Department of Texas, Veterans of Foreign Wars of the United States v. Texas Lottery Commission

Case: 11-50932 Document: 00512349603 Page: 1 Date Filed: 08/21/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 21, 2013
No. 11-50932 Lyle W. Cayce
Clerk
DEPARTMENT OF TEXAS, Veterans of Foreign Wars of the United States;
AMVETS DEPARTMENT OF TEXAS, INCORPORATED; AMVETS POST 52,
INCORPORATED; AMVETS POST 52, AUXILIARY, INCORPORATED; THE
GREAT COUNCIL OF TEXAS, Improved Order of Redmen; REDMEN WAR
EAGLE TRIBE NO. 17; REDMEN TRIBE NO. 21 GERONIMO; REDMEN
RAMONA COUNCIL NO. 5; THE INSTITUTE FOR DISABILITY ACCESS,
INCORPORATED, doing business as Adapt of Texas; TEMPLE ELKS LODGE
NO. 138, Benevolent and Protective Order of Elks of The United States of
America, Incorporated; BRYAN LODGE NO. 859, Benevolent and Protective
Order of Elks of The United States of America, Incorporated; AUSTIN LODGE
NO. 201, Benevolent and Protective Order of Elks of The United States of
America, Incorporated; ANNA FIRE AND RESCUE, INCORPORATED,
Plaintiffs - Appellees
v.
TEXAS LOTTERY COMMISSION; GARY GRIEF, Executive Director in His
Official Capacity; SANDRA K. JOSEPH, Director of Charitable Bingo in Her
Official Capacity; MARY ANN WILLIAMSON, Commissioner in Her Official
Capacity; COMMISSIONER IN OFFICIAL CAPACITY; J. WINSTON KRAUSE,
Commissioner in His Official Capacity,
Defendants - Appellants
Appeal from the United States District Court
for the Western District of Texas
Before STEWART, Chief Judge, DeMOSS and GRAVES, Circuit Judges.
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PER CURIAM:
The original opinion in this appeal was issued by a unanimous panel on
October 9, 2012. On November 21, 2012, we granted Appellees’ petition for panel
rehearing without hearing oral argument. We now withdraw our previous
opinion and substitute the following.
The question presented in this appeal is whether Texas’s charitable bingo
program violates the First Amendment by allowing charitable organizations to
raise money by holding bingo games on the condition that the money is used only
for the organizations’ charitable purpose, as defined by the Texas Bingo
Enabling Act. The Act specifically prohibits the use of bingo proceeds for certain
types of political advocacy, including lobbying and supporting or opposing ballot
measures. Plaintiffs-appellees, a group of charitable organizations licensed to
conduct bingo games, filed suit challenging those political advocacy restrictions,
arguing they violate their speech rights under the First Amendment. The district
court granted summary judgment in favor of Appellees and issued a permanent
injunction preventing enforcement of the challenged provisions. We reverse for
the following reasons.
BACKGROUND
The Texas Constitution has prohibited gambling for most of the State’s
history. See Tex. Const. of 1845, art. VII, § 17 (“No lottery shall be authorized by
this State; and the buying or selling of lottery tickets within this State is
prohibited.”); see also Tex. Const. art. III, § 47 (amended 1980) (“The legislature
shall pass laws prohibiting the establishment of lotteries and gift enterprises in
this State, as well as the sale of tickets in lotteries, gift enterprises or other
evasions involving the lottery principle, established or existing in other States.”);
Hardy v. State, 102 S.W.3d 123, 130 (Tex. 2003). In November 1980, Texas
voters approved an amendment to the Texas Constitution establishing an
exception to the general ban on gambling for charitable bingo. The exception
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allows the Texas Legislature to “authorize and regulate bingo games conducted
by a church, synagogue, religious society, volunteer fire department, nonprofit
veterans organization, fraternal organization, or nonprofit organization
supporting medical research or treatment programs.” Tex. Const. art. III,
§ 47(b). The constitution makes clear that the bingo exception was established
for the limited purpose of supporting the enumerated charitable organizations,
requiring that “all proceeds from the [bingo] games are spent in Texas for
charitable purposes of the organizations.” Id. § 47(b)(1).
To implement the charitable bingo exception, the Texas Legislature passed
the Bingo Enabling Act (“Bingo Act”) in 1981. Bingo Enabling Act, 67th Leg., 1st
C.S., ch. 11, 1981 Tex. Gen. Laws 85 (current version at TEX. OCC. CODE
§ 2001.001 et seq. (2012)). The Bingo Act sets forth the rules that govern the
State’s charitable bingo program and establishes a licensing scheme under which
eligible charitable organizations can obtain a license to hold bingo games. The
Act includes the Texas Constitution’s requirement that bingo proceeds are used
only for an organization’s “charitable purposes,” and specifies that bingo
proceeds may not be used for lobbying activities or to support or oppose ballot
measures (“political advocacy”). See TEX. OCC. CODE §§ 2001.454, .456. This
appeal centers on the political advocacy restrictions, which provide as follows:
A licensed authorized organization may not use the net proceeds
from bingo directly or indirectly to:
(1) support or oppose a candidate or slate of candidates for public
office;
(2) support or oppose a measure submitted to a vote of the people;
or
(3) influence or attempt to influence legislation.
Id. § 2001.456.
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Appellees, thirteen nonprofit organizations licensed to hold bingo games
(“Charities”), have challenged the second and third of the above provisions,
§ 2001.456(2)–(3), arguing they violate their First Amendment right to free
speech. They do not challenge the prohibition on using bingo funds to support or
oppose political candidates or the requirement that bingo proceeds are used only
for an organization’s charitable purposes. The lead plaintiffs are the Department
of Texas Veterans of Foreign Wars (“VFW”) and the Institute for Disability
Access, d/b/a ADAPT of Texas (“ADAPT”). Both VFW and ADAPT engage in
political advocacy in furtherance of their charitable mission. They maintain that
bingo generates a substantial portion of their total revenue and that the
challenged statutory provisions restrict their ability “to engage in political
advocacy to the degree that, in the judgment of [their] governing bod[ies], would
best further [their] purposes.”
The Charities filed suit on June 25, 2010 in the Western District of Texas
naming as defendants, in their official capacities, the commissioners and two
executive officers of the Texas Lottery Commission (collectively the
“Commission”).1 The Charities asserted claims under 42 U.S.C. § 1983 arguing
that the challenged provisions are facially invalid under the First Amendment
because they restrict political speech and fail to satisfy strict scrutiny. They also
alleged that the provisions impermissibly restrict speech on the basis of the
speaker’s identity because they apply to nonprofit organizations and not for-
profit gaming organizations. The Charities sought temporary and permanent
injunctions preventing enforcement of the challenged provisions, a declaration
that the provisions are unconstitutional, and attorneys’ fees.
On October 29, 2010, the district court issued a preliminary injunction
preventing enforcement of § 2001.456(2)–(3). The court, drawing heavily from
1
The Texas Lottery commission was originally named as a defendant, but was
dismissed from the suit by the district court on the basis of Eleventh Amendment immunity.
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the Supreme Court’s opinion in Citizens United v. Federal Election Commission,
130 S. Ct. 876 (2010), concluded that the challenged provisions are facially
unconstitutional under the First Amendment because they burden political
speech and fail to satisfy strict scrutiny. Shortly after the district court issued
its opinion, the Commission filed an interlocutory appeal in this court. The
Commission also filed motions to stay the preliminary injunction in the district
court and in this court, both of which were denied.
