Expressions Hair Design v. Schneiderman
Expressions Hair Design v. Schneiderman
Opinion
Each time a customer pays for an item with a credit card, the merchant selling that item must pay a transaction fee to the credit card issuer. Some merchants balk at paying the fees and want to discourage the use of credit cards, or at least pass on the fees to customers who use them. One method of achieving those ends is through differential pricing-charging credit card users more than customers using cash. Merchants who wish to employ differential pricing may do so in two ways relevant here: impose a surcharge for the use of a credit card, or offer a discount for the use of cash. In
I
A
When credit cards were first introduced, contracts between card issuers and merchants barred merchants from charging credit card users higher prices than cash customers. Congress put a partial stop to this practice in the 1974 amendments to the Truth in Lending Act (TILA). The amendments prohibited card issuers from contractually preventing merchants from giving discounts to customers who paid in cash. See § 306,
Two years later, Congress refined its dissimilar treatment of discounts and surcharges. First, the 1976 version of TILA barred merchants from imposing surcharges on customers who use credit cards. Act of Feb. 27, 1976, § 3(c)(1),
In 1981, Congress further delineated the distinction between discounts and surcharges by defining "regular price." Where a merchant "tagged or posted" a single price, the regular price was that single price. Cash Discount Act, § 102(a),
The federal surcharge ban was short lived. Congress allowed it to expire in 1984 and has not renewed the ban since. See § 201,
ibid
. The provision preventing credit card issuers from contractually barring discounts for cash, however, remained in place. With the lapse of the federal surcharge ban, several States, New York among them, immediately enacted their own surcharge bans. Passed in 1984,
In addition to these state legislative bans, credit card companies-though barred from prohibiting discounts for cash-included provisions in their contracts prohibiting merchants from imposing surcharges for credit card use. For most of its history, the New York law was essentially coextensive with these contractual prohibitions. In recent years, however, merchants have brought antitrust challenges to contractual no-surcharge provisions. Those suits have created uncertainty about the legal validity of such contractual surcharge bans. The *1148 result is that otherwise redundant legislative surcharge bans like § 518 have increasingly gained importance, and increasingly come under scrutiny.
B
Petitioners, five New York businesses and their owners, wish to impose surcharges on customers who use credit cards. Each time one of their customers pays with a credit card, these merchants must pay some transaction fee to the company that issued the credit card. The fee is generally two to three percent of the purchase price. Those fees add up, and the merchants allege that they pay tens of thousands of dollars every year to credit card companies. Rather than increase prices across the board to absorb those costs, the merchants want to pass the fees along only to their customers who choose to use credit cards. They also want to make clear that they are not the bad guys-that the credit card companies, not the merchants, are responsible for the higher prices. The merchants believe that surcharges for credit are more effective than discounts for cash in accomplishing these goals.
In 2013, after several major credit card issuers agreed to drop their contractual surcharge prohibitions, the merchants filed suit against the New York Attorney General and three New York District Attorneys to challenge § 518 -the only remaining obstacle to their charging surcharges for credit card use. As relevant here, they argued that the law violated the First Amendment by regulating how they communicated their prices, and that it was unconstitutionally vague because liability under the law "turn[ed] on the blurry difference" between surcharges and discounts. App. 39, Complaint ¶ 51.
The District Court ruled in favor of the merchants. It read the statute as "draw[ing a] line between prohibited 'surcharges' and permissible 'discounts' based on words and labels, rather than economic realities."
The Court of Appeals for the Second Circuit vacated the judgment of the District Court with instructions to dismiss the merchants' claims. It began by considering single-sticker pricing, where merchants post one price and would like to charge more to customers who pay by credit card. All the law did in this context, the Court of Appeals explained, was regulate a relationship between two prices-the sticker price and the price charged to a credit card user-by requiring that the two prices be equal. Relying on our precedent holding that price regulation alone regulates conduct, not speech, the Court of Appeals concluded that § 518 did not violate the First Amendment.
The court also considered other types of pricing regimes-for example, posting separate cash and credit prices. The Court of Appeals thought it "far from clear" that § 518 prohibited such pricing schemes.
