Expressions Hair Design v. Schneiderman, 581 U.S. ___ (2017)

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 15–1391

_________________

EXPRESSIONS HAIR DESIGN, et al., PETITIONERS v.ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL OF NEW YORK, et al.

on writ of certiorari to the united states court of appeals for the second circuit

[March 29, 2017]

Chief Justice Roberts delivered the opinion of the Court.

Each time a customer pays for an item with a credit card, the merchant selling that item must pay a transaction fee to the credit card issuer. Some merchants balk at paying the fees and want to discourage the use of credit cards, or at least pass on the fees to customers who use them. One method of achieving those ends is through differential pricing—charging credit card users more than customers using cash. Merchants who wish to employ differential pricing may do so in two ways relevant here: impose a surcharge for the use of a credit card, or offer a discount for the use of cash. In N. Y. Gen. Bus. Law §518, New York has banned the former practice. The question presented is whether §518 regulates merchants’ speech and—if so—whether the statute violates the First Amendment. We conclude that §518 does regulate speech and remand for the Court of Appeals to determine in the first instance whether that regulation is unconstitutional.

I

A

When credit cards were first introduced, contracts between card issuers and merchants barred merchants from charging credit card users higher prices than cash customers. Congress put a partial stop to this practice in the 1974 amendments to the Truth in Lending Act (TILA). The amendments prohibited card issuers from contractually preventing merchants from giving discounts to customers who paid in cash. See §306, 88Stat. 1515. The law, however, said nothing about surcharges for the use of credit.

Two years later, Congress refined its dissimilar treatment of discounts and surcharges. First, the 1976 version of TILA barred merchants from imposing surcharges on customers who use credit cards. Act of Feb. 27, 1976, §3(c)(1), 90Stat. 197. Second, Congress added definitions of the two terms. A discount was “a reduction made from the regular price,” while a surcharge was “any means of increasing the regular price to a cardholder which is not imposed upon customers paying by cash, check, or similar means.” §3(a), ibid.

In 1981, Congress further delineated the distinction between discounts and surcharges by defining “regular price.” Where a merchant “tagged or posted” a single price, the regular price was that single price. Cash Discount Act, §102(a), 95Stat. 144. If no price was tagged or posted, or if a merchant employed a two-tag approach—posting one price for credit and another for cash—the regular price was whatever was charged to credit card users. Ibid. Because a surcharge was defined as an increase from the regular price, there could be no credit card surcharge where the regular price was the same as the amount charged to customers using credit cards. The effect of all this was that a merchant could violate the surcharge ban only by posting a single price and charging credit card users more than that posted price.

The federal surcharge ban was short lived. Congress allowed it to expire in 1984 and has not renewed the ban since. See §201, ibid. The provision preventing credit card issuers from contractually barring discounts for cash, however, remained in place. With the lapse of the federal surcharge ban, several States, New York among them, immediately enacted their own surcharge bans. Passed in 1984, N. Y. Gen. Bus. Law §518 adopted the operative language of the federal ban verbatim, providing that “[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.” N. Y. Gen. Bus. Law Ann. §518 (West 2012); see also 15 U. S. C. §1666f(a)(2) (1982 ed.). Unlike the federal ban, the New York legislation included no definition of “surcharge.”

In addition to these state legislative bans, credit card companies—though barred from prohibiting discounts for cash—included provisions in their contracts prohibiting merchants from imposing surcharges for credit card use. For most of its history, the New York law was essentially coextensive with these contractual prohibitions. In recent years, however, merchants have brought antitrust challenges to contractual no-surcharge provisions. Those suits have created uncertainty about the legal validity of such contractual surcharge bans. The result is that otherwise redundant legislative surcharge bans like §518 have increasingly gained importance, and increasingly come under scrutiny.

B

Petitioners, five New York businesses and their owners, wish to impose surcharges on customers who use credit cards. Each time one of their customers pays with a credit card, these merchants must pay some transaction fee to the company that issued the credit card. The fee is generally two to three percent of the purchase price. Those fees add up, and the merchants allege that they pay tens of thousands of dollars every year to credit card companies. Rather than increase prices across the board to absorb those costs, the merchants want to pass the fees along only to their customers who choose to use credit cards. They also want to make clear that they are not the bad guys—that the credit card companies, not the merchants, are responsible for the higher prices. The merchants believe that surcharges for credit are more effective than discounts for cash in accomplishing these goals.

