Expressions Hair Design, et al., Respondents,v.Eric T. Schneiderman,, et al., Appellants.

Brief

N.Y.January 2, 2018

No. CTQ-2017-00004 To be argued by: Joshua Matz 25 minutes requested On Certified Question from the United States Court of Appeals for the Second Circuit State of New York Court of Appeals ____________________________ EXPRESSIONS HAIR DESIGN, et al., Plaintiffs-Respondents, v. ERIC SCHNEIDERMAN, in his official capacity as Attorney General of the State of New York, et al., Defendants-Appellants, GERALD MOLLEN, in his official capacity as District Attorney of Broome County, Defendant. _________________________________________________________ BRIEF OF RESPONDENTS _________________________________________________________ GARY FRIEDMAN FRIEDMAN LAW GROUP LLP 270 Lafayette Street New York, NY 10012 (212) 680-5150 DEEPAK GUPTA JOSHUA MATZ JONATHAN E. TAYLOR GUPTA WESSLER PLLC 1900 L Street NW, Suite 312 Washington, DC 20036 (202) 888-1741 deepak@guptawessler.com Counsel for Plaintiffs-Respondents August 9, 2018 i CORPORATE DISCLOSURE STATEMENT No publicly held corporation owns 10% or more of any respondent’s stock. Nor is any respondent a subsidiary of any parent company. ii TABLE OF CONTENTS Corporate disclosure statement ............................................................................... i! Table of authorities ............................................................................................... iii! Preliminary statement ............................................................................................ 1! Questions presented ............................................................................................... 6! Statement of the case .............................................................................................. 6! I.! Statutory framework ............................................................................... 6! A.! Surcharges and discounts: why labels do (and don’t) matter ........... 8! B.! The short-lived federal surcharge law ........................................... 11! C.! New York’s rushed enactment of G.B.L. § 518 ............................. 16! D.! Section 518’s enforcement history ................................................ 18! II.! This litigation ....................................................................................... 19! A.! The Southern District of New York .............................................. 21! B.! The Second Circuit Court of Appeals........................................... 23! C.! The United States Supreme Court ............................................... 24! D.! On remand to the Second Circuit ................................................ 27! Argument ............................................................................................................. 28! I.! This Court should reformulate the certified question. ........................... 30! II.! This Court should interpret Section 518 as prohibiting only undisclosed credit card surcharges. .......................................................... 33! A.! The proper scope of Section 518’s prohibition is ambiguous. ....... 34! 1.! Legislative history .......................................................... 35! 2.! Statutory purpose .......................................................... 38! B.! Section 518 should be interpreted narrowly.................................. 43! 1.! Constitutional avoidance ............................................... 43! 2.! The rule of lenity ........................................................... 50! C.! Under a correct interpretation of Section 518, the plaintiffs may advertise their prices as desired without violating state law. ............................................................................................... 52! Conclusion ........................................................................................................... 53 iii TABLE OF AUTHORITIES Cases! 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996) .......................................................................................... 44 Barenboim v. Starbucks Corp., 21 N.Y.3d 460 (2013) ....................................................................................... 31 Beck Chevrolet Co. v. Gen. Motors LLC, 27 N.Y.3d 379 (2016) ....................................................................................... 31 Bondi v. Dana’s R.R. Supply, 137 S. Ct. 1452 (2017) ...................................................................................... 45 Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980) ......................................................................... 23, 43, 44, 45 Dana’s R.R. Supply v. Bondi, 2014 WL 11189176 (N.D. Fla. Sept. 2, 2014) ................................................... 46 Dana’s R.R. Supply v. Florida, 807 F.3d 1235 (11th Cir. 2015) ............................................................ 2, 5, 40, 45 Edenfield v. Fane, 507 U.S. 761 (1993) .......................................................................................... 44 Expressions Hair Design v. Schneiderman, 137 S. Ct. 1144 (2017) ................................................................................. passim Expressions Hair Design v. Schneiderman, 808 F.3d 118 (2d Cir. 2015) .............................................................................. 24 Expressions Hair Design v. Schneiderman, 877 F.3d 99 (2d Cir. 2017) .....................................................................28, 31, 46 Expressions Hair Design v. Schneiderman, 975 F. Supp. 2d 430 (S.D.N.Y. 2013) .............................................. 23, 37, 40, 41 Flo & Eddie, Inc. v. Sirius XM Radio, Inc., 28 N.Y.3d 583 (2016) ....................................................................................... 31 iv Garner v. Louisiana, 368 U.S. 157 (1961) .......................................................................................... 29 Houston v. Hill, 482 U.S. 451 (1987) .......................................................................................... 47 Ibanez v. Fla. Dept. of Bus. & Prof. Reg., 512 U.S. 136 (1994) .................................................................................... 25, 44 In re R.M.J., 455 U.S. 191 (1982) .......................................................................................... 25 Israel v. Chabra, 12 N.Y.3d 158 (2009) ....................................................................................... 31 Italian Colors Restaurant v. Becerra, 878 F.3d 1165 (9th Cir. 2018) ....................................................................... 5, 45 Matter of Albany Law School v. New York State Office of Mental Retardation & Development Disabilities, 19 N.Y.3d 106 (2012) ....................................................................................... 34 Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229 (2010) .......................................................................................... 48 National Institute of Family & Life Advocates v. Becerra, 138 S. Ct. 2361 (2018) ...................................................................................... 46 O’Neill v. Oakgrove Construction, Inc., 71 N.Y.2d 521 (1988) ....................................................................................... 49 Overstock.com, Inc. v. New York State Department of Taxation & Finance, 20 N.Y.3d 586 (2013) ....................................................................................... 33 Pennhurst State School & Hospital v. Halderman, 465 U.S. 89 (1984) ............................................................................................ 30 People v. Correa, 15 N.Y.3d 213 (2010) ....................................................................................... 43 People v. Davidson, 27 N.Y.3d 1083 (2016) ............................................................................... 43, 49 v People v. Fulvio, 517 N.Y.S.2d 1008 (N.Y. Crim. Ct. 1987) ................................................ 3, 4, 18 People v. Golb, 23 N.Y.3d 455 (2014) ................................................................................. 33, 50 People v. Silburn, 31 N.Y.3d 144 (2018) ....................................................................................... 34 People v. Stephens, 28 N.Y.3d 307 (2016) ................................................................................. 43, 49 Reno v. American Civil Liberties Union, 521 U.S. 844 (1997) .......................................................................................... 51 Sorrell v. IMS Health Inc., 564 U.S. 552 (2011) .......................................................................................... 47 State by Abrams v. Camera Warehouse, Inc., 496 N.Y.S.2d 659 (Sup. Ct. 1985) .................................................................... 18 United States v. Wiltberger, 18 U.S. (5 Wheat.) 76 (1820)............................................................................. 51 Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748 (1976) .......................................................................................... 50 Webb v. Webb, 451 U.S. 493 (1981) .......................................................................................... 30 Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985) ...............................................................................24, 25, 47 Zwickler v. Koota, 389 U.S. 241 (1967) .......................................................................................... 47 Statutes! General Business Law § 518 ............................................................................ passim 15 U.S.C. § 1602 .................................................................................................. 12 15 U.S.C. § 1602(y) ........................................................................................ 14, 16 vi Legislative materials! Cash Discount Act, 1981: Hearings on S. 414 Before the Senate Banking Committee, 97th Cong. (1981) ..................................................................13, 14, 36 Pub. L. No. 93-495, 88 Stat. 1500 (1974). ............................................................ 11 Pub. L. No. 94-222, 90 Stat. 197 (1976) ............................................................... 12 Pub. L. No. 97-25, 95 Stat. 144 (1981) ................................................................. 14 S. Rep. No. 97-23 (1981) ...........................................................................14, 15, 16 156 Cong. Rec. S4839 (June 10, 2010) ................................................................... 7 Regulatory materials! 40 Fed. Reg. 30,915 (July 24, 1975) ...................................................................... 12 40 Fed. Reg. 32,305 (Aug. 1, 1975) ...................................................................... 12 40 Fed. Reg. 43,197 (Sept. 19, 1975) .............................................................. 12, 13 42 Fed. Reg. 743 (Jan. 4, 1977) ............................................................................ 13 43 Fed. Reg. 3,897 (Jan. 30, 1978) ................................................................. 13, 36 70 Fed. Res. Bull. 309 (Apr. 1984) .................................................................. 15, 37 Other authorities! Terri Bradford & Fumiko Hayashi, Federal Reserve Bank of Kansas City, Developments in Interchange Fees in the United States and Abroad (Apr. 2008) .............................................................. 6 Christopher J. Dodd, Credit Card Surcharges, New York Times, Mar. 12, 1984 ............................... 15, 37 Jon D. Hanson & Douglas A. Kysar, Taking Behavioralism Seriously, 112 Harv. L. Rev. 1420 (1999) ............................... 