Rowell v. Paxton

• Decision Date: 16 August 2018
• Docket Number: Cause No. A:14-CV-190-LY
• Citation: 336 F.Supp.3d 724
• Parties: Lynn ROWELL d/b/a Beaumont Greenery ; Montgomery Chandler, Inc.; Paula Cook; Townsley Designs, LLC; and Shonda Townsley, Plaintiffs, v. Ken PAXTON, in his Official Capacity as Attorney General of the State of Texas, Defendant.
• Court: U.S. District Court — Western District of Texas

336 F.Supp.3d 724

Lynn ROWELL d/b/a Beaumont Greenery ; Montgomery Chandler, Inc.; Paula Cook; Townsley Designs, LLC; and Shonda Townsley, Plaintiffs,

v.Ken PAXTON, in his Official Capacity as Attorney General of the State of Texas, Defendant.

Cause No. A:14-CV-190-LY

United States District Court, W.D. Texas, Austin Division.

Signed August 16, 2018

Deepak Gupta, Gupta Wessler PLLC, Washington, DC, Gary B. Friedman, Rebecca Quinn, Friedman Law Group, New York, NY, Richard L. Coffman, The Coffman Law Firm, Beaumont, TX, for Plaintiffs.

Benjamin S. Walton, Jeffrey E. Farrell, Office of the Attorney General, Emily L. Ardolino, Susan Watson, Texas Attorney General–General Litigation Division, Austin, TX, for Defendant.

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

LEE YEAKEL, UNITED STATES DISTRICT JUDGE

Before the court is the above styled and numbered action, which the United States Court of Appeals for the Fifth Circuit remanded to this court for further proceedings in light of Expressions Hair Design v. Schneiderman , ––– U.S. ––––, 137 S.Ct. 1144, 197 L.Ed.2d 442 (2017). See Rowell v. Pettijohn , 865 F.3d 237 (5th Cir.2017). Each plaintiff is a Texas merchant who alleges that as applied the Texas law prohibiting them from imposing surcharges on consumers' credit-card purchases, Texas Business and Commerce Code section 604A.0021, violates the merchants' commercial free-speech rights under the First Amendment to the United States Constitution. U. S. Const. amend. I ; Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y. , 447 U.S. 557, 561-66, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980) ; Tex. Bus. & Comm. Code Ann. § 604A.0021 (West Supp. 2017) ("Anti-Surcharge law" or "law").¹ The merchants request that the court permanently enjoin the State of Texas from enforcing the law against them.

The merchants filed this action in March 2014, contending that the Anti-Surcharge law is void for vagueness and violates the merchants' free-speech rights under the United States Constitution. Following a hearing on the State's motion to dismiss, the court concluded that the law properly regulated economic conduct–pricing–the law was not a regulation of speech, and the law was not void for vagueness.² Based on these holdings, the court dismissed Plaintiffs' Amended Complaint with prejudice. Rowell v. Pettijohn , No. 1:14-CV-190-LY, 2015 WL 10818660 (W.D. Tex. Feb. 4, 2015).

The merchants appealed and the circuit affirmed this court's decision. Rowell v. Pettijohn , 816 F.3d 73 (5th Cir. 2016). The merchants filed a petition for writ of certiorari to the Supreme Court of the United States, which the Supreme Court granted, vacated this court's judgment, and remanded the action to the circuit for further proceedings in light of Expressions Hair Design. Rowell v. Pettijohn , ––– U.S. ––––, 137 S.Ct. 1431, 197 L.Ed.2d 644 (2017). The circuit then remanded the action to this court for further proceedings. Rowell v. Pettijohn , 865 F.3d 237, 238 (5th Cir. 2017).

On remand, the court allowed the parties to amend their pleadings and set a schedule for discovery, briefing, and oral argument on cross-motions for summary judgment. By the second amended complaint the merchants allege only that the Anti-Surcharge law violates their First Amendment rights to freedom of speech.³ Pending, are Plaintiffs' Motion for Summary Judgment and For a Permanent Injunction and the State's Motion for Summary Judgment filed January 31, 2018 (Clerk's Document Nos. 78 & 79), each side's response, and each side's reply (Clerk's Document Nos. 86, 87, 88, & 89). Also before the court is the Corrected Plaintiffs' Statement of Undisputed Material Facts filed February 1, 2018 (Clerk's Document No. 83). On March 13, 2018, the court held a hearing on the cross-motions for summary judgment at which all parties were represented by counsel. Having considered the motions, responses, replies, Plaintiffs' Statement of Undisputed Material Facts, the case file, the arguments of counsel, and the applicable law, the court renders the following.

The amended Anti-Surcharge law provides:

(a) In a sale of goods or services, a seller may not impose a surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check, or a similar means of payment.

