My discussion of the opinion below. 411-Pain advertises extensively and connects callers to health care providers or attorneys in their areas. It contends that its “extensive—and very costly—advertising” benefits providers in its referral network who might not otherwise choose to advertise on their own. Defendants are the members of the Minnesota Board of Chiropractors whose enforcement of Minnesota’s No-Fault Act Amendments allegedly unconstitutionally chilled 411-Pain’s speech. The Act requires insurers to provide basic economic loss benefits to their insureds, regardless of fault, and also regulates ads to curtail potentially unethical practices by “licensed health care provider[s].” The 2012 amendments to this law require solicitations or ads for medical treatment or referral for medical treatment of an injury eligible under the No-Fault Act must:
1. be undertaken only by or at the direction of a health care provider;
2. prominently display or reference the legal name of the health care provider;
3. display or reference the license type of the health care provider … ;
4. not contain any false, deceptive, or misleading information, or misrepresent the services to be provided;
5. not include any reference to the dollar amounts of the potential benefits under [the No-Fault Act]; and
6. not imply endorsement by any law enforcement personnel or agency.
411-Pain argued that several elements of this suppressed its speech protected by the First Amendment. Its radio ads, for example, tell car accident victims to call the company immediately after an accident and inform accident victims that they “may be entitled to up to forty thousand dollars in injury and lost wage benefits,” without disclosing the legal names or license types of the health care providers in 411-Pain’s referral network. Sample ad excerpt:
... Car accidents happen ... What you plan to do next can make all the difference ... Car accident ... Remember after 911 ... Call 411 ... 1-800-411-pain ... 1-800-411-pain knows about car accidents ... It’s what they do ... Call 1-800-411-pain 24 hours a day 7 days a week from home, hospital or accident scene ... Call 1-800-411-pain and let them explain the up to $40,000 in injury and lost wage benefits you may be entitled to ... Plan now ... Program 1-800-411-pain into your phone number under “accident” ... Car accident, remember, after 911 call 411. 1-800-411-pain.
TV ads “feature a vehicle crash and then an actor appearing as a police officer or EMT with an ambulance conveying to viewers that if they call the phone number associated with 800-411-PAIN or go to411Pain.com, then they can get help after being injured in an accident.” 411-Pain claimed that the ads had conspicuous and prominent disclaimers stating that the person appearing in the ad was a “PAID ACTOR.”
The district court denied preliminary injunctive relief, finding that the challenged aspects were inherently misleading commercial speech and thus unprotected. The ads failed to inform victims that 411-Pain was a referral service, and the reference to up to $40,000 in benefits was inherently misleading because accident victims may receive nothing, or may receive benefits far in excess of $40,000 from many different sources. The use of law enforcement personnel “extend[ed] a misleading aura of authorized approval” to the company, despite the disclaimer. The ban on advertising not done “by or at the direction of a health care provider,” was a “valid prohibition on speech concerning unlawful activity,” since if the advertising was not done at the direction of licensed health care providers, then 411-Pain’s business relationships with chiropractors may implicate anti-kickback statutes. In the alternative, a referral business inherently advertises “at the direction of” its providers, and contracts could further clarify this. The disclosure requirements were also okay under Zauderer.
In order to make it hard to get a preliminary injunction (the standard comes from an abortion case), when a “validly enacted statute” is at issue, there’s an elevated standard for success, designed “to ensure that preliminary injunctions that thwart a state’s presumptively reasonable democratic processes are pronounced only after an appropriately deferential analysis.” (I don’t know why the court doesn’t just talk about eBay—it seems to suggest that a challenge to a non-legislative action isn’t governed by the likely success on the merits standard but by something lower.)
The court then tried to understand what Sorrell meant, determining that the Court had “devised a new two-part test for assessing restrictions on commercial speech.” First, ask whether a restriction is content- or speaker-based, or both. If it’s either, it’s subject to “heightened scrutiny,” though we don’t know what that means, since after determining that the regulation in Sorrell was indeed subject to heightened scrutiny, the court proceeded to use Central Hudson, saying that the state lost even under that standard. So, when commercial speech restrictions are content- or speaker-based, their constitutionality depends on Central Hudson. (Why is this new? Why aren’t all commercial speech regulations “content-based” in the sense that they only cover commercial speech, and not noncommercial speech? Your guess is as good as mine.)
So, the court of appeals turned to the first challenged provision, the ban on “any reference to the dollar amounts of the potential benefits under [the No-Fault Act].” This was a content- and speaker-based restriction, because it only applied to “licensed health care providers” and related people. Whether it governed inherently misleading speech was a question of law, which could be determined by examining the “particular content or method of the advertising” as well as from “experience [that] has proved that in fact such advertising is subject to abuse.” (Why isn’t that a fact question, not a question of law? Your guess is as good as mine.) Inherently misleading speech may be banned outright.
The court of appeals agreed that the reference in 411-Pain’s radio ads to a possible entitlement of “up to $40,000 in injury and lost wage benefits” was inherently misleading, because it implied that consumers would receive a floor of benefits “up to” $40,000, while many would receive nothing; it also implied that there was a ceiling that didn’t exist. “While an attorney or insurance agent qualified to advise clients about coverage could convey this information, 411-Pain’s advertisements of ‘up to’ $40,000 in economic loss benefits misleadingly limit the universe of information.” The ads could prompt some consumers to unnecessarily seek benefits and keep other consumers from obtaining more benefits.
