NEW YORK (Legal Newsline) – The U.S. Court of Appeals for the Second Circuit has sent the question of whether merchants who display credit card fees for customers still comply with state merchant laws to the New York Court of Appeals for certification.

The Second Circuit stated that it deferred the decision and sent the question to the state's highest court Dec. 6,.

Expressions Hair Design, one of the plaintiffs that filed suit, claims that merchants should be able to tell customers that they are imposing a credit card fee and state laws prohibiting them from doing so violates their freedom of speech.

The panel for the Second Circuit is judges Debra Ann Livingston, Richard C. Wesley and Susan L. Carney.

Livingston stated “Finding aspects of the New York statute at issue in this case unclear, and, further, that the resolution of these ambiguities will determine the course of our constitutional analysis, we defer decision and certify the following question to the New York Court of Appeals: 'Does a merchant comply with New York’s General Business Law 518 so long as the merchant posts the total‐dollars‐and‐cents price charged to credit card users?'”

The merchants say they want to encourage customers to use cash to avoid the fees that credit card companies charge merchants, which is usually 2 to 3 percent. They also claim that credit card companies don’t want customers to know the fees, preferring to keep the fees invisible to the customers.

The Second Circuit ruled against the merchants in 2015, stating that New York’s general business law (518) regulated prices, not speech.

Disagreeing somewhat, Chief Justice John G. Roberts Jr. stated in a U.S. Supreme Court opinion that New York 518 “regulates speech” by “regulating the communication of prices rather than prices themselves.”

New York’s 518, enacted in 1984, prohibits merchants from imposing a surcharge when a customer uses a credit card. The merchants argue against banning the single-sticker regime, when merchants post a cash price and an additional credit card surcharge, claiming that they are not similarly prohibited from giving customers a discount for using cash. 

Livingston noted the conflicts, saying, “outside our own assessment that Section 518 bars single‐sticker pricing, there is no judicial authority that would indicate to us whether Section 518’s bar is: (1) designed to force disclosure of an item’s credit‐card price (and, if so, how), (2) alternatively, whether the law is designed to sweep much more broadly, or, (3) at the other extreme, whether it bars single‐sticker pricing at all. “

Supreme Court Justices Sonia Sotomayor and Stephen Breyer recommended sending the question for certification to the Court of Appeals in the Supreme Court’s remand. 

Livingston agreed, stating, “We see no obvious way to conduct the functional analysis…without first gaining greater clarity about the correct application of Section 518 under New York law.”

The defendants are represented by Judith Vale, Barbara D. Underwood and Steven C. Wu for Eric T. Schneiderman, in his official capacity as New York attorney general; Kathy Chang Park for Zachary W. Carter, corporation counsel of the city of New York; Cyrus R. Vance, in his official capacity as district attorney of New York County; and Eric Gonzalez, in his official capacity as Acting District Attorney.

Plaintiffs are represented by Deepak Gupta and Jonathan E. Taylor of Gupta Wessler PLLC in Washington, D.C.

U.S. Court of Appeals for the 2nd Circuit case numbers 13‐4533, 13‐4537 

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