NY’s Highest Court Will Consider Credit Card Surcharge Ban

by Manatt, Phelps & Phillips, LLP
Contact

Manatt, Phelps & Phillips, LLP

The New York Court of Appeals will consider the state’s law prohibiting merchants from imposing credit card surcharges, following certification of that question by the Second Circuit, on remand from the U.S. Supreme Court.

What happened

The dispute began in 2013, when a group of New York businesses and merchants filed suit arguing that Section 518 of the state’s General Business Law violated their First Amendment free speech rights.

The statute states: “No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check or similar means. Any seller who violates the provisions of this section shall be guilty of a misdemeanor punishable by a fine not to exceed five hundred dollars or a term of imprisonment up to one year, or both.”

A federal district court judge sided with the merchants and struck down the law, but a panel of the Second Circuit reversed. Section 518 does not regulate speech, the court held—it regulates conduct.

However, other federal circuit courts reached different conclusions when considering state surcharge laws. Recognizing the split, the Supreme Court granted certiorari in the Second Circuit case.

The Supreme Court vacated and remanded, holding that the statute must be analyzed as a speech regulation under the First Amendment.

Facing the parties for a second time, the federal appellate panel had a narrower question to answer: whether a “single-sticker-price scheme” ran afoul of Section 518. Some of the plaintiffs averred that they wanted to post a single price for their goods and services and then display the credit card surcharge to be imposed (either as a percentage of the base price or as a dollar amount) alongside that single price. For example, a merchant might post a price of $10 for an item, but note “with roughly equal prominence” that a three percent surcharge would be imposed on credit card users.

But when faced with the Supreme Court’s mandate to determine whether Section 518 is a valid commercial speech regulation under Central Hudson Gas & Electric Corp. v. Public Service Commission of New York and if the law could be upheld as a valid disclosure requirement under Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, the Second Circuit asked for a little help.

“We have previously noted our uncertainty about how widely Section 518’s restrictions sweep,” the court said, and that “resolution of at least some of this uncertainty will clear the path for our First Amendment analysis. Thus, before definitively addressing the questions the Supreme Court has asked us to resolve—namely, whether Section 518, as applied to the single-price scheme, is either a valid regulation of commercial speech under Central Hudson or a permissible disclosure rule under Zauderer—we seek the benefit of the New York Court of Appeals’ views with respect to certain aspects of Section 518’s operations.”

Specifically, the panel asked the state’s highest court whether a merchant complies with Section 518 so long as the merchant posts the total dollars and cents price charged to credit card users. If so, then the statute could potentially be understood from a First Amendment perspective to do nothing but compel the truthful disclosure of an item’s credit card price, the court said.

Alternatively, if Section 518 restricts certain forms of speech that the state deems particularly deceptive (failing to post the credit card price, for example) but preserves alternative ways for merchants to communicate the same message (that consumers will pay less when they pay in cash), that fact would be relevant to the court’s analysis.

“As a result, it is clear to us that securing the Court of Appeals’ views on the question whether a merchant complies with Section 518 so long as, when posting prices, the merchant discloses the total dollars and cents price charged to credit card users will materially assist—and will in fact determine the course of—our First Amendment analysis,” the Second Circuit wrote.

The panel certified the following question to the New York Court of Appeals: “Does a merchant comply with New York’s General Business Law Section 518 so long as the merchant posts the total dollars and cents price charged to credit card users?”

To read the opinion in Expressions Hair Design v. Schneiderman, click here.

Why it matters

The battle over New York’s surcharge law continues, with the case headed to the state’s highest court for clarification on whether the “single sticker price” strategy will satisfy the requirements of the statute as well as constitutional analysis. This issue may ultimately be of greater importance to Uber drivers and other workers in the so-called “gig economy” but it could also result in disparate impact for those who avoid gig economy applications.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Manatt, Phelps & Phillips, LLP | Attorney Advertising

Written by:

Manatt, Phelps & Phillips, LLP
Contact
more
less

Manatt, Phelps & Phillips, LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.