8 Daniel Kahneman et al., Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias, 5 J. Econ. Persps. 193 (1991) .............................................................................. 8 vii Edmund W. Kitch, The Framing Hypothesis: Is It Supported by Credit Card Issuer Opposition to a Surcharge on a Cash Price?, 6 J.L. Econ. & Org. 217 (1990) ................................... 11 Carol Krucoff, When Cash Pays Off, Washington Post, Sept. 22, 1981 ........................................ 13 Adam J. Levitin, Priceless? The Economic Costs of Credit Card Merchant Restraints, 55 UCLA L. Rev. 1321 (2008)........................................................................ 6, 8 Adam J. Levitin, The Antitrust Super Bowl: America’s Payment Systems, No-Surcharge Rules, and the Hidden Costs of Credit, 3 Berkeley Bus. L.J. 265 (2006) .......................... 9, 10 Antonin Scalia & Bryon A. Garner, Reading Law: The Interpretation of Legal Texts (2012) ............................................... 51 Scott Schuh et al., Fed. Reserve Bank of Boston, Who Gains and Who Loses from Credit Card Payments? (2010) ..................................................................................... 9, 10 Hilary Stout, Credit Issuers Lift Rules on Credit Surcharges, New York Times, Dec. 20, 2013 ........ 19 Cass R. Sunstein, What’s Available? Social Influences and Behavioral Economics, 97 Nw. U. L. Rev. 1295 (2003) ........................................................................... 9 Richard Thaler, Toward a Positive Theory of Consumer Choice, 1 J. Econ. Behav. & Org. 39 (1980)................................................................... 11 Amos Tversky & Daniel Kahneman, Rational Choice and the Framing of Decisions, 59 J. Bus. S251 (1986) ........................ 12 Elizabeth Warren, Antitrust Issues in Credit Card Merchant Restraint Rules (2007)................................... 10 1 PRELIMINARY STATEMENT Suppose you own a deli in New York. You accept credit cards, but that comes at a cost: swipe fees imposed by banks for processing each transaction. And those fees add up. To address the problem, you have two basic options. First, you could shift these fees to all of your customers by setting higher prices across the board. This strategy, however, hides the added cost of credit cards and forces cash- paying customers to subsidize the use of credit. You might therefore prefer a second approach: charging more for purchases made by credit card. For example, you might charge $10 for pastrami sandwiches bought with cash, but $10.20 if bought with a credit card. So far, so good. Dual pricing of this sort is legal everywhere, including in New York. But now you need to decide how to inform your customers of the two prices. You consider four options: 1 1. Sandwich: $10 cash price $10.20 credit-card price 2 2. Sandwich: $10 cash price $0.20 per item added to credit-card purchases 3 3. Sandwich: $10 cash price 2% per item added to credit-card purchases 4 4. Sandwich: $10.20 credit-card price $0.20 discount per item off cash purchases As a matter of economic reality, these options are identical. Each of them is a truthful, non-deceptive, easily understood listing of the price for a pastrami sand- wich. Although some options reference a surcharge and others reference a 2 discount, the difference is merely semantic. See Dana’s R.R. Supply v. Bondi, 807 F.3d 1235, 1245 (11th Cir. 2015) (“What is a surcharge but a negative discount? If the same copy of Plato’s Republic can be had for $30 in cash or $32 by credit card, absent any communication from the seller, does the customer incur a $2 surcharge or does he receive a $2 discount? Questions of metaphysics aside, there is no real-world difference between the two formulations.”). In most states, you could advertise your pastrami-sandwich prices however you wished. In New York, though, it’s not so simple. A state law, G.B.L. § 518, provides that “no seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.” Compliance with § 518 is a big deal: violations are criminal offenses. Describing prices the wrong way can land you behind bars for up to a year. You might therefore ask: what does § 518 actually prohibit? This question, however, has repeatedly defied easy answers. As Justice Sotomayor observed last year, “Section 518 can be interpreted in several ways” and is possessed of an “elusive nature.” Expressions Hair Design v. Schneiderman, 137 S. Ct. 1144, 1153, 1155 (2017) (Sotomayor, J., concurring in the judgment). Although § 518 looks like it might be a total ban on differential pricing for cash and credit cards, nobody thinks it has that effect. Instead, § 518 has been read and enforced as imposing a shifting array of limits on the manner in which merchants communicate their prices. 3 Given that § 518 is a criminal law restricting speech, clarity is essential. Yet from the outset, § 518 has been anything but clear. The federal law on which § 518 is based was itself criticized for causing widespread confusion and uncertainty. And when that federal statute expired in 1984, New York borrowed its operative text— while excluding its main definitional provisions—with little debate or deliberation. Since then, § 518 has been interpreted in jarringly inconsistent and expansive ways. In 1987, for instance, a gas station owner was criminally prosecuted for telling a customer that gas costs “five cents extra” with a credit card, even though he clearly advertised both the cash and credit card prices. See People v. Fulvio, 517 N.Y.S.2d 1008, 1013 (N.Y. Crim. Ct. 1987) (holding § 518 unconstitutional as applied). More recently, the Attorney General targeted dozens of small merchants through- out New York, warning that “you can charge more for a credit card all you want, but you have to say that this is the cash discount rate.” A. 154, 161. This startlingly broad conception of § 518—and resulting uncertainty about the law’s true scope—has discouraged dual pricing by merchants in New York. That includes the plaintiffs here, each of whom has deeply held beliefs about the broader societal harms of hiding the cost of credit. Consistent with their desire to raise public awareness of the issue, the plaintiffs would like to post their prices in a manner that alerts customers to the added cost of using a credit card. Specifically, they would like to pursue option 2 or 3 on the first page of this brief. 4 Given their understandable fear that § 518 would be interpreted as prohibit- ing such price displays, the plaintiffs filed suit in federal court to enjoin § 518 on First Amendment grounds and as unconstitutionally vague. Their suit was prem- ised on a reasoned estimation of how the State would likely apply § 518, particularly given the State’s broad view of that law. The plaintiffs also emphasized the disturbing unpredictability in the State’s interpretation of § 518. This litigation has only confirmed that assessment. From 1984 until 2013, the State interpreted § 518 as a regulation of merchant speech, even if cash and credit-card prices were both prominently displayed. See, e.g., Fulvio, 517 N.Y.S.2d at 1013. In the U.S. District Court for the Southern District of New York, however, the State changed its tune. There, it interpreted § 518 as a “false advertising statute” that allows credit-card surcharges, so long as they are “displayed as prominently as the cash price.” Dist. Ct. Dkt. 27 at 2. Then, in the U.S. Court of Appeals for the Second Circuit, the State sang a different song altogether. This time, it asserted that § 518 is not a false-advertising law, but is instead a price regulation that outlaws “collecting additional money from credit-card users above the regular price.” N.Y. CA2 Br. 24. The State largely stuck to that view in the U.S. Supreme Court, which squarely rejected the notion that § 518 is a mere price regulation. See Expressions, 137 S. Ct. at 1150–51. Yet in advance of that defeat, the State had already begun stepping toward still another pivot: this time, to describing 5 § 518 as a convoluted disclosure requirement subject to relaxed constitutional scrutiny. On the State’s latest theory, § 518 mandates only that merchants who charge different amounts for cash and credit cards mark their products with the higher credit-card price. Section 518 has thus morphed from a speech restriction, to a false advertis- ing law, to a price regulation, and most recently to a disclosure requirement—all in just five years. But even as the State has careened wildly in its account of § 518, near-identical statutes in two other states have been invalidated under the First Amendment. See Italian Colors Rest. v. Becerra, 878 F.3d 1165, 1168 (9th Cir. 2018); Dana’s R.R. Supply, 807 F.3d at 1239. Moreover, the U.S. Supreme Court has made clear that § 518 cannot escape First Amendment scrutiny. See Expressions, 137 S. Ct. at 1151. The writing is on the wall: if § 518 is held to prohibit the plaintiffs’ pre- ferred price displays, it will be struck down. Fortunately, this Court now has an opportunity to clarify the scope of § 518. Given the State’s hitherto freewheeling approach to enforcing this criminal statute, as well as precepts of constitutional avoidance and lenity, the Court should give § 518 a narrow interpretation. In particular, it should reformulate the certified question—which, as written, does not address the plaintiffs’ desired price dis- plays—and hold that § 518 prohibits only undisclosed credit-card surcharges. On that view, § 518 is a classic anti-fraud measure. This reading of the statute respects 6 legitimate consumer-protection purposes, avoids criminalizing truthful speech, and aligns the statute with principles of lenity and First Amendment law. It would also end this litigation, which the plaintiffs launched solely because they feared their desire to speak openly about the real cost of credit would make them criminals. QUESTIONS PRESENTED 1. Does a merchant comply with New York’s General Business Law § 518 so long as the merchant posts the total dollars-and-centers price charged to credit- card users? 2. Does a merchant comply with New York’s General Business Law § 518 so long as the merchant does not impose undisclosed surcharges on credit-card users? STATEMENT OF THE CASE I.! Statutory framework Despite what the ads may say, credit cards aren’t “priceless.” Each time a consumer pays by credit card, the merchant incurs a swipe fee. These fees, imposed by credit-card issuers on every transaction, are typically passed on to all consumers through higher prices. Fee rates in the United States rank among “the highest in the world.” Bradford & Hayashi, Fed. Reserve Bank of Kansas City, Developments in Interchange Fees in the United States and Abroad (Apr. 2008). The typical fee is between 2% and 3% of the purchase amount, and fees are even more imposing in some cases. Levitin, Priceless? The Economic Costs of Credit Card Merchant Restraints, 55 UCLA 7 L. Rev. 1321, 1330, 1355 (2008). By processing more than two trillion dollars in transactions, credit-card issuers receive more than $50 billion in swipe fees annual- ly. 156 Cong. Rec. S4839 (June 10, 2010). These invisible fees are burdensome. Some merchants therefore wish to pass on the cost of credit cards only to those who use them. They may also seek to draw customers’ attention to the existence and societal harms of swipe fees. This requires dual pricing. It also requires a decision about whether to describe the difference between the two prices as a “surcharge” or “discount.” As an economic matter, this is a distinction without a difference. A “sur- charge” and a “discount” are just two ways of framing the same price information—like calling a glass half full instead of half empty. But studies show that consumers react differently to the two labels: they care more about surcharges than they do about discounts. Precisely because the surcharge label is most effective at communicating the true cost of credit cards—and at influencing customer behavior—the credit-card industry has long insisted that it be suppressed. By including speech codes in their contracts and lobbying legislators, credit-card companies have sought to censor merchants. They have also aimed to sow confu- sion about when (if ever) it is lawful to describe credit card prices as involving a “surcharge.” 