Soda Warning Case Tests How High Court’s NIFLA Decision Affects Commercial Speech Mandates

FirstAmendmentFor the past several decades, the U.S. Supreme Court and at least some federal appeals courts have been moving in opposite directions with respect to First Amendment protection for commercial speech. The Supreme Court’s trend since the mid-1970s has been to afford ever-increasing protection to truthful speech uttered by commercial speakers. In sharp contrast, some federal appeals courts have become increasingly deferential toward government efforts to control such speech. The Supreme Court’s June 2018 decision in NIFLA v. Becerra resoundingly affirmed the Court’s strict limits on the government’s authority over commercial speech, particularly in the context of compelled speech.

The first major test of whether appeals courts will heed that directive came before an en banc panel of the Ninth Circuit on September 25. The questions posed by the 11 judges on the panel suggest that the Ninth Circuit remains reluctant to embrace NIFLA’s message.

San Francisco’s Effort to Compel Speech

The case heard by the Ninth Circuit, American Beverage Ass’n v. San Francisco, is a challenge to a San Francisco ordinance that requires soft-drink makers (and manufacturers of other sugar-sweetened drinks) to include a health warning in their billboard advertising. The warning must be prominent (it must occupy at least 20% of the ad) and must state, “WARNING: drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay.” The American Beverage Association (ABA), a trade group for beverage manufacturers, is challenging the ordinance on First Amendment grounds.

The ABA asserts that the mandated warning is false (there is no evidence that soda consumed in moderation has adverse health effects) and overly burdensome (manufacturers have said that they will stop all billboard advertising rather than run ads that are likely to be overpowered by large warnings). The district court denied the ABA’s motion for a preliminary injunction, and it appealed to the Ninth Circuit. A three-judge panel reversed the lower court decision, finding the ordinance violated the First Amendment. That decision was vacated when the Ninth Circuit agreed to review the decision en banc.

Appeals Courts’ Rejection of Compelled Speech Claims

The district court’s decision to uphold San Francisco’s ordinance is unsurprising when viewed in the context of recent federal appeals-court decisions addressing compelled speech. The Second, Sixth, Ninth and D.C. Circuits, among others, have adopted highly deferential standards when reviewing statutes that compel commercial entities to speak involuntarily. Those circuits hold that while the First Amendment provides businesses with substantial protection against government speech restrictions, businesses are afforded minimal constitutional protection against being compelled to utter truthful speech.

The Ninth Circuit reasoned in its 2017 CTIA v. City of Berkeley decision (a decision later vacated by the Supreme Court and remanded back to the appeals court) that the principal rationale for granting First Amendment protection against restrictions on advertising and other forms of commercial speech is that information conveyed through advertising can be helpful to consumers. That rationale does not apply to compelled speech, the Ninth Circuit stated, and a business’s constitutionally protected interest in not providing any particular factual information is “minimal.” CTIA thus concluded that any challenge to government-compelled commercial speech is subject to what essentially amounts to rational-basis review.

NIFLA Is a Game Changer

The Second, Sixth, Ninth and D.C. Circuits have supported this limited conception of First Amendment rights by pointing to language from a 1985 Supreme Court decision, Zauderer v. Office of Disciplinary Counsel. Their interpretation of Zauderer has been subject to considerable dispute. The Court’s June 2018 decision in NIFLA v. Becerra decisively rejects that interpretation.

NIFLA addressed a constitutional challenge to a California law requiring pregnancy-services clinics to post notices (both on their premises and in all advertisements) regarding the availability of abortion services at unrelated State-operated facilities. The Court struck down the statute (which imposed distinct compelled-speech requirements on licensed and unlicensed clinics), finding that it violated the clinics’ First Amendment rights not to be compelled to speak.

Notably, nothing in the Court’s opinion suggests that compelled commercial speech is subject to less First Amendment scrutiny than are restrictions on commercial speech. To the contrary, in concluding that the California law could not pass constitutional muster, NIFLA interchangeably cites both compelled-speech decisions and speech-restriction decisions. While NIFLA did not specify precisely what level of constitutional scrutiny should be applied to the law, the Court determined that the law violated the First Amendment even if analyzed under the somewhat relaxed scrutiny the Court has routinely applied to government regulation of commercial speech.

