Expressions Hair Design Update: State Asks Second Circuit to Certify Interpretation of General Business Law § 518 to the Court of Appeals

Seven weeks ago, the Second Circuit asked the parties in Expressions Hair Design v Schneiderman to submit further briefing on whether it should certify to the Court of Appeals the question of how General Business Law § 518, New York’s credit card surcharge law, should be interpreted, whether section 518 is a valid commercial disclosure, and whether the statute validly limits commercial speech as applied to the retailers’ proposed single-sticker pricing scheme.  The parties’ briefs are now in.

Following on the recommendation of Justice Sotomayor in her Supreme Court concurrence, the State argues that the Second Circuit should certify two questions concerning the interpretation of section 518 to the Court of Appeals because the statute’s constitutionality turns on the Court’s answer to those questions.  Particularly, the State asked the Second Circuit to certify these questions:

The Court of Appeals has never addressed the scope of section 518, that is, what exactly the law prohibits.  The State argues that it has consistently interpreted the provision to bar the retailers from showing a single sticker price, but then charging consumers who pay with a credit card more.  “Under this reading, the statute does not apply to a seller that either posts a regular price that is the price that credit-card users pay, or that posts a total dollars-and-cents credit-card price along with a (lower) price for cash users.”  (State’s Brief, at 11).  Although the State claims its interpretation has been consistent, it acknowledges that at least three of the Supreme Court justices expressed doubt about exactly what the law prohibits.  Because of the “lingering interpretive uncertainty over GBL § 518,” the State argues that the Second Circuit should allow the Court of Appeals to resolve any doubt.

The Court of Appeals’ interpretation of section 518 would determine the First Amendment analysis that the Second Circuit must conduct, the State argues, or could show that the statute does not violate the First Amendment “if it were interpreted to prohibit sellers from imposing any price differential on cash and credit-card users—including a cash discount.”  (State’s Brief, at 13-14).  Certification would also allow the Court of Appeals to determine whether the plain text of section 518 may be interpreted in a way to avoid the potential constitutional issue.  Thus, the State argues, “the New York Court of Appeals should be afforded the opportunity to adopt the narrower, less problematic interpretation, using the interpretive tools, presumptions, and standards that it deems proper.” (State’s Brief, at 15 [cleaned up]).

The retailer plaintiffs, on the other hand, argue that certification of the statutory interpretation question to the Court of Appeals is barred by the Supreme Court’s opinion.  The Supreme Court, they argue, “adopted [the Second Circuit’s] interpretation of the law, held that the law proscribes the plaintiffs’ intended speech, and remanded for [the Second Circuit] to analyze § 518 as a speech regulation—an analysis that does not turn on any unsettled question of state law.”  (Plaintiffs’ Brief, at 2 [cleaned up]).  Thus, the Plaintiffs argue, the Supreme Court’s interpretation of the law as a speech regulation forecloses the Second Circuit’s ability to certify “whether the law is a speech regulation (or any other question) to New York state court.”  (Plaintiffs’ Brief, at 17).

Indeed, they point out, although Justice Sotomayor’s opinion is styled as a concurrence, on the point that the case should have been remanded with a direction to certify the interpretation question to the Court of Appeals, she was effectively dissenting from the majority’s refusal to do that.  The Plaintiffs, therefore, argue that the Supreme Court majority’s direction that the Second Circuit decide whether section 518’s ban on credit card surcharges violates the First Amendment allows the Court to do only that, not to certify a question to the Court of Appeals.

Even without their construction of the Supreme Court opinion, the Plaintiffs argue that certification is inappropriate because the Court of Appeals could not construe section 518 as prohibiting any dual pricing scheme because such an interpretation “would directly conflict with a federal statute expressly protecting the right of merchants to provide discounts to cash-paying customers, see 15 U.S.C. § 1666f—and so would likely be preempted under the Constitution’s Supremacy Clause. The constitutional-avoidance doctrine thus has no application in a case like this one, where avoiding one set of constitutional problems necessarily presents the court with an entirely new set of constitutional problems.”  (Plaintiffs’ Brief, at 18).  Finally, the Plaintiffs pointed out that they were not challenging section 518’s application to a two-sticker pricing scheme, so there was no judiciable dispute there to certify to the Court of Appeals.

Given the stark contrast in the parties’ positions, it will be interesting to see which approach the Second Circuit decides to take.  Copies of the State’s brief and the Plaintiffs’ brief are linked here.


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