While the interlocutory appeal was pending, the Charities moved for
summary judgment. On August 30, 2011, the district court issued an opinion
granting the Charities’ motion for summary judgment for the reasons stated in
the opinion granting the preliminary injunction. That same day the district court
entered a final judgment permanently enjoining enforcement of the challenged
provisions and declaring them unconstitutional. The interlocutory appeal was
dismissed as moot and the Commission timely filed a new appeal challenging the
permanent injunction.
STANDARD OF REVIEW
This court reviews the grant of summary judgment de novo, applying the
same standard used by the district court. Hill v. Carroll Cnty., Miss., 587 F.3d
230, 233 (5th Cir. 2009). Summary judgment is appropriate when “there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” FED. R. CIV. P. 56(a).
DISCUSSION
A. Standing
Before reaching the merits of this appeal, we must first address the
Commission’s argument that the Charities lack Article III standing because
their claims are not redressable.
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Constitutional standing is a jurisdictional question which we review de
novo. Nat’l Fed’n of the Blind of Tex., Inc. v. Abbott, 647 F.3d 202, 208 (5th Cir.
2011). To establish Article III standing, a plaintiff must show “an injury-in-fact
caused by a defendant’s challenged conduct that is redressable by a court.” K.P.
v. LeBlanc, 627 F.3d 115, 122 (5th Cir. 2010). For a plaintiff’s claim to be
redressable, it must be “likely, as opposed to merely speculative, that a favorable
decision will redress the plaintiff’s injury.” S. Christian Leadership Conference
v. Supreme Court of the State of La., 252 F.3d 781, 788 (5th Cir. 2001). “[A]
plaintiff satisfies the redressability requirement when he shows that a favorable
decision will relieve a discrete injury to himself. He need not show that a
favorable decision will relieve his every injury.” LeBlanc, 627 F.3d at 123(alteration in original) (quoting Larson v. Valente, 456 U.S. 228, 243 n.15 (1982)).
The Commission argues that the Charities’ claims are not redressable
because the relief they seek—the ability to use bingo proceeds for political
advocacy—is independently foreclosed by the requirement in the Texas
Constitution and the Bingo Act that bingo proceeds be used only for an
organization’s charitable purpose. See Tex. Const. art. III, § 47(b)(1); TEX. OCC.
CODE § 2001.454. According to the Commission, even if we enjoin enforcement
of the political advocacy restrictions, the charitable purpose requirement, which
the Charities have not challenged, would still prohibit the Charities from using
bingo proceeds for lobbying or to support or oppose ballot measures. As support,
the Commission argues: (1) that by enacting the challenged political advocacy
restrictions, the legislature made clear that an organization’s charitable purpose
cannot include political advocacy, and (2) that the Commission’s interpretation
of the charitable purpose requirement is reasonable and entitled to deference.
We agree that the Bingo Act makes clear that an organization’s charitable
purpose cannot include lobbying or supporting or opposing ballot measures, at
least for purposes of the State’s charitable bingo program. The Act provides that
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bingo proceeds may be spent only on an organization’s charitable purposes,
§ 2001.454, and then specifically prohibits the use of bingo proceeds for political
advocacy, § 2001.456. Clearly, political advocacy is not a charitable purpose for
which bingo proceeds can be used under the Act.2
However, the Commission’s standing argument requires that we interpret
the charitable purpose requirement as containing an independent prohibition on
the use of bingo proceeds for political advocacy, in addition to the prohibition in
§ 2001.456 challenged by the Charities. While the term “charitable purpose” is
not defined in the Texas Constitution, it is defined in the Bingo Act. See Owens
v. State, 19 S.W.3d 480, 484 (Tex. App.—Amarillo 2000, no pet.) (“The [Texas]
Legislature may define terms which are not defined in the Constitution
itself . . . .”). We interpret Texas statutes the way we believe the Texas Supreme
Court would do so. See United States v. Escalante, 239 F.3d 678, 681 n.12 (5th
Cir. 2001); see also Lipscomb v. Columbus Mun. Separate Sch. Dist., 269 F.3d
494, 508 n.72 (5th Cir. 2001). The Bingo Act defines “charitable purpose” as
follows:
Except as otherwise provided by law, the net proceeds derived from
bingo and any rental of premises are dedicated to the charitable
purposes of the organization only if directed to a cause, deed, or
activity that is consistent with the federal tax exemption the
organization obtained under 26 U.S.C. Section 501 and under which
2
As originally passed in 1981, the Bingo Act’s requirements that bingo proceeds be used
for an organization’s charitable purpose and not for political advocacy are located one after
another in the same subsection, suggesting that the latter was merely a clarification of the
former: “The net proceeds of any game of bingo and of any rental of premises for bingo shall
be exclusively devoted to the charitable purposes of the organization permitted to conduct the
game. The proceeds of any game of bingo or of any rental may not be used to support or oppose
a particular candidate or a slate of candidates for public office or in favor of or in opposition
to any measure submitted to a vote of the people.” Bingo Enabling Act, 67th Leg., 1st C.S., ch.
11, § 11(d), 1981 Tex. Gen. Laws 85, 90. The prohibition on using bingo proceeds for lobbying
was added by amendment in 1983. Act of May 25, 1983, 68th Leg., R.S., ch. 575, § 19a(h), 1983
Tex. Gen. Laws 3443, 3470–71.
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the organization qualifies as a nonprofit organization as defined by
Section 2001.002. If the organization is not required to obtain a
federal tax exemption under 26 U.S.C. Section 501, the
organization’s net proceeds are dedicated to the charitable purposes
of the organization only if directed to a cause, deed, or activity that
is consistent with the purposes and objectives for which the
organization qualifies as an authorized organization under Section
2001.002.
TEX. OCC. CODE §2001.454(b); see also id. § 2001.002(7).
A plain reading of the above definition, which is obviously quite broad,
does not support the Commission’s assertion that an organization’s use of bingo
proceeds for political advocacy is inconsistent with the charitable purpose
requirement absent the restrictions in § 2001.456. Cf. R.R. Comm’n of Tex. v.
Tex. Citizens for a Safe Future and Clean Water, 336 S.W.3d 619, 628 (Tex. 2011)
(“We ordinarily construe a statute so as to give effect to the Legislature’s intent
as expressed in its plain language.”). The definition shows that the requirement
is satisfied so long as bingo proceeds are used for a “cause, deed, or activity that
is consistent with” the purpose for which an organization received its federal tax
exemption and qualified as a charitable organization under state law. TEX. OCC.
CODE § 2001.454(b) (emphasis added). It is easy to imagine scenarios where a
charity could use political advocacy to advance its charitable purpose in a way
consistent with this definition.3 As the Charities point out, the VFW lobbies in
support of property tax exemptions for disabled veterans and for veteran
entitlement programs offered through the Veterans Administration. We see no
reason why these projects violate the above definition, and the Commission
provides no basis to conclude otherwise.
3
The court is aware that 26 U.S.C. § 501 restricts the amount of political advocacy
certain nonprofit organizations may engage in to remain eligible for a federal tax exemption.
See, e.g., 26 U.S.C. §§ 501(c)(3), (h). Nevertheless, we find no support for the Commission’s
broad assertion that any expenditure by a charity for political advocacy is inherently
inconsistent with a tax exemption granted under 26 U.S.C. § 501.
