and each day is considered to be a separate offense.
Linc-Drop challenged the constitutionality of the Ordinance on First Amendment grounds, and sought a preliminary injunction preventing the City from enforcing it pending the outcome of the challenge.
According to the Federal District Court for the District of Nebraska, when evaluating the regulation of professional charitable solicitation, the Court considers whether (1) the City had a sufficient or legitimate interest in enacting the Ordinance, (2) the interest identified is significantly furthered by a narrowly-tailored regulation, and (3) the regulation substantially limits charitable solicitations. The City resisted the application of this standard of review, arguing that Linc-Drop is not engaged in charitable solicitation but is rather “using the March of Dimes name to hoodwink the city’s unwitting residents into placing items in the donation boxes instead of donating them to legitimate charitable organizations.” The Court rejected this position, however, stating that that fact that Linc-Drop is being paid to engage in charitable solicitation does not make it less so. The court further clarified for the city that the constitutionality of the Ordinance, and not Linc-Drop’s conduct, was the issue of the case. “Whether Linc-Drop is violating the Ordinance, or even whether Linc-Drop is defrauding people, does not change the provisions of the Ordinance or the reasons for its enactment.”
Likewise the Court rejected the city’s position that the boxes are more akin to billboards and should be considered commercial speech. The Court stated that “the public receptacles are not mere collection points for unwanted items, but are rather silent solicitors and advocates for particular charitable causes….They represent far more than an ‘upturned palm’ or a mere ‘proposal of a commercial transaction that says donate goods here.’” The solicitation found on the boxes “is characteristically intertwined with informative and perhaps persuasive speech seeking support for particular causes or for particular views on economic, political or social issues.”
In defending the constitutionality of 80 percent requirement of the Ordinance, the City argued that the Ordinance serves two governmental purposes, “preventing deception and ensuring funds go to benefit charitable organizations,” and “protecting charities and the public from fraud.” The interest in protecting charities and the public from fraud is sufficiently substantial to justify a narrowly-tailored regulation, but the Court pointed out that federal courts have repeatedly decided that using percentages to decide the legality of a fundraiser’s fee is not narrowly tailored to the government’s interest in preventing fraud. Citing Supreme Court precedence, the Court noted “several legitimate reasons why a charity might reject the State’s overarching measure of a fundraising drive’s legitimacy…even if the government had a valid interest in protecting charities from their won naivete or economic weakness, a percentage requirement was not narrowly tailored to achieve it.”
The Court also struck down the provision barring professional fundraisers from obtaining permits. Federal courts have prevented local governments from restraining solicitation by professional fundraisers, even if a high percentage of the funds raised would be used to cover administrative costs. It is therefore axiomatic that the government cannot categorically restrain all solicitation by professional fundraisers, as the permit prohibition would do. It is not narrowly tailored to the government’s interest in preventing fraud.
The Federal District Court of Nebraska determined that the Ordinance is so plainly at odds with precedent of Supreme Court rulings the the preliminary injunction desired by Linc-Drop was granted, and the City was barred from enforcing any aspect of the Ordinance until a final decision is made by the United States Magistrate Judge.
The need for fracking sand has created intense pressure to open new sand mines and expand operations in existing mines in many Midwestern states. In the Wisconsin legislature, a new bill would prohibit local governments from imposing new zoning ordinances that are more restrictive than existing zoning rules on existing operations. The bill also would shield sand mines from any other new ordinance or license requirement if the mines are operating within the year preceding the ordinance or requirement’s adoption.
The full article from Fox 11 News website in Madison is here.
by Rachel Greifenkamp
(Wisconsin Court of Appeals, February 12, 2014)
Delavan, a city in southeastern Wisconsin recently attempted to “protect rural character and farming viability” by utilizing its extraterritorial plat approval authority to deny a proposal made by Lake Delavan Property Company to develop a 600-home subdivision just outside of the city limits. According to WIS. STAT. § 236.10(1)(b), a municipality is authorized to exercise extraterritorial plat approval authority over land within one and one-half miles of the city limits. The land that the developer purchased is in the Town of Delavan, but within one and one-half miles of the City of Delavan.
The question in this case was whether the City’s denial of the Company’s plan is prohibited by WIS. STAT. § 236.45(3)(b). This provision states that a city may not use its extraterritorial power to deny the approval of a plat on the basis of the proposed land use unless the denial is based on zoning regulations passed cooperatively with neighboring towns. The only part of the statute that was contested was whether the proposed subdivision was denied on the basis of the proposed land use. The city maintained that the denial was based on its application of its density restrictions (one residential dwelling per 35 acres in the extraterritorial area), which is a permissible use of extraterritorial plat approval authority. Conversely, the developer claimed that the thirty-five acre density restriction is designed to keep the borders of the city agricultural.
