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

Annotate this Case



No. 15–1391



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

[March 29, 2017]

Justice Sotomayor, with whom Justice Alito joins, concurring in the judgment.

The Court addresses only one part of one half of petitioners’ First Amendment challenge to the New York statute at issue here. This quarter-loaf outcome is worse than none. I would vacate the judgment below and remand with directions to certify the case to the New York Court of Appeals for a definitive interpretation of the statute that would permit the full resolution of petitioners’ claims. I thus concur only in the judgment.


New York prohibits its merchants from “impos[ing] a surcharge on a [customer] 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). A merchant who violates this prohibition commits a misdemeanor and risks “a fine not to exceed five hundred dollars or a term of imprisonment up to one year, or both.” Ibid.


Section 518 can be interpreted in several ways. On first read, its prohibition on “impos[ing] a surcharge” on credit card customers appears to prohibit charging customers who pay with a credit card more than those who pay by other means. See Black’s Law Dictionary 1579 (9th ed. 2009) (“surcharge” means “[a]n additional tax, charge, or cost”). That is, §518 may require a merchant to charge all customers the same price, no matter the form of payment.

An earlier federal law containing an almost identical prohibition muddies the path to this plain text reading. A 1976 amendment to the Truth in Lending Act set out a temporary prohibition barring a “seller in any sales transaction” from “impos[ing] a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means.” §3(c)(1), 90Stat. 197. The amendment also defined a “surcharge” as “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. “[R]egular price” was later defined to mean the displayed price if a merchant displayed only one price or the credit card price if the merchant either did not display prices or displayed both cash and credit card prices. §102(a), 95Stat. 144. Under that definition, a merchant violated the federal prohibition on “impos[ing] a surcharge” by displaying in dollars-and-cents form only one price—the cash price—and then charging credit card customers a higher price.[1]

When the federal law lapsed in 1984, New York enacted §518, which sets out the same ban on “impos[ing] a surcharge.” New York borrowed the federal prohibition almost verbatim. But it chose, without explanation, not to borrow the federal definitions or to enact clarifying definitions of its own.

The difference between the laws leaves §518 open to at least three interpretations. It could be read in line with its plain text to require that a merchant charge the same price to all his customers. It could be read in line with the lapsed federal ban to permit a merchant to charge different prices to cash and credit card customers but to prohibit a merchant from displaying in dollars-and-cents form only the cash price and then charging credit card customers a higher price. On this reading, §518 would not apply where a merchant displays in dollars-and-cents form only the credit card price and then charges a lower price to cash customers, or where a merchant displays both the cash and credit card prices in dollars-and-cents form. Or it could be read more broadly, based on the omission of the definitions that had limited the federal ban’s scope. On this reading, §518 might prohibit a merchant from characterizing the difference between the cash and credit card prices as a “surcharge,” no matter how he displays his prices.[2]

Confirming the elusive nature of §518, New York has pressed almost all of these interpretations during this litigation. Before the District Court, it viewed §518 as mirroring the lapsed federal ban. See 975 F. Supp. 2d 430, 442 (SDNY 2013). Before the Second Circuit, it offered the lapsed federal ban as a narrowing interpretation, thus suggesting that §518 applies more broadly than that provision. See 808 F. 3d 118, 140, n. 13 (2015). And before this Court, it explained that other prosecutorial entities in New York are not bound by its interpretation of §518 (or the interpretations of the state district attorneys who are parties to this case), leaving open the possibility of still other interpretations. See Tr. of Oral Arg. 40.[3]


Petitioners here are five New York merchants. When a customer pays with a credit card, petitioners (like all merchants) are charged a processing fee by the card issuer. Petitioners want to pass that fee on to their credit card paying customers, but not their cash paying customers. They want to charge cash customers one price and credit card customers a higher price that includes the processing fee. One petitioner, Expressions Hair Design, currently does pass the costs of credit card processing fees on to its credit card paying customers. The other four charge one price to all customers. They set their prices to account for the processing fees they predict they will incur.

All five would prefer to use a different pricing system or display than the ones they use now. Expressions Hair Design and Five Points Academy would like to charge cash and credit card customers two different prices and to display a dollars-and-cents cash price alongside the extra charge for credit card customers—say, “$100 with a 3% credit card charge” or “$100 with a $3 credit card charge.” Brooklyn Farmacy & Soda Fountain, Brite Buy Wines & Spirits, and want to charge cash and credit card customers two different prices and to characterize the difference in prices as a “surcharge” when they display or convey their prices to customers. App. 47–48, 51, 57.