The Court acknowledged that it had applied a deferential standard of review to the compelled speech at issue in Zauderer—an Ohio requirement that lawyer advertisements offering services on a contingency-fee-only basis must include a disclosure that clients could be liable for litigation costs should they lose their case. Although Zauderer upheld the disclosure requirement as a means of preventing consumer deception, numerous federal appeals courts have applied the Zauderer standard outside its deception-preventing context. Indeed, the lower courts applied Zauderer to the California pregnancy-services statute at issue in NIFLA even though the speech mandated by that statute was not designed to prevent consumer deception.

NIFLA calls that approach into serious question. For example, the Supreme Court stated that Zauderer was inapplicable to the statutory provision governing licensed clinics because the speech compelled by California was not limited to “purely factual and uncontroversial information about the terms under which … services will be available.” (Similarly, San Francisco’s mandated health warning says nothing about “the terms under which [soft drinks] will be available.”) NIFLA ultimately concluded that it need not decide whether the Zauderer standard applied to the statutory provision governing unlicensed clinics because it held that the provision could not survive First Amendment scrutiny even under that standard.

NIFLA’s analysis leaves little doubt that the Zauderer standard is far more demanding than the rational-basis review that some federal appeals courts have been applying in compelled commercial speech cases. In particular, the Court held that Zauderer requires the government to demonstrate that its compelled speech: (1) is not “unjustified or unduly burdensome”; (2) is “no broader than reasonably necessary”; and (3) is not under-inclusive in terms of who is covered by the speech requirement.

Yesterday’s Ninth Circuit Argument: A Reluctance to Embrace NIFLA?

Not surprisingly, NIFLA held center stage during the Ninth Circuit’s September 25 oral argument in ABA v. San Francisco. The judges hinted that they may remand the case to the district court for reconsideration of the preliminary injunction motion in light of the standards set out NIFLA. But a majority of the 11-judge panel appeared to resist arguments that NIFLA requires wholesale reconsideration of their approach to compelled commercial speech challenges.

Perhaps the most constitutionally vulnerable portion of the San Francisco ordinance is the requirement that the health warning must occupy at least 20% of soft-drink billboard ads. Several judges cited NIFLA’s admonition that compelled speech not be “unduly burdensome” and worried that the large size of the health warning might cause soft-drink makers to cease billboard advertising altogether. But they went on to suggest that San Francisco might be able to eliminate that problem by reducing the size of the health warning somewhat.

Several judges observed that the district court may not have adequately considered the under-inclusiveness problem. That is, all food, if consumed to excess, can lead to the health problems identified by San Francisco, yet the City confined its health-warning requirement to advertisements for a single category of food products: sugar-sweetened drinks. The judges’ observations suggested that they may support remanding the case to allow the district court to address the under-inclusiveness issue in the first instance.

First Amendment advocates have to be disappointed, however, by the Ninth Circuit’s apparent unwillingness to grapple with the essential disconnect between its past approach to compelled commercial-speech law and that of the Supreme Court. With the exception of Judge Sandra Ikuta, the en banc panelists appeared relatively unconcerned by government efforts to require businesses to convey the government’s message—even when, as here, the government is quite capable of speaking on its own behalf. It is very difficult to square such efforts with NIFLA’s requirement that any compelled speech be “no broader than reasonably necessary.”

Moreover, the Supreme Court has repeatedly insisted (most recently in NIFLA) that compelled commercial speech is never constitutionally permissible unless it is both “factual” and “uncontroversial.” As Washington Legal Foundation explained in its brief filed with the three-judge panel that heard ABA v. San Francisco, even if San Francisco’s health warning is “factual” (a dubious proposition in itself)), it is clearly “controversial” in light of its suggestion that calories from added sugars are somehow more dangerous than calories from other sources. Yet the en banc panelists did not question previous Ninth Circuit decisions holding that “uncontroversial” is merely a synonym for “factual” and imposes no additional burden on a government when defending a compelled-speech requirement.

The Ninth Circuit’s en banc decision in ABA v. San Francisco is likely to be the first major test of whether the federal appeals courts recognize their obligation, in light of NIFLA, to more closely review government efforts to compel businesses to convey a particular message. If the Ninth Circuit and other appeals courts fail to apply closer review, the Supreme Court may need to take up the issue once again.

Also published by Forbes.com on WLF’s contributor page.

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