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Nor is the Commission’s interpretation of the charitable purpose
requirement entitled to deference. The Texas Supreme Court has explained that
it will “generally uphold an agency’s interpretation of a statute it is
charged . . . with enforcing, ‘so long as the construction is reasonable and does
not contradict the plain language of the statute.’” Citizens for a Safe Future and
Clean Water, 336 S.W.3d at 625 (quoting First Am. Title Ins. Co. v. Combs, 258
S.W.3d 627, 632 (Tex. 2008)). However, that deference is “tempered by several
considerations.” Id.It is true that courts give some deference to an agency regulation
containing a reasonable interpretation of an ambiguous statute. But
there are several qualifiers in that statement. First, it applies to
formal opinions adopted after formal proceedings, not isolated
comments during a hearing or opinions [in a court brief]. Second,
the language at issue must be ambiguous; an agency’s opinion
cannot change plain language. Third, the agency’s construction
must be reasonable; alternative unreasonable constructions do not
make a policy ambiguous.
Id. (alteration in original) (quoting Fiess v. State Farm Lloyds, 202 S.W.3d 744,
747–48 (Tex. 2006)). The Commission has not pointed to any formal opinion
interpreting § 2001.454 to include an independent prohibition on political
advocacy. And while the Bingo Act certainly defines the term “charitable
purpose” very broadly, the definition is not ambiguous.
The Charities have standing to bring their claims.
B. Do the Challenged Provisions Penalize Speech?
Relying heavily on the Supreme Court’s opinion in Citizens United, 130 S.
Ct. 876, the district court concluded that the restrictions on using bingo proceeds
for lobbying or to support or oppose ballot measures violate the First
Amendment because they burden political speech and fail to satisfy strict
scrutiny. The district court also concluded that the restrictions violate the
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unconstitutional conditions doctrine because they require, as a condition of
participating in the State’s charitable bingo program, that charities not exercise
their right to engage in political speech.
The Commission argues that the challenged provisions do not penalize
speech at all. It contends that the charitable bingo program is a state subsidy
provided for the benefit of qualifying charities and that the challenged provisions
simply represent a decision by the State not to subsidize political speech. The
Supreme Court has made clear, the Commission argues, that a decision not to
subsidize speech does not equate to a penalty on speech. The Commission
maintains that the challenged provisions do not violate the unconstitutional
conditions doctrine because they apply only to bingo proceeds, and therefore only
restrict speech within the confines of the State’s charitable bingo program. It
notes that charities can participate in the bingo program and still engage in
political advocacy; they must simply use funds other than those generated from
bingo.
We begin by noting that the Charities have challenged the facial validity
of the Bingo Act’s speech restrictions. “A facial challenge to a legislative Act is,
of course, the most difficult challenge to mount successfully, since the challenger
must establish that no set of circumstances exist under which the Act would be
valid.” United States v. Salerno, 481 U.S. 739, 745 (1987). That the challenged
provisions “might operate unconstitutionally under some conceivable set of
circumstances is insufficient to render [them] wholly invalid.”4 Id. We briefly
review the principles underlying the unconstitutional conditions doctrine as well
4
Considering that the political advocacy restrictions have been present in the Bingo
Act since 1983, we would have anticipated an as applied challenge.
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as the related concept that government can subsidize some activities to the
exclusion of others.5
“In the most general sense, the unconstitutional-conditions doctrine
examines the extent to which government benefits may be conditioned or
distributed in ways that burden constitutional rights or principles.” Pace v.
Bogalusa City Sch. Bd., 403 F.3d 272, 286 (5th Cir. 2005). One of the most
frequently cited cases discussing the doctrine is Perry v. Sindermann, 408 U.S.
593 (1972). That case involved a claim by a professor at a state university
alleging that his right to free speech was violated because he was discharged for
publicly criticizing the university’s administrative policies. Id. at 594–96. The
Court held that the denial of a government benefit (a teaching position) cannot
be predicated on the exercise of a constitutional right. The Court explained:
For at least a quarter-century, this Court has made clear that even
though a person has no “right” to a valuable government benefit and
even though the government may deny him the benefit for any
number of reasons, there are some reasons upon which the
government may not rely. It may not deny a benefit to a person on
a basis that infringes his constitutionally protected
interests—especially, his interest in freedom of speech. For if the
government could deny a benefit to a person because of his
constitutionally protected speech or associations, his exercise of
those freedoms would in effect be penalized and inhibited. This
would allow the government to produce a result which it could not
command directly. Such interference with constitutional rights is
impermissible.
5
We acknowledge that these principles are sometimes difficult to reconcile. See ERWIN
CHEMERINSKY, CONSTITUTIONAL LAW: PRINCIPLES AND POLICIES 1013 (4th ed. 2011) (discussing
the intersection of the unconstitutional conditions doctrine and the notion that government
can subsidize some activities to the exclusion of others).
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Id. at 597 (internal citation and quotation marks omitted). While the precise
boundaries of the unconstitutional conditions doctrine can be difficult to define,6
the Supreme Court has repeatedly reaffirmed the doctrine’s basic premise. See
Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47, 59
(2006) (“[T]he government may not deny a benefit to a person on a basis that
infringes his constitutionally protected . . . freedom of speech even if he has no
entitlement to that benefit.” (internal quotation marks omitted)); Bd. of Cnty.
Comm’rs v. Umbehr, 518 U.S. 668, 674 (1996); Dolan v. City of Tigard, 512 U.S.
374, 385 (1994) (“Under the well-settled doctrine of ‘unconstitutional conditions,’
the government may not require a person to give up a constitutional right . . . in
exchange for a discretionary benefit conferred by the government . . . .”).
As the Charities acknowledge, however, the Supreme Court has also held
that when government provides a subsidy it is entitled to define the parameters
of the subsidized program, even if that means excluding certain types of speech.
The Supreme Court explained this principle in Rust v. Sullivan, 500 U.S. 173(1991). That case involved a federal program providing funding for family
planning services. Id. at 178. The legislation establishing the program made
clear that abortion was not an approved method of family planning. Id. The
Department of Health and Human Services promulgated regulations that
required, as a condition of participating in the program, that service providers
not advocate for abortion (including lobbying) or provide abortion counseling
within the scope of the program. Id. at 179–81. The service providers challenged
those restrictions, arguing that they violated the unconstitutional conditions
doctrine because they conditioned receipt of a government benefit (participation
in a government program) on the relinquishment of their First Amendment right
to advocate for abortion. Id. at 196.
6
See id. at 1010–13.
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The Court held that the unconstitutional conditions doctrine did not apply
because “the Government is not denying a benefit to anyone, but is instead
simply insisting that public funds be spent for the purposes for which they were
authorized. The . . . regulations do not force the . . . grantee to give up abortion-
related speech; they merely require that the grantee keep such activities
separate and distinct from [program] activities.” Id. at 196. Responding to the
service providers’ argument that the speech restrictions constituted
impermissible viewpoint discrimination, the Court expounded on the concept
that government may subsidize certain activities and not others:
The Government can, without violating the Constitution, selectively
fund a program to encourage certain activities it believes to be in
the public interest, without at the same time funding an alternative
program which seeks to deal with the problem in another way. In so
doing, the Government has not discriminated on the basis of
viewpoint; it has merely chosen to fund one activity to the exclusion
of another. A legislature’s decision not to subsidize the exercise of a
fundamental right does not infringe the right. A refusal to fund
protected activity, without more, cannot be equated with the
imposition of a penalty on that activity. There is a basic difference
between direct state interference with a protected activity and state
encouragement of an alternative activity consonant with legislative
policy.
Id. at 193 (emphasis added) (internal quotations and citations omitted).
The Court also applied this principle in Regan v. Taxation with
Representation of Washington, 461 U.S. 540 (1983), which involved restrictions
similar to those at issue here. In that case, a nonprofit organization challenged
a federal statute prohibiting tax exemptions for organizations whose activities
include a substantial amount of lobbying. Id. at 542 & n.1. The organization
argued that the statute violated the unconstitutional conditions doctrine because
it conditioned a government benefit (a tax exemption) on the recipient giving up
its right to engage in political speech. Id. at 545. The Supreme Court disagreed.
