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

Case: 11-50932 Document: 00512713387 Page: 1 Date Filed: 07/28/2014

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

July 28, 2014

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; UNKNOWN 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

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No. 11-50932

Before STEWART, Chief Judge, and JOLLY, DAVIS, JONES, SMITH,

DeMOSS, DENNIS, CLEMENT, PRADO, OWEN, ELROD, SOUTHWICK,

HAYNES, GRAVES, and HIGGINSON, Circuit Judges. *

STEWART, Chief Judge, joined by JOLLY, DAVIS, JONES, SMITH,

CLEMENT, PRADO, OWEN, ELROD, SOUTHWICK, HAYNES, and

HIGGINSON:

The issue presented in this appeal is the constitutionality of political

advocacy restrictions contained in the Texas Bingo Enabling Act (“the Bingo

Act”). The Bingo Act allows charitable organizations to raise money by holding

bingo games on the condition that the money is used only for the organizations’

charitable purpose. Plaintiffs-Appellees filed suit challenging these

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. The panel majority opinion, which reversed the district

court, was vacated by our decision to rehear this case en banc. Dep’t of Tex.,

Veterans of Foreign Wars of the U.S. v. Tex. Lottery Comm’n, 734 F.3d 1223

(5th Cir. 2013). For the reasons stated below, we now affirm the district court’s

permanent injunction and summary judgment.

I. BACKGROUND

In Texas, gambling is generally prohibited. Tex. Const. art. III, § 47.

However, in 1980, the Texas Constitution was amended to establish an

exception to this prohibition for charitable bingo. Id. § 47(b). The Texas

legislature implemented this exception through the Bingo Act, which

authorizes qualified nonprofit organizations to host bingo games. Tex. Occ.

* Judge King, having taking senior status before the rehearing en banc, did not

participate in this decision. Judge Costa did not participate in the en banc rehearing or in

this decision.

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Code Ann. § 2001.001 et seq. The Bingo Act contains the following political

advocacy restrictions:

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.

Plaintiffs-Appellees are a host of nonprofit organizations (and/or their

parent organizations) licensed to conduct bingo in Texas (“the Charities”). 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. On June 25,

2010, they brought suit under 42 U.SC. § 1983 against the commissioners and

two executive officers of the Texas Lottery Commission, the state agency

responsible for bingo licensing and regulation (collectively, “the

Commission”). 1 Specifically, they alleged that the latter two of these

restrictions, Sections 2001.456(2)–(3), violate their right to freedom of speech.

The First Amendment challenge was twofold: First, the Charities

claimed that subsections two and three of Section 2001.456 are facially

unconstitutional because they are a direct abridgement of speech with no

compelling or substantial justifying interest. Second, they claimed the law

unconstitutionally discriminates between the Charities and similarly situated

businesses, such as racetracks, which are not prohibited from using their

revenue for political purposes.

In light of the then-upcoming legislative session, the Charities moved for

entry of a preliminary injunction barring enforcement of the political speech

1 The Texas Lottery Commission was originally a defendant, but it was dismissed

based on sovereign immunity.

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restrictions in Section 2001.456(2)–(3). The district court granted the

Charities’ request on October 29, 2010 and explained its reasoning in an

extensive opinion. Relying heavily on the Supreme Court’s opinion in Citizens

United v. Federal Election Commission, 558 U.S. 310 (2010), the district court

concluded that the restrictions in Section 2001.456 violate the First

Amendment because they burden political speech and fail to satisfy strict

scrutiny. The district court also concluded that the restrictions are

unconstitutional conditions because they require that, as a condition of

participating in the state’s charitable bingo program, the Charities not exercise

their right to engage in political speech.

The Charities moved for summary judgment, which the district court

granted, permanently enjoining the Commission from enforcing the invalid

provisions. The Commission appealed. A unanimous panel of this court

originally reversed the district court’s summary judgment in favor of the

Charities and its permanent injunction preventing enforcement of the

challenged statutory provisions. Dep’t of Texas, Veterans of Foreign Wars of

U.S. v. Texas Lottery Comm’n, 698 F.3d 239 (5th Cir. 2012), withdrawn, 727

F.3d 415 (5th Cir. 2013), vacated, 734 F.3d 1223 (5th Cir. 2013). After panel

rehearing, a panel majority issued a revised opinion that again reversed the

district court’s judgment. Texas Lottery Comm’n, 727 F.3d 415, vacated, 734

F.3d 1223. Thereafter, this court granted en banc rehearing. 734 F.3d 1223.