8 Section 518 was passed at the credit-card industry’s behest in 1985 after the lapse of a similar (and similarly unclear) federal law. For years, it had little effect, because standard-issue credit-card contracts forbade merchants from imposing surcharges. In recent years, however, those contract terms have been called into doubt under antitrust law. That has generated renewed anxiety about § 518. So, too, have the State’s broad and inconsistent interpretations of the statute. If § 518 is read as the State now requests, it will stand as the last remaining barrier to accu- rately and effectively communicating the cost of credit in New York. The only way to avoid that outcome is to adopt a narrower construction of § 518. A.! Surcharges and discounts: why labels do (and don’t) matter It’s Economics 101 that a credit-card “surcharge” and a cash “discount” are just “different frames for presenting the same price information—a price difference between two things.” Levitin, Priceless?, at 1351. They are equal in every way, except one: the label that the merchant uses to communicate that price difference. But labels matter. “[T]he frame within which information is presented can significantly alter one’s perception of that information, especially when one can perceive the information as a gain or a loss.” Hanson & Kysar, Taking Behavioralism Seriously, 112 Harv. L. Rev. 1420, 1441 (1999). Simply put, people tend to view losses or penalties as more significant than gains or benefits of equivalent amounts. See Kahneman et al., Anomalies: The Endowment Effect, Loss Aversion, and Status Quo 9 Bias, 5 J. Econ. Persps. 193, 199 (1991). As a result, “consumers react very differ- ently to surcharges and discounts.” Levitin, The Antitrust Super Bowl: America’s Payment Systems, No-Surcharge Rules, and the Hidden Costs of Credit, 3 Berkeley Bus. L.J. 265, 280 (2006). They are significantly more likely to respond to surcharges (perceived as losses for using credit) than to discounts (perceived as gains for using cash). See Sunstein, What’s Available? Social Influences and Behavioral Economics, 97 Nw. U. L. Rev. 1295, 1312 (2003). This principle of human behavior is well-known to credit-card companies. Indeed, the reason swipe fees are so high in America is that they’ve been disguised as cash discounts or kept entirely hidden from consumers—the people who decide which payment method to use. “What most consumers do not know is that their decision to pay by credit card involves merchant fees, retail price increases, a nontrivial transfer of income from cash to card payers, and consequently a transfer from low-income to high-income consumers.” Schuh et al., Fed. Reserve Bank of Boston, Who Gains and Who Loses from Credit Card Payments? 1 (2010). Swipe fees thus function as an invisible tax, channeling billions of dollars an- nually from consumers to banks. The fees are also highly regressive. In a reverse- Robin Hood effect, low-income cash purchasers subsidize the cost of credit cards, while enjoying none of their benefits or convenience. Schuh et al., Who Gains and Who Loses, at 21. According to Fed economists, “[b]y far, the bulk of [this subsidy] 10 is enjoyed by high-income credit card buyers,” who receive an average of $2,188 every year, paid disproportionately by poor households. Id. The result is a regime in which food-stamp recipients subsidize frequent-flier miles. Warren, Antitrust Issues in Credit Card Merchant Restraint Rules 1 (2007). The effectiveness of the surcharge label at avoiding such market distor- tions—and preventing such economic disparity—is why many merchants, including the plaintiffs in this case, seek to employ it. By describing their lawful dual pricing scheme as involving a “surcharge,” they seek to more effectively inform consumers of the cost of credit. This may create meaningful competition and political awareness and may ultimately drive down the cost of swipe fees—as price-transparency reforms in other countries show. See Levitin, Antitrust Super Bowl, at 312–13. If surcharge fees are seen as too high, consumers will use a different payment method, and banks will have to lower their fees to attract business. Id. But if government forbids framing the added cost as a surcharge, merchants lose their most effective means of informing consumers of the cost of credit. Simi- larly, if government creates widespread uncertainty about the legality of using the surcharge label—as New York has done with § 518—merchants may avoid dual pricing altogether. That is particularly true if government uses the criminal law to regulate in this sphere. After all, the dividing line between surcharges and discounts is famously blurry (and often nonexistent), and merchants are properly fearful of 11 subjecting themselves to criminal prosecution. The upshot is that merchants pass on swipe fees to all consumers by raising prices across the board. Consumers are left unaware of how much they pay for credit and have no incentive to reduce their credit-card use. And in the end, swipe fees remain high. B.! The short-lived federal surcharge law In the early days of credit cards, any attempt at differential pricing between cash and credit was strictly forbidden by the contractual rules credit-card compa- nies imposed on merchants. Kitch, The Framing Hypothesis: Is It Supported by Credit Card Issuer Opposition to a Surcharge on a Cash Price?, 6 J.L. Econ. & Org. 217, 219–20 (1990). In 1974, however, as these rules faced mounting antitrust scrutiny, Ameri- can Express agreed to allow merchants to provide consumers with differential price information. Id. at 220. Congress then amended the Truth in Lending Act (TILA) to grant merchants a non-waivable right to “offer[] a discount” to induce consum- ers “to pay by cash, check, or similar means” rather than by credit card. Pub. L. No. 93-495, 88 Stat. 1500, 1515 (1974). Consumer advocates initially considered the TILA amendment a victory. But “the credit card lobby turned its attention to form rather than substance,” focusing on the way prices are communicated. Thaler, Toward a Positive Theory of Consumer Choice, 1 J. Econ. Behav. & Org. 39, 45 (1980). Aware that price labels can affect consumer behavior, the industry “insist[ed] that any price difference between 12 cash and credit purchases should be labeled a cash discount rather than a credit card surcharge.” Tversky & Kahneman, Rational Choice and the Framing of Decisions, 59 J. Bus. S251, S261 (1986). A bare-knuckled lobbying campaign by the credit card industry ultimately led Congress to amend TILA to enact a prohibition on “surcharges,” despite the authorization for “discounts.” Pub. L. No. 94-222, § 3, 90 Stat. 197 (1976) (“No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means.”). This ill-fated venture lasted only ten years (1974 to 1984). Throughout that period, it generated widespread confusion and uncertainty. By virtue of the well- recognized economic equivalence between surcharges and discounts, many legisla- tors, regulators, and merchants found it extremely difficult to ascertain what forms of pricing were prohibited. In 1975, for instance, the Fed reversed its position several times on whether federal law prohibited surcharges at all. See 40 Fed. Reg. 30,915, 30,986 (July 24, 1975) (yes); 40 Fed. Reg. 32,305, 32,360 (Aug. 1, 1975) (no); 40 Fed. Reg. 43,197, 43,201 (Sept. 19, 1975) (yes again). Responding to the Fed’s confusion, Congress amended TILA in 1976, defining the word “discount” to mean “a reduction made from the regular price,” and adding that it “shall not mean a surcharge.” Id. (codified at 15 U.S.C. § 1602). A “surcharge,” in turn, meant “any means of 13 increasing the regular price to a cardholder which is not imposed upon customers paying by cash, check, or similar means.” Id. But this distinction, too, proved difficult to pin down. In 1977, for example, the Fed issued regulations forbidding “any pricing system” advertising “a cash price which is not available to someone purchasing with a credit card.” 42 Fed. Reg. 743, 780–81 (Jan. 4, 1977). Yet the very next year, in a departure from its new regulation, the Fed opined that a gas station may post signs and posters stating “the cash price without also disclosing the credit card price,” so long as the credit-card price is listed at the pump. 43 Fed. Reg. 3,897, 3,899 (Jan. 30, 1978). By 1981, TILA’s surcharge rule was widely seen as a debacle. Reflecting this view, a member of the Fed testified about “the obvious difficulty in drawing a clear economic distinction between a permitted discount and a prohibited surcharge.” Cash Discount Act, 1981: Hearings on S. 414 Before the S. Banking Comm., 97th Cong. 9 (1981). “If you just change the wording a little bit, one becomes the other.” Id. at 22. Because “the distinction is, at best, uncertain,” she remarked, many merchants had been forced to “throw[] up [their] hands in frustration” and steer clear of dual pricing, because “compliance [was] simply not worth the merchant’s risk or effort.” Id. at 9. Other commentators echoed this view. See Krucoff, When Cash Pays Off, Wash. Post, Sept. 22, 1981 (“[T]he regulations have been so complicated. Smaller 14 business people, who are most likely to offer [discounts], may have been intimidat- ed by the fear it could be viewed as an illegal surcharge.”). Nonetheless, Congress decided to temporarily renew the surcharge law for three additional years. Pub. L. No. 97-25, 95 Stat. 144 (1981). In a last-ditch effort to offer clarity, Congress also defined “regular price,” against which surcharges and discounts are both measured. Congress provided that the “regular price” is “the tag or posted price charged for the property or service if a single price is tagged or posted,” or “the price charged for the property or service when payment is made by use of an open-end credit plan or a credit card if either (1) no price is tagged or posted, or (2) two prices are tagged or posted.” Cash Discount Act Hearings, at 5; see Pub. L. No. 97-25, § 102(a), 95 Stat. 144 (1981) (15 U.S.C. § 1602(y)). As an accompanying Senate Report explained, this definition was meant primarily to ensure that merchants “cannot implement two-tier pricing systems which deceive or mislead the consumer.” S. Rep. No. 97-23, at 4 (1981) (“1981 Senate Report”). It sought to achieve that goal by ensuring that “consumers will be seeing at least the highest possible price they will have to pay when they see a tagged or posted price.” Id. Critically, these amendments were intended to permit substantial flexibility: merchants could have “two-tier pricing systems” and could “choose the manner and method by which they will tag or post these prices,” so long as “when prices are tagged or posted, the consumers will be exposed to the 15 highest price.” Id. This rule would ensure that “consumers cannot be lured into an establishment on the basis of the ‘low, rock-bottom price’ only to find at the cash register that the price will be higher if a credit card is used.” Id. Congress’s final attempt at clarifying the surcharge law did not succeed. In 1984, Senator Dodd summarized the conventional wisdom: “Many merchants are not sure what the difference between a discount and a surcharge is and thus do not offer different cash and credit prices for fear they will violate the ban on surcharg- es.” Credit Card Surcharges, N.Y. Times, Mar. 12, 1984 (letter to editor). One month later, the Fed reported that the distinction between two labels for “fundamentally equivalent conduct” had caused “confusion among merchants about the difference between a permissible discount and an illegal surcharge.” 