All five do not use their preferred pricing systems or displays for fear of violating §518. Expressions Hair Design and Five Points Academy believe §518 prohibits their pricing display because it would convey the credit card processing costs impermissibly as a surcharge, rather than permissibly as a discount—say, “$103 with a 3% discount for cash payment” or “$103 with a $3 discount for cash payment.” The other three petitioners believe that §518 regulates how they can describe the difference between cash and credit card prices. Because §518 does not, in their view, clearly state just how it regulates those descriptions, they have decided that the uncertainty counsels against a change.

Petitioners view §518 as an unconstitutional restriction on their ability to display and describe their prices to their customers. And so they sued and challenged the law on First Amendment grounds.


Resolving petitioners’ challenge to §518 requires an accurate picture of how, exactly, the statute works. That understanding is needed both to decide whether §518 prohibits petitioners’ preferred pricing systems and displays and, if so, whether that prohibition is consistent with the First Amendment. See 808 F. 3d, at 141; ante, at 10, n. 3.

But the Second Circuit did not decide just how far §518 extends. It instead decided how §518 applies to part of the petitioners’ challenge—the pricing display Expressions Hair Design and Five Points Academy wish to use—and declined to decide how, or even if, §518 applies to the rest of the challenge. While §518 evades easy interpretation, a partial decision was neither required nor right. The court below erred by not asking the New York Court of Appeals for a definitive interpretation of §518, and this Court errs by not correcting it.


Given a constitutional challenge that turned on the interpretation of an ambiguous state statute not yet definitively interpreted by the state courts, the Second Circuit faced a problem. Any interpretation it gave §518 would not be authoritative since state courts, not federal courts, have the final word on the interpretation of state statutes. But it had before it two routes—abstention and certification—to a solution. Both would have allowed it to secure an authoritative interpretation of §518 before resolving the constitutional challenge.

In this context, abstention and certification serve the same goals. Both recognize that when the outcome of a constitutional challenge turns on the proper interpretation of state law, a federal court’s resolution of the constitutional question may turn out to be unnecessary. The state courts could later interpret the state statute differently. And the state court’s different interpretation might result in a statute that implicates no constitutional question, or that renders the federal court’s constitutional analysis irrelevant. See, e.g., Arizonans for Official English v. Arizona, 520 U. S. 43, 79 (1997) ; Brockett v. Spokane Arcades, Inc., 472 U. S. 491 –509 (1985) (O’Connor, J., concurring). Abstention and certification avoid this risk by deferring a federal court’s decision on the constitutionality of the state statute until a state court has authoritatively resolved the antecedent state-law question.

Abstention is a blunt instrument. Under Railroad Comm’n of Tex. v. Pullman Co., 312 U. S. 496 (1941) , a federal court’s decision to abstain sends the plaintiff to state court. Once the plaintiff obtains the state courts’ views on the statute, he may return to federal court, state- court decision in hand, for resolution of the constitutional question. Pullman abstention thus “entail[s] a full round of litigation in the state court system before any resumption of proceedings in federal court.” Arizonans for Official English, 520 U. S., at 76.

Certification offers a more precise tool. In States that have authorized certification, a federal court may “put the [state-law] question directly to the State’s highest court, reducing the delay, cutting the cost, and increasing the assurance of gaining an authoritative response.” Ibid. The rule relevant here is typical of certification statutes. New York allows a federal court of appeals to certify “determinative questions of New York law . . . involved in a case pending before that court for which no controlling precedent of the Court of Appeals exists . . . to the [New York] Court of Appeals.” N. Y. Comp. Code, Rules & Regs., tit. 22, Rule 500.27(a) (2016).[4]

While the decision to certify “rests in the sound discretion of the federal court,” Lehman Brothers v. Schein, 416 U. S. 386, 391 (1974) , this Court has repeatedly emphasized that certification offers clear advantages over abstention. “[M]ere difficulty in ascertaining local law is no excuse for” abstaining and “remitting the parties to a state tribunal for the start of another lawsuit.” Id., at 390. Keeping the case, waiting for an answer on the certified question, and then fully resolving the issues “in the long run save[s] time, energy, and resources and helps build a cooperative judicial federalism.” Id., at 391. As a result, “the availability of certification greatly simplifies the analysis” of whether to abstain. Bellotti v. Baird, 428 U. S. 132, 151 (1976) ; see also Arizonans for Official English, 520 U. S., at 75 (“Certification today covers territory once dominated by a deferral device called Pullman abstention” (internal quotation marks omitted)). And this Court has described abstention as particularly problematic where, as here, a challenge to a state statute rests on the First Amendment. Cf. Virginia v. American Booksellers Assn., Inc., 484 U. S. 383, 396 (1988) (“Certification, in contrast to the more cumbersome and (in this context) problematic abstention doctrine, is a method by which we may expeditiously obtain that construction”); Houston v. Hill, 482 U. S. 451 –468 (1987).