When a developer believes that the denial of a plat was arbitrary, unreasonable, or discriminatory, they can appeal to the circuit court where, if it is found that the denial of the plat was arbitrary, unreasonable, or discriminatory, the court will direct the City to approve the plat. In the circuit court it was ruled that the city acted outside its jurisdiction by using its extraterritorial power to deny the proposed plat based on land use. The state court of appeals agreed with the circuit court. “The city’s 35-acre density restriction is an improper use if its extraterritorial plat approval authority to rezone land….Common knowledge and experience tell us that the ordinance’s blanket density requirements effectively preclude residential development throughout extraterritorial jurisdiction. Indeed, the ordinance’s preamble states the ordinance was enacted ‘in order to protect rural character and farming viability.’” The judgment in favor of Lake Delavan Property Company was affirmed.
(Wisconsin Court of Appeals, February 6, 2014)
Lamar Central Outdoor Advertising owns a sign located along Interstate highway 39/90/94 in the Town of Dekorra. On March 18, 1972 WIS. STAT. §84.30 became effective. This statute generally prohibits construction of signs along state or interstate highways subject to specified exceptions; however, because the sign in question was in existence before the statute was enacted it was granted nonconforming status. Section 84.30(5)(bm) also provides that if a lawful nonconforming sign is enlarged, replaced, relocated, or if additional signs are erected, the sign loses its lawful nonconforming status and is subject to removal. In November, 2010 the Wisconsin Department of Transportation (DOT) ordered Lamar to take down the sign because modifications had been made to the support structure. The DOT said that a third wooden support beam had been added to the sign along with several other modifications. The DOT argued that this modification constituted a substantial change to the structure, causing the sign to lose its legal nonconforming status.
The Division of Hearings and Appeals (DHA) heard the case and determined that the addition of the third wooden post constituted a substantial change but the other modifications did not. The DHA concluded that the sign had therefore lost its legal nonconforming status. A circuit court later reversed the decision made by the DHA because the addition of the third wooden post did not constitute a substantial change. The DOT appealed the ruling and the Wisconsin Court of Appeals affirmed the circuit court ruling in favor of Lamar. The Court of Appeals decided that the support post constituted maintenance and repair because it did not enlarge or expand the sign, nor change the look or appearance of it, and did not exceed fifty percent of the replacement value of the sign. “From all that we can glean from the record [the third post was] added to stabilize the sign structure, a maintenance and repair function.” As a result, the sign did not lose its nonconforming status.
An interesting article appeared in Bloomberg Businessweek this past week about WalMart’s increasing emphasis on smaller stores in urban areas. It turns out that these are the stores showing the most growth in sales.
In the U.S., Wal-Mart’s comparable store sales, an important measure of a retailer’s health, declined 0.6 percent. ….There was one bright spot: Wal-Mart’s smaller stores. ….The smaller locations (which range in size from 15,000 square feet to 39,000 square feet) had positive comparable sales growth and increases in traffic each quarter of 2013. The grocery stores, called Neighborhood Markets, had sales growth of about 4 percent for the year. Trouble is, there aren’t many of them: 346 to be exact, and only 20 of the even smaller Walmart Express stores. …. Wal-Mart is now planning to open between 270 and 300 smaller stores this fiscal year, a big increase from plans revealed back in October to build just 120 to 150 new small stores.
They are behind the curve, however, compared to Dollar Tree, Dollar General and Family Dollar Stores, who together have over 23,000 stores of that size.
Last October the Wisconsin Court of Appeals ruled that towns do not have the jurisdiction to zone shorelands in Wisconsin; the exclusive jurisdiction lies with counties. At least one town has asked its county to adopt stricter shoreland zoning rules within the boundaries of the county. The article from the Ashland Daily Press is here. Ashland County is in northern Wisconsin.
by Gary Taylor
Anthony Browne v. City of Iowa City
(Iowa Court of Appeals, February 19, 2014)
The city of Iowa City denied Anthony Browne’s application for a mobile vending cart permit. He was one of eight applicants vying for six available permits to operate downtown. The city created a matrix to score the applications. One of the criterion in the matrix was past satisfactory experience working with Iowa City. Because Browne had no prior experience with the city he received a low score on that criterion. He ultimately finished seventh out of the eight applicants. Browne requested and was granted a licensing hearing before the city council. In the process he was provided with all emails and other communications concerning the permitting process. The city council affirmed the denial.
