McLemore v. Gumucio
| Decision Date | 23 July 2019 |
| Docket Number | No. 3:19-cv-00530,3:19-cv-00530 |
| Parties | WILL MCLEMORE, et al., Plaintiffs, v. ROXANA GUMUCIO, et al., Defendants. |
| Court | U.S. District Court — Middle District of Tennessee |
MEMORANDUM OPINION
Pending before the Court is Plaintiffs' Motion for a Preliminary Injunction. (Doc. No. 3). Via the motion, Plaintiffs request that the Court preliminarily enjoin the State from enforcing its licensure regime on auctioneers that conduct online extended-time auctions. The Court has considered the motion and its accompanying memorandum of law (Doc. Nos. 3 & 5), Defendants' response (Doc. No. 43), each party's court-ordered supplemental brief, (Doc. Nos. 18 & 20), and the arguments and evidence received at the July 10, 2019 hearing on the motion. For the reasons discussed below, Plaintiffs' motion will be GRANTED.
In 1967, Tennessee created the Tennessee Auction Commission ("the Commission") with the goal of regulating the profession of auctioneering. (Doc. No. 4 at ¶ 54). In 2006, as e-commerce began to emerge, Tennessee amended its auctioneering regulatory statutes and created anexemption for "fixed price or timed listings that allow bidding on an Internet website but that does not constitute a simulcast of a live auction." See Tenn. Code Ann. § 62-19-103(9). By including this exemption, which was known as the "eBay law," Tennessee placed (non-simulcast) online auctions outside its regulatory purview. (Doc. No. 4 at ¶ 65; Doc. No. 4-5 at 23, 25; Doc. No. 4-11 at 25).
In 2016, the Commission proposed a rule that would have excluded extended-time auctions (i.e., auctions whereby the ending time can be extended based on bidding activity) from the eBay exemption. (Doc. No. 4 at ¶ 86; Doc. No. 4-3). Tennessee's Joint Government Operations Committee rejected the proposed rule, and the Tennessee Auctioneers Association2 proposed a similar rule in 2017. (Id. at ¶ 98). After that bill failed, the issue was again raised in 2018. (Id. at ¶ 105). The 2018 bill was amended to create a Task Force to study the question of online auction regulation. (Id. at ¶ 114). 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 ¶¶ 155-57). The Task Force then recommended, among other things, that "electronic" exchanges be added to the definition of an auction for the purpose of requiring auctioneers participating in online extended-time auctions to be licensed. (Id. at ¶¶ 159-161).
Consistent with this recommendation, a bill was introduced to amend Tennessee's statutes regulating auctions and the licensing requirements for those who conduct "auctions." See 2019 Tenn. Pub. Ch. 471 (hereinafter "PC 471"). Specifically, the bill amends the definition of "auction" to include "electronic" exchanges. (Id. at § 4). The bill further stated that it is unlawful for anyperson to "[a]ct as, advertise as, or represent to be an auctioneer without holding a valid license issued by the commission." (Id. at § 5). 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; the bill carved out from this exemption extended-time auctions. (Id. at § 6(9)).
Also included in the bill are numerous exemptions to the requirement that an auctioneer conducting an online extended-time auction must be licensed. 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. at § 6). On May 24, 2019, Tennessee Governor Bill Lee signed PC 471 into law. (See Doc. No. 4-2 at 8). The law was to go into effect on July 1, 2019. (Id. at 7).