II. STANDARD OF REVIEW

We review a district court’s summary judgment de novo, applying the

same standards as the district court. Ballard v. Devon Energy Prod. Co., 678

F.3d 360, 365 (5th Cir. 2012). Summary judgment should be granted if “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).

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III. DISCUSSION

The Commission first attacks the Charities’ standing to bring the

underlying suit. The Commission next argues that because the Bingo Act

creates a subsidy the state may constitutionally attach restrictions to funds

earned by a charity through participation in the program. Additionally, the

Commission argues that even if the Bingo Act does not create a subsidy, the

restrictions are permissible under the First Amendment. We address each

argument in turn.

A. Standing 2

Constitutional standing is a jurisdictional question that 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 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

2 We agree with the panel majority’s conclusion that the Charities have standing to

sue. See Texas Lottery Comm’n, 727 F.3d at 419–21. Accordingly, we generally adopt the

panel majority’s standing analysis herein. See id.

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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 Ann. § 2001.454(a). 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 activity, and (2) the

Commission’s interpretation of the charitable purpose requirement is

reasonable and entitled to deference.

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

Section 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 the organization qualifies as a nonprofit organization as

defined by Section 2001.002. If the organization is not required to

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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 Ann. § 2001.454(b); see also id. § 2001.002(7).

A plain reading of the above definition, which is quite broad, does not

support the Commission’s assertion that an organization’s use of bingo

proceeds for political advocacy is inherently inconsistent with the charitable

purpose requirement. Cf. R.R. Comm’n of Tex. v. Tex. Citizens for a Safe Future

& 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 Ann.

§ 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 that

satisfies this definition. 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 charitable purpose requirement as defined above, and

the Commission provides no basis to conclude otherwise.

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 &

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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

in which it has interpreted the charitable purpose requirement as establishing

a wholesale prohibition on political advocacy. And while the Bingo Act

certainly defines the term “charitable purpose” very broadly, the definition is

not ambiguous. Accordingly, the Charities have standing to bring their claims.

B. The Challenged Provisions

The Commission argues that the Bingo Act’s political advocacy

restrictions do not unconstitutionally burden political speech because they fall

within the government’s power to subsidize some activities to the exclusion of

others. This conclusion is rooted in the Supreme Court’s jurisprudence

regarding the government’s attachment of conditions to its allocation of public

funds, which, in the case of the federal government, arises from Congress’s

spending power.

1. The Bingo Act does not create a subsidy.

The Spending Clause of the U.S. 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.”

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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, 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.

The Commission principally relies on two Supreme Court cases to justify

the provisions as subsidies. See Rust v. Sullivan, 500 U.S. 173 (1991); Regan

v. Taxation with Representation of Wash., 461 U.S. 540 (1983). These cases

hold that the government may attach certain restrictions to direct or indirect

receipt of funds from the public fisc.

In Taxation with Representation, the Supreme Court held that the

Internal Revenue Code’s (“Code”) grant of tax exemption for certain nonprofit

organizations that do not engage in substantial lobbying activities—and its

denial of tax-deductible contributions to those that do—does not violate the

First Amendment. 461 U.S. at 545–51. Specifically, § 501(c)(3) of the Code

allows taxpayers who contribute to tax-exempt, non-lobbying organizations to

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deduct the amount of their contributions on their federal income tax returns.

Id. at 543. Section 501(c)(4) grants tax-exempt status to certain nonprofit

organizations, but contributions to these 501(c)(4) organizations are not tax-

deductible. Id. In upholding these provisions, the Court explained:

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 Court noted that the Code allows a 501(c)(3) organization to create

a 501(c)(4) organization to conduct its lobbying activities. Id. Importantly,

however, a § 501(c)(3) organization could not subsidize its § 501(c)(4) affiliate

because “public funds might be spent on an activity Congress chose not to

subsidize.” Id. Thus, the Court equated tax-deductible donations to “public

funds,” since the donor can then reduce his or her taxable income by this

amount. In this way, Taxation with Representation 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 that required that service providers not advocate for abortion or

provide abortion counseling with funds for the program, Title X. 500 U.S. at

178–81, 203. The Court stated: “[W]e have here not the case of a general law

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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 precedent upholding conditions that would violate the

Constitution if not attached to a grant of public funds. Id. at 195 n.4 (“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.”).