70 Fed. Res. Bull. 309, 310–11 (Apr. 1984). This was evidenced by “many inquiries the Board ha[d] received about the distinction.” Id. In the Fed’s view, such “uncertainty about the law”—even after Congress’s amendments—likely “discouraged merchants from offering discounts,” out of fear that they could not comply. Id. at 311. A key point of ambiguity in the federal law concerned labels that list a price and indicate a surcharge for credit cards, expressed either as a percentage increase or a fixed dollars-and-cents amount. Congress certainly wanted to ensure that customers were not ambushed with surcharges at the register. But so long as a merchant clearly posted its dual-pricing system, Congress never mandated that the 16 merchant express prices in any particular “manner and method.” 1981 Senate Report at 4. Nor did Congress ever indicate its view that a merchant violated the “regular price” requirement if its sticker stated “$10 plus 20 cents per item added for payment by credit card” or “$10 plus 2% per item added for payment by credit card.” Cf. Expressions Oral Argument Tr. 37 (“But 20 cents and $10, that’s not too complicated unless you’re taking a very patronizing and condescending view of the capabilities of the American consumer.” (Roberts, C.J.)). It was thus unclear—at the time—whether a label stating the cash price and a percentage or dollars-and- cents surcharge for credit cards satisfied the rule that “two prices [be] tagged or posted.” See 15 U.S.C. § 1602(y). In the end, many of the ambiguities that afflicted the federal surcharge law were never resolved. Instead, they were simply banished in 1984. That year, to near-universal acclaim, Congress finally (and permanently) allowed the surcharge law to expire. C.! New York’s rushed enactment of G.B.L. § 518 The end of the federal surcharge law didn’t catch credit-card companies by surprise. Sensing that Congress might not revive it, the industry convinced ten states—including New York—to enact surcharge laws of their own. Most were adopted when it appeared that the federal law would not be renewed (in 1981) or shortly after it expired (in 1984). 17 Despite heated controversy elsewhere, the New York bill passed easily within a few months of the federal law’s expiration. It triggered little debate or public notice and was subjected to a bare minimum of deliberation. A. 117. The skimpy legislative record suggests that this law—now known as G.B.L. § 518—was seen as a short-term measure “while extension of the Federal ban . . . is debated by Con- gress.” Id. To that end, § 518 was meant to mirror “the provisions of the Federal ban that recently expired.” A. 109. Sparse as it is, the legislative record suggests two main policy rationales for the law. First, an anti-deception rationale: ensuring that merchants could not advertise one price and then, “at the time of the sale, raise or lower the price according to the method of payment.” A. 109; see also A. 114 (letter from the New York Consumer Protection Board indicating that the law exists to prevent “unan- nounced price increases at the point of sale”). Second, an anti-profiteering rationale: allowing surcharges might “result in a windfall for some retailers with no concomi- tant benefit for consumers.” A. 112. Enacted in June 1984, § 518 tracks the text of the federal law verbatim. But New York’s statute differs in a couple of important respects. Most notably, the legislature declined to enact the federal definitional provisions governing “sur- charge,” “discount,” and “regular price.” Further, unlike Congress and many other jurisdictions, New York made violations of its surcharge law a misdemeanor 18 crime—punishable by fines, imprisonment, or both. New York thus made an unclear law even less clear, and the penalties for its violation more severe. D.! Section 518’s enforcement history New York immediately began enforcing its surcharge law against merchants. See, e.g., State by Abrams v. Camera Warehouse, Inc., 496 N.Y.S.2d 659 (Sup. Ct. 1985). In one early case, the State brought criminal charges against a gas-station owner who offered dual pricing and put up signs that “clearly stated the ‘cash price’ and the ‘credit price’ for his gasoline,” which differed by five cents per gallon. Fulvio, 517 N.Y.S.2d at 1010. The owner was convicted because his cashier made the mistake of telling one customer that it cost “five cents extra” to use a credit card instead of saying that it would cost a “nickel less” to use cash. Id. at 1013. But this conviction was short-lived. The trial court held that § 518 is unconstitutional because it treats “precisely the same conduct . . . either as a criminal offense or as lawfully permissible behavior depending only upon the label the individual affixes to his economic behavior.” Id. at 1011. Fulvio may have temporarily dampened enforcement efforts, but it did not end them. In 2008 and 2009, the Attorney General conducted a series of sweeps against more than fifty merchants, many of whom were targeted even though they clearly disclosed their cash and credit prices. The Attorney General’s office de- clared it illegal to say that paying with credit costs “more” and provided specific 19 instructions on how to describe pricing schemes to customers. A. 154, 161. The Attorney General’s staff even informed one merchant that his employees had to “characteriz[e] the difference between paying with cash and paying with credit as a cash ‘discount,’ not a credit ‘surcharge.’” A. 154. This merchant tried to follow the State’s script, but customers found it “confusing,” and it was “not the message that [he] meant to convey.” Id. So he eventually gave up on dual pricing entirely. See id. In that respect, § 518 functioned just like the failed federal regime: as a confusing, state-mandated limitation on how merchants can truthfully describe their prices, leading many merchants to avoid dual pricing altogether and thereby entrench high swipe fees. II.! This litigation Over the last few years, many credit-card companies have removed their contractual no-surcharge rules in response to nationwide antitrust litigation. See Stout, Credit Issuers Lift Rules on Credit Surcharges, N.Y. Times, Dec. 20, 2013. Laws like § 518 have therefore assumed sudden importance: they are all that stops merchants from truthfully telling consumers that they impose a surcharge because credit cards cost more. Fearful that § 518 would be enforced against them, five New York merchants (and their principals) filed this suit in June 2013. Although their circumstances differ slightly, they all want to truthfully tell their customers that there is an “additional fee” or “surcharge” for paying with credit. 20 One plaintiff, Expressions Hair Design, prominently posted a sign informing its customers that it would charge 3% “more” to pay for a haircut with a credit card. But the salon took down the sign after learning of § 518. It now tells custom- ers that it has two prices—a lower price for cash, a higher one for credit. A. 56–57. It tries “to be as careful as [it] can to avoid characterizing that price difference as a ‘surcharge’ or an ‘extra’ charge for paying with a credit card.” A. 57. Because of § 518, Expressions cannot communicate its prices how it would like—by calling the difference in its prices a “surcharge.” Id. Like Expressions, the four other plaintiffs—Brooklyn Farmacy & Soda Foun- tain, Brite Buy Wines & Spirits, Five Points Academy, and Patio.com—want to charge two different prices and to call the difference a “surcharge” for credit. They do not offer cash discounts because they believe that “[l]abeling the difference as a ‘discount’ . . . would not be nearly as effective as calling it a ‘surcharge.’” A. 88. In publicizing their prices, these merchants have modified their speech due to § 518’s lack of clarity. Brooklyn Farmacy, for instance, is “not willing to take the risk that [it] might be prosecuted by the state simply for conveying truthful information to [its] customers about the higher cost of using a credit card.” A. 89. As this case has unfolded, the State has taken a dizzying array of positions regarding the meaning of § 518. This instability in the Attorney General’s own 21 description of the law illuminates many of the key issues here and points out the need for a narrow construction. A.! The Southern District of New York The plaintiffs filed this case in June 2013, alleging that § 518 violates their rights under the First Amendment of the United States Constitution and that it is unconstitutionally vague. At an initial hearing, the State articulated its interpreta- tion of § 518 in a colloquy with Judge Rakoff: THE STATE: [W]e think [the statute] gives the plaintiffs and all other reasonable people notice of what is lawful and what is unlawful. THE COURT: So the statute allows . . . merchants to offer discounts for using cash or a debit card, but makes it a crimi- nal offense to impose surcharges for using a credit card. What’s the difference? THE STATE: We don’t think there is a difference in terms of the underlying economic value. The way our office interprets the statute is that it doesn’t—we are going after merchants who entice consumers to commence an economic transaction by advertising one price and then, once they arrive at the reg- ister, informing them when they pull out their credit card that they are going to be subject to a surcharge above and beyond that[.] THE COURT: So you are interpreting [it as] a false advertis- ing statute. THE STATE: Essentially, yes, that’s how our office enforces it . . . we think that’s the most reasonable interpretation of it. 22 Dist. Ct. Hearing Tr. 6/14/13, at 5–6. On the basis of this interpretation, the State argued that the plaintiffs had no reason to fear that § 518 would be enforced against them if they posted their desired price displays. See id. The state took the same position in its briefs. There, it reasoned that § 518 does not prohibit surcharges but is instead “an anti-fraud statute” that bars only the imposition of “additional hidden fee[s].” Dist. Ct. Dkt. 27, at 21, 39. On this view, “a seller violates § 518 only if it charges consumers more for using a credit card without displaying that credit card price at least as prominently as the cash price.” Dist. Ct. Dkt. 27, at 19. Construed as a false advertising law, § 518 forbids only deceptive, bait-and-switch tactics, such as levying an undisclosed surcharge on the use of credit cards when customers arrive at the register. Notably, at this stage, the State did not attempt to defend its surcharge law as prohibiting “surcharges.” In fact, it did the opposite, acknowledging that § 518 would be “untenable” and “illogical” if read that way. Dist. Ct. Dkt. 27 at 2, 3, 19, 21, 32, 30, 31, 32, 45. As the State observed, this reading would make no sense because liability “would turn solely on the label that a seller used to describe its dual pricing scheme.” Id. at 24. Judge Rakoff disagreed with the State’s interpretation of § 518. Looking in part to the State’s own enforcement history, he concluded that § 518 is properly read as outlawing the plaintiffs’ proposed price displays. Expressions Hair Design v. 23 Schneiderman, 975 F. Supp. 2d 430, 443 (S.D.N.Y. 2013). He then held that § 518 violates the First Amendment and is impermissibly vague. Id. at 442–48. Here, he reasoned that § 518 “plainly regulates speech” because it “draws the line between prohibited ‘surcharges’ and permissible ‘discounts’ based on words and labels, rather than economic realities.” Id. at 444–45. “Pricing is a routine subject of economic regulation,” he added, “but the manner in which price information is conveyed to buyers is quintessentially expressive, and therefore protected by the First Amendment.” Id. at 445. Examining the State’s justifications for the law under intermediate scrutiny—as required by Central Hudson Gas & Electric Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557 (1980)—he concluded that § 518’s “virtually incomprehensible distinction between what a vendor can and cannot tell its customers offends the First Amendment.” Expressions, 975 F. Supp.2d at 436. B.! The Second Circuit Court of Appeals After stipulating to an order permanently enjoining it from enforcing the law against the plaintiffs, the State appealed. At this point, the state abandoned its false- advertising interpretation and instead defended the law as banning “surcharges” but permitting “discounts.” This “surcharge prohibition,” the State argued, “is a direct pricing regulation that does not restrict plaintiffs’ speech.” NY CA2 Br. 24. The State made no attempt to reconcile this position with its opposite position in the district court. 