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ORAL ARGUMENT SCHEDULED FOR APRIL 11, 2000
IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
Frank Taucher, et al., v.
Brooksley E. Born, et al.,
On Appeal from the United States District Court for the District of Columbia
BRIEF OF AMICUS CURIAE THE REPORTERS COMMITTEE FOR FREEDOM OF THE PRESS IN SUPPORT OF THE PLAINITFFS-APPELLEES
Gregg P. Leslie TABLE OF CONTENTS STATEMENT OF INTEREST OF AMICUS CURIAE I.The licensing scheme is an unconstitutional prior restraint. III.The public dissemination of information about commodities trading is not "commercial speech."
Cases Alexander v. United States, 509 U.S. 544 (1993) Bantam Books, Inc. v. Sullivan, 372 U.S. 58 (1963) Central Hudson Gas & Electric Corp. v. Public Serv. Comm'n, 447 U.S. 557 (1980) In re Petroleum Prods. Antitrust Litig., 680 F.2d 5 (2d Cir.), cert. denied sub nom. Arizona v. McGraw-Hill, Inc., 459 U.S. 909 (1982) In re Photo Marketing Ass'n Intl., 327 N.W.2d 515 (Mich. Ct. App. 1982) Lovell v. City of Griffin, 303 U.S. 444 (1938) *Lowe v. SEC, 472 U.S. 181 (1985) National Life Ins. Co. v. Phillips Publishing, Inc., 793 F. Supp. 627 (D. Md. 1992) Near v. Minnesota, 283 U.S. 697 (1931) *Nebraska Press Ass'n v. Stuart, 427 U.S. 539 (1976) Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations, 413 U.S. 376 (1973) Reuber v. Food Chem. News, Inc., 925 F.2d 703 (4th Cir.), cert. denied, 501 U.S. 1212 (1991) SEC v. Wall St. Publishing Institute, Inc., 851 F.2d 365 (D.C. Cir. 1988), cert. denied sub nom. Wall St. Publishing Inst., Inc. v. SEC, 489 U.S. 1066 (1989) Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546 (1975) State ex rel. Sports Management News, Inc. v. Nachtigal, 921 P.2d 1304 (Or. 1996) Staub v. Baxley, 355 U.S. 313 (1958) Valentine v. Chrestensen, 316 U.S. 52 (1942) Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748 (1976) 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 499 (1996) Statutes Commodity Exchange Act, 7 U.S.C. § 1 et seq. Investment Advisers Act of 1940, 15 U.S.C. § 80b-1 et seq. * Authorities upon which we chiefly rely are marked by asterisks.
STATEMENT OF INTEREST OF AMICUS CURIAE The Reporters Committee for Freedom of the Press is a voluntary, unincorporated association of working reporters and editors dedicated to defending the First Amendment and freedom of information interests of the news media and the public. For thirty years, the Reporters Committee has provided representation, legal guidance, and research in press freedoms litigation. This case does not affect only publishers and readers of newsletters concerning the commodities market. If this Court determines that the government can force publishers--under the threat of criminal prosecution--to register with a governmental agency before being allowed to publish, the ramifications to First Amendment rights will be felt by all publishers and journalists. The regulation is odious to First Amendment rights because it encroaches on protected speech and promotes self-censorship, which is inimical to the First Amendment and this country's commitment to robust, uncensored debate on matters of public concern. In the 17th century, British author John Milton published an influential essay entitled Appeal for the Liberty of Unlicensed Printers, which argued against a government having the power to license publishers. In the 18th century, the distribution of Thomas Paine's pamphlets helped inspire the American Revolution. The First Amendment freedom of press provision recognizes the power of Milton's arguments in favor of allowing publishers to distribute their materials without a government license and encompasses both the pamphlets of Thomas Paine and the newsletters of the plaintiffs in this case. Because the government now attempts to take away those hard-fought First Amendment freedoms, the Reporters Committee joins the plaintiffs in urging that this Court affirm the district court's judgment. This case involves the Commodity Futures Trading Commission's interpretation of portions of the Commodity Exchange Act. The CFTC is attempting to restrain publishers of nonpersonalized financial information from disseminating that information unless they submit to a government-imposed, prepublication registration scheme. Violators of the registration requirement are subject to civil and criminal sanctions for failure to register. The registration scheme is a prior restraint on the publishing of information about the sales of commodity futures, which is protected speech that is entitled to the highest level of First Amendment protection. The Commodity Exchange Act mandates that a "commodity trading advisor" must register with the Commodity Futures Trading Commission if he or she wants to make business use of interstate commerce, including the mail systems. 