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A lawsuit challenging a New York law that stops merchants from adding a surcharge for credit card purchases was sent back to the Second Circuit by the U.S. Supreme Court March 29 ( Expressions Hair Design v. Schneiderman , 2017 BL 100257, U.S., No. 15-1391, 3/29/17 ).
The merchants argued that the law keeps consumers in the dark because merchants can’t truthfully advertise how they price their products, while New York asserted that the law prevents consumer anger.
The U.S. Court of Appeals for the Second Circuit found that the law regulates conduct, but Chief Justice John G. Roberts, writing for the court, disagreed, finding that it regulates speech.
The holding was not surprising, given how strongly the Roberts Court has upheld free speech principles, a constitutional law professor told Bloomberg BNA.
The high court, unanimous in the judgment, declined to dive into the First Amendment issues raised by the parties, however, including whether the law is a valid commercial speech regulation, because we “are a court of review, not of first view,” it said.
It remanded for the Second Circuit to analyze the law as a speech regulation.
The court may have remanded the case because it only has eight members, Deepak Gupta, an attorney for the merchants challenging the law, told Bloomberg BNA.
Gupta is the founding principal of Gupta Wessler PLLC in Washington.
“You can see in their opinions a strong effort to be minimalist,” Gupta said.
This minimalism can also be attributed to the fact that the court limited its analysis as it applied to this particular pricing practice, Steven D. Schwinn, a constitutional law professor at the John Marshall Law School in Chicago, told Bloomberg BNA.
“It’s a very narrow decision,” Schwinn said.
I’m therefore “not sure the ruling itself will have much of an impact one way or the other,” he said.
Another possible reason for the remand may be the effort to avoid Lochnerization of the First Amendment, an issue that was “ lurking in the background of the case,” Gupta said.
In Lochner v. New York, the U.S. Supreme Court struck down an economic regulation, finding it violated the constitutional liberty of contract.
Lochner was widely criticized and eventually overruled. Since then, the high court has been loath to interfere with economic regulation.
The “last thing we wanted to do with this case” was to further the deregulatory agenda and we “took pains” to avoid implicating the doctrine by, for instance, not arguing for the highest level of strict scrutiny, Gupta said.
The court “drew a very clear line” that doesn’t expansively open the door to lots of deregulatory uses of the First Amendment and they also didn’t say anything about the level of scrutiny,” he said.
By sending the case back, the court “dodged the question” and saved for another day “a reckoning on strict scrutiny for commercial speech restrictions,” Gupta said.
The law—N.Y. Gen. Bus. Law §518—states that no seller “may impose a surcharge on a holder who elects to use a credit card” instead of a cash payment.
The merchants challenging the law argued that it keeps consumers in the dark by criminalizing truthful speech, because where a seller chooses to set its sticker price is a communicative act.
But New York asserted that the law merely prevents unfair profiteering, consumer anger and deceptive sales tactics.
Section 518 “is not like a typical price regulation” that regulates a seller’s conduct by dictating how much to charge for an item, the court said.
It regulates “how sellers may communicate their prices,” it said.
For example, a merchant who want to charge $10 per item for cash buyers and $10.30 for credit card users can’t tell buyers it costs $10 plus a 30-cent charge for credit but has to display one price—$10.30, the court said.
“In regulating the communication of prices rather than prices themselves, §518 regulates speech,” it said.
This holding is not surprising because the Roberts Court has “time and time again upheld free speech principles” against legislation restricting it, Schwinn said.
Justice Stephen G. Breyer concurred in the judgment, but said that because the law’s interpretation is unclear, on remand, the Second Circuit should ask New York’s highest court to clarify it, as this “is a matter of state law.”
Justice Sonia Sotomayor, joined by Justice Samuel A. Alito, Jr., also concurred in the judgment but called the majority’s ruling a “quarter-loaf outcome.”
The holding didn’t fully address the petitioners’ question of whether the law unconstitutionally restricts speech, Sotomayor said.
Even though §518 “evades easy interpretation” and is ambiguous, “a partial decision was neither required not right,” she said.
The Second Circuit erred by not certifying the question of the statute’s interpretation to the N.Y. Court of Appeals “and this Court errs by not correcting it,” Sotomayor said.
“I would vacate the judgment below and remand with instructions to” certify the question for a definitive interpretation, she said.
Gupta didn’t agree with Sotomayor’s bread analogy.
The ruling “squarely addressed” our concern about listing surcharges and what it leaves open is: How do you apply First Amendment scrutiny to this law, he said.
On remand, we’ll show that “the laws fail scrutiny under the First Amendment because they have the purpose and effect of keeping consumers in the dark about the cost of credit cards,” he said.
The New York attorney general’s press office said in a statement released to Bloomberg BNA that it respects “the Court’s decision and will continue to defend the statute on remand.”
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