Am. Beverage Ass'n v. City & Cnty. of S.F., 16-16072

• Decision Date: 31 January 2019
• Docket Number: No. 16-16072, No. 16-16073,16-16072
• Citation: 916 F.3d 749
• Parties: AMERICAN BEVERAGE ASSOCIATION; California Retailers Association, Plaintiffs-Appellants, and California State Outdoor Advertising Association, Plaintiff, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant-Appellee. American Beverage Association; California Retailers Association, Plaintiffs, and California State Outdoor Advertising Association, Plaintiff-Appellant, v. City and County of San Francisco, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

916 F.3d 749

AMERICAN BEVERAGE ASSOCIATION; California Retailers Association, Plaintiffs-Appellants,

and

California State Outdoor Advertising Association, Plaintiff,

v.CITY AND COUNTY OF SAN FRANCISCO, Defendant-Appellee.

American Beverage Association; California Retailers Association, Plaintiffs,

and

California State Outdoor Advertising Association, Plaintiff-Appellant,

v.City and County of San Francisco, Defendant-Appellee.

No. 16-16072

No. 16-16073

United States Court of Appeals, Ninth Circuit.

Argued and Submitted En Banc September 25, 2018 Pasadena, California

Filed January 31, 2019

GRABER, Circuit Judge:

Plaintiffs American Beverage Association, California Retailers Association, and California State Outdoor Advertising Association challenge Defendant City and County of San Francisco’s Sugar-Sweetened Beverage Warning Ordinance, City & Cty. of S.F., Cal., Bd. of Supervisors Ordinance No. 100-15, § 1 (June 16, 2015). The Ordinance requires health warnings on advertisements for certain sugar-sweetened beverages ("SSBs"). Plaintiffs argue that the Ordinance violates their First Amendment right to freedom of speech. Relying on the United States Supreme Court’s decision in National Institute of Family & Life Advocates v. Becerra ("NIFLA "), ––– U.S. ––––, 138 S.Ct. 2361, 201 L.Ed.2d 835 (2018), we conclude that Plaintiffs will likely succeed on the merits of their claim that the Ordinance is an "unjustified or unduly burdensome disclosure requirement[ ] [that] might offend the First Amendment by chilling protected commercial speech." Zauderer v. Office of Disciplinary Counsel , 471 U.S. 626, 651, 105 S.Ct. 2265, 85 L.Ed.2d 652 (1985). The remaining preliminary injunction factors also weigh in Plaintiffs’ favor. We therefore hold that the district court abused its discretion by denying Plaintiffs’ motion for a preliminary injunction, and we reverse and remand.

FACTUAL AND PROCEDURAL BACKGROUND

In June 2015, Defendant enacted the Ordinance, which requires that certain SSB advertisements ("SSB Ads") include the following statement:

WARNING: Drinking beverages with added sugar(s) contributes to obesity

, diabetes, and tooth decay. This is a message from the City and County of San Francisco.

City & Cty. of S.F., Cal., Health Code art. 42, div. I, § 4203(a) (2015). An "SSB Ad" covers

any advertisement, including, without limitation, any logo, that identifies, promotes, or markets a Sugar-Sweetened Beverage for sale or use that is any of the following: (a) on paper, poster, or a billboard; (b) in or on a stadium, arena, transit shelter, or any other structure; (c) in or on a bus, car, train, pedicab, or any other vehicle; or (d) on a wall, or any other surface or material.

Id. § 4202. Under section 4202, though, an "SSB Ad" does not include advertising in or on: periodicals; television; electronic media; SSB containers or packaging; menus; shelf tags; vehicles used by those in the business of manufacturing, selling, or distributing SSBs; or logos that occupy an area of less than 36 square inches. Id. The Ordinance defines "SSB" as "any Nonalcoholic Beverage sold for human consumption, including, without limitation, beverages produced from Concentrate, that has one or more added Caloric Sweeteners and contains more than 25 calories per 12 ounces of beverage." Id. But "SSB" does not include drinks such as milk, plant-based milk alternatives, natural fruit and vegetable juices, infant formulas, and supplements. Id. The Ordinance provides detailed instructions regarding the form, content, and placement of the warning on SSB Ads, including a requirement that the warning occupy at least 20% of the advertisement and be set off with a rectangular border. Id. § 4203(b).

Defendant’s stated purpose in requiring the warning is, among other reasons, to "inform the public of the presence of added sugars and thus promote informed consumer choice that may result in reduced caloric intake and improved diet and health, thereby reducing illnesses to which SSBs contribute and associated economic burdens." Id. § 4201. Failure to comply with the warning requirement can result in administrative penalties imposed by San Francisco’s Director of Health. Id. § 4204(a).

Plaintiffs sued to prevent implementation of the Ordinance. The district court denied Plaintiffs’ motion for a preliminary injunction. Concluding that Plaintiffs likely would not succeed on the merits of their First Amendment challenge, the district court held that the warning is not misleading, does not place an undue burden on Plaintiffs’ commercial speech, and is rationally related to a substantial governmental interest. But the court stayed implementation of the Ordinance pending this timely interlocutory appeal.