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As in Rust, it noted that the plaintiff remained free to exercise its speech rights
(lobby) outside the scope of the government tax exemption program. Id. at
544–45. The Court equated the tax exemption to a government subsidy and held
that the restrictions were simply a choice by the government not to subsidize
lobbying. Id. at 544, 545–46. The Court made clear that government’s decision
not to subsidize the exercise of a constitutional right does not equate to a penalty
on the right. See id. at 546 (“Congress has not infringed any First Amendment
rights or regulated any First Amendment activity. Congress has simply chosen
not to pay for [plaintiff’s] lobbying.”); id. at 549 (“We have held in several
contexts that a legislature’s decision not to subsidize the exercise of a
fundamental right does not infringe the right . . . .”); see also United States v.
Am. Library Ass’n, Inc., 539 U.S. 194, 210–12 (2003) (rejecting an argument that
libraries’ speech rights were violated by requiring that they restrict internet
access in order to receive a federal subsidy because “[a] refusal to fund protected
activity, without more, cannot be equated with the imposition of a ‘penalty’ on
that activity” (quoting Rust, 500 U.S. at 193)).
We agree that the Bingo Act’s political advocacy restrictions fall within
government’s power to subsidize some activities to the exclusion of others and
therefore do not penalize political speech. This case is distinguishable from
Citizens United in two key respects. Citizens United involved a challenge to a
federal statute prohibiting corporations from making expenditures for speech
relating to federal elections. Citizens United, 130 S. Ct. at 887–88. Unlike this
case, Citizens United did not involve speech restrictions in the context of a
government subsidy. Here, the State has created a subsidy program where select
charities are permitted to engage in a gambling activity in order to raise extra
money for their charitable causes. As a condition of participating in the program,
and receiving the extra money, the state requires that the money not be used for
political advocacy. This requirement does not penalize political speech; it simply
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represents a decision by the State not to subsidize that activity. See Rust, 500
U.S. at 193 (“A legislature’s decision not to subsidize the exercise of a
fundamental right does not infringe the right.” (quoting Regan, 461 U.S. at 549));
see also Am. Library Ass’n, 539 U.S. at 211–12.
The Charities argue that the State’s charitable bingo program cannot be
construed as a subsidy because it is implemented by means of a licensing scheme
instead of cash payments or tax exemptions. They contend that the principles set
forth in Rust and Regan apply only to subsidy programs where “the government
is providing funds from its treasury to the beneficiary.” These arguments,
however, place form over substance. In creating the charitable bingo program,
the State established a narrow exception to the State’s ban on bingo in order to
allow a limited group of charities to conduct bingo games, free of competition, to
generate extra revenue. As the Texas Constitution makes clear, this extra
revenue is authorized to the limited extent that it is used for the charitable
purposes of the organization. See Tex. Const. art. III, § 47(b). That this
supplemental income stream is accessible by way of a license, instead of cash
payments or a tax exemption, does not change the fact that the bingo program
constitutes a government subsidy for participating charities.
The Charities further argue that because the charitable bingo program
utilizes a licensing scheme, any decision construing the program as a subsidy for
purposes of Rust and Regan is tantamount to equating all government licenses
to subsidies, which would empower government to restrict any speech funded by
licensed activity.7 There are, of course, many significant distinctions between a
commercial occupational license and a state charitable gaming program, created
by the state constitution, that allows select charities to raise extra money
7
The Charities acknowledge that this fear is hypothetical at this point, as no other
provision in the Texas Occupations Code restricts political advocacy funded by a licensed
activity.
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through a gambling activity on the condition the money is used for the
organizations’ charitable purpose. Suffice to say, however, that we reject the
notion that commercial occupational licences are subsidies, and hold only that
the State’s charitable bingo program, established in the Texas Constitution and
implemented by the Bingo Act, constitutes a subsidy for participating charities.8
Citizens United is also distinguishable in that it involved a statute that
imposed an “outright ban” on specific types of political speech. Citizens United,
130 S. Ct. at 897–98. In other words, the restrictions at issue in Citizens United
completely foreclosed any way for corporations to engage in the prohibited
political speech. Id. The provisions at issue in this case, however, only prohibit
the use of bingo proceeds for political advocacy and therefore only restrict speech
within the scope of the State’s charitable bingo program. As explained in Rust,
the unconstitutional conditions doctrine is implicated when government
requires, as a condition of participating in a government program, that the
participant not exercise a constitutional right outside the scope of the program.
See Rust, 500 U.S. at 197 (“[O]ur ‘unconstitutional conditions’ cases involve
situations in which the Government has placed a condition on the recipient of the
subsidy rather than on a particular program or service, thus effectively
prohibiting the recipient from engaging in the protected conduct outside the
scope of the federally funded program.”); see also Agency for Int’l Dev. v. Alliance
for Open Soc’y Int’l, Inc., No. 12-10, 570 U.S. __, 2013 U.S. LEXIS 4699, at
*16–24 (U.S. June 20, 2013) (reaffirming this principle). The challenged
provisions in this case do nothing to restrict speech outside the scope of the
8
We also reject the Charities’ argument that the challenged provisions discriminate on
the basis of the speaker’s identity because they apply to nonprofit organizations participating
in the charitable bingo program, but not for-profit gambling businesses licensed to hold horse
and dog races under the Texas Racing Act, Tex Rev. Civ. Stat. art. 179e, § 1.02 (2012). As
explained above, the political advocacy restrictions represent a decision by the State not to
subsidize political advocacy, and the decision not to subsidize certain types speech does not
equate to a penalty on that speech. See Rust 500 U.S. at 193.
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State’s bingo program. Charities are free to participate in the bingo program and
engage in political advocacy; they simply must not use bingo proceeds to do so.
CONCLUSION
The Bingo Act’s restrictions on the use of bingo proceeds for political
advocacy are permissible conditions on a government subsidy and do not operate
to penalize speech. Accordingly, we REVERSE the judgment of the district court
and all relief granted therein.
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CARL E. STEWART, Chief Judge, dissenting:
I agree with the majority’s conclusion that the Charities have standing to
bring this suit. However, because I conclude that the Bingo Act’s political
advocacy restrictions are facially invalid, I would affirm the district court’s
judgment and permanently enjoin enforcement of the subject provisions. I
therefore respectfully dissent from the majority’s opinion upholding the
restrictions as permissible conditions on a government subsidy.
The Bingo Act does not provide the Charities with a government “subsidy,”
as that concept is understood in the Supreme Court’s jurisprudence, simply
because there is no direct or indirect grant of public funds or other in-kind
benefit to the Charities. Accordingly, the Act’s political speech restrictions
constitute unconstitutional conditions on a governmental benefit, i.e., a license
to conduct bingo games, because they fail to survive strict scrutiny.
I.
The majority holds that “the Bingo Act’s political advocacy restrictions fall
within government’s power to subsidize some activities to the exclusion of others
and therefore does not penalize political speech.” Ante, at 14. This conclusion
is rooted in the Supreme Court’s jurisprudence regarding the government’s
power to attach conditions to its allocation of public funds, which, in the case of
the federal government, arises from Congress’s spending power.
The Spending Clause of the United States Constitution authorizes
Congress “[t]o lay and collect Taxes, Duties, Imposts and Excises, to pay the
Debts and provide for the common Defen[s]e and general Welfare of the United
States[.]” U.S. Const. art. I, § 8, cl. 1. “The Clause provides Congress broad
discretion to tax and spend for the ‘general Welfare,’ including by funding
particular state or private programs or activities. That power includes the
authority to impose limits on the use of such funds to ensure they are used in the
manner Congress intends.” Agency for Int’l Dev. v. Alliance for Open Soc’y Int’l,
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Inc., 133 S. Ct. 2321, 2327-28 (2013) (citation omitted); see also South Dakota v.
