McLemore v. Gumucio
| Decision Date | 23 March 2022 |
| Docket Number | 3:19-cv-00530 |
| Court | U.S. District Court — Middle District of Tennessee |
| Parties | WILL MCLEMORE, et al., Plaintiffs, v. ROXANA GUMUCIO, et al., Defendants. |
Pending before the Court is Defendants' Motion for Summary Judgment (Doc. No. 88, “Defendants' Motion”) supported by an accompanying brief (Doc. No. 88-1). Plaintiffs filed a response (Doc. No. 106), and Defendants filed a reply (Doc. No. 110). Also pending before the Court is Plaintiffs' Motion for Summary Judgment (Doc. No. 90 “Plaintiffs' Motion”), supported by an accompanying brief (Doc. No. 91). Defendants filed a response (Doc. No. 107), and Plaintiffs filed a reply (Doc. No. 111). Also pending before the Court is Plaintiffs' Motion to Exclude Defendants' Expert Witness Justin Ochs (Doc. No 89, “Motion to Exclude”).
For the reasons stated below, Defendants' Motion will be denied Plaintiffs' Motion will be granted, and Plaintiffs' Motion to Exclude will be denied as moot.
BACKGROUND[1]
In 1967, Tennessee created the Tennessee Auction Commission (“the Commission”) with the goal of regulating the profession of auctioneering. (Doc. No. 50 at ¶ 54). In 2006, as e-commerce began to emerge, Tennessee amended its auctioneering regulatory statutes and created an exemption from the regulatory scheme for “fixed price or timed listings that allow bidding on an Internet website but that does not constitute a simulcast of a live auction.” (Id. at ¶ 65 (citing Tenn. Code Ann. § 62-19-103(9)). In 2016, the Commission proposed a rule that would have excluded online extended-time auctions (i.e., auctions whereby the ending time can be extended based on bidding activity)[2] from such exemption. (Id. at ¶ 86). But on December 15, 2016, before this proposed rule became effective, Tennessee's Joint Committee for Government Operations pulled it out for specific review and ultimately rejected it. (Id. at ¶¶ 87, 95). In 2017, the Tennessee General Assembly again considered a bill that would have required extended-time, but not fixed-time, [3] online auctions to be licensed. (Id. at ¶ 96). After that bill failed, the issue was raised again in 2018. (Id. at ¶¶ 104, 105). The 2018 bill was amended to create a Task Force to study the issue of online-auction regulation. (Doc. No. 114 at ¶ 205). The Task Force analyzed three years of complaint data, which revealed very few complaints for online auctions in general (11 overall in three years) and even fewer for extended-time auctions-three overall and none in 2018. (Id. at ¶¶ 205-207, 211). The Task Force then recommended, among other things, that “electronic” exchanges be added to the definition of an auction (so that “electronic” (i.e., online) auctions may be regulated) and further recommended that the term “timed listing” be defined, for purposes of the above-referenced exemption, as “offering goods for sale with a fixed ending time and date which does not extend based on bidding activity.” (Doc. No. 50 at ¶¶ 158-160).
Thereafter, a bill was introduced to amend Tennessee's statutes (codified at Tenn. Code Ann. § 62-19-101 et seq.) regulating auctions and the licensing requirements for those who conduct “auctions.” (Id. at ¶ 162); 2019 Tenn. Pub. Ch. 471 (hereinafter “PC 471”). Specifically, as recommended by the Task Force, Section 4(2) of the bill effectively amends the definition of “auction” contained at Tenn. Code Ann. § 62-19-101(2) to include “electronic” exchanges. (Id. at ¶ 181).[4] Also, Section 5(a)(1) of the bill essentially restated existing law (set forth in Tenn. Code Ann. § 62-19-102(a)(1)) in providing that it is unlawful for any person to “[a]ct as, advertise as, or represent to be an auctioneer without holding a valid license issued by the commission.” (Id. at ¶ 185).[5] In addition, Section 4(12) of the bill further narrowed the exemption (i.e., the exemption from otherwise applicable licensing requirements) for so-called “timed listings” that allow bidding on an Internet website; , Section 4(12) carved out from this exemption extended-time auctions. (Id. at ¶ 187).