In 2013, after several major credit card issuers agreed to drop their contractual surcharge prohibitions, the merchants filed suit against the New York Attorney General and three New York District Attorneys to challenge §518—the only remaining obstacle to their charging surcharges for credit card use. As relevant here, they argued that the law violated the First Amendment by regulating how they communicated their prices, and that it was unconstitutionally vague because liability under the law “turn[ed] on the blurry difference” between surcharges and discounts. App. 39, Complaint ¶51.

The District Court ruled in favor of the merchants. It read the statute as “draw[ing a] line between prohibited ‘surcharges’ and permissible ‘discounts’ based on words and labels, rather than economic realities.” 975 F. Supp. 2d 430, 444 (SDNY 2013). The court concluded that the law therefore regulated speech, and violated the First Amendment under this Court’s commercial speech doctrine. In addition, because the law turned on the “virtually incomprehensible distinction between what a vendor can and cannot tell its customers,” the District Court found that the law was unconstitutionally vague. Id., at 436.

The Court of Appeals for the Second Circuit vacated the judgment of the District Court with instructions to dismiss the merchants’ claims. It began by considering single-sticker pricing, where merchants post one price and would like to charge more to customers who pay by credit card. All the law did in this context, the Court of Appeals explained, was regulate a relationship between two prices—the sticker price and the price charged to a credit card user—by requiring that the two prices be equal. Relying on our precedent holding that price regulation alone regulates conduct, not speech, the Court of Appeals concluded that §518 did not violate the First Amendment.

The court also considered other types of pricing regimes—for example, posting separate cash and credit prices. The Court of Appeals thought it “far from clear” that §518 prohibited such pricing schemes. 808 F. 3d 118, 137 (CA2 2015). The federal surcharge ban on which §518 was modeled did not apply outside the single-sticker context, and the merchants had not clearly shown that §518 had a “broader reach” than the federal law. Ibid. Deciding that petitioners’ challenge in this regard “turn[ed] on an unsettled question of state law,” the Court of Appeals abstained from reaching the merits of the constitutional question beyond the single-sticker context. Id., at 135 (citing Railroad Comm’n of Tex. v. Pullman Co., 312 U. S. 496 (1941) ).

We granted certiorari. 579 U. S. ___ (2016).

II

As a preliminary matter, we note that petitioners present us with a limited challenge. Observing that the merchants were not always particularly clear about the scope of their suit, the Court of Appeals deemed them to be bringing a facial attack on §518 as well as a challenge to the application of the statute to two particular pricing regimes: single-sticker pricing and two-sticker pricing. Before us, however, the merchants have disclaimed a facial challenge, assuring us that theirs is an as-applied challenge only. See Tr. of Oral Arg. 4–5, 18.

There remains the question of what precise application of the law they seek to challenge. Although the merchants have presented a wide array of hypothetical pricing regimes, they have expressly identified only one pricing scheme that they seek to employ: posting a cash price and an additional credit card surcharge, expressed either as a percentage surcharge or a “dollars-and-cents” additional amount. See, e.g., App. 101–102, 104; Tr. of Oral Arg. 4–5, 18. Under this pricing approach, petitioner Expressions Hair Design might, for example, post a sign outside its salon reading “Haircuts $10 (we add a 3% surcharge if you pay by credit card).” Or, petitioner Brooklyn Farmacy & Soda Fountain might list one of the sundaes on its menu as costing “$10 (with a $0.30 surcharge for credit card users).” We take petitioners at their word and limit our review to the question whether §518 is unconstitutional as applied to this particular pricing practice.[1]

III

The next question is whether §518 prohibits the pricing regime petitioners wish to employ. The Court of Appeals concluded that it does. The court read “surcharge” in §518 to mean “an additional amount above the seller’s regular price,” and found it “basically self-evident” how §518 applies to sellers who post a single sticker price: “the sticker price is the ‘regular’ price, so sellers may not charge credit-card customers an additional amount above the sticker price that is not also charged to cash customers.” 808 F. 3d, at 128. Under this interpretation, signs of the kind that the merchants wish to post—“$10, with a $0.30 surcharge for credit card users”—violate §518 because they identify one sticker price—$10—and indicate that credit card users are charged more than that amount.