Dole, 483 U.S. 203, 206 (1987) (“Incident to this [spending] power, Congress may
attach conditions on the receipt of federal funds, and has repeatedly employed
the power ‘to further broad policy objectives by conditioning receipt of federal
moneys upon compliance by the recipient with federal statutory and
administrative directives.’” (citations omitted)). State legislatures likewise have
broad latitude in exercising their spending powers. See Leathers v. Medlock, 499
U.S. 439, 451 (1991) (citing to cases recognizing this broad authority). “As a
general matter, if a party objects to a condition on the receipt of federal funding,
its recourse is to decline the funds. This remains true when the objection is that
a condition may affect the recipient’s exercise of its First Amendment rights.”
Alliance for Open Soc’y, 133 S. Ct. at 2328 (citations omitted).
II.
The majority relies on two Supreme Court cases for its holding that the
Bingo Act imposes permissible speech restrictions on a government subsidy:
Regan v. Taxation With Representation of Washington, 461 U.S. 540 (1983), and
Rust v. Sullivan, 500 U.S. 173 (1991). I discuss each in turn.
In Regan, the Supreme Court held that the Internal Revenue Code’s
(“Code”) grant of tax exemption for certain nonprofit organizations, and its
denial of tax-deductible contributions to those that do not engage in substantial
lobbying activities, do not violate the First Amendment. 461 U.S. at 542-51. At
issue in Regan were two provisions of the Code, sections 501(c)(3) and 501(c)(4).
See Regan, 461 U.S. at 542-44 (citing 26 U.S.C. §§ 501(c)(3), (4)).1 Section
501(c)(3) grants tax exemption to certain nonprofit organizations “no substantial
part of the activities of which is carrying on propaganda, or otherwise
attempting to influence legislation . . . and which does not participate in, or
1
While these provisions have been amended since Regan was decided in 1983, the
substance of the provisions remains unchanged.
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intervene in . . ., any political campaign on behalf of (or in opposition to) any
candidate for public office.” In turn, 26 U.S.C. § 170(c)(2) allows taxpayers who
contribute to these 501(c)(3) organizations to deduct the amount of their
contributions on their federal income tax returns. On the other hand, Section
501(c)(4) grants tax-exempt status to certain nonprofit organizations, but
contributions to these 501(c)(4) organizations are not tax-deductible. Unlike
Section 501(c)(3) organizations, Section 501(c)(4) organizations are allowed to
engage in substantial lobbying to advance their exempt purposes. Regan, 461
U.S. at 543. The plaintiff in Regan, Taxation With Representation (“TWR”),
challenged the prohibition against substantial lobbying under Section 501(c)(3)
“because it want[ed] to use tax-deductible contributions to support substantial
lobbying activities.” Id. at 543-44.
The Court upheld the Code’s lobbying restrictions as a permissible
condition on a government subsidy. Regan, 461 U.S. 543-46. In so holding, the
Court explained the effect of the tax exemption system:
Both tax exemptions and tax-deductibility are a form of
subsidy that is administered through the tax system.
A tax exemption has much the same effect as a cash
grant to the organization of the amount of tax it would
have to pay on its income. Deductible contributions are
similar to cash grants of the amount of a portion of the
individual’s contributions. The system Congress has
enacted provides this kind of subsidy to non profit civic
welfare organizations generally, and an additional
subsidy to those charitable organizations that do not
engage in substantial lobbying. In short, Congress
chose not to subsidize lobbying as extensively as it
chose to subsidize other activities that non profit
organizations undertake to promote the public welfare.
Id. at 544 (footnote omitted).
The Code allows a 501(c)(3) organization to create a 501(c)(4) organization
to conduct its lobbying activities, a structure TWR previously had in place.
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Regan, 461 U.S. at 544. Importantly, the Court noted, however, that a Section
501(c)(3) organization could not subsidize its Section 501(c)(4) affiliate because
“public funds might be spent on an activity Congress chose not to subsidize.”
Regan, 461 U.S. at 544. Thus, the Court equated tax-deductible donations to
“public funds,” since the donor can then reduce his or her taxable income by this
amount. See also id. at 544 & n.6 (characterizing the “congressional purpose”
as “ensuring that no tax-deductible contributions are used to pay for substantial
lobbying”). In this way, Regan indicates that the government’s indirect grant of
public funds, vis-á-vis the tax deductions, allows the government to condition the
nonprofit organizations’ receipt of those tax-deductible donations on certain First
Amendment restrictions.
Rust upheld certain conditions on federal funds for family planning
services which required that service providers not advocate for abortion or
provide abortion counseling with funds for the program, Title X. Rust, 500 U.S.
at 178-81, 196. The Court stated: “[W]e have here not the case of a general law
singling out a disfavored group on the basis of speech content, but a case of the
Government refusing to fund activities, including speech, which are specifically
excluded from the scope of the project funded.” Id. at 194-95. The Court relied
on its prior precedent upholding conditions that would be violative of the
Constitution if not attached to a grant of public funds: “We have recognized that
Congress’ power to allocate funds for public purposes includes an ancillary power
to ensure that those funds are properly applied to the prescribed use.” Id. at 195
n.4 (citations omitted).
Accordingly, the common thread in Rust and Regan is that the government
may attach certain speech restrictions to funds linked to the public
treasury–when either granting cash subsidies directly from the public coffers
(Rust) or approving the withholding of funds that otherwise would go to the
public treasury (Regan). See also Nat’l Endowment for the Arts v. Finley, 524
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U.S. 569, 587-88 (1998) (“[A]lthough the First Amendment certainly has
application in the subsidy context, we note that the Government may allocate
competitive funding according to criteria that would be impermissible were
direct regulation of speech or a criminal penalty at stake. . . . Congress has wide
latitude to set spending priorities.” (citing Regan, 461 U.S. at 549)); Jason
Mazzone, The Waiver Paradox, 97 Nw. U. L. Rev. 801, 821-22 (2003) (“The
rationale underlying these cases upholding conditions attached to government
benefits [including Rust and Regan] appears to be that they all involve programs
in which the government spends money to promote some social goal.”).
In these ways, the bingo program in Texas is wholly distinguishable from
the subsidies in Regan2 and Rust,3 simply because no public monies or
2
Regan was also predicated upon the government’s broad authority in establishing tax
policy, another feature which sets that case apart from the instant case. See Regan, 461 U.S.
at 547 (“Legislatures have especially broad latitude in creating classifications and distinctions
in tax statutes.”); see also Lloyd Hitoshi Mayer, Charities and Lobbying: Institutional Rights
in the Wake of Citizens United, 10 Election L.J. 407, 416 (2011) (“[The Supreme Court] has
consistently showed significant deference to Congress when it comes to tax law even when
addressing constitutional challenges.” (citations omitted)).
3
Rust is further distinguishable because that case involved governmental speech,
where the state has a particularly strong interest in safeguarding a governmental program’s
message:
The Court in Rust did not place explicit reliance on the rationale
that the counseling activities of the doctors under Title X
amounted to governmental speech; when interpreting the holding
in later cases, however, we have explained Rust on this
understanding. We have said that viewpoint-based funding
decisions can be sustained in instances in which the government
is itself the speaker, or instances, like Rust, in which the
government “used private speakers to transmit specific
information pertaining to its own program.” As we said in
[Rosenberger v. Rector & Visitors of University of Virginia, 515
U.S. 819, 833 (1995)], “[w]hen the government disburses public
funds to private entities to convey a governmental message, it
may take legitimate and appropriate steps to ensure that its
message is neither garbled nor distorted by the grantee.”
