You may have gone to pay for a purchase and been told by the store owner that there was an extra charge to pay by credit card. And you’ve undoubtedly gone to a gas station with two sets of prices: lower prices for cash and higher prices for credit cards.

Is there any difference between the two practices? Under Florida law, there is. Under section 501.0117, Florida Statutes, the store owner actually committed a misdemeanor by imposing a “surcharge” for paying by credit card:

A seller or lessor in a sales or lease transaction may not impose a surcharge on the buyer or lessee for electing to use a credit card in lieu of payment by cash, check, or similar means, if the seller or lessor accepts payment by credit card. A surcharge is any additional amount imposed at the time of a sale or lease transaction by the seller or lessor that increases the charge to the buyer or lessee for the privilege of using a credit card to make payment.

On the other hand, section 501.0117 says it “does not apply to the offering of a discount for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card…” So it’s perfectly legal for gas stations to have lower cash prices.

In other words, under section 501.0117, businesses may offer a discount for using cash, but may not add an extra charge for using a payment card. Is there any real difference between charging less for not using a payment card (legal) and charging more for using a payment card (illegal)? Or is it merely a semantic difference?

Those are the questions at the heart of the 11th Circuit’s opinion in Dana’s Railroad Supply v. Attorney General, State of Florida, decided November 4, 2015. We’ll get back to the 11th Circuit’s answer, but first some background.

The Campaign Against State Anti-Surcharge Prohibitions

Dana’s is one of a series of lawsuits that have recently been brought by small businesses challenging state law prohibitions on credit card surcharges. Nine states have such laws. A Washington, D.C. law firm known for consumer rights advocacy, Gupta Beck, has filed suits challenging the surcharge prohibitions of the four largest–California, New York, Texas, and Florida–on first amendment grounds.

What’s behind the challenges? While the anti-surcharge statutes may appear, at first glance, to be consumer protection statutes intended to protect consumers from extra charges, the plaintiffs say the laws are actually intended to protect the ability of major credit card issuers (Visa, Mastercard, and American Express) to charge merchants excessive card processing (swipe) fees, which they say are two to three times higher in the U.S. than in other countries.

It was the major credit card issuers that lobbied for anti-surcharge statutes. In the late 1970s and early 1980s, Congress passed a federal anti-surcharge statute, but it expired and was not renewed. After its expiration, the plaintiffs say, the major credit card issuers lobbied state legislatures to pass state laws like section 501.0117.

Until recently, Visa and Mastercard’s merchant agreements prohibited merchants, even in states without statutory prohibitions, from charging customers extra for paying by credit card. But in a class action settlement resolving an antitrust case against the issuers, Visa and Mastercard agreed to remove those prohibitions from their merchant agreements. (The settlement has not yet become final, as certain class members have objected to the settlement. An appeal of the district court’s approval of the settlement is currently pending before the U.S. Court of Appeals for the 2nd Circuit.) But the removal of such provisions in merchant agreements can’t affect merchants’ practices in states where surcharges are still prohibited by statute.

What’s So Bad About Surcharges?

Why would Visa and Mastercard want to ban surcharges? As a matter of economics, the higher prices are, the fewer items consumers tend to buy. So if credit cards are more expensive to use, consumers are less likely to use them.

How do anti-surcharge laws hurt consumers? Merchants must pay credit card processing fees, but can’t charge credit card users directly for the fees. So credit card use raises the merchants’ overall costs. And because they are prohibited from passing on the costs of credit card processing directly to credit card users, the charges are instead reflected in higher prices charged to all customers to cover the costs.

(For example, suppose 50% of a merchant’s customers use credit cards and the merchant is charged 4% per transaction. With surcharges allowed, the merchant could charge 4% extra to the credit card users to cover the processing. With surcharges prohibited, the merchant must charge all customers 2% higher prices to cover the processing fee.) In this sense, anti-surcharge laws help one group of customers (credit card users) at the expense of another group (cash-paying customers). That transfer is magnified due to the prevalence of rewards cards (which often cost merchants the most to process), as cash customers are essentially paying (through higher prices merchants must charge across the board to cover credit card processing) for the rewards a subset of customers receive for using their credit cards.

