For-Profit Thrift Store Secures First Amendment Dismissal of Deceptive Marketing Claims Relating to Nonprofits

The Supreme Court of Washington unanimously agreed with TVI Inc., doing business as Value Village, that claims brought by the state's attorney general for alleged deceptive advertising and marketing had to be dismissed because they infringed on the organization's First Amendment right to solicit contributions on behalf of nonprofit organizations.

According to the opinion, TVI operates about 20 for-profit thrift stores in Washington. It contracts with nonprofit organizations that either independently collect donations that they give to TVI or allow TVI to collect donations on their behalf at TVI's locations. What is in it for both parties? As the court summarized:

By working with charity partners, TVI obtains inventory at a lower price than it would pay a for-profit supplier. The charity partners, in turn, receive a predictable source of unrestricted funding, as well as publicity from TVI's marketing.

The attorney general raised concerns about "deceptive net impressions" in violation of the state's Consumer Protection Act. By the time the case reached the state supreme court, only three such impressions were still at issue: "(1) 'that [TVI] is itself a nonprofit or charitable organization,' (2) 'that in-store purchases . . . provide a financial benefit to [TVI's] charity partners,' and (3) 'that donations accepted at [TVI's] retail stores in the Spokane, Washington, market benefitted The Rypien Foundation' from January 2014 to February 2015." 

Applying the U.S. Supreme Court's charitable solicitation cases and other First Amendment precedents, the Washington Supreme Court held that TVI's marketing had full First Amendment protection as it inextricably intertwined charitable solicitations and commercial speech. Given the state's claims imposed content-based restrictions, the court further held the claims must survive exacting scrutiny. The court concluded they did not because "[t]wo of the State's claims are not based on properly tailored allegations, and the third is not supported by exacting proof."

Coverage: Seattle Times.

Lloyd Mayer