Legal Servs. Corp. v. Velazquez, 531 U.S. 533, 541 (2001) (alteration in original) (other
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“spending” by the state are involved. The Black’s Law Dictionary definition of
“subsidy” is informative:
A grant, [usually] made by the government, to any
enterprise whose promotion is considered to be in the
public interest. Although governments sometimes
make direct payments (such as cash grants), subsidies
are [usually] indirect. They may take the form of
research-and-development support, tax breaks,
provision of raw materials at below-market prices, or
low-interest loans or low-interest export credits
guaranteed by a government agency.
Black’s Law Dictionary 1565 (9th ed. 2009). Aside from the Charities’ promotion
of the public interest, the licensing scheme in the Bingo Act does not fall into
even a broad interpretation of these examples of “grants . . . made by the
government.” There is no direct or indirect receipt of funds from the public
fisc. The only “grant” here is the legislative authority to conduct what would be
illegal otherwise–bingo games.
Moreover, the bingo games are not state-run; they are merely licensed and
regulated by the state. The Commission argues that the program constitutes a
subsidy in part because there is no functional difference between the current
structure of the program and an alternative structure where the state runs the
bingo games and then distributes the funds to the Charities itself. I disagree.
In the latter scenario, the state would expend its own resources to conduct the
games and make all business decisions, and the Charities would be mere passive
beneficiaries of the state’s grace. Cf. Regan, 461 U.S. at 549 (“[A]ppropriations
are comparable to tax exemptions and deductions, which are also ‘a matter of
grace [that] Congress can, of course, disallow . . . as it chooses.’” (citation
citations omitted).
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omitted)). Here, however, the Commission’s own website describes bingo as a
“business.” As the Charities argue, “[t]he revenue charities realize from bingo
is what they earn from the exercise of their lawful business. It ‘does not come
from the government, and it does not cost the taxpayers a dime.’” Instead, the
Charities pay the state an annual licensing fee, as well as five percent of each
bingo prize awarded.4 Tex. Occ. Code §§ 2001.104, 2001.502.
The premise upon which Regan and Rust are based–that the state has
broad authority under its spending powers to attach conditions to its grant of
public funds–is thus inapposite to the facts of this case. Rather, the Bingo Act’s
regulatory scheme is more akin to most other occupational licenses, where the
state grants an entity that satisfies certain qualifying criteria the authority to
4
A useful distinction can be drawn between this structure and that of state-run
lotteries, for which states are increasingly entering into contracts with private management
companies for their long-term operation. See Office of Legal Counsel, U.S. Dep’t of Justice,
Scope of Exemption under Federal Lottery Statutes for Lotteries Conducted By a State Acting
under the Authority of State Law, 2008 WL 4671395, at *1 (Oct. 16, 2008). Federal law
generally prohibits the advertisement and promotion of lotteries in interstate commerce. Id.(citing 18 U.S.C. §§ 1301-04, 1953(a)). However, federal law exempts from these prohibitions,
inter alia, lotteries “conducted by [a] State acting under the authority of State law.” Id.(citations omitted). In providing guidance regarding whether or not a lottery is “conducted by
[a] State,” the Office of Legal Counsel issued an advisory opinion describing some features of
a state-run lottery:
We conclude that the statutory exemption for lotteries “conducted
by a State” requires that the State exercise actual control over all
significant business decisions made by the lottery enterprise and
retain all but a de minimis share of the equity interest in the
profits and losses of the business, as well as the rights to the
trademarks and other unique intellectual property or essential
assets of the State’s lottery. . . .
[M]erely regulating the lottery, or licensing a private lottery
concession pursuant to detailed standards prescribed by the
State, plainly cannot be sufficient to satisfy the requirements of
the statutory exemption [for lotteries conducted by a state].
Id. at *1, *3. The bingo program in Texas, by contrast, has none of the features that would
indicate that it is state-run.
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do what would be illegal in the absence of the license–here, conduct bingo games.
See Black’s Law Dictionary 1002 (defining “license,” in relevant part, as “[a]
permission, [usually] revocable, to commit some act that would otherwise be
unlawful”). The Charities point to several features of the bingo program that
convincingly illustrate its primary function as a regulatory scheme:
The Commission’s Charitable Bingo Division is
recognized by the Texas Attorney General as a
“law-enforcement agency[.]”5 It employs licensed peace
officers, auditors, etc. and enjoys broad authority over
all aspects of the bingo game.6 It licenses the charities
that conduct bingo as well as other related,
noncharitable, occupations (bingo equipment
manufacturers, lessors of bingo premises, etc.). It
regulates the types of games that may be played, their
frequency and times, and the qualifications of bingo
employees. It distributes no government funds or any
other largesse, other than the right to engage in a
highly regulated trade. This is a regulatory function,
utterly undifferent [sic] from other licensing agencies
such as the Texas Alcoholic Beverage Commission,
Texas Department of Licensing and Regulation, and the
Texas Racing Commission.
These features only underscore the incongruity of the “subsidy” paradigm to the
bingo program here.
As one court aptly stated, “simply because both subsidies and licenses
enure a benefit does not mean they are one and the same. . . . [The government]
may not use its regulatory powers to influence or penalize speech.” Satellite
5
See Tex. Att’y Gen., Informal Letter Ruling No. OR2012-14155, 2012 WL 4041287,
at *2 (Sept. 6, 2012) (“This office has determined the [C]ommission is a law enforcement
agency.” (citations omitted)).
6
See Tex. Occ. Code § 2001.053 (“The [C]ommission may employ officers or
investigators[.]”); id. § 2001.051(b) (“The [C]ommission has broad authority and shall exercise
strict control and close supervision over all bingo conducted in this state[.]”); see also Tex.
Gov’t Code § 467.101(a)(1) (“The [C]ommission has broad authority and shall exercise strict
control and close supervision” over several activities, including bingo.).
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Broad. & Commc’ns Ass’n of Am. v. F.C.C., 146 F. Supp. 2d 803, 830 (E.D. Va.
2001), aff’d, 275 F.3d 337 (4th Cir. 2001) (citations omitted). Accordingly, I
would hold that the Bingo Act creates a regulatory regime that grants the
Charities a benefit–in the form of a license–to conduct bingo games, rather than
a government subsidy. The Bingo Act’s political speech restrictions would thus
be subject to the Supreme Court’s jurisprudence relating to the “unconstitutional
conditions doctrine” and political speech restrictions. Once the analysis is
removed from the “subsidy” realm, then, the unconstitutionality of the Bingo
Act’s political advocacy restrictions becomes apparent.7
III.
A.
The “unconstitutional conditions doctrine” is long-standing:
For at least a quarter-century, this Court has made
clear that even though a person has no ‘right’ to a
valuable governmental benefit and even though the
government may deny him the benefit for any number
of reasons, there are some reasons upon which the
government may not rely. It may not deny a benefit to
a person on a basis that infringes his constitutionally
protected interests–especially, his interest in freedom
of speech.
Perry v. Sindermann, 408 U.S. 593, 597 (1972); see also Rumsfeld v. Forum for
Academic & Institutional Rights, Inc., 547 U.S. 47, 59 (2006) (citation omitted)
(re-affirming the unconstitutional conditions doctrine).