But in another sense, anti-surcharge prohibitions hurt all consumers, as well as all merchants. They do so by increasing credit card usage, which leads to higher merchant costs, which lead to higher prices across the board.

And they do so by allowing Visa and Mastercard to charge higher processing fees than they otherwise could. Due to the lack of surcharges, consumers don’t know how much of the price of the items they buy is attributable to credit card processing charges (just as they don’t know what portion of an item’s price is attributable other items of overhead), so consumers, the card companies’ customers, don’t put any pressure on card issuers to charge lower transaction fees.

But recall that while merchants can impose surcharges for using credit cards, they can offer cash discounts. Why wouldn’t allowing merchants to give discounts for cash-paying customers have the same effect as allowing merchants to charge credit card users a surcharge? According to the merchants (and the economics research on which they rely), consumer behavior is more likely to change to avoid a loss than to avoid missing out on a benefit. So if paying with a credit card results in a surcharge (a loss), consumers will be less likely to choose to use a credit card than if paying with a credit card simply means missing out on a cash discount (a potential gain).

Speech or Conduct?

The challenges to anti-surcharge statutes are premised on the assertion that those statutes regulate speech, rather than conduct. That is because the 1st Amendment only applies to speech.

Structuring a transaction is generally thought to be conduct, not speech, and many statutes regulate such activities without any suggestion that they are regulating speech. So how is section 501.0117’s prohibition on surcharges any different?

According to the 11th Circuit, section 501.0117 doesn’t prohibit the conduct it appears at first glance to govern, which the court characterized as “dual pricing,” i.e., charging higher prices to credit card users than to cash buyers. That can’t be the function of the statute because it allows cash discounts, which are the functional equivalent of credit card surcharges.

Presuming that the statute must do something, the court pondered whether it might prohibit surcharges that are not disclosed before the transaction occurs. But it concluded that conduct could not be what the statute prohibits, due to the language of section 501.0117 as well as because it is already prohibited by another statute.

If the statute doesn’t prohibit dual-pricing, and prohibits “surcharges” but not “discounts,” then its focus can only be on speech, i.e., the words merchants may use to describe the fact that consumers must pay extra to use a credit card. Merchants are allowed to call higher credit card prices standard prices, and lower cash prices “discounts,” but are prohibited from calling cash prices standard and credit card prices “surcharges.”

But whether you call the lower price a discount and the other price standard or call one price standard and the other a surcharge doesn’t change the conduct, only the words used to describe it. So section 501.0117 regulates–and prohibits–certain speech. The court analogized the statute to a state law prohibiting restaurants from serving half-empty glasses of water but permitting them to serve half-full glasses.

Once finding that the statute regulates speech rather than conduct, it was not a large jump to conclude that it violates the 1st Amendment. The 1st Amendment allows some leeway for the government to regulate commercial speech. But commercial speech restrictions must relate to “misleading or related to unlawful activity,” the government must have a substantial interest at stake, and the regulation must advance that interest, in a way that does not prohibit more speech than necessary.

Given the court’s understanding of section 501.0117 as merely regulating semantics, telling merchants words they can and can’t use to describe dual pricing, it followed that section 501.0117 could not past muster. Arguably, the statute actually requires misleading speech rather than prohibiting it. The reason for dual pricing, after all, is to allow the merchant to charge more (surcharge) for credit card transactions to pay for the credit card processing fees.

Will Credit Card Surcharges Become the Norm?

For now, it would seem that merchants in Florida are free to impose surcharges for credit card transactions. But it remains to be seen whether this decision will have any real effect on the marketplace.

There’s also a chance the November decision may not be the final word. In the case challenging New York’s anti-surcharge law, the 2nd Circuit unanimously rejected the argument that the statute regulated speech.