7 U.S.C. § 6m(1). The statute defines a "commodity trading advisor" as someone who advises people "either directly or through publications, writings, or electronic media" about commodity trading. 7 U.S.C. § 1a(5)(A). It excludes from its registration scheme only publishers of print or electronic data who enjoy "general and regular dissemination" and whose commodity trading information is "solely incidental to the conduct of their business or profession." 7 U.S.C. § 1a(5)(B)(iv), 1a(5)(C). Failure to register with the CFTC is a felony, punishable by five years of imprisonment and a fine of $500,000.00. 7 U.S.C. § 13(a)(5). Under the statute, the CFTC has broad discretion to grant or deny registration. 7 U.S.C. § 6(p) (stating that the CFTC can select "appropriate standards with regard to training, experience and such other qualification as the Commission finds necessary or desirable to insure the fitness of persons required to be registered"). The CFTC can revoke or suspend a publisher's registration. 7 U.S.C. § 6n(6)(A). The CFTC has attempted to enforce the statute by demanding registration of (a) the print publishers of nonpersonalized investment information, advice, and recommendations, (b) developers and distributors of computer software, and (c) internet publishers of nonpersonalized investment information, advice, and recommendations. The effect of the CFTC's attempted enforcement is twofold. First, it presents publishers with a dilemma: either register with the government and publish under the constant threat of having their license revoked in the future or refuse to register with the government and risk prosecution and imprisonment. Second, it presents specialized publishers with the aforementioned dilemma while exempting mainstream publishers such as the New York Times and Wall Street Journal from the regulatory scheme, even if the mainstream publishers print the same material as the specialized publishers and disseminate it to a larger audience. Onerous government regulations or threats of punishment for speaking are what render prior restraints on speech "the most serious and the least tolerable infringement on First Amendment rights." Specialized publishing entities possess the same First Amendment rights as their larger media counterparts, all of whom enjoy the right to be free from licensing schemes and other prior restraints on publication. A registration scheme like the one at issue here is no less objectionable--or violative of the First Amendment--because it is directed toward small publishers. I. The licensing scheme is an unconstitutional prior restraint. Prior restraints are government actions that "forbid speech activities." Alexander v. United States, 509 U.S. 544, 550 (1993) (holding that any judicial order restricting speech that is issued in advance of publication is a prior restraint). Licensing schemes like the one at issue here are reminiscent of the framework under which the prior restraint doctrine developed. See id. at 554 n.2 (observing that the precept of prior restraint has its roots in the 16th- and 17th- century English system of censorship, where all printing presses and printers were licensed by the government and nothing could lawfully be published without the prior approval of a government censor); see also Staub v. Baxley, 355 U.S. 313, 322 (1958) (defining a prior restraint as "requiring a permit or license [to engage in speech activities] which may be granted or withheld in the discretion of [an] official"). In 1985, the Supreme Court considered a newsletter publisher's First Amendment challenge to a provision of the Investment Advisers Act of 1940 that had required individuals who provided nonpersonalized investment advice to register with the Securities and Exchange Commission. See Lowe v. SEC, 472 U.S. 181 (1985) (citing Investment Advisers Act of 1940, 15 U.S.C. § 80b-1 et seq.). The Court unanimously found in favor of the newsletter publisher. Although a five-member majority decided the issue on statutory, rather than constitutional grounds, both the opinion of the Court and Justice White's concurrence noted that the registration component of the Investment Advisers Act created a framework for licensing speakers and therefore powerfully implicated the First Amendment. See Lowe, 472 U.S. at 205; Lowe, 472 U.S. at 229-30 (White, J., concurring). The majority quoted Chief Justice Hughes's 1938 description of the historical underpinnings of the First Amendment right to publish outside of the regulatory power of the government:
