I. Introduction – Constitutional Principles Offer Businesses Potential Defenses
In two cases decided in June 2020, the Ninth Circuit U.S. Court of Appeals applied federal law and constitutional protections to limit state law rights and remedies. In Sonner v. Premier Nutrition Corp., 2020 WL 3263043 (9th Cir. June 17, 2020), the Court held that where a plaintiff in federal court dismisses her state law causes of action for damages, the court must employ federal equitable principles, in part to protect the Seventh Amendment right to trial by jury, in determining the viability of the remaining state statutory equitable cause of action. In IMDb.com Inc. v. Becerra, 2020 WL 3396306 (9th Cir. June 19, 2020), the Court held that a state statute that prohibits a specific category of publicly accessible websites from publishing age-related information is subject to a First Amendment free speech challenge, where the state fails to show that the statute is narrowly tailored and the least restrictive means of achieving the compelling governmental interest in reducing incidents of age discrimination.
These cases teach the following lessons for plaintiffs, defendants, and businesses in general:
- When bringing state law consumer claims in federal court, plaintiffs must carefully consider when and how doctrines under federal law will apply to impact their claims in that forum differently from how state law doctrines would apply. Likewise, defendants should explore whether such doctrines could benefit them in such cases filed in federal court or in determining whether to remove a case filed in state court.
- The right to freedom of expression prohibits a legislature from adopting a law imposing content restrictions on a publicly accessible website even where the restrictions further a compelling governmental interest, like reducing incidents of age discrimination, where protections against age discrimination may be enforced without impacting speech rights.
- A law ostensibly directed toward such a content restriction on a membership-subscription website could escape strict scrutiny by the courts, but if the law extends beyond the bounds of that website to include an affiliated, but publicly accessible site, strict scrutiny will apply, with the results noted above.
II. Sonner v. Premier Nutrition – Federal Equitable Principles Govern the Viability of Equitable Claims under State Law in Federal Court
In the consumer case, Sonner v. Premier Nutrition Corp., plaintiff had filed an amended complaint containing a consumer class claim for damages under California’s Consumer Legal Remedies Act, Civ. Code § 1782 (“CLRA”), and a class claim for restitution and injunctive relief under California’s Unfair Competition Law, Bus. & Prof. Code § 17200 et seq. (“UCL”). Desiring to try the class claims to the court rather than a jury, plaintiff filed a second amended complaint dismissing the CLRA damages claim two months before trial.
In its opposition to plaintiff’s motion for leave to file the second amended complaint, defendant argued that, if the legal claim were dismissed, the court would have to dismiss the equitable restitution claims under the UCL, because the plaintiff had an adequate remedy, for damages, at law. At the hearing on the motion for leave, plaintiff received another warning that dismissal of the damages claim could result in dismissal of the equitable claim if defendant filed a motion to dismiss based on the adequate-legal-remedy doctrine, but plaintiff forged ahead. In granting defendant’s subsequent motion to dismiss without leave to amend, the Court found that the UCL claims were subject to California’s adequate-legal-remedy doctrine.
On appeal, plaintiff argued that the court had to apply state law in determining whether she had to show she lacked an adequate legal remedy as a condition to pursuing the UCL claims. And she maintained that the California legislature had eliminated the requirement to show an inadequate remedy at law in pursuing equitable remedies under the UCL. Defendant contended that federal equitable principles, including the requirement that a party pursuing equitable relief show it lacks an inadequate remedy at law, governed the court in a diversity case.
Following the admonitions in U.S. Supreme Court Justice Felix Frankfurter’s opinion for the Court in Guaranty Trust Co. of New York v. York, 326 U.S. 99 (1945), the Ninth Circuit held that “a federal court must apply traditional equitable principles before awarding restitution under the UCL and the CLRA.” For over a century, federal courts had adhered to the “fundamental principle . . . that state law cannot expand or limit a federal court’s equitable authority.” This principle applies even where the outcome of a case under state law would be different if brought in federal court from the outcome in state court.
The requirement under federal common law to show an inadequate remedy at law as a condition to pursuing equitable remedies “implicates the well-established federal policy of safeguarding the constitutional right to a trial by jury in federal court.” Therefore, even assuming California made the policy decision to streamline UCL and CLRA claims by eliminating that showing for equitable claims under those statutes, “the strong federal policy protecting the constitutional right to a trial by jury outweighs that procedural interest.”
