Tuesday, September 29, 2015
Reversing United States District Judge Jed Rakoff who had declared unconstitutional New York General Business Law § 518 prohibiting sellers from imposing a surcharge on customers who use credit cards, the Second Circuit's opinion in Expressions Hair Design v. Schneiderman held that the law does not violate either the First Amendment or the Due Process Clause. [UPDATE: The Second Circuit issued an AMENDED OPINION on December 11, 2015].
The expressive element in the challenge to pricing regulation is not immediately obvious. But as Judge Debra Ann Livingston's opinion for the unanimous panel explains:
Section 518 does not prohibit all differentials between the price ultimately charged to cash customers and the price ultimately charged to credit‐card customers; it forbids charging credit‐card customers an additional amount above the regular price that is not also charged to cash customers, but it permits offering cash customers a discount below the regular price that is not also offered to credit‐card customers. (That is, it allows what we have termed “cash discounts.”) To illustrate, if a seller’s regular price is $100, it may not charge credit‐card customers $103 and cash customers $100, but if the seller’s regular price is $103, it may charge credit‐card customers $103 and cash customers $100.
Plaintiffs’ submissions reveal that they are claiming First Amendment protection for two distinct kinds of pricing schemes. First, Plaintiffs aver that they would like to post only a single price for their goods and services and charge more than that price to credit‐card customers, but are prohibited from doing so by Section 518. (Five Points Academy: “It is not our intention to display two separate prices for each good and service that we offer, but rather to display—with roughly equal prominence—a single set of prices and the credit card surcharge amount.”); (Expressions Hair Design: “We would like to . . . characterize the price difference as a 3% credit‐card surcharge on top of the listed cash price.”). In other words, Plaintiffs are seeking First Amendment protection for the kind of straightforward single‐sticker‐price scheme that Section 518 clearly prohibits. Second, Expressions Hair Design (the only Plaintiff to do so) currently posts two different prices for its services—one for credit‐card customers and one for cash customers—and fears being prosecuted for characterizing this price differential as a “surcharge,” or for telling its customers that credit costs “more.”
The court is clear that prices are not expressive. It also rejects the argument that the statute actually bans an expressive label it disfavors ("credit-card discount") while permitting one a label it approves ("cash discount"). As the court explains,
Plaintiffs’ chief error—or, perhaps more accurately, the central flaw in their argument—is their bewildering persistence in equating the actual imposition of a credit‐card surcharge (i.e., a seller’s choice to charge an additional amount above the sticker price to its credit‐card customers) with the words that speakers of English have chosen to describe that pricing scheme (i.e., the term “credit‐card surcharge”).
Yet this was also the error of the district judge who applied the test from Central Hudson and concluded the NY law failed it.
The court also rejected the arguments that the NY statute is unconstitutional as applied to Expressions Hair Design's "dual price" scheme and an overbreadth challenge to other "hypothetical" pricing schemes. The court found that the New York courts had not ruled on such questions and that Section 518 was "readily susceptible" to a narrowing construction that would eliminate the constitutional issues. The court declined to certify the question to the New York Court of Appeals.
Finally, the court very succinctly resolved the due process vagueness challenge by finding that the statute had a "core meaning that can reasonably be understood."
Thus, sellers doing business in New York are again constitutionally prohibited from imposing credit card surcharges. Cash discounts, however, remain permissible.
UPDATE: September 29, 2016, The United States Supreme Court has granted certiorari.