(b) This section does not apply to:

(1) a state agency, county, local governmental entity, or other governmental entity that accepts a credit card for the payment of fees, taxes, or other charges; or

(2) a private school that accepts a credit card for payment of fees or other charges, as provided by Section 111.002.

(c) This section does not create a cause of action against an individual for violation of this section.

Tex. Bus. & Com. Code Ann. § 604A.0021 (West Supp. 2017). Additionally, the related enforcement provision was amended in 2015 and 2017, and redesignated from the Texas Finance Code to the Texas Business and Commerce Code. See Act of May 19, 2017, 85th Leg., R.S., ch.196, § 2, 2017 Tex. Sess. Laws Serv. 369, 370 (West) (Tex. Bus. &Com. Code § 604A.003 (West Supp. 2017). Although the law has been amended, it has not substantively changed since this action was filed in 2014.

The undisputed facts are that each merchant would like to tell their customers, without fear of the State enforcing the Anti-Surcharge law, that there is a "surcharge" if a customer pays for a purchase with a credit card and that there is "no additional charge" if the customer pays with cash or a check. More to the point, the merchants want to say why the surcharge is assessed-because of credit-card swipe fees. Further, the merchants will charge a surcharge that does not exceed the amount of the credit-card swipe fee the merchant pays to a credit-card company.

Also proceeding in tandem with this action are other federal-court cases challenging similar state anti-surcharge laws. See Italian Colors Rest. v. Becerra , 878 F.3d 1165 (9th Cir. 2018) (affirming summary judgment in favor of plaintiffs that as-applied the California anti-surcharge law violated plaintiffs' First Amendment free-speech rights); Expressions Hair Design v. Schneiderman , 877 F.3d 99 (2d Cir. 2017) (on remand from Supreme Court, circuit certified question to New York Court of Appeals: "Does a merchant comply with New York's General Business Law § 518 so long as the merchant posts the total-dollars-and-cents price charged to credit card users?"); Expressions Hair Design v. Schneiderman , 30 N.Y.3d 1051, 69 N.Y.S.3d 580, 92 N.E.3d 803 (2018) (certified question accepted); Dana's R.R. Supply v. Attorney General, Fla. , 807 F.3d 1235 (11th Cir. 2015), cert. denied , ––– U.S. ––––, 137 S.Ct. 1452, 197 L.Ed.2d 647 (2017) (reversing summary judgment in favor of Florida, holding Florida's anti-surcharge law unconstitutional abridgment of merchants' free-speech rights, and remanding to district court for further proceedings); Dana's R.R. Supply , No. 4:14-CV-0134-RH/CAS (N.D. Fla. May 2, 2017) (judgment rendered enjoining Florida from taking action to enforce Florida's anti-surcharge law).

Expressions Hair Design

The Supreme Court's opinion in Expressions Hair Design provides the starting point for this court's analysis. Expressions Hair Design held that New York's anti-surcharge law, which is similar to Texas's law, was not a typical price-control regulation because the law tells a merchant nothing about the amount the merchant is allowed to collect from a cash or credit-card-paying consumer. 137 S.Ct. at 1150-51. Under the law,

Sellers are free to charge $10 for cash and $9.70, $10, $10.30, or any other amount for credit. What the law does regulate is how sellers may communicate their prices. A merchant who wants to charge $ 10 for cash and $10.30 for credit may not convey that price any way he pleases. He is not free to say "$10, with a 3% credit card surcharge" or "$10 plus $0.30 for credit" because both of those displays identify a single sticker price–$10–that is less than the amount credit card users will be charged.

Id. at 1151. The law regulates the communication of prices, not the prices charged, therefore, the New York law regulates speech. Id. The Supreme Court remanded the action for further inquiry about whether the New York law, as a speech regulation, survives First Amendment scrutiny. Id. The Supreme Court recognized the parties' dispute about whether the New York law is a valid commercial-speech regulation. However, as the record had yet to be developed on the matter, the Court declined to consider in the first instance whether the law survives First Amendment scrutiny, and remanded the action for a speech-regulation analysis.⁴

Proceedings in this action are at a similar crossroads; the action is before this court for a First Amendment speech-regulation analysis.

Summary-judgment review

Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a) ; Celotex Corp. v. Catrett , 477 U.S. 317, 323–25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Ragas v. Tenn. Gas Pipeline Co. , 136 F.3d 455, 458 (5th Cir. 1998). If the moving party carries its burden of showing that there is no genuine dispute as to any material fact, the burden shifts to the nonmovant to introduce specific facts or produce evidence that shows the existence of a genuine dispute regarding a material fact that prevents the grant of summary judgment in the movant's favor. Fed. R. Civ. P. 56(e) ; See also Celotex , 477 U.S. at 322–23, 106 S.Ct. 2548. A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

On cross motions for summary judgment, the court reviews each party's...