Case: Expressions Hair Design, et al. v. Schneiderman, et al.
Issue: Whether a New York statute that prohibits surcharges on sales transactions paid with a credit card violates the First and Fourteenth Amendments of the U.S. Constitution.
Case Summary: The Second Circuit upheld a New York statute prohibiting surcharges on sales transactions paid with a credit card by vacating a Manhattan federal district court order that held the statute violated the First and Fourteenth Amendments of the U.S. Constitution.
Plaintiffs, a group of retailers, brought the suit alleging that New York’s “no surcharge” statute violated the First Amendment of the U.S. Constitution by improperly regulating their speech in how they could describe the price difference between cash and credit purchases. The retailers stated 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. The retailers moved the district court for a preliminary injunction to prevent the defendants from enforcing the statute.
The Manhattan district court ruled in favor of the retailers, holding that the “no surcharge” statute violated the First Amendment because it created a “virtually incomprehensible distinction” between prohibited surcharges and permissible discounts based on words and labels, rather than economic realities.” The court also ruled that the statute was unconstitutionally vague in violation of the Due Process Clause of the Fourteenth Amendment.
On appeal, the Second Circuit vacated the district court’s ruling. With respect to the First Amendment claims, the court held that prices are not considered speech within the meaning of the First Amendment because price-control laws have never triggered the First Amendment. The court reasoned that because the “no surcharge” statute only regulates the difference between a seller’s sticker price and the ultimate price that it charges to credit-card customers, the specific relationship between the two prices does not regulate speech. The court concluded that because the plaintiffs “failed to show that the statute differs in a constitutionally significant way from other laws that regulate prices,” the statute therefore does not implicate the First Amendment.
With respect to the Fourteenth Amendment claims, the court rejected the retailers’ claim that the law is unconstitutionally vague because the statute is identical to a federal statute under which it was based. The court said that it was confident sellers “of ordinary intelligence” could readily understand how to avoid imposing a credit card surcharge if they post single sticker prices.
Bottom Line: There is no uniformity among the federal courts regarding the constitutionality of the “no surcharge” law. California recently held that its “no surcharge” statute was unconstitutional, but Texas recently held otherwise.