The common thread in Rust and Taxation with Representation 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 (Taxation with Representation). See also Nat’l Endowment for

the Arts v. Finley, 524 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.”). The bingo program in Texas is wholly distinguishable from the

subsidies in Taxation with Representation and Rust simply because no public

monies or “spending” by the state are involved. 3

3 Two later Supreme Court cases, Davenport v. Washington Education Association,

551 U.S. 177 (2007) and Ysursa v. Pocatello Education Association, 555 U.S. 353 (2009), are

also inapposite because the Bingo Act creates a licensing program and not a subsidy. In

Davenport, the Court upheld a law requiring that labor unions receive affirmative

authorization from a nonmember before spending that nonmember’s fees for election-related

purposes when the fees were collected by a government employer. 551 U.S. at 191. The Court

relied on the principles underlying its treatment of situations where the “government is

acting in a capacity other than as regulator” and where the government subsidizes speech in

reaching this holding. Id. at 188–89. However, in the instant case, the government is acting

as a regulator and is not subsidizing speech; therefore, these underlying principles are

inapplicable. In Ysursa, the Court held that Idaho was not required to allow a public-sector

employee to deduct from his wages directly to the union’s political action committee when

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The Commission’s interpretation contorts the definition of “subsidy.”

The Black’s Law Dictionary defines “subsidy” as follows:

A grant, 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). The licensing scheme in the Bingo

Act does not fall into even a broad interpretation of these examples of

“grants . . . made by the government.” See id. 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. This argument is unavailing. 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. Taxation with Representation, 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

Idaho did allow the employee to deduct from his wages union dues. 555 U.S. at 355. In so

holding, the Court relied on Taxation with Representation and noted that by allowing this

deduction, the government was not required to aid the unions in their political speech. Id. at

359. Here, however, the Charities, not the government, administer the bingo games

themselves in a manner similar to any other occupational license granted by the state.

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omitted)). Here, however, the Commission’s own website describes bingo as a

“business.” The bingo programs are run completely by the Charities and any

funds raised are the result of the Charities’ own efforts. The Charities pay the

state an annual licensing fee as well as five percent of each bingo prize

awarded. Tex. Occ. Code Ann. §§ 2001.104, 2001.502.

The premise upon which Taxation with Representation 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 an

occupational license, where the state grants an entity that satisfies certain

qualifying criteria the authority to 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. For example, the Commission’s Charitable

Bingo Division is characterized as a “law enforcement agency.” See Tex. Att’y

Gen., Informal Letter Ruling No. OR2012–14155, 2012 WL 4041287, at *2

(Sept. 6, 2012). It regulates all bingo-related activities, including the types of

games played, game frequency and times, and bingo-employee qualifications.

Tex. Occ. Code Ann. §§ 2001.055, 2001.419, 2001.313. The provision’s

placement in Texas’s Occupations Code further supports its characterization

as an occupational license. All these features 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

Broad. & Commc’ns Ass’n of Am. v. FCC, 146 F. Supp. 2d 803, 830 (E.D. Va.

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2001), aff’d, 275 F.3d 337 (4th Cir. 2001) (citations omitted). Accordingly, we

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 restrictions are thus subject to the

Supreme Court’s jurisprudence relating to the “unconstitutional conditions

doctrine” and laws burdening political speech.

2. The Bingo Act includes unconstitutional conditions.

The “unconstitutional conditions doctrine” is well-established:

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). 4

A state’s mere licensing of an entity does not empower the state to attach

unconstitutional restrictions to the granting of that license. For example, in

4 The Supreme Court has not treated the unconstitutional conditions doctrine as an

absolute prohibition. In other contexts, it has suggested that certain conditions that abridge

constitutional rights can sometimes be constitutional conditions. See Nollan v. Cal. Coastal

Comm’n, 483 U.S. 825, 836 (1987) (“[T]he Commission’s assumed power to forbid construction

of the house in order to protect the public’s view of the beach must surely include the power

to condition construction upon some concession by the owner, even a concession of property

rights, that serves the same end.”). If the greater power to prohibit gambling for a good

reason includes the lesser power to condition for the same reason, Texas has not exercised its

lesser power to condition for such a reason. The doctrine is perhaps best summed up by

Dolan v. City of Tigard: “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 where the benefit sought has little or no

relationship to [the right].” 512 U.S. 374, 385 (1994) (emphasis added) (citations omitted).

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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.

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, 770 (1976) (licensed pharmacists)); 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)). 5

We conclude that because the subsidy rationale is inapplicable, the

unconstitutional conditions doctrine controls. Congress and, by extension,

state legislatures may not condition the conferral of a government benefit on

5Notably, 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 under the unconstitutional

conditions doctrine. See R.A.V. v. City of St. Paul, 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 . . . .”).