7
It is true that the state of Texas has made a policy decision to allow only the Charities
to conduct bingo games in order to provide additional income to these organizations whose
missions are in the public interest. However, I would hold that the state’s grant of this benefit
is insufficient to bring it within the Supreme Court’s jurisprudence relating to conditions on
government subsidies. Further, categorizing a benefit as a subsidy does not necessarily end
the analysis, as the funding conditions may still be infirm under the unconstitutional
conditions doctrine. See, e.g., Alliance for Open Soc’y, 133 S. Ct. at 2328-30 (applying the
unconstitutional conditions doctrine to a speech restriction on the receipt of government funds
and concluding the restriction was unconstitutional under the First Amendment).
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A state’s mere licensing of an entity does not empower the state to attach
constitutional restrictions to the granting of that license. For example, in 44
Liquormart, Inc. v. Rhode Island, the Supreme Court held unconstitutional
under the First Amendment a state’s statutory prohibition against
advertisements that provided the public with accurate information relating to
liquor prices. 517 U.S. 484, 489 (1996) (plurality op.). In so ruling, the Court
reasoned:
That the State has chosen to license its liquor retailers
does not change the analysis. Even though government
is under no obligation to provide a person, or the public,
a particular benefit, it does not follow that conferral of
the benefit may be conditioned on the surrender of a
constitutional right. In Perry v. Sindermann, . . . the
Court explained that government “may not deny a
benefit to a person on a basis that infringes his
constitutionally protected interests–especially his
interest in freedom of speech.” That teaching clearly
applies to state attempts to regulate commercial
speech, as our cases striking down bans on truthful,
nonmisleading speech by licensed professionals attest.
Id. at 513 (citing, inter alia, Bates v. State Bar of Ariz., 433 U.S. 350, 355 (1977)
(licensed attorneys); Va. Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc.,
425 U.S. 748 (1976) (licensed pharmacists)) (other citations omitted); see also
R.S.W.W., Inc. v. City of Keego Harbor, 397 F.3d 427, 434 (6th Cir. 2005) (“Under
the unconstitutional conditions doctrine, ‘a state actor cannot constitutionally
condition the receipt of a benefit, such as a liquor license or an entertainment
permit, on an agreement to refrain from exercising one’s constitutional rights[.]’”
(citation omitted)).8
8
Notably, the foregoing cases striking down First Amendment restrictions on a state's
grant of a license took place in the commercial speech context. “The Constitution . . . affords
a lesser protection to commercial speech than to other constitutionally guaranteed expression.”
United States v. Edge Broad. Co., 509 U.S. 418, 426 (1993) (citations omitted). The argument
is therefore even more compelling that the restrictions on political speech here are suspect
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In accordance with the Supreme Court’s unconstitutional conditions
jurisprudence, I conclude that the Bingo Act’s political advocacy restrictions are
facially invalid because they fail to survive strict scrutiny. See, e.g., Alliance for
Open Soc’y Int’l, Inc. v. U.S. Agency for Int’l Dev., 651 F.3d 218, 234-39 (2d Cir.
2011), aff’d, 133 S. Ct. 2321 (concluding that certain restrictions on funding
recipients’ speech were unconstitutional conditions by analyzing the restrictions
under heightened scrutiny).
B.
“The freedom of speech . . . which [is] secured by the First Amendment
against abridgment by the United States, [is] among the fundamental personal
rights and liberties which are secured to all persons by the Fourteenth
Amendment against abridgment by a State.” Burson v. Freeman, 504 U.S. 191,
196 (1992) (alterations in original) (quoting Thornhill v. State of Alabama, 310
U.S. 88, 95 (1940)). “Laws that burden political speech are ‘subject to strict
scrutiny,’ which requires the Government to prove that the restriction ‘furthers
a compelling interest and is narrowly tailored to achieve that interest.’” Citizens
United v. Fed. Election Comm’n, 558 U.S. 310, 340 (2010) (citation omitted).
The Bingo Act prohibits the Charities from using their bingo proceeds,
inter alia, to “support or oppose a measure submitted to a vote of the people” or
“influence or attempt to influence legislation.”9 See Tex. Occ. Code §§
2001.456(2), (3). Accordingly, these prohibitions constitute facial restrictions on
under the unconstitutional conditions doctrine. See R.A.V. v. St. Paul, Minn., 505 U.S. 377,
422 (1992) (Stevens, J., concurring in judgment) (“Our First Amendment decisions have
created a rough hierarchy in the constitutional protection of speech. Core political speech
occupies the highest, most protected position; commercial speech . . . [is] regarded as a sort of
second-class expression.”).
9
The Charities do not challenge the Bingo Act’s prohibition on the use of bingo
proceeds “to support or oppose a candidate or slate of candidates for public office.” See Tex.
Occ. Code § 2001.456(1).
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the Charities’ political advocacy, albeit within the confines of the bingo program,
and are therefore subject to strict scrutiny.
C.
The Commission asserts three rationales for the Bingo Act’s political
advocacy restrictions: 1) regulating gambling, including “limiting the size of the
state’s gambling industry”; 2) combating fraud on Texas’s citizens, meaning
“ensuring that [citizens’] money goes only toward the charity advertised by the
bingo hall” and “not lobbyists”; and 3) protecting charities from squandering
bingo revenue on political advocacy, as opposed to their “charitable purpose.”
The Commission characterizes these interests as “substantial,” rather than
“compelling,” since, as the Charities and the district court point out, the
Commission never even attempts to justify the political advocacy restrictions
under strict scrutiny. Rather, the Commission feebly contends that the Bingo
Act does not target political speech, even though the Act facially does just that.
As to the first asserted interest, the Commission is correct that the state
has a “substantial interest” in regulating gambling, including limiting the size
of the industry. See Greater New Orleans Broad. Ass’n v. United States, 527 U.S.
173, 185-86 (1999) (recognizing that the government may have a “substantial
interest” in restricting gambling to combat its related social ills, including
corruption, organized crime, bribery, drug trafficking, and gambling addiction).
Aside from the fact that the Commission cites to no case identifying this interest
as “compelling,” as opposed to “substantial,”10 however, the Commission fails to
explain how its interest in regulating gambling translates into a compelling
10
Under the less rigorous, intermediate scrutiny, a regulation will be upheld under the
First Amendment if it “further[s] an important or substantial governmental interest unrelated
to the suppression of free speech, provided the incidental restrictions d[o] not burden
substantially more speech than is necessary to further those interests.” Turner Broad. Sys.,
Inc. v. F.C.C., 520 U.S. 180, 189 (1997) (internal quotation marks and citation omitted).
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interest in regulating political speech that may or may not relate to gambling.
As the Supreme Court stated in 44 Liquormart:
The text of the First Amendment makes clear that the
Constitution presumes that attempts to regulate speech
are more dangerous than attempts to regulate
conduct. . . . [T]he First Amendment directs that
government may not suppress speech as easily as it
may suppress conduct, and that speech restrictions
cannot be treated as simply another means that the
government may use to achieve its ends.
517 U.S. at 512; see also Greater New Orleans Broad., 527 U.S. at 193. The
Commission fails to connect the conduct it has broad power to regulate with the
political advocacy restrictions in the Bingo Act. This same logic applies to the
Commission’s asserted interests in combating fraud and ensuring that bingo
proceeds go towards the Charities’ charitable purposes.
The Commission also fails to explain why the Charities’ political speech
should be curtailed in order to limit the size of the gambling industry, while
other gambling operators, i.e., dog and horse racetrack operators, may engage
in unfettered political advocacy. The Texas Racing Act (“Racing Act”) authorizes
racetrack operators to conduct gambling within the state. Tex. Rev. Civ. Stat.
art. 179e, § 1.02 (2012). However, these operators are not subject to any political
speech restrictions. See id. This differential treatment among speakers that
engage in substantially similar conduct–facilitating gambling in the
state–undermines the legitimacy of the state’s asserted interest in limiting the
gambling industry’s size. See Citizens United, 558 U.S. at 341 (“We find no basis
for the proposition that, in the context of political speech, the Government may
impose restrictions on certain disfavored speakers.”).
