Topic: Law and Civil Liberties

Crazy Law Allows “Discounts” for Cash but Not “Surcharges” for Credit

In Federalist 10, James Madison warned of “a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens or to the permanent and aggregate interests of the community.” These groups—“factions” in Madison’s terms—come together to seek concentrated benefits from favorable legislation and regulation rather than competing in the marketplace, while spreading the costs throughout society.

While Madison conceded that such interests could not be stopped completely, he acknowledged that certain steps could be taken to mitigate the “effects” of these groups, and the damage that they can do to the public interest. The First Amendment is one such protection. The New York legislature, however, ignored the First Amendment rights of both merchants and consumers when—at the behest of the credit-card lobby—it passed a law restricting how retailers can convey pricing schemes, as well as the public’s right to know about them. 

New York’s no-surcharge law—like those in 10 other states—insulate credit-card companies from consumer knowledge about who is actually causing the higher prices on goods when they use their credit card (“swipe fees”). The law does this not by restricting the merchants’ ability to charge different prices as between cash and credit payments—that’s legal everywhere—but by regulating the communications regarding the different prices.

To put it simply: the law allows merchants to offer “discounts” to cash-paying customers, but makes it a crime to impose economically equivalent “surcharges” on those who use plastic. By mandating how these merchants convey their pricing structure, New York is restricting speech on the basis of its content, which would seem to be an obvious First Amendment violation.

A federal district court agreed—as have two other federal courts, including the U.S. Court of Appeals for the Eleventh Circuit when it struck down a similar Florida law. The district court held that the law “plainly regulates speech”—not conduct—by drawing a line between prohibited “surcharges” and permissible “discounts” based solely on words and labels. The Second Circuit disagreed, however, holding that the law regulates “merely prices,” not speech.

Cato has now filed an amicus brief urging the Supreme Court to take up this important case and rule that collusion between business interests and state government can’t be used to circumvent constitutional rights. Indeed, the Framers sought to protect speech from the type of crony capitalism New York’s no-surcharge law manifests. We also argue that the Court should clarify that the First Amendment covers speech even if it involves commercial matters. When legislatures abridge these protections, judges should apply the highest form of scrutiny to these laws rather than limply deferring to majoritarian will. 

The Supreme Court will decide later this month, or possibly this fall, whether to take up Expressions Hair Design v. Scheniderman.

Thanks to former Cato legal intern Frank Garrison, who’ll be starting as a legal associate later this summer, for help with this brief.

Happy Magna Carta Day

On the fields of Runnymede, 801 years ago today, English nobles and clergy met to wrest from King John many of the rights we Americans now enjoy. There followed, however unevenly, the rule of law.

Thus was the nascent common law reduced to a document, Magna Carta, the world’s oldest, still honored “constitution.” Its lesson, that political power needs to be restrained by the rule of law, is as important to remember today as it was eight centuries ago. 

Click on the links above to see why.

NH Governor Vetoes School Choice Bill

For a few years now, the town of Croydon, NH (population 651) has been fighting with the governor and state board of education over their school choice policy. The town isn’t large enough to sustain its own K-12 district school, so it contracts with a neighboring town to educate most of its residents’ children starting in 5th grade. But when its contract was approaching expiration a few years ago, the town decided to give local parents the option of sending their children to private schools as well, and the town would cover tuition up to the amount that it was spending per pupil at the neighboring district school (about $12,000).

That’s when the governor and state education bureaucrats got involved. They objected to the town’s use of tax revenue at non-government schools, though they had difficulty pointing to exactly which law or statute the town was violating. They’re currently embroiled in a lawsuit to sort out whether Croydon has the authority to decide how to spend its local tax dollars, but meanwhile the state legislature passed a bill clarifying that Croydon and similar towns have the authority to enact their own school choice policies. 

Last week, NH Gov. Maggie Hassan vetoed that bill citing two arguments I had already refuted in a Union Leader op-ed earlier in the week. In her veto message, Gov. Hassan wrote:

House Bill 1637 diverts taxpayer money to private and religious schools with no accountability or oversight, a clear violation of the New Hampshire Constitution, which states, ‘… no money raised by taxation shall ever be granted or applied for the use of the schools of institutions of any religious sect or denomination.’ Not only is the bill unconstitutional, it also has no mechanism to ensure a student’s constitutional right to the opportunity to receive an adequate education and would undermine the state’s efforts to ensure a strong and robust public education system for all New Hampshire students.