Browne argued that the city violated his due process rights by, among other things, including what he referred to as a “seniority criterion” into the matrix and not giving him credit for successful experience working in other communities. The district court ruled in favor of the city and the Court of Appeals affirmed. Reviewing multiple federal and state cases, the court found that Browne has no constitutionally protected liberty or property interest in his unilateral expectation to receive a mobile vending permit.
Any right plaintiff has to earn a living through a food cart, like other intangible employment rights, arises from state law and does not spring from the fundamental guarantees of the Constitution. Municipalities in the United States have a history of stringently regulating or even prohibiting food cart vendors; thus, the right to freely operate a food cart is not “deeply rooted” in our Nation’s history and traditions. Nor is the right to freely operate a food cart implicit in our concept of ordered liberty. Therefore, the court finds that plaintiff fails to allege a property right that is protected by the Constitution and does not state a substantive due process cause of action as a matter of law.
The court went further to state that even if he had such an interest, he was afforded appropriate process, including notice, full disclosure, of all city communications regarding the permitting process, and the opportunity to be heard.
Issuance of conditional use permit for nonconforming use does not usurp landowner’s nonconforming use rights
by Rachel Greifenkamp
(Minnesota Supreme Court, December 4, 2013)
Wapiti Park campground in the City of Elk River, Minnesota began operating in 1973, seven years prior to the City enacting a zoning ordinance that, at first, did not permit campgrounds in that location, then permitted them as conditional uses, then even later again removed campgrounds as either conditional or permitted uses. Wapiti Park applied for and was granted a conditional use permit in 1984 (during the period of time when they were allowed as conditional uses) even though it could have continued operating as a nonconforming use. When Wapiti Park later violated the conditions of the conditional use permit the city revoked the permit and asserted that Wapiti Park was no longer authorized to operate the campground. Wapiti Park sued the city. The district court found in favor of Wapiti Park but the Court of Appeals reversed. Wapiti Park appealed to the Minnesota Supreme Court.
One question addressed in this case is whether a landowner of a nonconforming use who voluntarily complies with a later-enacted zoning ordinance relinquishes the nonconforming-use status and the right to operate under that status in the future. This issue has been answered in opposite ways in other jurisdictions. The Minnesota Supreme Court concluded that a landowner does not surrender the right to continue a nonconforming use by obtaining a conditional use permit unless the landowner affirmatively waives the right to be treated as a nonconforming use. Waiving a right in Minnesota requires knowledge of the right and an intent to waive the right. In this case, the City of Elk River had the burden of proving that Wapiti Park had both knowledge of their right to remain a nonconforming use and intended to waive the right when they applied for the conditional use permit. Although Wapiti Park knew of its nonconforming use rights as a campground in 1984 when it applied for a conditional use permit, the city produced nothing for the record to indicate that Wapiti Park intended to waive or subordinate its rights to the city’s zoning regime. The court concluded that the conditional use permit did not alter the Park’s status as a nonconforming use.
The second issue addressed was whether the city had authority to terminate the nonconforming use by revoking the conditional use permit. Minn. Stat. secs. 465.01 and 462.57 describe four circumstances under which a nonconforming use may be terminated. They include eminent domain, discontinuance of the nonconforming use, destruction of the nonconforming use, and judicial determination that the use is a nuisance. The Minnesota Supreme Court ruled that Wapiti Park may continue to operate the campground as a nonconforming use because these statutes do not include the revocation of a previously issued conditional use permit as a condition of termination, and none of the identified four circumstances applied to Wapiti Park. Interestingly, the court identified a nonconforming use as “a constitutionally protected property right,” citing a Connecticut court case and not the Minnesota constitution in support of that proposition.
The time seemed right for a reminder about the annual Planning and Zoning Workshops tour (someday I will get black t-shirts made with the dates printed on the back!).
March 31, 2014 (Monday) Okoboji, Arrowwood Resort
April 1, 2014 (Tuesday) Carroll, Carrollton Inn
April 7, 2014 (Monday) Decorah, Hotel Winneshiek
April 8, 2014 (Tuesday) Clear Lake, Best Western Holiday Lodge
April 14, 2014 (Monday) Cedar Rapids, Clarion Hotel and Conference Center
April 21, 2014 (Monday) Sioux City, Bev’s on the River
April 22, 2014 (Tuesday) Creston, Supertel Inn and Conference Center
For more information, and the online registration link, click on the “Intro to Planning and Zoning Workshops” tab at the top of this page. Reminder: We are moving exclusively to an online registration system for the workshops this year. When you register you will have the option to pay by credit card, or to be invoiced via email.