And Judge Carnes reached the same conclusion about section 501.0117 in his vigorous dissent from the 11th Circuit’s decision in Dana’s. So there’s a non-trivial possibility that the 11th Circuit might reconsider the case en banc, or even that the Supreme Court might review it, if requested.

It is not easy to get the Supreme Court of Florida to hear a case. That is by design: the Florida Constitution was amended in 1980 to curtail the Supreme Court’s jurisdiction so that it may only review a limited number of cases that fall into discrete categories. 

But the Court has a catch-all jurisdictional authority known as “All Writs” jurisdiction. All Writs jurisdiction is derived from Article V, Section 3(b)(7) of the Florida Constitution, which allows the Florida Supreme Court to “issue all writs necessary to complete exercise of its jurisdiction.”     

This constitutional provision has traditionally been interpreted narrowly. It has been understood to confer something akin to supplemental jurisdiction, rather than an independent basis for jurisdiction, and is invoked only in rare cases. 

But disputes involving exceptionally important issues with great time sensitivity appear to fall into the category of rare cases in which the Florida Supreme Court is willing to invoke its All Writs power. In The League of Women Voters of Florida v. Data Targeting, Inc., released May 27, 2014, the Florida Supreme Court was asked to weigh in in a pre-trial dispute in litigation over whether the 2012 apportionment of Florida’s congressional districts was designed to advance partisan political objectives in violation of the Fair District Amendments to the Florida Constitution.  

A week before trial was to begin, the trial judge ruled that documents obtained from a political consultant, which the plaintiffs wanted to use to show that political consultants participated in the redistricting process, could be used as evidence in the trial but would remain confidential. On appeal, the First DCA issued a short order ruling that the documents could not be admitted into evidence, and stating that it would issue an opinion explaining its reasoning.

The plaintiffs filed an emergency petition asking the Florida Supreme Court to stay the 1st DCA’s order so that the evidence could be presented at the trial and the trial court could decide the dispute with the aid of that evidence before the 2014 midterm elections. With the trial about to begin, the Court would need to act immediately if its decision was going to have any impact.

But while the Court said it had reason to believe it would have jurisdiction to review the 1st DCA’s decision, it could not be certain as yet.  Because the First DCA had not explained its reasoning in a full opinion, the Florida Supreme Court could not determine whether it had jurisdiction to hear the petition under its more commonly used bases, such as when there are conflicting rulings between districts on a point of law.

Nonetheless, the Court predicted that the district court opinion was likely to construe a provision of the Florida or federal constitution. And it noted that the Court had previously exercised jurisdiction in the same case based on the direct effect on a class of constitutional officers, but said that it could not say for sure whether jurisdicition to review the 1st DCA’s decision on the admissibility of the documents could be obtained on that basis. In addition, there was a chance that the 1st DCA would certify a question of great public importance, given “the statewide importance of this litigation and the lack of Florida precedent regarding the associational privilege,” which the 1st DCA appeared to have relied on based on its citation to a 9th Circuit case addressing that issue.

Although the All Writs doctrine does not prove an independent basis for jurisdiction, the Supreme Court explained, “this Court may utilize the constitutional all writs provision as a means of ‘protecting jurisdiction that likely will be invoked in the future.'” Thus, due to the likelihood that the Supreme Court would have jurisdiction, and that it would not be able to provide effective relief by exercising jurisdiction after the 1st DCA issued its opinion (and the trial likely already completed, the Supreme Court held that it was appropriate to stay the 1st DCA’s order under the All Writs doctrine:

In order to maintain the status quo during the ongoing trial, preserve this Court’s ability to completely exercise the eventual jurisdiction it is likely to have to review the First District’s decision, and prevent any irreparable harm that might occur if the Petitioners are prevented from using the challenged documents, we conclude that we must grant the petition and stay the enforcement of the First District’s reversal of the circuit court, pending the completion of the trial.