We granted certiorari. 579 U.S. ----,
II
As a preliminary matter, we note that petitioners present us with a limited challenge. Observing that the merchants were not always particularly clear about the scope of their suit, the Court of Appeals deemed them to be bringing a facial attack on § 518 as well as a challenge to the application of the statute to two particular pricing regimes: single-sticker pricing and two-sticker pricing. Before us, however, the merchants have disclaimed a facial challenge, assuring us that theirs is an as-applied challenge only. See Tr. of Oral Arg. 4-5, 18.
There remains the question of what precise application of the law they seek to challenge. Although the merchants have presented a wide array of hypothetical pricing regimes, they have expressly identified only one pricing scheme that they seek to employ: posting a cash price and an additional credit card surcharge, expressed either as a percentage surcharge or a "dollars-and-cents" additional amount. See, e.g., App. 101-102, 104; Tr. of Oral Arg. 4-5, 18. Under this pricing approach, petitioner Expressions Hair Design might, for example, post a sign outside its salon reading "Haircuts $10 (we add a 3% surcharge if you pay by credit card)." Or, petitioner Brooklyn Farmacy & Soda Fountain might list one of the sundaes on its menu as costing "$10 (with a $0.30 surcharge for credit card users)." We take petitioners at their word and limit our review to the question whether § 518 is unconstitutional as applied to this particular pricing practice. 1
III
The next question is whether § 518 prohibits the pricing regime petitioners wish to employ. The Court of Appeals concluded that it does. The court read "surcharge" in § 518 to mean "an additional amount above the seller's regular price," and found it "basically self-evident" how § 518 applies to sellers who post a single sticker price: "the sticker price is the 'regular' price, so sellers may not charge credit-card customers an additional amount above the sticker price that is not also charged to cash customers."
"We generally accord great deference to the interpretation and application of state law by the courts of appeals."
*1150
Pembaur v. Cincinnati,
IV
Having concluded that § 518 bars the pricing regime petitioners wish to employ, we turn to their constitutional arguments: that the law unconstitutionally regulates speech and is impermissibly vague.
A
The Court of Appeals concluded that § 518 posed no First Amendment problem because the law regulated conduct, not speech.
2
In reaching this conclusion, the Court of Appeals began with the premise that price controls regulate conduct alone. See
44 Liquormart, Inc. v. Rhode Island,
But § 518 is not like a typical price regulation. Such a regulation-for example, a law requiring all New York delis to charge $10 for their sandwiches-would simply regulate the amount that a store could collect. In other words, it would regulate the sandwich seller's conduct. To be sure, in order to actually collect that money, a store would likely have to put "$10" on its menus or have its employees tell customers that price. Those written or oral communications would be speech,
*1151
and the law-by determining the amount charged-would indirectly dictate the content of that speech. But the law's effect on speech would be only incidental to its primary effect on conduct, and "it has never been deemed an abridgment of freedom of speech or press to make a course of conduct illegal merely because the conduct was in part initiated, evidenced, or carried out by means of language, either spoken, written, or printed."
Rumsfeld v. Forum for Academic and Institutional Rights, Inc.,
Section 518 is different. The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. Sellers are free to charge $10 for cash and $9.70, $10, $10.30, or any other amount for credit. What the law does regulate is how sellers may communicate their prices. A merchant who wants to charge $10 for cash and $10.30 for credit may not convey that price any way he pleases. He is not free to say "$10, with a 3% credit card surcharge" or "$10, plus $0.30 for credit" because both of those displays identify a single sticker price-$10-that is less than the amount credit card users will be charged. Instead, if the merchant wishes to post a single sticker price, he must display $10.30 as his sticker price. Accordingly, while we agree with the Court of Appeals that § 518 regulates a relationship between a sticker price and the price charged to credit card users, we cannot accept its conclusion that § 518 is nothing more than a mine-run price regulation. In regulating the communication of prices rather than prices themselves, § 518 regulates speech.
Because it concluded otherwise, the Court of Appeals had no occasion to conduct a further inquiry into whether § 518, as a speech regulation, survived First Amendment scrutiny. On that question, the parties dispute whether § 518 is a valid commercial speech regulation under
Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y.,
"[W]e are a court of review, not of first view."