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the forfeiture of a constitutional right. 44 Liquormart, Inc., 517 U.S. at 515.

Accordingly, we address whether the conditions are unconstitutional burdens

on political speech.

3. The provisions burden political speech.

As the Supreme Court instructed in Citizens United, “[l]aws 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.” 558 U.S. at 340 (internal quotation marks

and citation omitted). The Commission argues that the challenged provisions

do not burden political speech; however, the express language of the Bingo Act

belies that proposition. The provisions at issue prohibit the Charities from

using their bingo proceeds to “support or oppose a measure submitted to a vote

of the people; or [] influence or attempt to influence legislation.” Tex. Occ. Code

Ann. § 2001.456(2)–(3). While the provisions limit the Charities’ use of bingo

funds, they are nevertheless targeted at political speech. Any argument to the

contrary is dubious at best. In this respect, the Bingo Act’s restrictions are

distinguishable from the provisions at issue in Southern Christian Leadership

Conference.

In Southern Christian Leadership Conference, the Louisiana Supreme

Court promulgated a rule prohibiting non-attorney student members of clinics

from representing as attorneys any client that the clinic had solicited. 252

F.3d at 785. This court determined that such a rule neither prohibited nor

prevented speech of any kind. Id. at 789. Importantly, the provision had no

bearing on the speech component of the rule—the actual solicitation of clients.

Id. It merely prohibited any non-lawyer students of the clinic from directly

representing such clients. Id. The clinics’ supervising attorneys could

represent the solicited clients and the students could work on the cases in other

capacities. Id. at 792. The restriction was on representation—it limited the

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circumstances under which non-attorneys could act as attorneys. See id. By

contrast, the restrictions at issue in this case explicitly and directly limit the

Charities’ ability to engage in political speech.

Because the challenged provisions constitute facial restrictions on the

Charities’ political speech, strict scrutiny applies. Therefore, the Commission

must demonstrate that the provisions serve a compelling interest and are

narrowly tailored to satisfy that interest. See Citizens United, 558 U.S. at 340.

4. The provisions cannot withstand strict scrutiny.

The Commission fails to identify a compelling state interest. It raises

three rationales in support of the challenged provisions: 1) regulating

gambling, including reducing the size of the gambling industry in Texas; 2)

combating fraud by ensuring that bingo proceeds are only used in support of

charities, not lobbyists; and 3) promoting charities—that is, ensuring charities

do not forgo spending their bingo revenue on their charitable purpose by

squandering those funds on political advocacy. Notably, as the Charities and

the district court stated, the Commission never attempts to characterize these

interests as compelling. Indeed, the Commission never purports to justify the

challenged provisions under strict scrutiny review. Rather, the Commission

merely contends that the rationales are substantial state interests.

The Commission’s first interest—regulating gambling—fails to properly

support the challenged provisions under strict scrutiny. While the Supreme

Court has recognized regulating gambling as a substantial state interest, see

Greater New Orleans Broad. Ass’n v. United States, 527 U.S. 173, 185–86

(1999), there is no authority suggesting that it is a compelling interest.

Moreover, we fail to see how Texas’s interest in regulating gambling is

furthered by restricting the Charities’ political speech, which may or may not

relate to gambling, and the Commission has failed to present any convincing

argument to that effect. See 44 Liquormart, Inc., 517 U.S. at 512 (“[T]he First

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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.”).

Equally troubling is the underinclusiveness of the challenged provisions.

Whereas the Bingo Act constrains the Charities’ political speech, see Tex. Occ.

Code Ann. § 2001.456(2)–(3), other gambling operators, such as horse and dog

racetrack operators, remain free to engage in unfettered political advocacy, see

Tex. Rev. Civ. Stat. art. 179e § 1.02 (2012). Such obvious underinclusiveness

undermines any argument that Texas is truly interested in regulating

gambling. See The Fla. Star v. B.J.F., 491 U.S. 524, 540 (1989) (“[T]he facial

underinclusiveness of § 794.03 raises serious doubts about whether Florida is,

in fact, serving, with this statute, the significant interests which appellee

invokes in support of affirmance.”); FCC v. League of Women Voters of Cal., 468

U.S. 364, 396 (1984) (“The patent . . . underinclusiveness of § 399’s ban

undermines the likelihood of a genuine [governmental] interest . . . .”

(alteration in original) (internal quotation marks and citation omitted)).