Justice Lewis issued a concurring opinion to explain his view that the litigation’s importance to the “democratic system of government in Florida–and public faith in that system,” combined with the fact that the Court had to act now in order to issue effective relief, made the case a rare instance in which All Writs jurisdiction was appropriate. Chief Justice Polston dissented in an opinion joined by Justice Canady, explaining that in his view it was inappropriate to exercise All Writs jurisdiction because “an independent basis for jurisdiction does not currently exist.”

The 1st DCA apparently agreed that the Florida Supreme Court should review the case. As a twist, the 1st DCA’s opinion never came. Before the Supreme Court issued its decision, a 1st DCA judge had filed an internal motion for the court to review the panel’s order en banc. A majority of the judges ultimately voted to grant en banc review, and ruled that “the appeal should have been passed through to the supreme court,” as had been requested.

The court vacated the prior order and certified an issue of great public importance for immediate review by the Florida Supreme Court. And the Florida Supreme Court has accepted jurisdiction.

Meanwhile, the trial has ended, and the trial court has ruled on the merits. Although the ruling invalidated 2 congressional districts, the legislature has announced that it does not intend to appeal.

But the legislature has also asked that the congressional districts not be redrawn until after the 2014 midterm elections. Will the Florida Supreme Court have jurisdiction if it asked to rule on whether the map must be redrawn before the midterms? Given the importance of the issues and the time sensitivity, that seems likely.  

Orlando City officials received good tidings on April 12, 2011, as 11th Circuit, sitting en banc, ruled in the City’s favor in First Vagabonds Church of God v. City of Orlando, No. 08-16788. The Court unanimously upheld an Orlando ordinance enacted to keep activists for the homeless from serving meals twice a week in Orlando’s most prominent park, Lake Eola Park.  The decision is available here (PDF).  

The Facts:

Essentially, a church catering to the homeless and a political group had set up shop twice a week in the park, serving meals that attracted dozens of homeless persons.  Nearby residents were *less than thrilled* about having these guests visit them so frequently.  

So Orlando enacted a city ordinance that requires anyone who wants to hold a “large group feeding” to obtain a permit, and limited applicants to holding a feeding twice per year in any one park.  Orlando has 42 parks within the vicinity of City Hall (in the Downtown Parks District) and another 66 elsewhere, so in theory the group could hold 84 of its 104 yearly “feedings” in the Downtown Parks, and the other 20 still within the City limits.  

Previous Decisions

The District Court enjoined enforcement of the ordinance as violative of First Amendment rights.  On appeal, Judge Edmonson, writing for a panel majority of himself and Judge Baldock of the 10th Circuit, sitting by designation, reversed.  The majority held that the conduct regulated by the Orlando ordinance, namely holding “large group feedings,” was not expressive in nature, so it was not protected by the 1st Amendment.

Dissents in the 11th Circuit are pretty rare as compared to other federal Circuits, but Judge Barkett vigorously dissented, disputing the majority’s characterization of the conduct being regulated.  In her view, the large group feedings the ordinance targeted had an unmistakable protest element to them, and the conduct was therefore entitled to 1st Amendment protection.

The En Banc Holding   

Here’s where it gets interesting.  Although Judge Barkett dissented from the panel decision, the en banc decision was unanimous (which is also pretty rare).  And the en banc Court reached the same result as the panel, finding that the ordinance is enforceable and Constitutional.

The difference was in the reasoning.  The en banc Court assumed without deciding that the conduct at issue was expressive in nature.  But it found that the ordinance itself passed Constitutional muster. 

The ordinance, the Court explained, does not ban any type of speech outright.  It is only a reasonable “time, place or manner” restriction” in that it restricts the amount of time any group can use any one park for a “feeding”. 

The ordinance is also viewpoint neutral, according to the Court.  Moreover, the Court noted, the homeless activist groups can obey the ordinance and still hold their feedings.  They will just need to rotate among the City’s parks.

Judge Barkett was apparently okay with that conclusion.  As was the rest of the unanimous Court.