Nautilus, Inc. v. Biosig Instruments, Inc.,
572 U.S. ----, ----,
B
Given the way the merchants have presented their case, their vagueness challenge gives us little pause. Before this Court, the only pricing practice they express an interest in employing is a single-sticker regime, listing one price and a separate surcharge amount. As we have explained, § 518 bars them from doing so. "[A] plaintiff whose speech is clearly proscribed
*1152
cannot raise a successful vagueness claim."
Holder v. Humanitarian Law Project,
C
The judgment of the Court of Appeals for the Second Circuit is vacated, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
Justice BREYER, concurring in the judgment.
I agree with the Court that New York's statute regulates speech. But that is because virtually all government regulation affects speech. Human relations take place through speech. And human relations include community activities of all kinds-commercial and otherwise.
When the government seeks to regulate those activities, it is often wiser not to try to distinguish between "speech" and "conduct." See R. Post, Democracy, Expertise, and Academic Freedom 3-4 (2012). Instead, we can, and normally do, simply ask whether, or how, a challenged statute, rule, or regulation affects an interest that the First Amendment protects. If, for example, a challenged government regulation negatively affects the processes through which political discourse or public opinion is formed or expressed (interests close to the First Amendment's protective core), courts normally scrutinize that regulation with great care. See,
e.g.,
Boos v. Barry,
I repeat these well-known general standards or judicial approaches both because I believe that determining the proper approach is typically more important than trying to distinguish "speech" from "conduct," see
Sorrell v. IMS Health Inc.,
Nonetheless, petitioners suggest that the statute does more. See, e.g., Brief for Petitioners 28 (arguing that the statute forbids "[f]raming the price difference ... as a credit surcharge"). Because the statute's operation is unclear and because its interpretation is a matter of state law, I agree with the majority that we should remand the case to the Second Circuit. I also agree with Justice SOTOMAYOR that on remand, it may well be helpful for the Second Circuit to ask the New York Court of Appeals to clarify the nature of the obligations the statute imposes. See N.Y. Comp. Code, Rules & Regs., tit. 22, Rule 500.27(a) (2016) (permitting "any United States Court of Appeals" to certify "dispositive questions of [New York] law to the [New York] Court of Appeals").
Justice SOTOMAYOR, with whom Justice ALITO joins, concurring in the judgment.
The Court addresses only one part of one half of petitioners' First Amendment challenge to the New York statute at issue here. This quarter-loaf outcome is worse than none. I would vacate the judgment below and remand with directions to certify the case to the New York Court of Appeals for a definitive interpretation of the statute that would permit the full resolution of petitioners' claims. I thus concur only in the judgment.
I
New York prohibits its merchants from "impos[ing] a surcharge on a [customer] who elects to use a credit card in lieu of payment by cash, check, or similar means."
A
Section 518 can be interpreted in several ways. On first read, its prohibition on "impos[ing] a surcharge" on credit card customers appears to prohibit charging customers who pay with a credit card more than those who pay by other means. See Black's Law Dictionary 1579 (9th ed. 2009) ("surcharge" means "[a]n additional tax, charge, or cost"). That is, § 518 may require a merchant to charge all customers the same price, no matter the form of payment.
An earlier federal law containing an almost identical prohibition muddies the
*1154
path to this plain text reading. A 1976 amendment to the Truth in Lending Act set out a temporary prohibition barring a "seller in any sales transaction" from "impos[ing] a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means." § 3(c)(1),
When the federal law lapsed in 1984, New York enacted § 518, which sets out the same ban on "impos[ing] a surcharge." New York borrowed the federal prohibition almost verbatim. But it chose, without explanation, not to borrow the federal definitions or to enact clarifying definitions of its own.