Moreover, as the Supreme Court noted in Citizens United, the First

Amendment prohibits “restrictions distinguishing among different speakers,

allowing speech by some but not others.” 6 558 U.S. at 340.

The Commission’s remaining interests—combating fraud and promoting

charities—are equally unpersuasive. Similar to the Commission’s interest in

regulating gambling, the Commission has failed to explain how its interests in

combating fraud and promoting charities are furthered by infringing on the

6The Commission has not articulated a compelling reason justifying the differential

treatment of bingo operators and dog and horse racetrack operators. To the contrary, the

Commission merely has recounted the history of gambling in Texas. While the development

of gambling may demonstrate differing regulatory schemes governing bingo gaming as

opposed to dog and horse racetracks, it fails to explain why one group’s political speech is

constrained but the other group’s political speech is not.

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Charities’ political speech. The Commission’s supposition that Texans are

defrauded when Charities allocate a portion of their bingo proceeds to political

advocacy is unfounded. Further, the Supreme Court previously has found such

paternalistic justifications unavailing. See Riley v. Nat’l Fed’n of the Blind of

N.C., Inc., 487 U.S. 781, 790–91 (1988) (“The State’s remaining justification—

the paternalistic premise that charities’ speech must be regulated for their own

benefit—is equally unsound. The First Amendment mandates that we

presume that speakers, not the government, know best both what they want

to say and how to say it.” (collecting citations)).

Even assuming that the Commission’s interests are compelling, the

challenged provisions are not narrowly tailored to achieve those ends. A law

is narrowly tailored if it “actually advances the state’s interest . . . , does not

sweep too broadly . . . , 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, 751 (8th Cir. 2005) (en banc) (citations omitted).

There are a myriad of alternatives available to the Commission to assist

it in regulating the gambling industry, combating fraud, and promoting

charities. See, e.g., Greater New Orleans Broad., 527 U.S. at 192 (suggesting

nonspeech alternatives for curtailing gambling). Any possibility of fraud could

be easily addressed by imposing public disclosure requirements on charities.

See, e.g., Vill. of Schaumburg v. Citizens for a Better Env’t, 444 U.S. 620, 637–

38 (1980) (reasoning that “promot[ing] 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”). As for the

Commission’s interest in promoting charities by ensuring that bingo proceeds

are spent on charitable purposes, the Bingo Act already mandates that bingo

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proceeds be used in furtherance of the Charities’ charitable purposes. Tex. Occ.

Code Ann. § 2001.454 (“A licensed authorized organization shall devote to the

charitable purposes of the organization its net proceeds of bingo and any rental

of premises.”).

Accordingly, the political advocacy restrictions in the Bingo Act do not

withstand strict scrutiny. Not only has the Commission failed to articulate a

compelling interest justifying the challenged provisions, but even if we were to

accept the interests raised by the Commission as compelling, the restrictions

are not narrowly tailored. Consequently, the provisions at issue are facially

invalid under the First Amendment.

IV. CONCLUSION

Accordingly, we affirm the district court’s permanent injunction and

summary judgment.

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JAMES L. DENNIS, Circuit Judge, joined by DeMOSS and GRAVES, Circuit

Judges, dissenting:

Although I am in sympathy with the majority’s desire to promote strong

First Amendment protection of political speech, in my view, the Supreme

Court’s decisions in Ysursa v. Pocatello Education Association, 555 U.S. 353

(2009), Davenport v. Washington Education Association, 551 U.S. 177 (2007),

and Regan v. Taxation with Representation of Washington, 461 U.S. 540 (1983),

do not permit us to apply strict or heightened scrutiny necessary for us to strike

down the particular type of alleged speech restriction at issue in this case.

Ysursa involved Idaho laws under which government employees were

given the option of having the government, as their employer, deduct a portion

of their wages to pay their union dues. Government employees, however, were

not allowed to have the government deduct a portion of their wages to remit to

the union’s political action committee. Unions representing Idaho public

employees challenged this limitation as a violation of their First Amendment

rights. The Supreme Court rejected the challenge because, the Court

explained, while the First Amendment operates as a negative restraint to

forbid the government from “abridging the freedom of speech,” the amendment

“does not confer an affirmative right to use government payroll mechanisms

for the purpose of obtaining funds for expression.” 555 U.S. at 355. The Court

elaborated:

While publicly administered payroll deductions

for political purposes can enhance the unions’ exercise

of First Amendment rights, Idaho is under no

obligation to aid the unions in their political activities.

