Open for Business, but Banned From Advertising

Can the government require you to get a license merely to advertise a service that anyone can lawfully perform without a license? Strange as it sounds, that’s the question at the heart of a First Amendment challenge to an Ohio law that may be on its way to a rare en banc rehearing before the Sixth U.S. Circuit Court of Appeals. If the court chooses to hear the case, it could help resolve one of the most pressing questions in modern First Amendment law: What limits does the First Amendment impose on government’s ability to regulate businesses?

The law at issue is Ohio’s Precious Metals Dealer’s Act. Under that law, all people who buy and sell precious metals are subject to certain bookkeeping requirements. But there is an additional layer of regulation that applies only to people who advertise that they buy and sell precious metals. Those who advertise are considered “precious metal dealers” and must get a license, carry a surety bond, and make daily reports to the police, among other requirements.

In 2012, John Tomaso, the owner and operator of Liberty Coins, a business that buys, sells and trades silver and gold jewelry and other items, teamed up with the 1851 Center for Constitutional Law, a nonprofit law firm based in Ohio, to challenge the licensing requirement. Their argument was straightforward: If John is permitted to buy and sell precious metals without a license, he shouldn’t have to get a license merely because he advertises his lawful business. Requiring him to do so imposes an unconstitutional restriction on John’s right to engage in commercial speech, which the Supreme Court has long held is protected by the First Amendment.

A federal district court judge in Ohio agreed and enjoined the regulatory scheme, and a motions panel of the Sixth Circuit refused to stay that decision. But earlier this month, a merits panel of the Sixth Circuit disagreed and reversed the trial court’s ruling. Despite the fact that Ohio’s law is triggered exclusively by speech, the panel held that the law was merely a business regulation, and therefore subject to only “rational-basis scrutiny,” the lowest level of constitutional review.

That decision is wrong and it should not be allowed to stand. Not only does it conflict with binding precedent from the U.S. Supreme Court on the difference between regulations of speech and regulations of conduct, it conflicts with an array of cases holding that if it is legal to perform a service, it must be legal to advertise that service.

The most important case is the Supreme Court’s recent decision in Holder v. Humanitarian Law Project, which considered the constitutionality of a federal law that made it a crime to provide “material support” to certain designated terrorist organizations. But the term material support was broadly defined to include all sorts of things, including even speech in the form of expert advice. Plaintiffs, who wished to provide advice on non-violent conflict resolution, challenged that prohibition as a violation of the First Amendment.

The government defended the law, arguing that it regulated pure conduct, but the Supreme Court emphatically disagreed. And in doing so, the Court set forward a simple test for determining whether a law burdens speech or merely conduct: If the law is “triggered” by the act of conveying a particular message, it is a restriction on speech and must be analyzed as such.

Applying that principle to Ohio’s law makes it obvious that the law is a restriction on speech—a person can buy and sell an unlimited amount of precious metals without a license, but the moment they tell other people they are open for business, the licensing requirement kicks in.

Even before the Supreme Court’s decision in Holder, federal courts routinely applied similar principles to invalidate restrictions on advertising otherwise lawful services. In a 2009 case called Byrum v. Landreth, for example, the Fifth Circuit enjoined a Texas law that restricted who could advertise their services as an interior designer, even though Texas imposed no limits whatsoever on who could actually perform interior design. And well before that, in 1992, the Eleventh Circuit in Abramson v. Gonzalez struck down a Florida law that restricted the use of the title “psychologist,” even though Florida did not at that time regulate the practice of psychology.

These cases make clear not only that Ohio’s law is a restriction on speech, but that it should be struck down as unconstitutional. But if the case law is so uniformly aligned against the Sixth Circuit’s conclusion, how could the panel have gotten things so wrong?

Blame rests with the U.S. Supreme Court. Since the New Deal, the Supreme Court has instructed lower federal courts that they should review business regulations under the deferential rational-basis test. Over the same time period, however, the Court has become increasingly protective of all manner of speech, including commercial advertising. When these contradictory rules collide, federal courts too often throw up their hands and side with the government.

That reflexive deference is dangerous, particularly as we move to a more information-based economy. Countless Americans earn their living in occupations that consist primarily of speech. Rulings like the Sixth Circuit’s put all of that speech at risk. And this concern is not hypothetical; occupational licensing boards across the country have targeted bloggers and even newspaper columnists for censorship based on the idea that speech on topics like diet and parenting is really the “conduct” of dietetics or psychology.

Luckily, the Sixth Circuit has a chance to help reverse this trend. On April 22, the Institute for Justice joined with the 1851 Center to file a petition for rehearing en banc. If the Sixth Circuit grants the petition, it can make clear that those who are lawfully open for business have a First Amendment right to make that fact known to the world.

The author is a senior attorney at the Institute for Justice, which filed a petition for rehearing en banc in Liberty Coins v. Goodman (No. 13-3012).

More by | Paul Sherman Paul Sherman , Law.com Contributor
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