“Under current New Hampshire law, public schools are required to provide the opportunity for an adequate education, as defined by the Legislature, and are held accountable through laws and rules that require monitoring and review by the Department of Education. Additionally, as required by statute and as a result of Supreme Court decisions requiring a statewide education accountability system, New Hampshire schools are required to participate in the Statewide Educational Improvement and Assessment Program. If House Bill 1637 is enacted, public funds would be used to send students to private schools – which are only approved by the Department of Education for attendance and not curriculum, without the same accountability standards as the public schools – violating the requirements of state law and the state Constitution.

Respecting Property Rights Means Paying Just Compensation for Takings

There’s no such thing as a free lunch. Or as the Fifth Amendment puts it, “nor shall private property be taken for public use, without just compensation.” Despite the clarity with which the Takings Clause proclaims that government must respect property rights, state and local governments have long been contriving ways to obtain private property without paying the constitutionally required just compensation.

In 2012, San Juan County, Washington—the islands in the Salish Sea between Seattle and Victoria—enacted a rule that conditions shoreline owners’ proposed land uses on dedicating a portion of their property as on-site conservation areas. This isn’t a new tactic. In Nollan v. California Coastal Commission (1987), for example, the Supreme Court rejected the government’s conditioning of a building permit on the landowners’ granting a public easement across their property to access a beach. The Court acknowledged that conditioning a benefit on the property owners’ giving up their Fifth Amendment right to just compensation is “an out-and-out plan of extortion.” The Court elaborated seven years later in Dolan v. City of Tigard (1994), ruling that courts must apply a high level of scrutiny to conditions attached to land-use permits to prevent government “gimmickry.”

There’s No Such Thing as a ‘Public’ School

Perhaps the most pervasive myth about our nation’s education system is the notion that “public schools have to take all children.” Last year, when criticizing charter schools that she claimed, “don’t take the hardest-to-teach kids,” Hillary Clinton quipped, “And so the public schools are often in a no-win situation, because they do, thankfully, take everybody.” 

No, in fact, they do not.

At best, so-called “public” schools have to take all children in a particular geographic area, although they can and do expel children based on their behavior. They are more appropriately termed “district schools” because they serve residents of a particular district, not the public at large. Privately owned shopping malls are more “public” than district schools.

Twenty Years after Whren: A Crisis of Police Legitimacy

Today marks the 20th anniversary of the Supreme Court decision in Whren v. United States. The case clarified the constitutionality of the practice of “pretextual” traffic stops. The Court ruled that so long as an officer can articulate that a driver violated some traffic law, the officer may stop a motorist in order to investigate potential and wholly unrelated criminal activity. The case has effectively become a blueprint for police officers to racially profile drivers without repercussion.

Last fall, I gave a talk at Case Western Reserve Law School in a symposium dedicated to Whren and its legacy. The school’s law review recently published the article that came from that talk. Instead of putting forth an argument to overturn Whren, I argue that police departments ought to curtail or end the use of pretextual stops as a proactive policing measure. The Supreme Court’s ruling that the tactic is constitutional does not make it an ethical or wise tactic to employ.

Simply put, pretextual stops undermine police legitimacy by turning public servants into antagonistic interrogators. In practice, pretextual motor vehicle stops—much like the pedestrian Terry stops used in New York’s infamous Stop-and-Frisk program—ensnare far more innocent people than criminals. And most of the people who are stopped are black or Latino, further eroding police support in those communities. Police departments must establish their legitimacy—through trust and positive interactions—to improve their effectiveness and public safety. Overly aggressive and implicitly discriminatory policing practices undermine that legitimacy.

You can read the whole article here. The rest of this issue of the Case Western Reserve Law Review can be found here.

Update: I also wrote a shorter piece over at Rare describing what happens during a pretextual stop and why it’s so resented by the people who experience them. 

Happy Birthday Nat Hentoff!

Today Cato senior fellow Nat Hentoff turns 91.  Happy Birthday Nat!

Nat has opposed communism since he was 15 years old, but because he had a column with the Village Voice, people would sometimes assume he had communist sympathies.  In this video, Nat explains that that mistaken assumption is how he was able to get into a meeting with Fidel Castro’s deputy, Che Guevara, and challenge him about the dictatorial nature of the Castro regime.  He finds it puzzling why so many people fawn over Castro and Che.