And the State’s decision not to do so is not an

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abridgment of the unions’ speech; they are free to

engage in such speech as they see fit. They simply are

barred from enlisting the State in support of that

endeavor.

Id. at 359. The challenged Idaho laws did not “restrict political speech,”

the Court concluded, but merely “decline[d] to promote that speech by allowing

public employee checkoffs for political activities.” Id. at 355. Thus, because

the state did “not infringe[] the unions’ First Amendment rights,” the Court

held that the challenged laws were subject to only “deferential” “rational basis”

review. Id. at 359, 362.

In Ysursa, the Court relied on its prior decision in Davenport, stating

that it “guides our resolution here.” Id. at 360. In Davenport, the Court

addressed Washington state laws under which unions of government

employees were authorized to levy “agency fees” on employees who were not

union members but were nevertheless benefited by the union’s collective

bargaining. The union was not allowed, however, to spend such fees on

political speech unless “affirmatively authorized” by the person from whom the

fee was recovered. 551 U.S. at 182 (quoting statute). That “affirmative

authorization” restriction was at issue. The Court upheld the challenged

statute, “recogniz[ing],” as the Ysursa Court explained, “that the statute,

rather than suppressing union speech, simply declined to assist that speech by

granting the unions the right to charge agency fees for election activities.”

Ysursa, 555 U.S. at 361 (citing Davenport, 551 U.S. at 188-90).

Third is Regan, on which both Ysursa and Davenport relied. There, the

Court upheld the federal tax code’s refusal to provide certain tax benefits for

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political lobbying, explaining that, “Congress has not infringed any First

Amendment rights or regulated any First Amendment activity,” but has

“simply chosen not to pay for . . . lobbying.” 461 U.S. at 546. In Ysursa, the

Court stated that the government’s “decision not to assist fundraising” “is

simply not the same as directly limiting expression” and cited Regan in support

of the distinction. Ysursa, 555 U.S. at 360 n.2 (citing Regan, 461 U.S. at 550).

And in Davenport, the Court cited Regan for the proposition that the First

Amendment “does not require the government to enhance a person’s ability to

speak.” Davenport, 551 U.S. at 190.

It appears to me that the Texas charitable bingo program is analogous

to the circumstances addressed in Ysursa, Davenport, and Regan. The

charitable bingo program should not be considered in a void, but rather in its

proper context. Cf. ante, at 16 (calling the argument that charitable bingo does

not burden political speech “dubious at best” because the statute’s text is

“targeted at political speech”). We start from the contextual premise that, as

a matter of law, gambling, including bingo, “implicates no constitutionally

protected right” and rather “falls into a category of ‘vice’ activity that could be,

and frequently has been, banned altogether.” United States v. Edge Broad.

Co., 509 U.S. 418, 426 (1993); see also There to Care, Inc. v. Comm’r of Ind.

Dep’t of Revenue, 19 F.3d 1165, 1167 (7th Cir. 1994) (“Gambling has

traditionally been closely regulated or even forbidden, without anyone

suspecting that these restrictions violate the first amendment.”). And as a

matter of contextual fact, in Texas, bingo and other gambling has been

prohibited for most of the state’s history.

It was not until 1980 that Texas voters amended the state constitution

to allow charitable bingo as an exception to the general prohibition on

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gambling, see TEX. CONST. art. III, § 47, and not until 1981 that the legislature

enacted the Bingo Enabling Act, see TEX. OCC. CODE § 2001.001 et seq., which

allows bingo to operate in the state in only very limited circumstances. Under

the Act, only specified categories of religious and nonprofit organizations

(certain “religious societies,” “nonprofit organizations whose predominant

activities are for the support of medical research or treatment programs,”

“fraternal organizations,” “veterans organizations,” “volunteer fire

departments,” and “volunteer emergency medical services providers”) are

allowed, if licensed, to host bingo games on condition that they use their bingo

proceeds to support the “charitable purposes” of the organization. Id.

§§ 2001.101, 2001.454. They are not, however, permitted to use their bingo

proceeds, but they may use any other funds, to “support or oppose a measure

submitted to a vote of the people” or to “influence or attempt to influence

legislation.” Id. § 2001.456. 1

The 1981 charitable bingo program represents a legislative judgment

that, although the longstanding general prohibition on gambling should stand,

the social costs that support the suppression of gambling are outweighed in

limited circumstances. That is, regulated bingo should be permitted, the

legislature decided, if it means that health clinics for the poor have more funds

for medical services, that volunteer fire departments have more funds to

protect their communities, etc. The charitable bingo program is, in essence, a

legislative effort at promoting those aims, which the legislature has identified

as sufficiently worthy to warrant an exception to the gambling ban.