24 The Second Circuit accepted the State’s theory that § 518 “regulates con- duct, not speech.” Expressions Hair Design v. Schneiderman, 808 F.3d 118, 130 (2d Cir. 2015). In so doing, it addressed “two distinct kinds” of dual pricing. Id. at 128. First, it considered “post[ing] only a single price” on the label, while communi- cating the surcharge amount through a separate sign (e.g., “3% credit card surcharge”). Id. As to this kind of label, the court held that § 518 regulates only prices, not speech. See id. at 129–35. Second, it assessed a scheme in which a merchant “posts two different prices” on the label and “characterize[s] this price differential as a ‘surcharge.’” Id. at 129. Here, the court declined to “reach the merits,” and instead invoked an abstention doctrine. See id. at 135–42. C.! The United States Supreme Court In the Supreme Court, the State adhered to its position from the Second Circuit and defended § 518 as a “classic form of price regulation that implicates no First Amendment concerns.” Resp. Br. 1. This argument rested entirely on the State’s claim that § 518 “regulates the economic conduct of increasing prices on account of a customer’s credit-card use,” making the law (in the State’s view) “similar to a price ceiling.” Id. at 1–2. As a fallback, however, the State suggested in passing that § 518 might in- stead be understood as a disclosure requirement subject to laxer scrutiny under Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985). In Zauderer, the Supreme 25 Court held that government may require businesses to disclose “purely factual and uncontroversial information,” so long as these disclosure obligations are not “unjustified or unduly burdensome.” Id. at 651. Zauderer applies only to true “disclosure requirements,” not to “prohibitions on speech.” Id. at 650. Further, it may be invoked only to remedy a harm that is “potentially real not purely hypo- thetical,” Ibanez v. Fla. Dept. of Bus. & Prof. Reg., 512 U.S. 136, 146 (1994), and may extend “no broader than reasonably necessary,” In re R.M.J., 455 U.S. 191, 203 (1982). The State’s hint that Zauderer could apply here was lifted from an amicus brief in support of neither party filed by the United States Solicitor General. In that brief, the United States characterized the expired federal surcharge law as “requir- ing merchants to disclose their higher credit-card price up front, in dollars-and- cents form.” U.S. Br. 14. The United States did not cite any materials from the 1970s or 1980s documenting this “dollars-and-cents” interpretation. Rather, its brief reflected a modern gloss on the expired federal statute designed to square it with Zauderer—as Justice Sotomayor seemingly noticed, since she declined to accept the correctness of that view in her separate opinion. Expressions, 137 S. Ct. at 1154 n.1 (Sotomayor, J., concurring in the judgment). Although a law cannot simultaneously be a speech restriction, a price regula- tion, and a disclosure mandate, this did not deter the State. To squeeze § 518 into 26 Zauderer’s framework, the State insisted that its law—like the lapsed federal stat- ute—can conceivably be read as requiring only that the higher credit-card price be posted in dollars-and-cents form. This reading, the State asserted, “continue[s] the same consumer protection policies as Congress had pursued—including protecting consumers from the misleading prices that they would face if a seller posted a single regular price and only later imposed an additional surcharge for customers using credit cards.” Resp. Br. 54. At oral argument, the notion that § 518 qualifies as a disclosure mandate triggered substantial skepticism across the bench. See, e.g., Tr. at 35 (Justice Kenne- dy worrying that a merchant could be held liable even though it posted “truthful information”); id. at 37 (the Chief Justice remarking: “But 20 cents and $10, that’s not too complicated unless you’re taking a very patronizing and condescending view of the capabilities of the American consumer”); id. at 38 (Justice Kagan observing “this does not look like a disclosure requirement”); id. at 59 (Justice Ginsburg asking: “Can you explain to me how it’s a disclosure requirement to suppress the actual cost of the credit card purchase?”). In addition, many Justices opined that § 518 is an exceptionally unclear statute. See, e.g., id. at 20 (Justice Alito); id. at 24 (Justice Kagan); id. at 54 (Justice Kennedy). Ultimately, the Court concluded that § 518 burdens protected speech by lim- iting “how sellers may communicate their prices.” Expressions, 137 S.Ct. at 1151. In 27 reaching that result, the Court did not interpret § 518 itself, but rather deferred to the Second Circuit’s interpretation of the law. See id. at 1149. Rather than assess whether § 518 survives First Amendment scrutiny, the Supreme Court then remanded this case to the Second Circuit. Concurring in the judgment, Justice Sotomayor argued in favor of certifying questions to this Court about the scope of § 518’s prohibition. Had the Second Circuit done so, she noted, it “might have avoided the need for a constitutional ruling altogether.” Id. at 1158. Certification would also resolve ambiguity among several plausible interpretations of § 518—which would be especially helpful to all parties because “New York has pressed almost all of these interpretations during this litigation.” Id. at 1155. D.! On remand to the Second Circuit Back in the Second Circuit, the State fully embraced the argument that § 518 mandates a price disclosure. It did so notwithstanding the statute’s prohibitory text, the State’s own enforcement actions, and the absence of any such disclosure interpretation from the law’s passage in 1985 until the United States filed its brief in 2016. But as the Supreme Court had noted, one premise underlying this disclo- sure theory is that a merchant who posts the higher credit-card price in dollars- and-cents form is in compliance with § 518, regardless of what else they say (e.g., calling the price a “surcharge”). See Expressions, 137 S. Ct. at 1151 n.3. Put different- 28 ly, the State’s theory presumes that posting the higher credit card price in dollars- and-cents form—but not in any other form—is necessary and sufficient to comply with § 518. The State’s entire position crumbles if that statutory premise is faulty. (Of course, even if that is the correct interpretation of § 518, the State must still demonstrate that its law is fairly characterized as a disclosure for purposes of Zauderer and that § 518 survives the resulting First Amendment scrutiny.) The Second Circuit subsequently issued a certification order asking this Court to decide whether the state-law premise of the State’s newly-discovered Zauderer argument is correct. See Expressions Hair Design v. Schneiderman, 877 F.3d 99, 103 (2d Cir. 2017). This Court accepted certification. ARGUMENT The plaintiffs filed this case because they feared that § 518 would be en- forced against them if they communicated their prices in the manner they prefer: a base price for cash, plus an added cost for credit cards, expressed as a percentage or dollars-and-cents increase. Sandwich: $10 cash price $0.20 per item added to credit-card purchases Sandwich: $10 cash price 2% per item added to credit-card purchases This method of communicating prices is truthful, easily understood, and non- deceptive. It affords all customers clear notice of the additional cost. And it is the 29 most effective way to communicate the higher costs of credit to customers who suffer from invisible swipe fees. Considering the State’s enforcement actions, the ambiguity of the statutory text, and widespread uncertainty about the lapsed federal surcharge law, the plaintiffs’ fear of enduring criminal penalties under § 518 was eminently reasona- ble. They had a sound basis for believing—and for arguing in federal court—that § 518, as interpreted and enforced by the State, forbids their preferred manner of communicating prices. The State’s ever-evolving interpretation of its own law throughout this litigation has only confirmed that point. In response to the State’s conception of § 518, the plaintiffs have consistently advanced two claims: that § 518 violates the First Amendment to the extent it restricts their speech; and that it is vague to the extent it doesn’t afford clear notice of what speech is proscribed. Although they differed in their judgments, Judge Rakoff and the Second Circuit both concluded that § 518 does, in fact, prohibit the plaintiffs’ intended speech. The Supreme Court, in turn, deferred to that assess- ment in evaluating § 518’s burden on the plaintiffs. But federal courts don’t have the final say on state-law questions. See Garner v. Louisiana, 368 U.S. 157, 169 (1961) (“[State] courts have the final authority to interpret and, where they see fit, to reinterpret that State’s legislation.”). Moreover, in interpreting state law, federal courts possess diminished authority “to construe 30 state statutes so as to avoid or obviate federal constitutional challenges.” Webb v. Webb, 451 U.S. 493, 500 (1981). And federal courts lack the authority to grant declaratory or injunctive relief against state officers for violating state law. See Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 121 (1984). Because only this Court can definitively interpret § 518, the plaintiffs only now have the opportunity to seek an authoritative answer to the most basic state- law issue presented by their case: does § 518 prohibit them from posting prices as they prefer? Put differently, should it be permissible to say “$10 for cash, $10.20 for credit,” but a criminal offense to say “$10 for cash, $.20 additional for credit”? The answer to that question should be “no.” Section 518’s scope is ambigu- ous as a matter of text, legislative history, and statutory purpose. And if § 518 exists to protect consumers, that objective can be fulfilled on a narrower reading—one that forbids only undisclosed surcharges for paying by credit card. This interpretation is supported by principles of lenity and constitutional avoidance, and is further justified by the State’s overbroad approach to enforcing § 518. If accepted, a narrower view of § 518 would bring an end to this litigation and prevent further disputes over how the First Amendment applies in this commercial context. I.! This Court should reformulate the certified question. The Second Circuit has asked this Court to decide whether a merchant complies with § 