Supreme Court Signals Enhanced Support for Commercial Speech in 44 Liquormart Central Hudson Lives; Death Knell for Posadas By P. Cameron DeVore, Esq.

In its most significant First Amendment decision of the 1995 term, the Supreme Court strongly signaled its support for enhanced commercial speech protection in 44 Liquormart, Inc. v. Rhode Island. The Court's May 13 ruling unanimously reversed the First Circuit and held a Rhode Island ban on price advertising for alcohol beverages to be impermissible under the First Amendment. "Unanimously" somewhat mis-characterizes the Court's decision, which was truly unanimous only in reversing the First Circuit's approval of the ban, and also the circuit's assertion that the Twenty-first Amendment legitimized such regulation. However, the unanimous judgment again demonstrated, as did the unanimous result in 1995's Rabin v. Coors Brewing Co., that the Court believes commercial speech merits enhanced First Amendment protection. Moreover, additional justices are prepared to join in that result -- at least in the context of a total ban on commercial speech. Indeed, five justices would now bypass or overrule the Court's Central Hudson four-part test as inadequate protection for commercial speech. Justice Stevens's lengthy plurality opinion largely restated the view expressed in his Rabin concurrence that unless commercial speech regulations target false, misleading, or coercive advertising, or require disclosure of information designed to prevent such advertising, strict First Amendment scrutiny should apply. He apparently was the lone proponent of that view after Justice Blackmun's retirement, but he was joined here by Justices Ginsburg, Kennedy, and Souter. Justice Thomas, expanding on his opinion for the Court in Rabin, would hold all "paternalistic" regulatory schemes aimed to keep consumers in ignorance, whatever their motivation, to be per se impermissible. He would overrule Central Hudson and "return to the reasoning and holding of Virginia Pharmacy." Note that both Justices Thomas and Stevens stressed the historic role of commercial speech in America as strong justification for additional First Amendment protection. The opinions by Justices Stevens, Scalia, Thomas, and O'Connor clarified and resolved several key commercial speech issues: Central Hudson "lives" as the threshold test for commercial speech regulations. While Justice Stevens questioned the usual rationales (i.e., "hardiness" and "objectivity") for applying only intermediate scrutiny to commercial speech, he ultimately applied Central Hudson and found the Rhode Island ban wanting under both part three ("directly advancing") and part four ("reasonable fit"). Justice O'Connor would have applied Central Hudson, and even Justice Scalia, while stating that he "share[d] Justice from previous page Thomas's discomfort with the Central Hudson test," would not have overruled that case and would have applied it as a part of "our existing jurisprudence." The second prong of Central Hudson, requiring that government have a "substantial interest" underlying its regulations, continued to be the easiest Central Hudson test for government to meet. In footnote 4 Justice Stevens acknowledged allegations that the Rhode Island ban was in fact motivated by a desire to protect small retailers from price competition. Ultimately, however, he simply "accepted" the state's assertion that its true goal was "temperance." Central Hudson part three ("directly advancing") got a strong reading by Justice Stevens, requiring the trial court to provide findings of fact and "evidentiary support" that the regulation "significantly advanced" the state's interest. "Speculation and conjecture" cannot suffice "when the state takes aim at accurate commercial information for paternalistic ends." Part four was stressed and enhanced in the opinions by Justices Stevens, Thomas, and O'Connor. Although he reiterated the usual "reasonable fit" rubric, Justice Stevens stressed that Rhode Island had available "alternative forms of regulation that would not involve any restrictions on speech [and which] would be more likely to achieve the state's goal of promoting temperance. . . [Even] educational programs. . . might prove to be more effective." This led Justice Thomas to observe that "that view would go a long way toward the [post-Central Hudson] position I take [here]." Posadas de Puerto Rico Assocs. v. Tourism Co. (1986), the most dispiriting of the Court's commercial speech decisions and the flabbiest reading of the Central Hudson test, disappeared as a legitimate authority. Justice Stevens stated categorically that Posadas "erroneously performed the First Amendment analysis." He did not call for overruling Posadas, but his analysis eviscerated it as a viable First Amendment precedent.