The ads were also inherently misleading by omission: they didn’t explain that an accident victim wouldn’t receive $40,000, or any amount of money, as a simple cash transfer. The reference to “benefits” was insufficient, because “the effect of the invocation of money without reference to the Act or a description of the way the benefits are obtained misleadingly implies that 411-Pain will acquire cash and pass along a portion of it to the car accident victim.” In fact, 411-Pain would just refer consumers to providers, and the potential benefits would be paid to providers in the form of reimbursements for services. “By selectively omitting important pieces of information from its radio ads, 411-Pain’s speech is thus “inherently misleading” due to its failure to provide meaningful context as to the origin and source of potential benefits available under the No-Fault Act.” (Compare the misleading use of “fees” when ordinary laypeople wouldn’t know the difference between “costs” and “fees” in Zauderer.)
Next, on to the ban on implying endorsement “by any law enforcement personnel or agency.” This is content-based, but not unconstitutional, since implied endorsement by law enforcement is inherently misleading. Plaintiffs didn’t submit their video ads for review, relying instead on an affidavit. On this record, the ads were inherently misleading. An affiant’s statement that a disclaimer is “conspicuous and prominent,” standing alone, is “hopelessly subjective: a disclaimer’s ‘conspicuousness’ and ‘prominence’ are, inevitably, in the eyes of its beholder.” But regardless, the disclaimer, no matter how large, didn’t fix the problem: it didn’t “disclaim implied endorsement by the type of official the actor portrays.” (Compare the result in Allen v. National Video: “Moreover, the disclaimer says only that a celebrity double is being used, which does not in and of itself necessarily dispel the impression that plaintiff is somehow involved with National's products or services.”) The net effect was misleading.
This ban was distinguishable from invalid categorical bans on mere depiction of judges in attorney advertising, since portrayals of judges aren’t inherently misleading. The statute here didn’t ban all depiction of law enforcement, but rather endorsement. The court noted that 411-Pain’s ad didn’t show law enforcement performing normal functions, but rather “an officer or EMT who speaks directly to the audience and tells viewers to call 411-Pain immediately after a car accident. The actor-officer’s support for 411-Pain imbues the company with a faux-sense of official legitimacy that ‘inherently mislead[s]’ viewers.”
Next, the ban on ads that aren’t undertaken by or at the direction of a health care provider: This is a speaker-based restriction. But it too shouldn’t be preliminarily enjoined, since it targeted potentially unlawful activity, specificially violation of anti-kickback statutes. The authorization to advertise under providers’ direction, instead of burdening speech, allowed arrangements that otherwise might be illegal under governing state law. It’s simple for a provider to direct a third party, by paying it for advertising services. If 411-Pain is still nervous, it can draft contractual language warranting that it’s advertising at providers’ direction for purposes of the law.
Next, the requirement that ads “prominently display or reference the legal name of the health care provider” and the associated license type. 411-Pain argued that this amounted to a complete ban because it was so unduly burdensome. Given the number of providers in 411-Pain’s network, 411-Pain argued that it couldn’t possibly identify all of them and their license information on each ad. Also, it contended, without actual proof of deception, the appropriate standard was Sorrell and not Zauderer.
First, the court rejected a facial challenge: the provisions aren’t so unduly burdensome and unjustified that in no conceivable instance would such provisions ever be constitutional. Applied to a single provider, there’s no undue burden.
On the as-applied challenge, the court of appeals didn’t find an unconstitutional burden. The Supreme Court has said that when laws “impose a disclosure requirement rather than an affirmative limitation on speech, ... the less exacting scrutiny described in Zauderer governs” a court’s review of the disclosure rules, something the DC Circuit has called “akin to rational-basis review.” The state has a substantial interest in protecting the public from misleading and false advertising aimed at persons injured in automobile accidents.
But 411-Pain argued that the government hadn’t shown that the ads are actually misleading, and that Ibanez therefore controlled instead since the ads were only “potentially” misleading. However, Zauderer and Milavetz didn’t require proof of actual deception. The court of appeals followed Zauderer and Milavetz, inferring the inherently misleading character of the speech at issue from its content. “The ads fail to inform consumers of the nature of 411-Pain’s business as a referral service, and they omit the fact that the No-Fault Act is only one of many sources of recovery an accident victim may pursue. Indeed, the ads never mention the No-Fault Act at all.” No survey was required to determine that the ads had a tendency to mislead.
Under Zauderer, the question was whether the disclosure requirements were reasonably related to the state’s interest in preventing deception, and whether they were “unjustified or unduly burdensome.” Yes and no, respectively. The display of network providers’ legal names and license types was reasonably related to the state’s interest because “absent such disclosures, consumers know nothing about the type of care they may receive if they call 411-Pain.” If they’re calling immediately from the scene of an accident, as the ads encourage them to do, 411-Pain sometimes (if not always) puts them in touch with chiropractors, not physicians. “The disclosures thus serve an essential purpose by informing victims about the nature of the services offered by the providers with whom 411-Pain does business.” 411-Pain has a minimal interest in not providing any particular factual information in its ads.
Plus, there was no justification for finding an undue burden when the record had no evidence of the number of providers in 411-Pain’s network. 411-Pain’s affiant stated that the company intends to “establish and build” its referral network, and its business would be threatened “if as its network grows, each and every provider’s name and license type must be included in every advertisement.” Maybe, but this wasn’t enough for a preliminary injunction. “To decide whether the disclosure requirements are ‘unduly burdensome’ when applied to 411-Pain, the record must contain more than allegations; it must contain facts demonstrating the undue burden such requirements have on the company’s ability to advertise.” This is kicking the can down the road, and not very far: the question to be answered is what business models/forms of organization will be disallowed, in practice? When put that way, though, the post-Lochner settlement provides a ready answer: any forms the state has a rational basis to prohibit, regardless of whether that’s efficient.