“We generally accord great deference to the interpretation and application of state law by the courts of appeals.” Pembaur v. Cincinnati, 475 U. S. 469 , n. 13 (1986). This deference is warranted to “render unnecessary review of their decisions in this respect” and because lower fed-eral courts “are better schooled in and more able to interpret the laws of their respective States.” Brockett v. Spokane Arcades, Inc., 472 U. S. 491, 500 (1985) (quoting Cort v. Ash, 422 U. S. 66 , n. 6 (1975); internal quotation marks omitted). “[W]e surely have the authority to differ with the lower federal courts as to the meaning of a state statute,” and have done so in instances where the lower court’s construction was “clearly wrong” or “plain error.” 472 U. S., at 500, and n. 9 (internal quotation marks omitted). But that is not the case here. Section 518 does not define “surcharge,” but the Court of Appeals looked to the ordinary meaning of the term: “a charge in excess of the usual or normal amount.” 808 F. 3d, at 127 (quoting Webster’s Third New International Dictionary 2299 (2002); internal quotation marks omitted). Where a seller posts a single sticker price, it is reasonable to treat that sticker price as the “usual or normal amount” and conclude, as the court below did, that a merchant imposes a surcharge when he charges a credit card user more than that sticker price. In short, we cannot dismiss the Court of Appeals’ interpretation of §518 as “clearly wrong.” Accordingly, consistent with our customary practice, we follow that interpretation.

IV

Having concluded that §518 bars the pricing regime petitioners wish to employ, we turn to their constitutional arguments: that the law unconstitutionally regulates speech and is impermissibly vague.

A

The Court of Appeals concluded that §518 posed no First Amendment problem because the law regulated conduct, not speech.[2] In reaching this conclusion, the Court of Appeals began with the premise that price controls regulate conduct alone. See 44 Liquormart, Inc. v. Rhode Island, 517 U. S. 484, 507 (1996) (plurality opinion); id., at 524 (Thomas, J., concurring in part and concurring in judgment); id., at 530 (O’Connor, J., concurring in judgment). Section 518 regulates the relationship between“(1) the seller’s sticker price and (2) the price the seller charges to credit card customers,” requiring that these two amounts be equal. 808 F. 3d, at 131. A law regulating the relationship between two prices regulates speech nomore than a law regulating a single price. The Court of Ap-peals concluded that §518 was therefore simply a conduct regulation.

But §518 is not like a typical price regulation. Such a regulation—for example, a law requiring all New York delis to charge $10 for their sandwiches—would simply regulate the amount that a store could collect. In other words, it would regulate the sandwich seller’s conduct. To be sure, in order to actually collect that money, a store would likely have to put “$10” on its menus or have its employees tell customers that price. Those written or oral communications would be speech, and the law—by determining the amount charged—would indirectly dictate the content of that speech. But the law’s effect on speech would be only incidental to its primary effect on conduct, and “it has never been deemed an abridgment of freedom of speech or press to make a course of conduct illegal merely because the conduct was in part initiated, evidenced, or carried out by means of language, either spoken, written, or printed.” Rumsfeld v. Forum for Aca-demic and Institutional Rights, Inc., 547 U. S. 47, 62 (2006) (quoting Giboney v. Empire Storage & Ice Co., 336 U. S. 490, 502 (1949) ; internal quotation marks omitted); see also Sorrell v. IMS Health Inc., 564 U. S. 552, 567 (2011) .

Section 518 is different. The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer. 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. Instead, if the merchant wishes to post a single sticker price, he must display $10.30 ashis sticker price. Accordingly, while we agree with the Court of Appeals that §518 regulates a relationship between a sticker price and the price charged to credit card users, we cannot accept its conclusion that §518 is nothing more than a mine-run price regulation. In regulating the communication of prices rather than prices themselves, §518 regulates speech.

Because it concluded otherwise, the Court of Appeals had no occasion to conduct a further inquiry into whether §518, as a speech regulation, survived First Amendment scrutiny. On that question, the parties dispute whether §518 is a valid commercial speech regulation under Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n of N. Y., 447 U. S. 557 (1980) , and whether the law can be upheld as a valid disclosure requirement under Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U. S. 626 (1985) .

“[W]e are a court of review, not of first view.” Nautilus, Inc. v. Biosig Instruments, Inc., 572 U. S. ___, ___ (2014) (slip op., at 14) (internal quotation marks omitted). Accordingly, we decline to consider those questions in the first instance. Instead, we remand for the Court of Appeals to analyze §518 as a speech regulation.[3]

B

Given the way the merchants have presented their case, their vagueness challenge gives us little pause. Before this Court, the only pricing practice they express an interest in employing is a single-sticker regime, listing one price and a separate surcharge amount. As we have explained, §518 bars them from doing so. “[A] plaintiff whose speech is clearly proscribed cannot raise a successful vagueness claim.” Holder v. Humanitarian Law Project, 561 U. S. 1, 20 (2010) . Although the merchants argue that “no one can seem to put a finger on just how far the law sweeps,” Brief for Petitioners 51, it is at least clear that §518 proscribes their intended speech. Accordingly, the law is not vague as applied to them.[4]

C

The judgment of the Court of Appeals for the Second Circuit is vacated, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.