OLYMPIA, Wash. (Legal Newsline) - Washington Attorney General Robert Ferguson cited the wrong statute when he accused a retail chain of deceiving consumers into thinking they helped charities by purchasing donated goods, an appeals court ruled, finding the state’s consumer protection statute was too broad to cover speech involving charitable donations.
Ferguson sued TVI Inc. in 2017, accusing the operator of Value Village stores of misleading shoppers with advertising slogans such as “These racks support more than just clothes,” and “For over 60 years, Value Village has helped charities, communities and the planet prosper through the power of re-use.” For-profit TVI, with more than $1 billion a year in revenue, buys donated goods in bulk from charities and resells them at a profit.
The state won at trial, with a judge ruling in 2019 that TVI “knew or should have known” that its advertising could deceive consumers into thinking it was a nonprofit and its sales directly benefited charities.
TVI appealed, arguing the contested marketing statements were in fact charitable solicitations covered under a different Washington law and protected by the strictest standards of the First Amendment. Washington opposed the appeal, saying TVI’s advertising was mere commercial speech, which can be regulated under the consumer protection statute if it has the capacity to mislead consumers.
The Washington Court of Appeals agreed with TVI, overturning the trial judgment in an Aug. 16 decision. While elements of TVI’s advertising were commercial speech subject to the consumer protection statute, the court ruled, the statements about charities were “inextricably bound” with the purely commercial speech, placing it all under the strict scrutiny requirement of the First Amendment.
The appeals court also rejected Washington’s request to uphold the trial judge’s ruling that TVI violated the consumer protection statute because it “knew or should have known” its advertising was misleading. The requirement of guilty knowledge, or mens rea, isn’t in the Consumer Protection Act, the court said.
“The CPA is not ambiguous and requires no interpretation,” the court ruled. “The CPA does not include a mens rea element.”
To support its decision, the court cited a Fifth Circuit decision from 2011 allowing for-profit companies to pay charities a flat fee for using their logos on bins where they collected donated goods to resell at a profit. That court described the bins as “silent solicitors” that “implicitly advocate” for the charities’ causes and values.
Washington accused TVI of misleading consumers because it paid charities up front for goods, instead of contributing money to charity for each sale. The AG also accused TVI of deception by paying a flat $4,000-a-month fee to one charity, which he said could mislead consumers into thinking each sale benefited the charity.