Thursday, January 4, 2018
Plaintiffs May Impose Surcharge on Customers Who Pay by Credit Card
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday declared unconstitutional, as applied to the plaintiffs, California Civil Code §1748.1 which forbids retailers from imposing a surcharge on customers who pay by credit cards.
The opinion was written by Judge Sarah S. Vance of the U.S. District Court for the Eastern District of Louisiana, sitting by designation. She was joined in the opinion by Senior Circuit Judge Diarmuid F. O’Scannlain and Circuit Judge Johnnie B. Rawlinson.
Plaintiffs in the case are five California businesses that want to charge customers extra if they use credit cards because the credit card companies typically retain 2-3 percent of each charge. In 2015, District Judge Morrison C. England Jr. of the Eastern District of California declared the statute invalid and enjoined its enforcement.
“The district court granted summary judgment in favor of plaintiffs, declared the statute both an unconstitutional restriction of speech and unconstitutionally vague, and permanently enjoined its enforcement. We hold that the statute as applied to these plaintiffs violates the First Amendment. Thus, we affirm the district court’s judgment. We also narrow the scope of the district court’s relief to apply only to plaintiffs.”
The plaintiffs have standing, the judge said, because of the prospect of enforcement proceedings against them filed by the state attorney general or actions pursued by cardholders. Companies that impose surcharges are subject to treble damages and paying the cardholders’ attorney fees and costs.
Explaining how the challenged 1985 statute implicates the First Amendment, Vance said the case involves the “communication of prices.” She elaborated:
“[P]laintiffs in this case want to post a single sticker price and charge an extra fee for credit card use. Section 1748.1 prohibits plaintiffs from expressing then prices in this way, but it does allow retailers to post a single sticker price and offer discounts to customers paying with cash—despite the mathematical equivalency between surcharges and discounts. Thus, Section 1748.1…regulates commercial speech.”
The state has no legitimate interest in barring this communication, Vance said, noting that the plaintiffs are not seeking to charge hidden mark-ups.
“To the contrary,” she wrote, “plaintiffs’ declarations all state that plaintiffs want to communicate, not conceal, credit card surcharges. Thus, plaintiffs’ desired pricing schemes are not misleading.”
The state does have an interest in precluding consumer deception, she acknowledged, but said §1748.1 does not advance that interest.
However, the sweeping scope of the injunction, Vance declared, would only have been appropriate had the plaintiffs launched a facial challenge to the statute. Instead, she noted, they challenged it “as applied” to them, requiring that the judgment apply only to them.
The case is Italian Colors Restaurant v. Becerra, No. 15-15873
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