A three-judge panel of this court reversed the district court’s denial of a preliminary injunction, Am. Beverage Ass’n v. City & County of San Francisco , 871 F.3d 884 (9th Cir. 2017). We then ordered that the case be reheard en banc, 880 F.3d 1019 (9th Cir. 2018).

JURISDICTION AND STANDARDS OF REVIEW

We have jurisdiction under 28 U.S.C. § 1292.

We review the denial of a preliminary injunction for abuse of discretion. Harris v. Bd. of Supervisors , 366 F.3d 754, 760 (9th Cir. 2004). A district court abuses its discretion if it rests its decision "on an erroneous legal standard or on clearly erroneous factual findings." United States v. Schiff , 379 F.3d 621, 625 (9th Cir. 2004) (internal quotation marks omitted). "We review conclusions of law de novo and findings of fact for clear error." All. for the Wild Rockies v. Cottrell , 632 F.3d 1127, 1131 (9th Cir. 2011) (internal quotation marks omitted).

DISCUSSION

A preliminary injunction is an extraordinary remedy that may be awarded only if the plaintiff clearly shows entitlement to such relief. Winter v. Nat. Res. Def. Council, Inc. , 555 U.S. 7, 22, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). "A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest." Id. at 20, 129 S.Ct. 365.

A. Test for Analyzing a Claim of Compelled Speech

We begin by considering Plaintiffs’ likelihood of success on the merits of their First Amendment challenge. The First Amendment provides that "Congress shall make no law ... abridging the freedom of speech."¹ U.S. Const. amend. I. Its protection is broad, and the Supreme Court has "been reluctant to mark off new categories of speech for diminished constitutional protection." NIFLA , 138 S.Ct. at 2372 (internal quotation marks omitted). But NIFLA also acknowledged that the Court has "applied a lower level of scrutiny to laws that compel disclosures in certain contexts," including cases analyzing the required disclosure of "factual, noncontroversial information in ... ‘commercial speech.’ " Id.

The Ordinance regulates commercial speech and compels certain disclosures.² Therefore, in addressing Plaintiffs’ claim, we first determine what level of scrutiny applies. The parties dispute whether we should analyze the Ordinance’s compliance with the First Amendment under Central Hudson Gas & Electric Corp. v. Public Service Commission , 447 U.S. 557, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980), or under Zauderer , 471 U.S. 626, 105 S.Ct. 2265. We have discussed those two tests previously, stating that:

Under Central Hudson , the government may restrict or prohibit commercial speech that is neither misleading nor connected to unlawful activity, as long as the governmental interest in regulating the speech is substantial. 447 U.S. at 564 . The restriction or prohibition must "directly advance the governmental interest asserted," and must not be "more extensive than is necessary to serve that interest." Id. at 566 . Under Zauderer ..., the government may compel truthful disclosure in commercial speech as long as the compelled disclosure is "reasonably related" to a substantial governmental interest. Zauderer , 471 U.S. at 651 .

CTIA—The Wireless Ass’n v. City of Berkeley , 854 F.3d 1105, 1115 (9th Cir. 2017).³

In NIFLA , the Supreme Court applied the Zauderer test without deciding whether that test, in fact, applied. NIFLA , 138 S.Ct. at 2376–77. But before NIFLA , we examined a similar health and safety warning and held squarely that Zauderer provides the proper analytical framework for considering required warnings on commercial products: "[T]he government may compel truthful disclosure in commercial speech as long as the compelled disclosure is ‘reasonably related’ to a substantial governmental interest." CTIA , 854 F.3d at 1115. We rejected the argument that intermediate scrutiny—as required by Central Hudson , 447 U.S. 557, 100 S.Ct. 2343, for situations in which speech is restricted or prohibited—should govern. CTIA , 854 F.3d at 1115–17. We also rejected the argument that Zauderer applies only to situations in which the government requires disclosures to prevent consumer deception, pointing out that we were joining the holdings of several of our sister circuits.

Id. at 1116–17 (citing Am. Meat Inst. v. U.S. Dep’t of Agric. , 760 F.3d 18 (D.C. Cir. 2014) (en banc); Disc. Tobacco City & Lottery, Inc. v. United States , 674 F.3d 509 (6th Cir. 2012) ; N.Y. State Rest. Ass’n v. N.Y. City Bd. of Health , 556 F.3d 114 (2d Cir. 2009) ; Nat’l Elec. Mfrs. Ass’n v. Sorrell , 272 F.3d 104 (2d Cir. 2001) ).

NIFLA requires us to reexamine how we approach a First Amendment claim concerning compelled speech. But nothing in NIFLA suggests that CTIA was wrongly decided. To the contrary, NIFLA preserved the exception to heightened scrutiny for health and safety warnings. The Supreme Court made clear that it was not calling into "question the legality of health and safety warnings long considered permissible." NIFLA , 138 S.Ct. at 2376.⁴ NIFLA did not address, and a fortiori did not disapprove, the circuits’...