An Illinois statute designed to prevent "blockbusting" violates the First Amendment, the U.S. Court of Appeals for the Seventh Circuit ruled in August. The decision in Pearson v. Edgar is the latest chapter in a case that has bounced back and forth among federal courts for over 10 years.

The Seventh Circuit upheld a determination by the U.S. District Court for the Northern District of Illinois that the law, which attempted to regulate the solicitation of clients by real estate agents, could not pass constitutional muster under Central Hudson.

Blockbusting is a real estate practice in which real estate agents encourage homeowners to put their homes on the market by exploiting fears of change in the racial composition of the neighborhood that will result in declining home values.

The statute, 720 ILCS 590/1 sec. 1(d), allows homeowners to notify real estate agents that they do not wish to be solicited. Solicitation of such a homeowner by a real estate agent is a criminal offense.

The Seventh Circuit began its analysis of the statute by reviewing a previous decision in this case, Curtis v. Thompson. In Curtis, the Seventh Circuit applied the Central Hudson test and found that the state had adequately proved the statute furthered the state's interest in protecting residential privacy.

In the instant review of the statute, the Seventh Circuit first held that the anti-blockbusting provisions did not satisfy the third and fourth prongs of the Central Hudson test. It noted the district court had found as a fact that blockbusting no longer occurred with any frequency in Illinois. The appellate court could not call this finding clearly erroneous.

Without evidence that blockbusting was a problem in Illinois, the court of appeals could not say the regulation directly advanced the government's asserted interest in preventing blockbusting or that it was not more extensive than necessary to serve that interest.

The court also found that the state's interest in protecting residential privacy, while substantial, was not furthered by the statute. In so holding, the court analyzed the Supreme Court decision in City of Cincinnati v. Discovery Network, Inc.

In Discovery the Supreme Court considered a restriction that banned the distribution of handbills from commercial newsracks but imposed no similar ban on "regular" newspapers. The city asserted that safety and aesthetics justified its regulation. The Supreme Court agreed these were substantial interests but disagreed the regulation at issue furthered those interests.

The Seventh Circuit found that two major concepts permeate Discovery Network: (1) the importance of a "reasonable fit" between the restriction on speech and the goal to be achieved by that restriction; and (2) the value of commercial speech while commercial speech enjoys less protection than noncommercial speech, it is not entitled to so much less protection that it may be banned without adequate justification.

The court of appeals applied these two principles to the case at hand and declared the Illinois statute unconstitutional. While the speech at issue was lawful and not misleading and the interest in protecting residential privacy was substantial, the court held the state had not shown a reasonable fit between the law and the asserted interest.

The court found that the limited ban imposed by this statute was underinclusive. The district court had found no real evidence that real estate solicitation harms or threatens to harm residential privacy. Absent such evidence, this law could not be said to advance an interest in residential privacy in a direct and material way.

In addition, the court of appeals noted that its earlier decision in Curtis v. Thompson had held that the regulation of commercial speech based upon content was less problematic than the similar regulation of noncommercial speech. The court sought to rectify that holding in light of Discovery Network.

This saga began in 1986 when Century 21 Pearson, Inc. Realtors, realtor Alvin Pearson, and his employee Brenda Curtis were criminally charged with violating the anti-blockbusting statute. Their criminal complaints were dismissed but only after both Pearson, Curtis, and another employee were assessed a $100 fine and placed under court supervision.

In turn, Pearson and Curtis filed a civil rights suit alleging the statute violated the First Amendment and the Equal Protection Clause, and that it was unconstitutionally vague. They sought a preliminary injunction preventing its enforcement.

The U.S. District Court for the Northern District of Illinois dismissed the case after finding the complaint failed to state a claim under the First Amendment. Plaintiff Curtis filed an appeal. The U.S. Court of Appeals for the Seventh Circuit affirmed.

The case was remanded to the district court, where it was dismissed in its entirety. The plaintiffs appealed and the Seventh Circuit once again affirmed.

The plaintiffs petitioned the Supreme Court for a writ of certiorari. The Supreme Court granted the writ, vacated the opinion, and remanded the case back to the Seventh Circuit for further consideration in light of the Supreme Court's recent decision in Discovery Network.

The Seventh Circuit, in turn, remanded the case to the district court. The lower court conducted an evidentiary hearing in light of Discovery.

At the conclusion of that hearing, the district court held the State of Illinois had failed to prove that the statute directly and materially advanced its asserted goals, the prevention of blockbusting and the protection of residential privacy, under Central Hudson Part 3. That ruling set up the recently decided appeal to the Seventh Circuit.

Pearson v. Edgar, No. 97-2667, 1998 U.S. Dist. LEXIS 18260 (7th Cir. Aug. 7, 1998).

Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y., 447 U.S. 557 (1980).

Curtis v. Thompson, 840 F.2d 1291 (7th Cir. 1988).

City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410 (1993).