In Citizens United, the Supreme Court held that the government may not,
under the First Amendment, suppress political speech on the basis of the
speaker’s corporate identity. Citizens United, 558 U.S. at 365. Citizens United
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involved a facial First Amendment challenge to 2 U.S.C. § 441b, which, inter
alia, made it unlawful for “any corporation whatever, or any labor organization,
to make a contribution or expenditure in connection with” certain elections. See
2 U.S.C. § 441b(a). The Supreme Court struck down the relevant provisions
because they constituted a ban on corporate speech, notwithstanding the fact
that corporations could form political action committees that would be able to
engage in advocacy: “[T]he Government may not suppress political speech on the
basis of the speaker’s corporate identity. No sufficient governmental interest
justifies limits on the political speech of nonprofit or for-profit corporations.” See
Citizens United, 558 U.S. at 365. The relevant restrictions in Citizens United
also exempted media corporations; those companies were not subject to § 441b’s
ban on corporate expenditures. Id. at 351. The Court found no compelling
reason for differentiating between media corporations and other corporations,
in light of the admittedly dubious governmental interest in preventing “the
corrosive and distorting effects of immense aggregations of wealth that are
accumulated with the help of the corporate form and that have little or no
correlation to the public’s support for the corporation’s political ideas,” i.e., the
“antidistortion rationale.” See id. at 348 (citation omitted). The Court reasoned:
There is no precedent supporting laws that attempt to
distinguish between corporations which are deemed to
be exempt as media corporations and those which are
not. . . .
[B]y its own terms, the law exempts some corporations
but covers others, even though both have the need or
the motive to communicate their views. . . . This
differential treatment cannot be squared with the First
Amendment.
Id. at 352 (citations omitted). Accordingly, the Court concluded: “The law’s
exception for media corporations is, on its own terms, all but an admission of the
invalidity of the antidistortion rationale.” Id.
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Similarly here, Texas law’s exemption of dog and horse racetrack operators
from any political speech restrictions undermines the Commission’s asserted
interest in curtailing the size of the gambling industry.11 See also The Fla. Star,
491 U.S. 524, 540 (1989) (holding that a statute’s underinclusiveness “raises
serious doubts” about whether the law in fact serves the government’s asserted
interest).12
More importantly, even if the Commission’s interests are compelling, the
political advocacy restrictions are not narrowly tailored to achieve those ends.
A law is narrowly tailored if it “advances the state’s interest . . ., does not sweep
11
The Commission contends that, while “horse-track racing is gambling,” “it has not
been the subject of a longstanding constitutional ban, like games of pure chance.” Rather, the
Commission contends, “[s]ince early statehood, the Texas Constitution has banned lotteries,
bingo, gift enterprises, and other ‘schemes for the distribution of prize by chance.’” (citing State
v. Randle, 41 Tex. 292 (1874)). As a result, the Commission observes that no constitutional
amendment was necessary before passage of the Racing Act, unlike the Bingo Act. Further,
the Commission points out that “horse-track races may be conducted by any entity or
individual, whether non-profit or for-profit, who applies for a license . . . including the
[C]harities in this case.”
Nevertheless, the Commission has provided no compelling reason for this court to
differentiate between operators of bingo games and operators of dog and horse racetracks,
especially in light of Citizens United. The Commission’s historic account of the development
of gambling fails to explain how this history translates into a compelling reason for the
disproportionate burden on the Charities’ First Amendment rights specifically. Again, the
Commission’s argument perhaps explains why there would be differences in the regulatory
schemes of the two forms of gambling, but this distinction does not explain why the Charities’
political speech rights should be disproportionately burdened as a result. Moreover, the Texas
legislature authorized the two forms of gambling in the state within five years of one another:
It passed the Bingo Act first, in 1981, following the voters’ approval of a constitutional
amendment, and it passed the Racing Act in 1986. See Bingo Act, 67th Leg., 1st C.S., ch. 11,
1981 Tex. Gen. Laws 85 (current version at Tex. Occ. Code § 2001.001 et seq.); Racing Act, 69th
Leg., 2d C.S., ch. 19, § 1, 1986 Tex. Gen. Laws 48, 53 (current version at Tex. Rev. Civ. Stat.
art. 179e). The fact that the there was no formal, historic ban on racetrack betting thus seems
of limited relevance for our purposes.
12
Texas’s differential treatment of the speech rights of gambling operators is likewise
suspect, in and of itself, under Citizens United. However, I would not necessarily conclude
that this difference alone is sufficient to rule the political advocacy restrictions facially invalid;
rather, it informs the analysis of whether the state has proffered a compelling justification for
the speech restrictions.
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too broadly (is not overinclusive), does not leave significant influences bearing
on the interest unregulated (is not underinclusive), and could be replaced by no
other regulation that could advance the interest as well with less infringement
of speech (is the least-restrictive alternative).” Republican Party of Minn. v.
White, 416 F.3d 738, 752 (8th Cir. 2005) (en banc) (citations omitted).
The availability of nonspeech alternatives for regulating the gambling
industry, combating fraud, and ensuring that the Charities use their bingo
proceeds for charitable purposes render the Bingo Act’s political advocacy
restrictions facially invalid because the speech restrictions are not the least
restrictive means to achieve these ends. See, e.g., Greater New Orleans Broad.,
527 U.S. at 192 (suggesting nonspeech alternatives for curtailing gambling,
including “a prohibition or supervision of gambling on credit; limitations on the
use of cash machines on casino premises; controls on admissions; pot or betting
limits; location restrictions; and licensing requirements”); Vill. of Schaumburg
v. Citizens for a Better Env’t, 444 U.S. 620, 637-38 (1980) (discussing how an
unconstitutional statute prohibiting charitable fundraising could have been more
narrowly tailored by reasoning that “[e]fforts to promote disclosure of the
finances of charitable organizations also may assist in preventing fraud by
informing the public of the ways in which their contributions will be employed”);
see also Riley v. Nat’l Federation of the Blind of N.C., Inc, 487 U.S. 781, 790-92
(1988) (citations omitted) (holding that a statute regulating charities’ solicitation
by professional fund raisers was not narrowly tailored to promoting the state’s
interest in protecting the public and charities from fraud, and to ensuring
maximum financial support for the charities for their own benefit). Regarding
the Commission’s third asserted interest, the Bingo Act already requires that the
Charities use the bingo proceeds for their charitable purposes, and, as the
majority concludes, “an organization’s use of bingo proceeds for political
advocacy is [not] inconsistent with the charitable purpose requirement absent
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the restrictions in [Tex. Occ. Code] § 2001.456,” see ante, at 9, restrictions which
I conclude are unconstitutional and severable.
Moreover, even though the Bingo Act does not constitute a complete ban
on the Charities’ political advocacy, the Commission has not identified a
compelling enough interest in burdening the Charities’ First Amendment rights
in the first instance. While restricting the Charities’ political advocacy using the
bingo proceeds may be more narrowly tailored than an outright ban on all
political speech, there are less restrictive (i.e., nonspeech) means of achieving the
state’s asserted interests here. Accordingly, because the Bingo Act’s political
advocacy restrictions fail to satisfy strict scrutiny, I conclude that they are
facially invalid under the First Amendment.
IV.
I therefore would affirm the district court’s judgment concluding that the
political advocacy restrictions are unconstitutional and permanently enjoining
their enforcement.
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