518 “so long as [she] posts the total dollars-and-cents price charged 31 to credit users.” Expressions, 877 F.3d at 103. If the Court answers that question in the affirmative, then merchants in New York will either have to avoid dual pricing altogether or disavow the most effective method of communicating the added cost of credit cards to customers. But this Court need not answer the question as formulated by the Second Circuit. In its order, the Second Circuit recognized that “the New York Court of Appeals may reformulate or expand this certified question as it deems appropri- ate.” Id. at 100. This Court has not hesitated to exercise that prerogative when the Second Circuit’s orders did not capture the precise question truly at issue. See Beck Chevrolet Co. v. Gen. Motors LLC, 27 N.Y.3d 379, 389 (2016); Flo & Eddie, Inc. v. Sirius XM Radio, Inc., 28 N.Y.3d 583, 611 (2016) (Fahey, J., concurring); Barenboim v. Starbucks Corp., 21 N.Y.3d 460, 470 (2013); Israel v. Chabra, 12 N.Y.3d 158, 163 (2009). Reformulating the certified question here is appropriate for two reasons. First, rather than ask this Court to assess the legality of the plaintiffs’ price displays under state law, the Second Circuit has instead asked it to assess whether a differ- ent, hypothetical price display would comply with state law. It has done so exclusively to clarify one premise of the State’s theory-du-jour: that § 518 is a disclosure mandate governed by Zauderer. Even if this Court agrees with the State’s position, substantial litigation remains. In contrast, if the Court adopts a narrower 32 interpretation of § 518, this case would end—and merchants in New York, includ- ing the plaintiffs here, would have clarity about their legal obligations. Second, reformulating the certified question is proper because the version posed by the Second Circuit obscures a reasonable alternative interpretation. The certification order presumes that New York law draws a distinction between two truthful, clearly displayed price listings: “$10 for cash, $10.20 for credit” and “$10 for cash, $.20 additional for credit.” Put differently, it presumes that New York’s criminal law attaches significance to whether a credit card price is displayed in dollars-and-cents form or as an added cost (e.g., a percentage or a fixed amount). But this supposed line between “dollars-and-cents” prices and other prices is the very heart of the dispute. And the Second Circuit’s distinction is one that neither the State, nor the Legislature, nor the New York courts have ever previously drawn with respect to § 518. As we explain later in this brief, the relevant question is whether the added cost for credit-card use has been clearly communicated to customers, not whether it is expressed in one form or another. Accordingly, this Court should reformulate the certified question as follows: “Does a merchant comply with § 518 so long as the merchant does not impose undisclosed surcharges on credit-card users?” In the alternative, this Court should answer the Second Circuit’s certified question in the negative and interpret § 518 as prohibiting only the imposition of undisclosed surcharges for credit. 33 II.! This Court should interpret Section 518 as prohibiting only undisclosed credit card surcharges. Nobody would describe § 518 as a model of clarity. As Justice Sotomayor remarked to the State’s lawyer, “You’re asking me to take a lot of steps, which is start with the language of the statute, ignore it, and go to a Federal statute and apply its definitions. How many of them, you haven’t quite told me. How you differ, you haven’t quite told me.” Tr. at 48. This reaction was widely shared among the Justices. See id. at 20 (Justice Alito); id. at 24 (Justice Kagan); id. at 54 (Justice Kennedy). And for good reason: § 518 is a semantic and interpretive mess. This is why the State has been able to impute so many different meanings to it. It is also why the plaintiffs charged § 518 with unconstitutional vagueness. Given § 518’s ambiguity, it should be construed narrowly. This is true, first and foremost, as a matter of constitutional avoidance. See Overstock.com, Inc. v. N.Y. State Dep’t of Taxation & Fin., 20 N.Y.3d 586, 593 (2013) (“[C]ourts must avoid, if possible, interpreting a presumptively valid statute in a way that will needlessly render it unconstitutional” (citation omitted)). A narrow reading of § 518’s criminal prohibitions is also supported by the rule of lenity. See People v. Golb, 23 N.Y.3d 455, 468 (2014) (“[I]f two constructions of a criminal statute are plausible, the one more favorable to the defendant should be adopted in accordance with the rule of lenity” (citation omitted)). 34 Specifically, this Court should read § 518 as prohibiting only undisclosed sur- charges. This interpretation properly “discern[s] and give[s] effect to the Legislature’s intention.” Matter of Albany Law Sch. v. N.Y. State Office of Mental Retarda- tion & Dev. Disabilities, 19 N.Y.3d 106, 120 (2012). It also fulfills “the spirit and purpose of the act and the objects to be accomplished,” People v. Silburn, 31 N.Y.3d 144, 155 (2018), while minimizing the extent to which § 518 criminalizes truthful speech about prices. A.! The proper scope of Section 518’s prohibition is ambiguous. “Evidence of legislative intent is first sought in the words the Legislature has used.” Silburn, 31 N.Y.3d at 155. Here, however, those words shed little light: “No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.” As the State acknowledges, these words—read in isolation—might fairly be interpreted as forbidding separate prices based on the method of payment. See Br. 30; see also Expressions, 137 S. Ct. at 1154 (Sotomayor, J., concurring in the judgment). But in addition to risking major commercial disruption, that interpretation is foreclosed by the universal understanding that § 518 is meant to regulate how merchants communicate prices, rather than any disparities in those prices themselves. 35 So much for the text. As the State admits, we must look to “the legislative history and purpose” of § 518 to guide us. Br. 31. But even on close inspection, those materials offer less guidance than one might hope. 1.! Legislative history First consider legislative history. The State rests most of its brief on a single claim: that § 518 means the same thing as the now-expired federal surcharge law, which was itself unambiguous in requiring merchants to post their higher credit- card price in dollars-and-cents form. See Br. 32–39. The first half of this claim is unobjectionable. There is strong evidence that § 518 was intended as a temporary stopgap following the expiration of the lapsed federal surcharge law and that it was meant to mirror that law’s provisions. See A. 109, 110, 112, 117. But the second half of the State’s claim is flawed as an account of the federal surcharge law in effect from 1976 to 1984. It is also profoundly ahistorical, which is a rather serious problem for an argument based on legislative history. New York passed § 518 just a few months after the federal surcharge law lapsed. There is no indication that anybody, at that point in time, understood the federal law as mandating a dollars-and-cents posting of the higher credit-card price. Neither the United States (in its brief to the Supreme Court) nor the State (in its brief here) has identified any authoritative materials from the 1970s or 1980s offering such an interpretation. The closest they have come is a single Senate 36 report, which observed that “consumers will be seeing at least the highest possible price they will have to pay when they see a tagged or posted price.” 1981 Senate Report at 4. But this very report proceeded to explain that merchants could “choose the manner and method by which they will tag or post these prices,” so long as they ensured that customers did not “find at the cash register that the price will be higher if a credit card is used.” Id. As we have explained above, it is hardly obvious that the authors of this Senate report thought it would be illegal to clearly state, “$10 for cash, $.20 additional for credit.” Moreover, if the United States and the State are correct about how TILA was understood at the time, where are all the Federal Register notices, formal opinions, guidance documents, industry newsletters, public statements, and other indicia that TILA was clear on this extraordinarily simple, important point? Why did the Federal Reserve Board give advice in 1978 in conflict with that understand- ing? See 43 Fed. Reg. at 3,899. Why did a Fed governor testify in 1981 about the “obvious difficulty” in separating surcharges and discounts, adding that most merchants had “thrown up [their] hands in frustration” because “compliance [was] simply not worth the merchant’s risk or effort”? Cash Discount Act Hearings. Why did United States Senators pen op-eds stating that “Many merchants are not sure what the difference between a discount and a surcharge is and thus do not offer different cash and credit prices for fear they will violate the ban on surcharges”? Dodd, Credit 37 Card Surcharges. Why did the Fed report in 1984 that “uncertainty about the law” had caused “confusion among merchants”? 70 Fed. Res. Bull. at 310–11. And why was there never a single enforcement action for violations of this supposed bright- line rule? The obvious answer is also the right one: because the federal definitions were the subject of widespread uncertainty and confusion. Further, as Judge Rakoff has observed, the federal scheme made “no mention of how prominently a seller’s credit- card price must be disclosed or whether it may be expressed in dollars and cents or a percentage.” Expressions, 975 F. Supp. 2d at 443 (emphasis added). When the New York Legislature copied and extended the federal surcharge law, it neither considered nor resolved that lingering ambiguity. If anything, the New York Legislature compounded it by excluding the federal scheme’s definitional provi- sions. And while the United States has recently proposed its own interpretation of how the lapsed federal rules should have been understood—an interpretation accepted by the Supreme Court in 2017—that development does not retroactively clarify the intent of New York legislators several decades ago. For these reasons, legislative history does not favor any particular interpreta- tion of § 518. It’s clear that the federal law authorized discounts for credit cards, as well as two-sticker-price schemes. See State Br. 34–35. But it’s unclear whether federal law permitted or prohibited price displays like those that the plaintiffs 38 would like to use. At the very least, this issue was unsettled in the 1980s and was not resolved by the passage of § 518. 2.! Statutory purpose We must therefore turn to statutory purpose. As noted above, the legislative history suggests two basic goals for § 518: preventing consumer deception and minimizing price gouging by merchants. Although the State relied heavily on the latter anti-profiteering rationale in federal court, it hardly even mentions that point here—presumably because there is no reason to believe its interpretation of § 518 is related to that objective.1 So what about thwarting consumer deception? The problem for the State is that its reading of § 518 doesn’t achieve that goal any more effectively than does a narrower reading confined solely to undisclosed surcharges. And it doesn’t actually explain why the legislature would have wanted to criminalize prominently disclosed credit-card surcharges. Moreover, the State’s exceptionally broad view of the law’s consumer-informative purposes are difficult to square with both the legislative record and the substantial number of exemptions to § 518. 