The court below chose a convoluted course: It rejected certification, abstained in part, and decided the question in part. It did so by dividing petitioners’ challenge into two parts. As to the first part, it held that §518 did prohibit the pricing display that Expressions Hair Design and Five Points Academy prefer: displaying the cash price alongside the credit card charge.[5] It found this application of §518 consistent with the First Amendment. See 808 F. 3d, at 130. As to the second part, it declined to address whether §518 speaks to, or unconstitutionally restricts, how petitioners who wish to display both the cash and credit card prices in dollars-and-cents form can describe the difference between those prices. See id., at 136. It doubted whether §518 did reach that broadly and assumed that, even if it did, the New York state courts would construe the statute more narrowly—in line with the lapsed federal provision. And so the court declined to certify the question and chose instead to abstain from deciding this part of petitioners’ challenge. See id., at 137–139. It did so even though New York, responsible for enforcing §518, had “never quite abandon[ed]” its position that §518 might reach more broadly than the lapsed federal provision. Id., at 140, n. 13.

The Second Circuit should have exercised its discretion to certify the antecedent state-law question here: What pricing schemes or pricing displays does §518 prohibit? Certification might have avoided the need for a constitutional ruling altogether. If the state court reads §518 only as a price regulation, no constitutional concerns are implicated. Compare 44 Liquormart, Inc. v. Rhode Island, 517 U. S. 484, 507 (1996) (plurality opinion) (“direct regulation” of prices does “not involve any restriction on speech”), with Virginia Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U. S. 748, 761 (1976) (price advertisements contain protected speech because they convey a merchant’s “ ‘idea’ ” that “ ‘I will sell you the X prescription drug at the Y price’ ”). Or certification might have limited the scope of the constitutional challenge in the case. If the state court reads §518 to mirror the lapsed federal ban, that would eliminate the need for a constitutional ruling on the second part of petitioners’ challenge (premised on a reading of §518 that prohibits more than the lapsed federal ban). At the very least, certification would have allowed the court to resolve petitioners’ entire challenge in one go.

The Second Circuit declined to exercise its discretion to certify because it viewed the “state of the record” as too underdeveloped. 808 F. 3d, at 141. It thought that the New York Court of Appeals could not interpret §518, and that it could not resolve the challenge to §518, basedon that record. Both issues are pure questions of law: whether §518 prohibits petitioners’ preferred pricing sys-tems and displays (a statutory interpretation question for theNew York Court of Appeals) and whether §518 survives petitioners’ First Amendment challenge (a constitutional question for the Second Circuit). And both issues turn on only a limited set of facts—the pricing systems and displays that petitioners wish to use. As discussed above, the record contains those facts. The “state of the record” thus does not counsel against certification. Given the significant benefits certification offered and given the absence of persuasive downsides identified by the Second Circuit, the decision not to certify was an abuse of discretion.


The consequences of the decision not to certify reverberate throughout the Court’s opinion today. For lack of a definitive interpretation of §518, it chooses to address only the first part of petitioners’ challenge and to defer to the Second Circuit’s partial interpretation of §518.[6] Ante, at 6–8. It then holds that §518 does restrict constitutionally protected speech. Ante, at 8–10. But it does not decide whether §518’s restriction is constitutionally permissible because doing so would require it to answer the ever-present question in this case: “whether the statute permits . . . pricing schemes like the one . . . Expressions currently uses.” Ante, at 10, n. 3. And so it sends this case back to the Second Circuit for further proceedings. Ante, at 10.


“The complexity” of this case “might have been avoided,” Arizonans for Official English, 520 U. S., at 79, had the Second Circuit certified the question of §518’s meaning when the case was first before it. The Court’s opinion does not foreclose the Second Circuit from choosing that route on remand. But rather than contributing to the piecemeal resolution of this case, I would vacate the judgment below and remand with instructions to certify the case to the New York Court of Appeals to allow it to definitively interpret §518. I thus concur only in the judgment.