44 Liquormart, Inc. v. Rhode Island, 116 S. Ct. 1495 (1996). Rubin v. Coors, 115 S. Ct. 1585 (1995). Central Hudson Gas & Electric. Corporation. v. Public Serb Commission of N.Y., 447 U.S. 557 (1980). Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748 (1976). Posadas de Puerto Rico Assocs. v. Tourism Co., 478 U.S. 328 (1986). United States v. Edge Broadcasting, 509 U.S. 418 (1993). Florida Bar v. Went For It, Inc., 115 S. Ct. 2371 (1995). 44 Liquormart Creates Ripple Effect for Three Other Advertising Cases The Supreme Court wasted no time dispatching three related commercial speech cases in the wake of its 44 Liquormart ruling. One week after articulating an enhanced level of commercial speech protection in 44, the Court on May 20 vacated the judgment in Pennsylvania State Police v. Hospitality Investments of Philadelphia, Inc., and remanded the case to the Pennsylvania Supreme Court 'for further consideration in light of 44 Liquormart....' The Pennsylvania court had upheld a similar state ban on alcohol beverage price advertising by licensees, based largely on a Twenty-first Amendment rationale. That same day, the Court granted certiorari, vacated, and remanded for further consideration in light of 44 the decision of the Fourth Circuit in Anheuser-Busch, lnc. v. Schmoke. The circuit had affirmed a district court approval of restricting outdoor advertisement of alcohol beverages based solely on a "reasonable belief" by government that its regulation constituted a reasonable fit. Finally, on July 1, the Court followed suit in the companion case from Baltimore, Penn Advertising v. Schmoke (testing a ban on tobacco billboards), and similarly vacated and remanded that case. While there are other issues in the Baltimore cases, the vacated First Amendment analysis by the Fourth Circuit clearly is no longer viable following 44 Liquormart. -PCD Pennsylvania State Police v. Hospitality Investments of Philadelphia, Inc., 650 A.2d 854(Pa.1994),_U.S._ (No.94-1247). Anheuser-Busch, Inc. v. Schmoke, 63 F.3d 1305 (4th Cir.1995), _U.S._ (No.95-685). Penn Advertising v. Schmoke, 63 F.3d 1318, U.S. App. LEXIS 24504 (4th Cir.1995), _U.S._ (No.95 806).

Justice O'Connor, joined by Chief Justice Rehnquist and Justices Souter and Breyer, completed the relegation of Posadas to the First Amendment dustbin, observing that the Court's post-1986 cases require a "closer look" at state justifications for regulation of commercial speech. Chief Justice Rehnquist's joinder in Justice O'Connor's concurrence seemed to reflect his acquiescence that his 5-to-4 majority opinion in Posadas is no longer authoritative. 44 Liquormart provides powerful authority against the most frequent argument of government regulators that their judgments are entitled to deference if only they are "rational" or"reasonable," and also deals a serious blow to the much-criticized Rehnquist dictum in Posadas that the power to regulate a product includes a "lesser" power to regulate commercial speech about the product. Justice Stevens also takes exception to the assertion that regulation of "vice" products or activities somehow merits a greater deference to regulatory prerogatives: Almost any product that poses some threat to public health or public morals might reasonably be characterized by the state legislature as relating to "vice activity." Such characterization, however, is anomalous when applied to products such as alcoholic beverages, lottery tickets, or playing cards, that may be lawfully purchased on the open market. Also in this portion of his analysis, Justice Stevens usefully cabins Edge Broadcasting not as a "vice" case, but as one dealing with regulation of state lottery activities, illegal in the state where they were advertised. The opinions in 44 Liquormart repay careful reading by students of the First Amendment and by all commercial speech aficionados. In spite of the continuing application of Central Hudson -- a test that has worked reasonably well in practice but has allowed such aberrations as Posadas and Florida Bar -- 44 Liquormart indicates that the existing boundary of commercial speech protection is likely to continue to expand. In almost every respect, 44 Liquormart is good news for America's advertisers and consumers. P. Cameron DeVore, a partner in the Seattle office of Davis Wright Tremaine, is Chair of the firm's Communications and Media Law Department. He regularly represents the media and national advertisers in major First Amendment cases in the U.S. Supreme Court, and federal and state trial and appellate courts.