The difference between the laws leaves § 518 open to at least three interpretations. It could be read in line with its plain text to require that a merchant charge the same price to all his customers. It could be read in line with the lapsed federal ban to permit a merchant to charge different prices to cash and credit card customers but to prohibit a merchant from displaying in dollars-and-cents form only the cash price and then charging credit card customers a higher price. On this reading, § 518 would not apply where a merchant displays in dollars-and-cents form only the credit card price and then charges a lower price to cash customers, or where a merchant displays both the cash and credit card prices in dollars-and-cents form. Or it could be read more broadly, based on the omission of the definitions that had limited the federal ban's scope. On this reading, § 518 might prohibit a merchant from characterizing the difference between the cash and credit card prices as a "surcharge," no matter how he displays his prices. 2
*1155
Confirming the elusive nature of § 518, New York has pressed almost all of these interpretations during this litigation. Before the District Court, it viewed § 518 as mirroring the lapsed federal ban. See
B
Petitioners here are five New York merchants. When a customer pays with a credit card, petitioners (like all merchants) are charged a processing fee by the card issuer. Petitioners want to pass that fee on to their credit card paying customers, but not their cash paying customers. They want to charge cash customers one price and credit card customers a higher price that includes the processing fee. One petitioner, Expressions Hair Design, currently does pass the costs of credit card processing fees on to its credit card paying customers. The other four charge one price to all customers. They set their prices to account for the processing fees they predict they will incur.
All five would prefer to use a different pricing system or display than the ones they use now. Expressions Hair Design and Five Points Academy would like to charge cash and credit card customers two different prices and to display a dollars-and-cents cash price alongside the extra charge for credit card customers-say, "$100 with a 3% credit card charge" or "$100 with a $3 credit card charge." Brooklyn Farmacy & Soda Fountain, Brite Buy Wines & Spirits, and Patio.com want to charge cash and credit card customers two different prices and to characterize the difference in prices as a "surcharge" when they display or convey their prices to customers. App. 47-48, 51, 57.
All five do not use their preferred pricing systems or displays for fear of violating § 518. Expressions Hair Design and Five Points Academy believe § 518 prohibits their pricing display because it would convey the credit card processing costs impermissibly as a surcharge, rather than permissibly as a discount-say, "$103 with a 3% discount for cash payment" or "$103 with a $3 discount for cash payment." The other three petitioners believe that § 518 regulates how they can describe the difference between cash and credit card prices. Because § 518 does not, in their view, clearly state just how it regulates those descriptions, they have decided that the uncertainty counsels against a change.
Petitioners view § 518 as an unconstitutional restriction on their ability to display and describe their prices to their customers. And so they sued and challenged the law on First Amendment grounds.
II
Resolving petitioners' challenge to § 518 requires an accurate picture of how, exactly,
*1156
the statute works. That understanding is needed both to decide whether § 518 prohibits petitioners' preferred pricing systems and displays and, if so, whether that prohibition is consistent with the First Amendment. See
But the Second Circuit did not decide just how far § 518 extends. It instead decided how § 518 applies to part of the petitioners' challenge-the pricing display Expressions Hair Design and Five Points Academy wish to use-and declined to decide how, or even if, § 518 applies to the rest of the challenge. While § 518 evades easy interpretation, a partial decision was neither required nor right. The court below erred by not asking the New York Court of Appeals for a definitive interpretation of § 518, and this Court errs by not correcting it.
A
Given a constitutional challenge that turned on the interpretation of an ambiguous state statute not yet definitively interpreted by the state courts, the Second Circuit faced a problem. Any interpretation it gave § 518 would not be authoritative since state courts, not federal courts, have the final word on the interpretation of state statutes. But it had before it two routes-abstention and certification-to a solution. Both would have allowed it to secure an authoritative interpretation of § 518 before resolving the constitutional challenge.
In this context, abstention and certification serve the same goals. Both recognize that when the outcome of a constitutional challenge turns on the proper interpretation of state law, a federal court's resolution of the constitutional question may turn out to be unnecessary. The state courts could later interpret the state statute differently. And the state court's different interpretation might result in a statute that implicates no constitutional question, or that renders the federal court's constitutional analysis irrelevant. See,
e.g.,
Arizonans for Official English v. Arizona,
Abstention is a blunt instrument. Under
Railroad Comm'n of Tex. v. Pullman Co.,
Certification offers a more precise tool. In States that have authorized certification, a federal court may "put the [state-law] question directly to the State's highest court, reducing the delay, cutting the cost, and increasing the assurance of gaining an authoritative response."
While the decision to certify "rests in the sound discretion of the federal court,"
Lehman Brothers v. Schein,
The court below chose a convoluted course: It rejected certification, abstained in part, and decided the question in part. It did so by dividing petitioners' challenge into two parts. As to the first part, it held that § 518 did prohibit the pricing display that Expressions Hair Design and Five Points Academy prefer: displaying the cash price alongside the credit card charge.
