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Media Alerts - Expressions Hair Design v. Schneiderman - Second Circuit
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September 29, 2015
  Expressions Hair Design v. Schneiderman - Second Circuit
Headline: Second Circuit Holds New York's Consumer Protection Statute Prohibiting Merchants from Charging Credit-Card Surcharge Does Not Violate the First Or Fourteenth Amendments

Area of Law: Business; Consumer Protection

Issue(s) Presented: Whether New York's consumer protection statute that prohibits imposing a credit-card surcharge on consumers violates the First Amendment and is unconstitutionally vague in violation of the Due Process Clause of the Fourteenth Amendment.

Brief Summary: Five New York businesses ("Plaintiffs") challenged New York's General Business Law § 518 ("Section 518"), which prohibits sellers from imposing a credit-card surcharge over the regular product purchase price, as unconstitutional, and sought a permanent injunction enjoining New York State from enforcing the law against them. Plaintiffs argued the law is an impermissible content-based free speech restriction in violation of the First Amendment and is impermissibly vague, and therefore void, under the Due Process Clause of the Fourteenth Amendment of the United States Constitution.

The United States District Court for the Southern District of New York agreed, declaring Section 518 unconstitutional and enjoining New York from enforcing it against the Plaintiffs. The United States Court of Appeals for the Second Circuit reversed and remanded the district court's decision, holding that Section 518 regulates prices, not speech, and has a core meaning that can reasonably be understood and applied.

To read the full opinion, please visit:
http://www.ca2.uscourts.gov/de...758de/1/hilite/


Extended Summary: New York State enacted General Business Law § 518 ("Section 518") in 1984 to prohibit businesses from collecting surcharges from customers who purchase goods or services with credit cards instead of cash, check or other alternative payment. New York's enactment of Section 518 was motivated by the expiration of an almost identical federal law. While prohibiting a credit card "surcharge," both the federal law, by its express statutory language, and New York State law, in its summary, permit sellers to offer a "discount" to customers paying in cash. Unlike the expired federal law, Section 518 does not incorporate explicit definitions of "surcharge," "discount," and "regular price."

Five New York businesses, Expressions Hair Design, The Brooklyn Farmacy & Soda Fountain, Inc., Bunda Starr Corp., Five Points Academy, and Patio.Com LLC, along with their owners and officers (collectively the "Plaintiffs"), sued the Attorney General of the State of New York and the District Attorneys of New York County and Kings County (collectively "New York") in the United States District Court for the Southern District of New York, claiming that Section 518 violates the First Amendment's Free Speech Clause and is void for vagueness under the Fourteenth Amendment's Due Process Clause. The district court agreed and entered a judgment declaring Section 518 unconstitutional and permanently enjoining New York from enforcing the law against Plaintiffs. The Defendants appealed. The United States Court of Appeals for the Second Circuit reversed, holding Section 518 does not violate either the First Amendment or Fourteenth Amendment of the United States Constitution.

At the time of suit, only one Plaintiff charged different amounts for credit and cash. That Plaintiff alleged its speech was impermissibly burdened because describing the pricing difference as a "surcharge" or telling customers they would be "charged more" for credit might violate Section 518. The remaining Plaintiffs contended the statute impermissibly restricted their ability to post a single price for goods and services and charge "a surcharge" to credit‐card customers, rather than offering a "discount" to those paying cash. They also contended the statute was impermissibly vague because its applicability depends upon the particular language a seller uses to describe its pricing.

In reversing the district court's finding that the statute violated the First Amendment, the Second Circuit found that Section 518 is a restriction not on speech, but merely on pricing. Citing extensive Supreme Court precedent, the court found it well-established that regulations of economic conduct, including price controls and other price regulations, do not implicate the First Amendment. The Court stated that Plaintiffs mistakenly sought to equate the restriction on the actual imposition of a credit card surcharge with a restriction on the words of the English language used to describe the pricing scheme. It further noted that not only have price-control laws have never been linked to the First Amendment, but prices, although inherently communicated through language, are not considered speech.

The Court also concluded that the district court erred in holding Section 518 unconstitutionally vague under the Due Process Clause of the Fourteenth Amendment. Relying on Supreme Court cases emphasizing that a law is facially unconstitutional only if it is impermissibly vague in all of its applications, the Second Circuit found that Section 518 is constitutional because it has a core meaning that can reasonably understood as applying to sellers who post a single price for goods and services. The Court expressed confidence that sellers of ordinary intelligence could readily understand how to avoid imposing a credit card surcharge, and that New York authorities have sufficient guidance in determining whether sellers are in violation of the law.

Accordingly, the Second Circuit concluded that Section 518 violates neither the First nor the Fourteenth Amendments, and vacated the judgment of the district court and remanded for dismissal of Plaintiffs' claims.

To read the full opinion, please visit:
http://www.ca2.uscourts.gov/de...5590f0758de/1/hilite/

Panel: Circuit Judges Wesley, Livingston, and Carney

Argument Date: 3/5/2015

Date of Issued Opinion: 9/29/2015

Docket Number: 13-4533(L)

Decided: Vacated and Remanded

Case Alert Author: Brad Landau

Counsel: Deepak Gupta, Gupta Beck PLLC, Washington, DC (Gary Friedman, Friedman Law Group, LLP, New York, NY, on the brief), for Plaintiffs‐Appellees; Judith Vale, Assistant Attorney General (Barbara D. Underwood, Solicitor General, Steven C. Wu, Deputy Solicitor General, on the brief), for Defendant‐Appellant Eric T. Schneiderman, in his official capacity as Attorney General of the State of New York; Larry A. Sonnenschein, Ronald E. Sternberg, for Zachary W. Carter, Corporation Counsel of the City of New York, for Defendants‐Appellants Cyrus R. Vance, Jr., in his official capacity as District Attorney of New York County, and Charles J. Hynes, in his official capacity as District Attorney of Kings County; Linda P. Nussbaum, Grant & Eisenhofer, P.A., New York, NY, for Amici Curiae The Kroger Company, Safeway Inc., Walgreen Co., Food Lion, LLC, Hy‐Vee Inc., H.E. Butt Grocery Co., The Great Atlantic & Pacific Tea Co., Inc., Albertson's LLC, and Rite Aid Corp., in support of Plaintiffs‐Appellees; J. Douglas Richards, Cohen Milstein Sellers & Toll PLLC, New York, NY, for Amici Curiae Consumer Action, National Association of Consumer Advocates, National Consumers League, and U.S. Public Interest Research Group, in support of Plaintiffs‐Appellees; Henry C. Meier, Associate General Counsel, for Amicus Curiae Credit Union Association of New York in support of Defendants‐Appellants.

Author of Opinion: Judge Livingston

Case Alert Circuit Supervisor: Elyse Diamond Moskowitz.

    Posted By: Elyse Moskowitz @ 09/29/2015 07:52 PM     2nd Circuit  

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