In addition, Section 6 of the bill effectively restated the exemptions ) to the applicability of the entire statutory scheme (including, necessarily, its licensing requirements) set forth in Tenn. Code Ann. § 62-19-101 et seq. (Id. at ¶ 186).[6] Some exemptions are based on the kind of auction involved, while others were based on the identity of the party conducting the auction. These exemptions include, among others, “[a]n auction conducted by or under the direction of a governmental entity”; “[a]n auction conducted on behalf of a political party, church, or charitable corporation or association”; “[a]n auction conducted for the sale of livestock”; “an auction for the sale of tobacco”; “[a]ny fixed price or timed listings that allow bidding on an Internet website, but do not constitute a simulcast of a live auction”; “[a]n in person or simulcast auction whose primary business activity is selling nonrepairable or salvage vehicles in this state”; and “[a]n individual who generates less than twenty-five thousand dollars ($25, 000) in revenue a calendar year from the sale of property in online auctions.” (Id.). As noted, these exemptions apply to the entire statutory scheme, meaning that they apply to the new general requirement that persons conducting extended-time auctions be licensed.
On May 24, 2019, Tennessee Governor Bill Lee signed PC 471 into law. (Id. at ¶ 179). The law was to go into effect on July 1, 2019. (Id. at ¶ 180).
Plaintiff McLemore Auctions Company, LLC (“McLemore Auction”), is a Tennessee limited liability company with a physical location in Nashville, Tennessee. (Doc. No. 106 at ¶ 1). Plaintiff Will McLemore is the president of McLemore Auction. (Id. at ¶ 2). McLemore and McLemore Auction contract with owners of tangible personal property to sell that property at auction through the website www.mclemoreauction.com (Id. at ¶ 5). McLemore and McLemore Auction rely on independent contractors who do not hold Tennessee auctioneer licenses to conduct auctions through the McLemore Auction website. (Id. at ¶ 6). McLemore Auction uses exclusively the extended-time auction format, whereby (as noted above) the time of the auction closing can be extended based on bidding activity. (Id. at ¶ 7).
Plaintiff Purple Wave, Inc., is a privately held corporation, incorporated in Delaware and physically located in Manhattan, Kansas. (Id. at ¶ 8). Plaintiff Adam McKee is the president and CEO of Purple Wave. (Id. at ¶ 12). McKee and Purple Wave contract with owners of tangible personal property to sell that property at auction through the website www.purplewave.com (“Purple Wave's website”). (Id. at ¶ 19). Purple Wave's website uses an extended-time auction format. (Id. at ¶ 9). No. person employed by Purple Wave holds any license issued by the Tennessee Auctioneer Commission. (Id. at ¶ 16).
Plaintiff Interstate Auction Association (IAA) is an unincorporated association with members who are dedicated to online auctioneer freedom. (Id. at ¶ 5). It was organized by McLemore as a direct response to the proposed amendment; it is made up primarily of online auctioneers, both licensed and unlicensed. (Id.).
II. Procedural Background
On June 26, 2019, Plaintiffs filed a Complaint in this Court, asserting that the provisions of the amended statute that require licensure for extended-time online auctions violate their rights to free speech under the First Amendment and Fourteenth Amendment of the United States Constitution and Article I, Section 19 of the Tennessee Constitution; burden interstate commerce in violation of the Commerce Clause of the United States Constitution; and violate the Privileges or Immunities Clause of the United States Constitution. (See Doc. No. 4). On June 27, 2019 (four days prior to the law's effective date), Plaintiffs filed a Motion for [a] Temporary Restraining Order and a Preliminary Injunction, which requested the Court to enjoin the State from enforcing its licensure regime with respect to online websites. (Doc. No. 3). On June 28, 2019, the Court entered a temporary restraining order (“TRO”) that enjoined the State from applying Tennessee's auctioneering laws and licenses to “electronic” exchanges, or online auction websites, or against Plaintiffs. (Doc. No. 14). On July 10, 2019, the Court held a hearing on Plaintiffs' motion for preliminary injunction. Thereafter, the Court granted Plaintiffs' motion for preliminary injunction, finding that Plaintiffs were likely to succeed on the merits of their Dormant Commerce Clause claim, and that the other applicable preliminary injunction factors weighed in favor of granting Plaintiffs' requested relief. See McLemore v. Gumucio, No. 3:19-cv-00530, 2019 WL 3305131, at *13 (M.D. Tenn. July 23, 2019). Thus, the Court enjoined the State “from applying Tennessee's auctioneering laws and licenses to ‘electronic' exchanges, or online auction websites, or against Plaintiffs pending further order of the Court.” Id.
On November 20, 2019, Plaintiffs filed an Amended Complaint asserting the same claims asserted in the Complaint but adding further factual allegations. (Doc. No. 50). On December 4, 2019, Defendants filed a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (Doc. No. 52). The Court granted Defendant's motion to dismiss in part, dismissing Plaintiffs' Privileges and Immunities claim pursuant to Rule 12(b)(6) but denying the motion to dismiss as to Plaintiffs' claims alleging violations of each of the following: the First Amendment; Article I, Section 19 of the Tennessee Constitution; and the Dormant Commerce...
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