1Texas law also prohibits charitable bingo licensees from using their bingo proceeds

to “support or oppose a candidate or slate of candidates for public office,” but the plaintiffs-

appellees here do not challenge that restriction.

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Viewed in such light, it appears, under the reasoning of Ysursa,

Davenport, and Regan, that the charitable bingo program’s limitation against

the use of bingo proceeds for lobbying and other political speech, which the

legislature has decided not to promote, does not “suppress” that speech, thus

subjecting the statute to strict or heightened scrutiny under the First

Amendment. Pre-1981, before the charitable bingo program was created, the

appellees here could use their general funds for any political advocacy they

desired. The creation of charitable bingo in 1981 did nothing to change that.

Today, with the charitable bingo program in place, the appellees remain

equally free to use their general funds for any political advocacy they desire.

They are only restricted from using their new, post-1981 charitable bingo

proceeds, which they were previously prohibited from obtaining, for political

advocacy. In other words, the appellees’ only grievance with the charitable

bingo program that Texas created in 1981 is that it does not “assist [them] in

funding the expression of [certain political speech].” Ysursa, 555 U.S. at 358.

But, as the Supreme Court has said, the First Amendment “does not require

the government to enhance a person’s ability to speak.” Davenport, 551 U.S.

at 190 (citing Regan, 461 U.S. at 549-50).

Therefore, under the reasoning of Ysursa, Davenport, and Regan, I

respectfully dissent from the majority’s striking down the challenged parts of

the Texas charitable bingo program under strict or heightened scrutiny.

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JAMES E. GRAVES, Circuit Judge, joined by DeMOSS and DENNIS, Circuit

Judges, dissenting.

I fully join Judge Dennis in dissenting from the majority opinion, which

strikes down the challenged parts of the Texas charitable bingo program under

strict scrutiny. However I write separately to address the majority’s holdings

that the Bingo Act does not create a subsidy and that the unconstitutional

conditions doctrine applies in this case.

The Texas Constitution bans gambling. However, in 1980, Texas voters

approved an amendment establishing an exception for charitable bingo. The

Texas Bingo Enabling Act, passed in 1981, allows qualifying Texas charities to

obtain a license to hold bingo games so long as all proceeds are spent in Texas

and used for charitable purposes. The Act prohibits the use of bingo proceeds

to support or oppose political candidates, to support or oppose ballot measures,

or for lobbying. However, charities are not prohibited from using their own

money for these purposes.

The Charities brought a facial challenge of the Act, asserting that the

restrictions violate their First Amendment rights to free speech. The district

court agreed and granted summary judgment for the charities. The district

court also granted an injunction preventing enforcement of the challenged

provisions. A panel of this court reversed the district court. On en banc

rehearing, the majority now affirms the district court’s permanent injunction

and summary judgment. In affirming the district court, the majority concludes

that the Bingo Act does not provide a subsidy to the Charities and that it

includes unconstitutional conditions. I disagree.

In general terms, “the unconstitutional-conditions doctrine examines the

extent to which government benefits may be conditioned or distributed in ways

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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, 92 S.Ct. 2694, 33

L.Ed.2d 570 (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.

However, the Supreme Court has also held that when the 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, 111 S.Ct. 1759,

114 L.Ed.2d 233 (1991). In Rust, the Court held that 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

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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, 103 S.Ct. 1997, 76 L.Ed.2d 129

(1983), which involved restrictions similar to those at issue here. In Regan,

the Court held that the statute prohibiting tax exemptions for organizations

whose activities include a substantial amount of lobbying did not violate the

unconstitutional conditions doctrine. Specifically, the Court 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 the 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, 123 S.Ct. 2297, 156 L.Ed.2d 221 (2003) (rejecting

an argument that libraries' speech rights were violated by requiring that they

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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)).

The Charities argue, and the majority agrees, 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. The

majority concludes that Rust and Regan are distinguishable because “no public

monies or ‘spending’ by the state are involved” in the bingo program in Texas.

(Maj. Op. at 316-318). I disagree, as these arguments 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. Notwithstanding the existence

of this income stream, the State also spends money to run the program, as

discussed more fully below.

