An Illinois law that regulates solicitation of residential property owners by real estate agents violates the First Amendment, a federal appeals court ruled recently in a 12-year-old case which the court called a "long-running saga."
The law in question imposes criminal penalties on real estate agents who solicit any residential property owner "at any time after such person or corporation has notice that such owner does not desire to sell such residential property."
The Illinois Legislature passed the measure to help prevent the practice of blockbusting, or "panic peddling," which the court defined as "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 and the ensuant declining home values."
The Chicago real estate company Century 21 Pearson, Inc. Realtors, its owner Alvin Pearson and employee Brenda Curtis first challenged the law in 1986 after being charged with violating the statute. They faced the charges after another employee of Pearson's called homeowners who had placed their names on a no-solicitation list.
Although the criminal charges against Pearson and the others were dropped, each was sentenced to a $100 fine and court supervision.
Pearson and his co-plaintiffs contended the law violated their commercial free-speech rights. A federal district court disagreed. On appeal, the 7th U.S. Circuit Court of Appeals also denied plaintiffs' motion for a preliminary injunction to prevent enforcement of the law in the 1988 opinion Curtis v. Thompson.
When the case was sent back down, the district court dismissed it in its entirety. On appeal, the 7th Circuit agreed with the lower court's dismissal in Pearson v. Thompson.
Pearson then appealed to the U.S. Supreme Court, which granted review in 1993. Instead of issuing a written opinion, the high court sent the case back down to the 7th Circuit, ordering the appeals court to reconsider its decision in light of the high court's 1993 decision in City of Cincinnati v. Discovery Network.
In Discovery Network, the Supreme Court had struck down on First Amendment grounds a Cincinnati ordinance that banned newsracks containing commercial handbills. The high court determined that the city of Cincinnati had failed to establish a "reasonable fit" between its goals of safety and aesthetics and its chosen means to achieve the goals.
The Supreme Court rejected the Cincinnati law in part because the city banned newsracks containing commercial handbills but allowed many other newsracks, including those containing newspapers. The high court wrote that Cincinnati officials had "seriously underestimate[d] the value of commercial speech."
Pursuant to the Supreme Court's order, the 7th Circuit once again sent the case back down to the district court, this time for an evidentiary hearing that would take into consideration the "impact" of the Discovery Network case.
Last year, the federal district court determined that the law did violate the First Amendment because the state had failed to prove that the measure directly and materially advanced its stated goals of preventing blockbusting and protecting residential privacy.
The district court made several important findings of fact after holding a two-week bench trial, a trial held before a judge without a jury. These findings included:
- "There is no evidence that standard real estate marketing materials cause rapid racial change or contribute to panic selling."
- "Panic peddling and blockbusting did occur in Chicago during the 1960s and early 1970s."
- "However, blockbusting and panic peddling rarely, if ever, occur in Illinois today."
- "During the bench trial, the defendants produced no evidence in this case that real estate solicitation harms or threatens to harm residential privacy."
On appeal, a three-judge panel of the 7th Circuit agreed last month in Pearson v. Edgar that the law was unconstitutional.
Just as the Supreme Court in Discovery Network had rejected a law that banned only newsracks containing commercial handbills, the 7th Circuit rejected the Illinois anti-solicitation law in part because it prohibited solicitation only by real estate agents.
The 7th Circuit wrote: "The distinction between real estate solicitation and other types of solicitation is not plausible absent evidence that real estate solicitation poses a particular threat to residential privacy. The restriction on speech does not reasonably fit the reason for the restriction."
The 7th Circuit noted that "Discovery Network has changed the law of commercial speech" on which its prior decisions had been based.
This time, the 7th Circuit reached the opposite conclusion from that found in its prior decisions in Curtis v. Thompson (1988), Pearson v. Thompson (1992) and in South-Suburban Housing Center v. Greater South Suburban Bd. of Realtors (1991), a case in which the court rejected a First Amendment challenge to a similar city anti-solicitation law.
For this reason, the Illinois attorney general's office is now arguing that a full panel of the 7th Circuit should review this decision.
The state filed its motion for full panel review Aug. 28. Ben Goldgar, an assistant attorney general who is handling the case for the state, said that the three-judge panel had "misread Discovery Network."
"We believe that Discovery Network did not work a fundamental change in commercial speech jurisprudence, but instead was a narrow decision," Goldgar said.
In their petition for full-panel review, the attorney general's office wrote that "states are entitled to make distinctions in the realm of commercial speech."
Phillip Stahl, attorney for Pearson since 1986, applauded the 7th Circuit's decision. "The 7th Circuit saw a need to reexamine its prior precedents," he said. "The first three times the 7th Circuit ruled that the statute, or a similar city ordinance, did not violate the First Amendment and was a permissible regulation of commercial speech," Stahl said. "This time the court held that the statute is unconstitutional because the state had failed to demonstrate specifically that there were real harms that the statute addressed and that the statute would alleviate those harms in a direct and material way.
"The appeals court was quite correct in perceiving not only the specific holding of Discovery Network, but also the attitude of the Supreme Court that content-based restrictions on commercial speech are inherently suspect and must be carefully scrutinized to determine whether the statute has met the reasonable-fit requirement of the commercial-speech doctrine," Stahl said.
Stahl called the decision "a very valuable precedent for commercial speech because it eliminates prior opinions which those who wanted to suppress speech had been relying on."
Goldgar said that "no decision had yet been made" on whether the state would appeal to the Supreme Court if the 7th Circuit does not grant a full panel review.