Two recent cases involving charitable organizations underscore that what charities say, and how they say it, can raise the same issues – and scrutiny – as for-profit speech.
Recently, the third-party fundraising platform, PayPal Charitable Giving Fund (PPGF), entered into an Assurance of Voluntary Compliance ("AVC") with twenty-three state attorneys general over its disclosure practices with prospective donors on its giving platform, Cause Hub. PPGF is itself a charity that receives charitable contributions from donors and then makes grants to charities selected by those donors. Selected charities are vetted by PPGF before the distribution occurs; however, in some cases, the donor’s selected charity does not pass PPGF’s vetting requirements. When that occurs, PPGF redirects the charitable funds to a similar charity which has passed PPGF’s vetting process.
Prior to its 2016 giving campaign, PPGF only listed charities on Cause Hub that registered with PPGF, maintained accounts with PayPal, and passed PPGF’s vetting process. However, in 2016, PPGF listed charities on Cause Hub that had not been vetted by PPGF but that were on a list received from Guidestar of 501(c)(3) charitable organizations. PPGF’s addition of these non-vetted charities led a multistate group of state regulators to inquire into PPGF’s fundraising practices. At issue for the regulators was whether PPGF made appropriate disclosures to prospective donors, including the fact that non-vetted charities appeared on Cause Hub and the fact that PPGF could “exercise its variance power” if the intended charities selected by the donors did not ultimately pass PPGF’s vetting process.
Although PPGF did not admit to any wrongdoing, it entered into a settlement that requires it to beef up its disclosures. The AVC requires PPGF to disclose any fees it charges; the expected time frame for the grant to the charities; the right of PPGF to reassign funds to a similar charity and why; whether charities are reviewed for compliance with state charitable registration requirements; and that donors’ contact information will not be shared with charities that do not pass PPGF’s vetting requirements. The AVC also forbids PPGF from implying that donors are directly donating to their chosen charities. Further, all these disclosures must be “unavoidable and prominent,” which is defined in the AVC as “not included in an optional pop up window or on another page accessed by a link on the original page” (emphasis added). Rather, the AVC states that “the information must be located on a page that each and every donor must access prior to donating to PPGF and in a position on that page that is in immediate proximity to a necessary field or button used by each and every donor.” The AVC also imposes ongoing reporting requirements and requires PPGF to donate $200,000 to the National Association of Attorneys General.
Separately, the district court for the Southern District of New York recently issued an opinion that a charity’s speech is actionable under the Lanham Act. In Tang, et al. v. Guo, et al., No. 17-cv-9031 (JFK), the plaintiffs alleged that the defendant runs charitable organizations and a media platform designed to compete with plaintiffs' own nonprofit organizations and online media outlet and that the defendant made false and defamatory statements about plaintiffs to drive donors away from plaintiffs' organizations to defendant’s competing organizations.
Although the defendant argued that its speech was not commercial and therefore not subject to the Lanham Act, the court found otherwise, declining to grant defendant’s motion to dismiss. In so holding, the court noted plaintiffs’ allegations in its amended complaint that the defendant added "DONATE" buttons to the video infomercials promoting his media outlets and fundraising organizations and that the defendant intended to increase viewership on its platforms to encourage viewers to donate to organizations that compete with plaintiffs' own nonprofit organizations. The court thus held that plaintiff met the elements of a Lanham Act claim “by plausibly alleging that Plaintiffs and Defendants compete for fundraising dollars, [the defendant’s] false statements were made for the purpose of influencing viewers to donate to his charitable organizations instead of Plaintiffs', and the statements were sufficiently disseminated to the relevant purchasing public by being posted to public forums such as YouTube and Twitter.”
The take-away? Doing good doesn’t obviate the need to do it well.