1 If the State were truly concerned with price gouging, it could simply pass a law capping the price difference between cash and credit. Section 518, in contrast, allows an unlimited price difference. It restricts only how merchants express this difference. There is no reason to believe that the State’s broader view of § 518 would be any more effective at thwarting profiteering than a reading of § 518 that prohibits only undisclosed surcharges. If anything, the State’s interpreta- tion would tend to disguise profiteer-level surcharges by requiring that merchants express the higher, surcharge-inclusive price on all items, instead of stating a cash price and then clearly indicating the amount of the surcharge in relation to it. 39 Let’s begin with discussions of purpose in the legislative record. There were two principal comments on this point. Both of those comments indicated concern with one specific form of deception: bait-and-switch tactics, where surcharges are unexpectedly or surreptitiously sprung on customers after they arrive at the cash register: Legislative Memorandum on § 518: “In effect, two price scales would exist for the merchant who would advertise a certain price and, at the time of the sale, raise or lower the price accord- ing to the method of payment. Consequently, the consumer would be subject to dubious marketing practices and variable purchase prices.” A. 110 (emphasis added). Consumer Protection Board: “One of the most important ef- forts of the consumer movement has been to insure that customers can depend on advertised claims and prices. Allow- ing credit surcharges may defeat this effort however, by permitting unannounced price increases at the point of sale.” A. 114 (emphasis added). Given this understanding of § 518’s anti-deception purposes, the narrower reading fully achieves them. As the record demonstrates, the plaintiffs want to “clearly and transparently” post truthful information about their lawful dual pricing. A. 98. And there is no risk of ambush at the register if § 518 is interpreted as requiring clear disclosure of all added costs—whether expressed as a total dollars-and-cents value for paying with credit (the State’s view) or as an addition to the cash price (the plaintiffs’ preferred labeling). Ultimately, New York’s interest in thwarting bait- 40 and-switch tactics requires only that consumers be clearly informed of any added costs for credit. There is a distinct irony to the State’s position here. It is lawful to create a dual pricing scheme for cash and credit. The State insists that it seeks only to promote consumer information and awareness within such a dual pricing regime. But it aggressively favors an interpretation of § 518 that would require merchants to communicate the additional cost of credit in the way that best conceals it—even when merchants have provided accurate, non-misleading information to custom- ers. See Dana’s R.R. Supply, 807 F.3d at 1249 (“Calling the additional fee paid by a credit card user a surcharge rather than a discount is no more misleading than is calling the temperature warmer in Savannah rather than colder in Escanaba.”). As Judge Rakoff observed, prohibiting the plaintiffs in this case from posting their price displays only “perpetuates consumer confusion by preventing sellers from using the most effective means at their disposal to educate consumers about the true costs of credit-card usage.” Expressions, 975 F. Supp. 2d at 446. “It would be perverse,” he added, “to conclude that a statute that keeps consumers in the dark about avoidable additional costs somehow ‘directly advances’ the goal of preventing consumer deception.” Id. For this reason, a narrower interpretation of 41 § 518 would “actually make consumers more informed rather than less” by permit- ting merchants to convey the true cost of credit. Id. at 446.2 The State’s insistence on its commitment to informing consumers of every potential cost is also undercut by the exceptions shot through § 518. Most striking, although the State justifies its view on the ground that consumers can’t be expected to estimate costs or do math as they shop, § 518 does not cover a whole gamut of potentially significant costs.3 As Judge Rakoff observed, “the statute thus does not actually ensure that the most prominently displayed price consumers encounter will reflect the highest price they will have to pay, since handling charges, shipping costs, service fees, processing fees, ‘suggested tips,’ and any number of other types of additional charges—which consumers may or may not be able to take steps to avoid—may still be added on top.” Expressions, 975 F. Supp. 3d at 447. In light of that fact, interpreting § 518 on the premise that customers must see the full, final, 2 The State suggests that its interpretation is supported by a legislative purpose of making it easier to calculate total credit-card prices as customers shop. See Br. 38–39. This is pure hokum. Nothing in the New York legislative record—including the sources that the State cites on page 39—support that point. Those sources reflect concern only with bait-and-switch tactics at the register. Similarly, as discussed supra at 14-15, the federal sources cited on page 38 of the State’s brief single out surprise at the register as their main concern, and emphasize the flexibility that merchants have in the manner and method of posting prices. In any event, as Chief Justice Roberts observed, the State’s rationale for its reading of § 518 takes a highly uncharitable view of the average consumer: “20 cents and $10, that’s not too complicated unless you’re taking a very patronizing and condescending view of the capabilities of the American consumer.” Tr. 37. 3 See N.Y. Crim. Proc. Law §§ 420.05, 520.10(1)(i); N.Y. Pub. Auth. Law § 1045-j(4-a)(b); N.Y. State Dep’t of Taxation and Fin, “Pay personal income tax by credit card,” http://on.ny.gov/2fFKBkO. 42 dollars-and-cents cost of every item is simply nonsensical. It makes far more sense to read § 518 as mandating a clear statement of any added costs for using credit, so that customers can easily ascertain the difference and make informed judgments about how to pay.4 To summarize, the plain text of § 518 is ambiguous with respect to a key question: whether a merchant is required to express credit-card surcharges in dollars-and-cents form, or may instead list a cash price and clearly denote the added cost with a fixed dollars-and-cents value or percentage. At face value, it seems passing strange to allow a sign that says “$10 for cash, $10.20 for credit,” but to make it a crime to say “$10 for cash, $.20 additional for credit.” This com- monsense reaction is only confirmed by a careful examination of § 518’s legislative history and statutory purposes. Although the State relies heavily on arguments relating to a lapsed federal surcharge law, it offers false clarity about the meaning of that statute. It also relies on an incorrect, ahistorical picture of how that law was understood in the 1980s, when the New York Legislature sought to mirror its restrictions in § 518. Accordingly, § 518 is ambiguous with respect to the price displays that the plaintiffs wish to post. On the State’s reading, they are forbidden. On a narrower 4 Viewed this way, § 518 is a form of false-advertising law. But it differs from existing New York laws by singling out a specific form of false advertising (undisclosed credit-card surcharges) and by imposing criminal penalties for such impropriety. Compare N.Y. Gen. Bus. Law § 518 with N.Y. Gen. Bus. Law § 349; id. § 350 & 350-a. 43 reading aimed at undisclosed surcharges, they are allowed. To break this impasse, the Court must look to extrinsic considerations, including constitutional avoidance and the rule of lenity. Those tenets of statutory interpretation require that § 518 be given a narrower construction—one that only minimally criminalizes truthful speech about prices. B.! Section 518 should be interpreted narrowly. “Where the language of a statute is susceptible of two constructions, the courts will adopt that which avoids injustice, hardship, constitutional doubts or other objectionable results.” People v. Correa, 15 N.Y.3d 213, 232 (2010). That principle supports a narrower reading of § 518. 1.! Constitutional avoidance In interpreting New York statutes, this Court makes “every effort to do so in a manner that avoids a constitutional conflict.” People v. Davidson, 27 N.Y.3d 1083, 1094 (2016). It will thus construe a state statute “so as to avoid constitutional issues if such a construction is fairly possible.” People v. Stephens, 28 N.Y.3d 307, 312 (2016) (citations omitted). Here, the narrower reading of § 518 certainly qualifies as “fairly possible.” And adopting that interpretation avoids a host of substantial First Amendment issues. The main constitutional issue is that § 518—as interpreted by the State—is an unlawful restriction on commercial speech under Central Hudson. 447 U.S. 557. 44 The Supreme Court has already held that in “regulating the communication of prices rather than prices themselves, § 518 regulates speech.” Expressions, 137 S. Ct. at 1151. Section 518 is thus undoubtedly subject to First Amendment scrutiny. Moreover, § 518 is plainly written as a restriction on how merchants may post their prices. It can therefore be upheld only if it prohibits speech that is either “mislead- ing” or “related to unlawful activity”—and only if its prohibition “directly advance[s]” a “substantial governmental interest” that “could [not] be served as well by a more limited restriction on commercial speech.” Central Hudson, 447 U.S. at 564, 569. The State’s burden under Central Hudson is “heavy.” 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 516 (1996). It must offer actual evidence, not conjec- ture, to show that it satisfies Central Hudson’s requirements. Edenfield v. Fane, 507 U.S. 761, 770–71 (1993). As we explained at length in our briefs to the United States Supreme Court, the State cannot meet that burden. See Petr. Br. 36–44; Reply Br. 13–16. The plaintiffs here seek to communicate lawful prices in a manner that bears no relation to illegal activity. See Central Hudson, 447 U.S. at 569. The State has not introduced any evidence to support its asserted consumer-protection rationales. See Ibanez, 512 U.S. at 146. Moreover, those rationales for suppressing truthful speech are either unrelated to the State’s stated goals (e.g., stopping profiteering) or in conflict with them (e.g., informing consumers). Finally, ready alternatives exist that would be less 45 restrictive of speech and more effective in addressing the state’s supposed consum- er-protection aims. See Central Hudson, 447 U.S. at 569. For example, the state could cap price differences between cash and credit, enforce existing false-advertising laws, or adopt our narrower interpretation of § 518 and require only that mer- chants clearly disclose any added costs for paying with credit. If § 518 is interpreted to criminalize the plaintiffs’ intended speech, as the State suggests, it would be unconstitutional. Over the past three years, the Ninth and Eleventh Circuit Courts of Appeals have both invalidated materially identical laws under Central Hudson. See Italian Colors Rest. v. Becerra, 878 F.3d 1165 (9th Cir. 2018) (“We fail to see how a law that keeps truthful price information from cus- tomers increases the accuracy of information in the marketplace.”); Dana’s R.R. Supply v. Bondi, 807 F.3d 1235 (11th Cir. 2015) (“By holding out discounts as more equal than surcharges, Florida’s [law] overreaches to police speech well beyond the State’s constitutionally prescribed bailiwick.”). And after the Supreme Court reversed the Second Circuit in this case, it conspicuously denied review of the Eleventh Circuit’s opinion, allowing that decision to stand. See Bondi v. Dana’s