In the procedural context of the case in the trial court, where, despite ample warning that doing so could jeopardize the viability of her UCL claims, the plaintiff had sought to dismiss the statutory damage claims “on the eve of trial,” the Court of Appeal held that the District Court had not abused its discretion in denying plaintiff leave to amend to reassert her damage claim when it granted dismissal of the UCL equitable claims.
III. IMDb.com Inc. v. Becerra – Preventing Age Discrimination Cannot Justify Restriction of Speech Where Other Remedies Are Available
In IMDb.com Inc. v. Becerra, IMDb.com Inc., “a free, publicly available website that offers a comprehensive database of information about movies, television shows and video games,” filed an action to prevent enforcement of Assembly Bill 1687, Cal. Civ. Code § 1798.83.5, mainly on the grounds that it infringed its First Amendment speech rights. AB 1687 prohibits “a commercial online entertainment employment service provider,” which offers services to paid subscribers, from publishing the subscriber’s date of birth or age information in the subscriber’s online profile or sharing that information with any internet website for publication, where the subscriber has asked the provider to remove that information. The statute also requires the provider to “remove from public view in an online profile of the subscriber the subscriber’s date of birth and age information on any companion Internet Web sites under its control.” The Court noted that the legislation at issue was directed at one website only, IMDb.com, and its subscriber employment service, IMDbPro.
The challenge to the statute was focused on the latter requirement. The issue was whether the part of the statute that required IMDb.com to remove from the public website age and birthdate information of a subscriber to IMDbPro, upon the subscriber’s request, and regardless of the source of that information, violated constitutional freedom of speech protections. As a first step in its analysis, the Court concluded that AB 1687 “[o]n its face . . . restricts speech because of its content…. It prohibits the dissemination of one type of speech: ‘date of birth or age information.’… And, perhaps more troubling, it restricts only a single category of speakers.” Because it imposes “direct and significant restrictions” on a category of speech and does not apply generally, the First Amendment required that the statute be subjected to strict scrutiny.
Rejecting the state’s contention that AB 1687 “merely regulates contractual obligations between IMDb and subscribers to IMDbPro,” the Court noted that “the statute reaches far beyond the terms of any subscriber agreement.” It also applies to information on the publicly available IMDb.com website, to “prohibit[] the publication of information submitted by members of the public with no connection to IMDb.”
Reviewing the categories of speech that, according to case law developed over the past few years, are not subject to such exacting scrutiny, the Court determined that AB 1687 did not fit in any of them. First, the portion of the statute on which the case focused does not seek to regulate “commercial speech,” because “public profiles on IMDb.com do not ‘propose a commercial transaction.’” The content on that database “is encyclopedic, not transactional.”
Second, the challenged portion of the statute does not seek to “regulate activity that facilitates illegal conduct.” This category of speech, as to which courts apply a lower level of scrutiny, involves “only those instances when the state restricts speech that itself that proposes an illegal transaction,” for example, advertising that discriminates by its language on the basis of sex or offers illegal transactions. There was nothing “illegal about truthful, fact-based publication of an individual’s age and birthdate when that information was lawfully obtained.” Rather than restricting such speech because of a concern about age discrimination, the state could provide for remedies to those who were damaged by such conduct or enforce remedies that already exist.
Third, the Court found no case law to support a lower level of scrutiny for laws restricting content of “public speech touching on private concerns.” The law at issue was not a law that would “regulate data collection and disclosure,” which would not trigger First Amendment concerns, such as statutes that prohibit “the misuse of information by entities that obtain that information from individuals through some exchange.”
The state could not sustain its burden to show AB 1687 furthered a compelling governmental interest in the least restrictive manner narrowly tailored to that end. It had failed to show that measures less restrictive of speech would be ineffective to further the compelling governmental interest in reducing incidents of age discrimination. The evidence presented about increased incidents of age discrimination was generalized and murky; it did not show that “the current law, or another speech-neutral law, would be insufficient to address the problem.” The underinclusiveness of the law was evidence that it was not narrowly tailored. AB 1687 “restricts only websites like IMDb.com while leaving unrestricted every other avenue through which age information might be disseminated.” The statute’s focus of its restrictions on those “who both (1) subscribe to IMDbPro and (2) request that IMDb remove his or her information from its public website,” called into question the state’s true motives in enacting the statute. That underinclusiveness showed that it was not narrowly tailored.
William Weinberger 