11th Circuit Strikes Down Florida Credit Card Surcharge Law, Cites Violation of Free Speech

Two days ago, the United States Court of Appeals for the Eleventh Circuit struck down as unconstitutional a Florida statute the barred the assessment of an additional fee for the use of a credit card. Interestingly enough, their reasoning was based upon the First Amendment's protection of free speech. A few years ago, it became fashionable for companies to start charging extra to customers that elected to use a credit card. The reasoning was sound: there is no expense incurred in taking cash, but there is a credit card processing fee, which could be passed off to the customer, netting the same amount of money for the business. Many states, including Florida, started to enact laws that would prevent this. In Florida's case, the law was written in such a way that the price quoted was essentially the credit card price, but a discount could be applied if a customer was paying in cash.

Starting in 2014, the Florida Attorney General sent cease and desist letters to businesses that were advertising that customers would be charged extra for use of a credit card. These letters were typical cease-and-desist letters threatening all kinds of nastiness should the companies persist in their policies of charging extra for credit cards.

Four businesses decided that they had had enough harassment, and filed suit against Florida alleging a violation of 42 USC § 1983, a code provision most often used by prisoners who claim to have been unjustly imprisoned. After getting dismissed at the trial court level, the businesses appealed to the 11th Circuit, who determined that they were, in fact, being unjustly harassed by the Florida Attorney General.

Lawyers who practice in this area were probably expecting the Court to make some type of decision based upon a rational basis test, which grants states wide leeway in enacting and enforcing legislation. However, the Court decided to use the strict scrutiny test laid down in free-speech cases, stunning everybody, including me.

Essentially, the 11th Circuit decided that any surcharge, as long as it was communicated beforehand, was still a proper market action. They characterized a surcharge as simply a "negative discount." Likewise, if a customer chose to use cash, the individual risk would receive a "positive discount." For the court, the case did not turn on whether or not the charge itself was appropriate, but instead how that charge was communicated. For instance, the law did not say that the cost of a book was set at $30, but $32 if you're paying by credit card. Instead, the law effectively said that the problem was communicating this simple fact that there was a increased rate for the use of a credit card when purchasing an item. This, the Court said, implicates the First Amendment.

Needless to say, after determining that the First Amendment was at issue, it was all downhill for Florida. There are scarcely few chances for a state to succeed on a First Amendment claim, especially after the numerous cases that have come out that have essentially eliminated the distinction between private speech and commercial speech, the most famous of which is Citizens United.

Bottom Line

It will probably be easy to extrapolate a lot from this case, but I would not. Yes, the 11th Circuit invoked the First Amendment in a credit card case (as if almost on a dare), but this seems to be a highly fact specific case. Honestly, I do not know how many state laws are written like Florida's, but I would doubt many. Therefore, the practical application of this case will probably be very narrow. But who knows, I was wrong once before.

Dana's Railroad Supply v. Attorney General, No. 14-14426 (11th Cir. 2015)

If you would like to see the opinion in its entirety, I've linked it above. What do you think about it? Is this going to be a narrow ruling, or are we going to start seeing more cases like this?