On The Case

When the government can make businesses talk

(Reuters) - As the U.S. Supreme Court infamously reminded us in 2010’s Citizens United v. Federal Election Commission, corporations have a First Amendment right to speak freely. Businesses also have a constitutional right, like people, not to speak – but that right is limited. In 1985’s Zauderer v. Office of Disciplinary Counsel, the Supreme Court said the main justification for extending First Amendment protection to commercial speech is the value such speech provides to consumers. So businesses, according to the Supreme Court, have only a “minimal” First Amendment interest in keeping information away from consumers.

Governments, meanwhile, have a right to protect their citizens. That right, obviously, does not always align with the free speech rights of corporations – think, for instance, of warning labels on cigarettes and alcohol. But the Supreme Court has not defined exactly when governments can compel businesses to speak against their own interests. Can the state act force disclosures only to counter deceptive commercial speech? Or do governments have broader authority to compel speech they deem to be in the public’s interest?

On Friday, the 9th U.S. Circuit Court of Appeals joined a slowly emerging consensus among the federal circuits, holding that governments have the right to mandate corporate speech “if the information in the disclosure is reasonably related to a substantial governmental interest and is purely factual.” The 9th Circuit decision in CTIA—The Wireless Association v. City of Berkeley digests precedent from several other appellate courts – most notably, the 2nd and D.C. Circuits – to discern a test for state authority to compel corporations to disclose information they’d rather not reveal.

The case involved a Berkeley ordinance requiring cellphone retailers to tell consumers that they might be exposed to radiation in excess of federal guidelines if they carry network-connected phones in their pockets or bras. The disclosure is based on guidelines set long ago by the Federal Communications Commission, which, according to the 9th Circuit, requires cellphone makers to include in user manuals “information that alerts users to the minimum distances appropriate for the device they are using.”

The cellphone trade association, represented by Gibson Dunn & Crutcher, argued that the First Amendment bars Berkeley from forcing cellphone businesses to spread inaccurate and controversial information. (The CTIA brief spends a lot of time explaining why there’s no reliable science linking cellphones to cancer and other illnesses and why the Berkeley law is pre-empted by federal regulation of phones; I’m just focusing on the First Amendment arguments.) According to the CTIA, the Supreme Court’s Zauderer opinion - which addressed disciplinary proceedings against a personal injury lawyer who failed to disclose in advertisements that unsuccessful contingency-fee clients might be on the hook for costs – is irrelevant except in instances of deceptive ads.

And even if Zauderer is the right standard, CTIA’s brief said, the Berkeley law violates the Zauderer requirement that state-mandated commercial speech must be “purely factual and uncontroversial.” According to the cellphone trade group, the Berkeley disclosure is neither. “The ordinance’s compelled notice is misleading and inaccurate, not ‘purely factual’; it is one-sided, disputed, and inflammatory, not ‘uncontroversial’; it is based on skepticism about well-established science, not any ‘legitimate’ government interest; and it is unnecessarily invasive, and thus ‘unduly burdensome,’” the brief said.

Berkeley, which is represented by Harvard professor and erstwhile presidential candidate Lawrence Lessig, countered that Supreme Court precedent on compelled commercial speech is based on the interests of the consumer listening to corporate disclosures, not the corporation forced to speak. “The Supreme Court has consistently protected an individual’s right to speak or not to speak, as the court is rightly skeptical whenever the state purports to require an individual to affirm any creed or particular set of views,” the Berkeley brief said. “Yet for commercial speech, the Supreme Court has been clear that this speaker-based autonomy interest does not apply.”

If the 9th Circuit were to adopt CTIA’s “radical view of the First Amendment,” Berkeley said, the court “would subject a range of ordinary, and heretofore unquestionable, federal, state and local regulatory programs to heightened scrutiny — thereby rendering them presumptively unconstitutional — including health and safety warnings … the simple ‘compelled speech’ of filing tax returns and even prohibitions on commercial and securities fraud, child pornography, perjury and conspiracy.”

The Berkeley brief predicted that CTIA had brought in “learned counsel” from Gibson Dunn because “it undoubtedly hopes to advance (its interpretation of corporate First Amendment rights) at the Supreme Court.” But if the cellphone group was hoping to peel the 9th Circuit away from other federal circuits, it failed.

The opinion, written by Judge William Fletcher, agreed with the en banc D.C. Circuit in American Meat Institute v. U.S. Department of Agriculture and the 2nd Circuit in National Electrical Manufacturers Association v. Sorrell that the Supreme Court’s Zauderer precedent is not restricted only to corporate speech demanded to correct misleading communications.

“We agree with our sister circuits that under Zauderer the prevention of consumer deception is not the only governmental interest that may permissibly be furthered by compelled commercial speech,” Judge Fletcher wrote. “We conclude that any governmental interest will suffice so long as it is substantial.”

The 9th Circuit did walk back from lower-court precedent interpreting Zauderer’s use of the word “uncontroversial.” Clearly, FCC guidelines on cellphones and radiation exposure are controversial. But the appeals court said the word is meant to refer just to the factual accuracy of the information the government requires to be disclosed, “not to its subjective impact on the audience.”

Judge Morgan Christen joined Judge Fletcher in finding that Berkeley’s mandated disclosures are factually accurate so, under the 9th Circuit’s brand-new test for compelled commercial speech, CTIA cannot enjoin the law.

Judge Michelle Friedland dissented from the majority’s view of the breadth of the Supreme Court’s Zauderer precedent, expressing “serious doubt” that the justices meant the lenient standard for compelled speech to apply beyond correcting misleading ads. She also split with Judges Fletcher and Christen on the factual truth of Berkeley’s mandated disclosure.

“Taken as a whole, the most natural reading of the disclosure warns that carrying a cell phone in one’s pocket is unsafe,” Judge Friedland wrote. “Yet Berkeley has not attempted to argue, let alone to prove, that message is true…. If Berkeley wants consumers to listen to its warnings, it should stay quiet until it is prepared to present evidence of a wolf.”

In an email statement, CTIA said, ““The court of appeals concluded that ‘CTIA is correct’ that there is no evidence of harmful effects caused by cell phones. We respectfully believe this fact demonstrates why the Berkeley ordinance violates the First Amendment since it necessarily makes Berkeley’s ‘warning’ misleading, as Judge Friedland recognized in her dissent.”

The group said it is considering its next step. That could be either a petition for rehearing en banc at the 9th Circuit or a petition for Supreme Court review.

Harvard’s Lessig did not respond to my email request for comment.