Plaintiff McLemore Auctions Company, LLC ("McLemore Auction"), is a Tennessee limited liability company with a physical location in Nashville, Tennessee. (Doc. No. 4 at ¶ 7). Plaintiff Will McLemore is the president of McLemore Auction. (Id. at ¶ 6). McLemore Auction has operated, and plans to continue to operate, online extended-time auctions of real estate and personal property in Tennessee. (Id. at ¶¶ 22 & 29). McLemore Auction employs one full-time employee, Will McLemore, and four independent contractors—Blake Kimball, Wilson Land, Jamie Boyd, and Dwayne Smith—who act as McLemore's auction managers. (Id. at ¶ 23).Kimball, Land, and Boyd do not hold any license under Tennessee's auctioneer laws, and McLemore relies on these unlicensed auction managers to conduct the auctions on McLemore Auction's website. (Id. at ¶¶ 24, 267). McLemore Auction exclusively uses the extended-time auction format, whereby (as noted above) the time of the auction closing extends based on bidding activity. (Id. at ¶ 32). McLemore Auction generates, and anticipates that it will continue to generate, more than $25,000 in sales revenue per calendar year from the sale of goods or real estate through online auctions. (Id. at ¶ 53). McLemore contends he and his company will suffer injury if the new law is enforced because the company would have to break contracts, which would threaten its business and cost it goodwill and customers. (Doc. No. 18-1 at 2-3). McLemore also avers that it would forever mar his reputation as a credible auctioneer. (Id.).
Plaintiff Purple Wave, Inc., is a privately held corporation, incorporated in Delaware and physically located in Manhattan, Kansas. (Doc. No. 4 at ¶ 9). Plaintiff Adam McKee is the president and CEO of Purple Wave. (Doc. No. 48-2 at ¶ 4). Via its website, Purple Wave conducts auctions of agricultural and construction equipment, and industrial, fleet, and government assets. (Id. at ¶ 5). Purple Wave's website uses an extended-time auction format and has already sold over $99,000 worth of goods in Tennessee during 2019. (Id. at ¶¶ 9-10, 12). No person employed by Purple Wave holds any license issued by the Tennessee Auctioneer Commission. (Doc. No. 4 at ¶ 216).
Plaintiff Interstate Auction Association (IAA) is an unincorporated association with members who are dedicated to online auctioneer freedom. (Id. at ¶ 10). It was organized by McLemore as a direct response to the proposed amendment, and is made up primarily of online auctioneers, both licensed and unlicensed. (Id.). Kimball, Land, and Boyd are members of the IAA. (Id. at ¶ 206).
On June 26, 2019, Plaintiffs filed their 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, Plaintiffs filed their Motion for Temporary Restraining Order and a Preliminary Injunction requesting the Court to enjoin the State from enforcing its licensure regime on online websites prior to the date the law was to go into effect—July 1, 2019. (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). The TRO went into effect on June 28, 2019 and was to expire on July 11, 2019 at 12:00 p.m. (Id.). On July 10, 2019, the Court held a hearing on Plaintiffs' motion for preliminary injunction. At the hearing, the Court indicated that it would extend the duration of the TRO by 14 days pursuant to Federal Rule of Civil Procedure 65(b)(2). Accordingly, the Court therefore issued a written order extending the TRO until July 26, 2019 at 12:00 p.m. (Doc. No. 26).
Federal Rule of Civil Procedure 65(a) authorizes a district court to issue a preliminary injunction prior to a trial on the merits. Wright & Miller, Federal Practice and Procedure § 2947 (2d ed. 1995). A preliminary injunction is an extraordinary remedy requiring the party seeking such relief to demonstrate a clear entitlement to the injunction under the given circumstances.Overstreet v. Lexington-Fayette Urban Cnty. Gov't., 305 F.3d 566, 573 (6th Cir. 2002). The purpose of a preliminary injunction is to preserve the status quo until the district court can hold a trial on the merits. United States v. Edward Rose & Sons, 384 F.3d 258, 261 (6th Cir. 2004).
Four factors must be considered and balanced when deciding whether to issue a preliminary injunction: (1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would suffer irreparable harm without the injunction; (3) whether issuance of the injunction would cause substantial harms to others; and (4) whether the public interest would be served by issuance of the injunction. Bonnell v. Lorenzo, 241 F.3d 800, 809 (6th Cir. 2001). "No single factor is a prerequisite to the issuance of a preliminary injunction; rather the Court must balance all four factors." Young v. Giles Cnty. Bd. of Edu., 181 F. Supp. 3d 459, 463 (M.D. Tenn. 2015) (cit...
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