The majority says that the Commission “contorts the definition of

‘subsidy’” and cites Black’s Law Dictionary before concluding that “[t]here is

no direct or indirect receipt of funds from the public fisc.” (Maj. Op. at lines

319-20, 331-32). However, the definition quoted by the majority does not

include any such statement requiring “direct or indirect receipt of funds from

the public fisc.” (Maj. Op. at lines 321-223). The definition merely says a

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“grant, made by the government, to any enterprise whose promotion is

considered to be in the public interest.” Black’s Law Dictionary 1565 (9th ed.

2009). The majority then concedes that there is, in fact, a grant by the

government here, i.e., “the legislative authority to conduct what would be

illegal otherwise – bingo games.” (Maj. Op. at lines 332-333). The majority

also concedes that the bingo program involves public monies and spending by

the state. Specifically, the bingo program requires Texas to spend money not

only on licensing, but also to essentially run a “law enforcement agency” and

regulate “all bingo-related activities, including the types of games played,

game frequency and times, and bingo-employee qualifications.” (Maj. Op. at

361, 363-364).

While some of these are regulatory costs, the majority cites no controlling

authority for its conclusion that a bingo program is a regulatory scheme, which

is akin to an occupational license and, thus, cannot be a subsidy. The majority

cites a district court case from Virginia for the statement that, “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 Broad. & Commc’ns Ass’n of Am. v. FCC, 146 F.

Supp. 2d 803, 830 (E.D. Va. 2001), aff’d, 275 F.3d 337 (4th Cir. 2001). Notably,

the Fourth Circuit found it unnecessary to address the argument of whether

the statutory copyright license should be seen as a targeted government

subsidy because they found that the rule in question was consistent with the

First Amendment. Satellite Broad. & Commc’ns Ass’n of Am., 275 F.3d at 355,

n.6.

There are, of course, many significant distinctions between a commercial

occupational license and a state charitable gaming program, created by the

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state constitution, that allows select charities to raise extra money through a

gambling activity on the condition the money is used for the organizations'

charitable purpose. Thus, under the definition of “subsidy” and the applicable

case law of Rust and Regan, the government may attach speech restrictions to

the bingo funds. See also Ysursa v. Pocatello Educ. Ass’n, 555 U.S. 353, 359

(2009); Davenport v. Washington Educ. Ass’n, 551 U.S. 177 (2007).

The Charities and the district court relied on Citizens United, 558 U.S.

310, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010), to support the conclusion that the

challenged provisions are facially unconstitutional under the First

Amendment because they burden political speech. But, Citizens United is

distinguishable in two key respects. Citizens United involved a challenge to a

federal statute prohibiting corporations from making expenditures for speech

relating to federal elections. Id. at 320-21. 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 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.

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 U.S. at 337. In other words, the restrictions in Citizens United completely

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foreclosed any way for corporations to engage in the prohibited political speech.

Id. However, the provisions at issue in this case 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. ----, 133 S.Ct. 2321, 2328–31, 186 L.Ed.2d

398 (2013) (reaffirming this principle). The Bingo Act's political advocacy

restrictions fall within the government's power to subsidize some activities to

the exclusion of others and therefore do not penalize political speech. As the

Charities are not prohibited from engaging in lobbying or political speech

outside the scope of the bingo program, the unconstitutional conditions

doctrine is not implicated here.

Moreover, even if the unconstitutional conditions doctrine was

implicated here, as Judge Dennis says, strict scrutiny is not appropriate.

Rather, the Commission would merely have to establish, at the very most, a

substantial state interest to justify the challenged provisions. 1 The majority

concedes that the Supreme Court has recognized the Commission’s first

1 I am not suggesting that intermediate scrutiny applies.

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Case: 11-50932 Document: 00512713387 Page: 33 Date Filed: 07/28/2014

No. 11-50932

interest of regulating gambling as a substantial state interest. See Greater

New Orleans Broad. Ass’n v. United States, 527 U.S. 173, 185-86 (1999). (Maj.

Op. at 465-468). 2

For the reasons stated herein, the challenged provisions in this case do

nothing to restrict speech outside the scope of the State's bingo program.

Charities are free to participate in the bingo program and to engage in political

advocacy; they simply must not use bingo proceeds to do so. 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.

Thus, I respectfully dissent.

2 The majority takes issue with Texas’ interest in regulating gambling based on the

ability of horse and dog racetrack operators being able to engage in “unfettered political

advocacy.” (Maj. Op. at 479). Despite the fact that Charities also enjoy a nonprofit or charity,

if you will, status and the ability to conduct bingo games unavailable to for-profit horse and

dog racetrack operators, the Charities are able to engage in “unfettered political advocacy”

with their own money.

33