5
It found this application of § 518 consistent with the First Amendment. See
The Second Circuit should have exercised its discretion to certify the antecedent state-law question here: What pricing schemes or pricing displays does § 518 prohibit? Certification might have avoided the need for a constitutional ruling altogether. If the state court reads § 518 only as a price regulation, no constitutional concerns are implicated. Compare
44 Liquormart, Inc. v. Rhode Island,
The Second Circuit declined to exercise its discretion to certify because it viewed the "state of the record" as too underdeveloped.
B
The consequences of the decision not to certify reverberate throughout the Court's opinion today. For lack of a definitive interpretation of § 518, it chooses to address only the first part of petitioners' challenge and to defer to the Second Circuit's partial interpretation of § 518. 6 Ante, at 1149 - 1150. It then holds that § 518 does restrict constitutionally protected speech. Ante, at 1150 - 1152. But *1159 it does not decide whether § 518's restriction is constitutionally permissible because doing so would require it to answer the ever-present question in this case: "whether the statute permits ... pricing schemes like the one ... Expressions currently uses." Ante, at 1151, n. 3. And so it sends this case back to the Second Circuit for further proceedings. Ante, at 1151.
III
"The complexity" of this case "might have been avoided,"
Arizonans for Official English,
Petitioner Expressions Hair Design currently posts separate dollars-and-cents prices for cash and credit-that is, it posts something like "$10 cash, $10.30 credit." It displays its prices in this way, however, only because it considers itself compelled to do so by the challenged law if it wants to charge different prices. Prior to becoming aware of the law, Expressions posted single prices along with a notice informing customers that a three percent surcharge would be added to their bill if they paid by credit card. Expressions has indicated that it would prefer to return to its prior practice. See App. 19, Complaint ¶ 3;
ibr.US_Case_Law.Schema.Case_Body:v1">id
Relying fully on their claim that § 518 regulated speech, petitioners did not advance any argument before the Court of Appeals that § 518 was constitutionally problematic even if deemed a regulation of conduct. See
To assess the statute's constitutionality, the Court of Appeals may need to consider a question we need not answer here: whether the statute permits two-sticker pricing schemes like the one petitioner Expressions currently uses, see n. 1, supra . Respondents' argument that § 518 is a constitutionally valid disclosure requirement rests on an interpretation of the statute that allows such two-sticker schemes.
For similar reasons, petitioners' related argument regarding abstention is no longer at issue. The Court of Appeals abstained from deciding whether § 518 was constitutional outside of the single-sticker context, but the merchants have disavowed any intent to challenge the law outside of this context.
This is the interpretation of the lapsed federal ban offered by the United States and accepted by the majority. For purposes of this opinion, I assume that this interpretation is correct.
Section 518's sparse enforcement history does not clear up the ambiguity. New York has pursued one § 518 prosecution, which resulted in a conviction later set aside on appeal. The decision supports, but does not require, giving § 518 a broader reading than the lapsed federal ban. See
People v. Fulvio,
The multiple available interpretations of § 518 do not render § 518 so vague as to violate the Due Process Clause. But they do render § 518 ambiguous enough to warrant asking the New York Court of Appeals to resolve the statute's meaning.
The New York Court of Appeals regularly accepts and answers certified questions. See,
e.g.,
Flo & Eddie, Inc. v. Sirius XM Radio, Inc.,
The court below did not truly engage with the plain text reading of § 518, under which a merchant may not charge different prices to cash and credit card customers. See
It does so by invoking an interpretive rule of deference to a lower federal court's construction of the law of a State within its jurisdiction, in line with the general principle that this Court does not resolve issues of state law. I do not read the Court's deference to the Second Circuit as holding that this Court will defer to a lower federal court's interpretation of state law even where doing so would cast serious constitutional doubt on, or invalidate, a state law. Such a rule would be incorrect. See
Frisby v. Schultz,
Reference
- Full Case Name
- EXPRESSIONS HAIR DESIGN, Et Al., Petitioners v. Eric T. SCHNEIDERMAN, Attorney General of New York, Et Al.
- Cited By
- 77 cases
- Status
- Published