1  This is the interpretation of the lapsed federal ban offered by the United States and accepted by the majority. For purposes of this opinion, I assume that this interpretation is correct.
2  Section 518’s sparse enforcement history does not clear up the ambiguity. New York has pursued one §518 prosecution, which resulted in a conviction later set aside on appeal. The decision supports, but does not require, giving §518 a broader reading than the lapsed federal ban. See People v. Fulvio, 136 Misc. 2d 334, 344–345, 517 N. Y. S. 2d 1008, 1015 (1987) (stating that §518 permits a conviction for being “careless enough to describe the higher price in terms which amount to the ‘credit price’ having been derived from adding a charge to the lower price” (emphasis deleted)). A more recent enforcement spree is more opaque. A group of merchants state that when a customer called asking for their prices, they would quote the cash price and tell the customers they charged, for example, “a $.05 surcharge” for payment with a credit card. See, e.g., App. 107. They state that in 2009 the New York Attorney General’s Office told them that they had violated §518, directed them to stop, and explained that they could comply with §518 by quoting the credit card price and offering a “discoun[t]” for payment with cash. Ibid. While these merchants’ acts would have violated the lapsed federal ban—by stating a single cash price and then charging a higher price to credit card customers—the recent enforcement actions do not demonstrate that §518 prohibits only those acts and stretches no further. And because the New York attorney general lacks the author-ity to adopt an interpretation of §518 that binds other prosecutorial entities in the State, these enforcement actions speak only to how the attorney general may interpret §518. See Tr. of Oral Arg. 40–41.
3  The multiple available interpretations of §518 do not render §518 so vague as to violate the Due Process Clause. But they do render §518 ambiguous enough to warrant asking the New York Court of Appeals to resolve the statute’s meaning.
4  The New York Court of Appeals regularly accepts and answers certified questions. See, e.g., Flo & Eddie, Inc. v. Sirius XM Radio, Inc., 28 N. Y. 3d 583, ___ N. E. 3d ___ (Dec. 20, 2016) (certified Apr. 13, 2016); Pasternack v. Laboratory Corp. of Am. Holdings, 27 N. Y. 3d 817, 59 N. E. 3d 485 (June 30, 2016) (certified Nov. 17, 2015); Matter of Viking Pump, Inc., 27 N. Y. 3d 244, 52 N. E. 3d 1144 (May 3, 2016) (certified June 10, 2015); Beck Chevrolet Co. v. General Motors LLC, 27 N. Y. 3d 379, 53 N. E. 3d 706 (May 3, 2016) (certified May 19, 2015); Ministers & Missionaries Benefit Bd. v. Snow, 26 N. Y. 3d 466, 45 N. E. 3d 917 (Dec. 15, 2015) (certified Mar. 5, 2015). The Second Circuit has “actively and vigorously employed” certification. Kaye, Tribute to Judge Guido Calabresi, 70 N. Y. U. Annual Survey Am. L. 33, 34 (2014) (noting, based on service as the Chief Judge of the New York Court of Appeals, that certification by the Second Circuit “has done an enormous amount to bridge the gap between our state and federal court systems”).
5  The court below did not truly engage with the plain text reading of §518, under which a merchant may not charge different prices to cash and credit card customers. See 808 F. 3d 118, 128 (CA2 2015). It is free to consider that reading on remand in light of the Court’s constitutional holding.
6  It does so by invoking an interpretive rule of deference to a lower federal court’s construction of the law of a State within its jurisdiction, in line with the general principle that this Court does not resolve issues of state law. I do not read the Court’s deference to the Second Circuit as holding that this Court will defer to a lower federal court’s interpretation of state law even where doing so would cast serious constitutional doubt on, or invalidate, a state law. Such a rule would be incorrect. See Frisby v. Schultz, 487 U. S. 474, 483 (1988) (describing lower courts’ interpretation as “plain error . . . [t]o the extent they endorsed a broad reading of the” law at issue because “the lower courts ran afoul of the well-established principle that statutes will be interpreted to avoid constitutional difficulties”). The Court’s silence on the relevance of the avoidance canon to the Second Circuit’s interpretation is consistent with an unexpressed conclusion, with which I disagree, that no narrowing construction is available that would avoid constitutional concerns or that a broader constriction raises no constitutional concerns.
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