R.R. Supply, 137 S. Ct. 1452 (2017). On the other side of the ledger, no court has explained how laws like § 518, as interpreted by the State, could satisfy Central Hudson. Such laws have been challenged in four states. They have been considered by 22 federal judges, includ- 46 ing eight Supreme Court Justices. No judge has suggested that these laws can pass muster, with the lone exception of a single conclusory sentence in an unpublished, since-reversed district court opinion. See Dana’s R.R. Supply v. Bondi, No. 14-cv-134, 2014 WL 11189176, at *2 (N.D. Fla. Sept. 2, 2014), rev’d by Dana’s R.R. Supply v. Bondi, 807 F.3d at 1235. Were the Second Circuit to disagree, the odds of further review and reversal would be quite high. In its certification order, the Second Circuit largely elided Central Hudson (just as it did in its earlier opinion, which the Supreme Court unanimously vacated). Only this time, instead of holding that the First Amendment does not apply, the court displayed considerable sympathy for the State’s Zauderer argument, which pictures § 518 as a disclosure requirement. See Expressions, 877 F.3d at 103–06. The Second Circuit’s reasoning on this score is curious, given that many Supreme Court Justices openly doubted the disclosure theory at oral argument—and given that the Supreme Court has already reversed the Second Circuit for failing to subject § 518 to First Amendment scrutiny. See supra at 26. Indeed, since the Second Circuit issued its certification order, the Supreme Court has reversed the Ninth Circuit for failing to properly evaluate a law under Zauderer. See Nat’l Inst. of Family & Life Advocates v. Becerra, 138 S. Ct. 2361, 2372 (2018). And as a general proposition, the Supreme Court is skeptical when states arrive late in litigation with new interpretations of their own laws: “For the State to 47 change its position is particularly troubling in a First Amendment case, where plaintiffs have a special interest in obtaining a prompt adjudication of their rights, despite potential ambiguities of state law.” Sorrell v. IMS Health Inc., 564 U.S. 552, 563 (2011) (citing Houston v. Hill, 482 U.S. 451, 467–68 (1987), and Zwickler v. Koota, 389 U.S. 241, 252 (1967)). There can thus be little doubt that construing § 518 as the State prefers would raise substantial constitutional questions regarding the scope and application of Zauderer. One such question would be whether Zauderer even applies. The Su- preme Court has recognized “material differences between disclosure requirements and outright prohibitions on speech.” Zauderer, 471 U.S. at 650. Interpreting § 518 as the State suggests, it still requires some awfully fancy footwork to describe the statute as anything other than a prohibition on certain ways of communicating prices. See § 518 (“(“[N]o seller . . . may . . .”); see also Expressions, 137 S. Ct. at 1152 (deeming it “clear that § 518 proscribes [the plaintiffs’] speech”); N.Y. CA2 Br. 35 (“The only thing that plaintiffs cannot say is that their prices include a credit-card surcharge.”). Justice Ginsburg cut to the chase at oral argument, asking the State’s lawyer, “Can you explain to me how it’s a disclosure requirement to suppress the actual cost of the credit card purchase?” Tr. 59. This question rested on a sound intuition. Laws upheld under Zauderer have been readily identifiable as disclosures; they did not “operate[] in effect” as disclo- 48 sure mandates through a Rube Goldberg-like series of interpretive contortions. State Br. 32. A law that prohibits all messages except one is not a disclosure re- quirement; it is instead a restriction that is all the more troubling for leaving only a single way to speak. See Tr. 38 (Justice Kagan observing that “this does not look like a disclosure requirement,” and then adding “shouldn’t the State be making clear that that’s what this is?”). But even if Zauderer does apply, the State will still face an uphill climb in justi- fying its purported disclosure mandate. The relevant distinction is between “$10 for cash, $10.20 for credit” and “$10, with $.20 added if you pay by credit.” As a matter of constitutional law, the State cannot command that merchants post the total credit card price in dollars-and-cents form unless the “possibility of deception” from other price listings is “self-evident” or is supported by record evidence. Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229, 251 (2010). But the State has offered no evidence at all. And the risk of deception posed by the plain- tiffs’ speech is hardly “self-evident.” If anything, as Chief Justice Roberts intimated at argument, the opposite is true. See Tr. 35 (“You’re saying . . . the American people are too dumb to understand that if you say $10 plus a 20-cent surcharge, they can’t figure out that that’s $10.20.”). Moreover, if the State is so concerned about consumers avoiding any math, and seeing the maximum price they’ll pay for products in dollars-and-cents form as 49 they stroll down store aisles, why doesn’t it require merchants to disclosure the total price for items—e.g., sales tax, shipping, and handling? This under-inclusiveness belies the State’s defense of § 518 as a safeguard against consumers doing elemen- tary arithmetic. See Tr. 50 (Justice Sotomayor: “[In] every State I have to figure out what that sales tax is and I’ve got to do the math in my own head.”). Finally, wholly apart from the federal constitutional issues described above, this Court must also consider the potential for conflict with New York’s own free speech protections. Article I, Section 8 of the New York Constitution assures the right to “freely speak, write and publish,” and prohibits uses of official authority that “restrain or abridge the liberty of speech or of the press.” These safeguards are “often broader than the minimum required by the [federal] First Amendment.” O’Neill v. Oakgrove Constr., Inc., 71 N.Y.2d 521, 529 n.3 (1988). And here, giving § 518 a broad reading would raise both state and federal constitutional concerns. To be clear, this Court need not decide any constitutional issues to answer the certified question (or a reformulated version of it). But this Court can account for “constitutional conflict” in deciding how to interpret § 518. See Davidson, 27 N.Y.3d at 1094. Because the State’s reading surely gives rise to “constitutional issues” that would be evaded under a narrower interpretation, the canon of consti- tutional avoidance supports reading § 518 as a prohibition on undisclosed surcharges. See Stephens, 28 N.Y.3d at 312. 50 2.! The rule of lenity The constitutional concerns in this case evoke not only principles of avoid- ance, but also presumptions of lenity. “[I]f two constructions of a criminal statute are plausible, the one more favorable to the defendant should be adopted in accordance with the rule of lenity.” Golb, 23 N.Y.3d at 468. Here, lenity points firmly in favor of a narrower reading of § 518. Notwithstanding ambiguous text, legislative history, and statutory purpose, the State would make it a crime to describe economically identical prices the wrong way, even when the “wrong” way of communicating a price is clear, accurate, and not misleading. This would criminalize the most effective way of communicating the hidden costs of credit cards. Contra Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 770 (1976). It would also create criminal liability where none is required by statute. Applying the rule of lenity is particularly appropriate in this case given § 518’s legislative history. This is not a provision over which the New York Legisla- ture carefully labored. To the contrary, it was rushed through the Legislature over thirty years ago as a temporary measure while Congress debated whether to renew relevant provisions of TILA. Hardly anybody commented on it. And apparently nobody deemed it necessary to address widely criticized, well-known ambiguities in the federal law from which § 518 was copied. Apart from a handful of prosecutions 51 in the late 1980s, § 518 then sat dormant for several decades, rendered moot by speech codes written into credit-card contracts. Section 518 has now emerged into relevance with embarrassingly little interpretive history, and with text that every- body recognizes as largely irrelevant to the scope of its criminal prohibition. Under these circumstances, giving § 518 a broader compass would collide di- rectly with political and constitutional principles underlying the rule of lenity. See Scalia & Garner, Reading Law: The Interpretation of Legal Texts 301 (2012) (“[A] fair system of laws requires precision in the definition of offenses and punishments. The less the courts insist on precision, the less the legislatures will take the trouble to provide it.”); see also United States v. Wiltberger, 18 U.S. (5 Wheat.) 76, 95 (1820) (Marshall, C.J.) (“The rule that penal laws are to be construed strictly . . . is found- ed on the tenderness of the law for the rights of individuals; and on the plain principle that the power of punishment is vested in the legislative, not in the judicial department.”). Rather than read § 518 in a manner that criminalizes more truthful speech— and that prohibits merchants from best communicating their view on the cost of credit—this Court should favor a narrow reading limited to undisclosed surcharges. That reading would respect principles of lenity and avoid undue, unintended censorship. See Reno v. Am. Civil Liberties Union, 521 U.S. 844, 872 (1997) (recogniz- 52 ing that “the severity of criminal sanctions may well cause speakers to remain silent rather than communicate even arguably unlawful words, ideas, and images”). C.! Under a correct interpretation of Section 518, the plaintiffs may advertise their prices as desired without violating state law. If the Court concludes that § 518 prohibits only undisclosed surcharges, this case can finally end. When they filed this suit in June 2013, the plaintiffs based their Article III standing and their theories of liability on the premise that § 518 forbids their desired price displays. Although that interpretation was reasonable in light of the State’s enforcement history and broad reading of § 518, and although federal courts accepted it as a likely guess about the meaning of state law, this Court alone has the power to declare what § 518 means. Rather than consign the parties to continued litigation over how the First Amendment applies in this context, the Court can clarify that § 518 doesn’t menace the plaintiffs with criminal liability. That clarification would offer welcome guidance to merchants throughout New York State. It would align § 518 with vital principles of statutory and constitutional interpretation. And it would ensure that this newly important statute does not chill speech as merchants seek to inform customers about the consequences of paying with credit—thus sparking a broader political dialogue about the distributive injustice of hidden swipe fees. 53 CONCLUSION For the foregoing reasons, this Court should reformulate the certified ques- tion—or answer it in the negative—and hold that § 518 prohibits only undisclosed surcharges. Respectfully submitted, /s/ Deepak Gupta DEEPAK GUPTA JOSHUA MATZ JONATHAN E. TAYLOR GUPTA WESSLER PLLC 1900 L Street NW, Suite 312 Washington, DC 20036 (202) 888-1741 deepak@guptawessler.com GARY FRIEDMAN FRIEDMAN LAW GROUP LLP 270 Lafayette Street New York, NY 10012 (212) 680-5150 August 9, 2018 Counsel for Plaintiffs-Respondents CERTIFICATE OF COMPLIANCE I hereby certify that this brief complies with the type-volume limitation of the New York Court of Appeals (22 N.Y.C.R.R.) § 500.13(c)(1) because it contains 13,046 words, according to the word-processing system used to prepare this brief. August 9, 2018 /s/ Deepak Gupta Deepak Gupta