Lovell v. City of Griffin, 303 U.S. 444, 451 (1938) (citations omitted), quoted in Lowe, 472 U.S. at 205. Because the CFTC's implementation of the statute amounts to a prior restraint, the next step is to determine whether the prior restraint passes constitutional muster. Since 1931, the U.S. Supreme Court has stated repeatedly that government attempts to censor the media are presumed unconstitutional. See, e.g., Near v. Minnesota, 283 U.S. 697, 716 (1931); Bantam Books, Inc. v. Sullivan, 372 U.S. 58, 70 (1963) (stating that any prior restraint carries a "heavy presumption against its constitutional validity") (citations omitted). The Court has reiterated that it rarely would uphold an order to cease publishing or a statute that threatened punishment for publishing information, and it has articulated only one scenario when a prior restraint could be permissible--an order barring publication of the movement of troop ships during war time. See Near, 283 U.S. at 716. Accordingly, editorial decisions about publication of information the government deems sensitive are generally left solely to the discretion of media organizations. The Supreme Court has articulated a three-part test to determine the constitutionality of a prior restraint: Is the prior restraint necessary to protect a compelling governmental interest that outweighs the publisher's First Amendment free speech rights?; Would other measures likely mitigate the alleged effects of unrestrained speech?; and, Would the prior restraint effectively prevent the threatened danger? See Nebraska Press Ass'n v. Stuart, 427 U.S. 539, 562 (1976). Here, the CFTC did not satisfy the Nebraska Press Association test. It did not show the district court that the licensing scheme at issue here justifies burdening the plaintiffs' fundamental right to report on matters of public concern. It did not show the district court that other statutory provisions concerning fraud that do not require the licensing of publishers could not alleviate the perceived potential harm resulting from the unregulated freedom to publish. And it did not show the district court that enforcement of the prior restraint would alleviate the perceived potential problem of fraudulent speech, especially given that the statute does not apply to general-interest publishers (such as The New York Times and The Wall Street Journal) who are free to publish the same allegedly fraudulent speech without fear of the CFTC imposing a prior restraint on them. The First Amendment protects the right of all publishers to be free from prior restraints on publication. "The liberty of the press is not confined to newspapers and periodicals. . . . The press in its historic connotation comprehends every sort of publication which affords a vehicle of information and opinion." Lovell, 303 U.S. at 444 (striking down laws requiring a license for the distribution of printed matter). In Lowe, the Court's majority construed a provision excluding from a regulatory scheme "the publisher of any bona fide newspaper, news magazine or business or financial publication of general and regular circulation" as including the plaintiff's investment advice newsletter. Lowe, 472 U.S. at 204. The majority recognized, however, that the statute would have operated as a prior restraint if the newsletter had fallen outside of the statutory exception. See id. ("Congress, plainly sensitive to First Amendment concerns, wanted to make clear that it did not seek to regulate the press through the licensing of nonpersonalized publishing activities."). The three concurring justices found that Congress had not included the newsletters in the statutory exception and that the statute was therefore "a regulation of speech or of the press . . . [that] must survive the level of scrutiny demanded by the First Amendment." Lowe, 472 U.S. at 230 (White, J., concurring). The entire Lowe Court agreed that First Amendment protections apply with equal force to large media entities and small publications specializing in the dissemination of information about particular industries or markets, which is a conclusion to which numerous other courts that have considered the issue have come. See, e.g., Reuber v. Food Chem. News, Inc., 925 F.2d 703, 707 (4th Cir.) (finding that a newsletter on pesticides and toxic chemicals was entitled to constitutional protections as a member of the press), cert. denied, 501 U.S. 1212 (1991); In re Petroleum Prods. Antitrust Litig., 680 F.2d 5, 7-8 (2d Cir.) (holding that a newsletter dedicated exclusively to covering events in the petroleum industry was entitled to a First Amendment-based privilege against compelled third-party discovery), cert. denied sub nom. Arizona v. McGraw-Hill, Inc., 459 U.S. 909 (1982); National Life Ins. Co. v. Phillips Publishing, Inc., 793 F. Supp. 627, 648 (D. Md. 1992) (stating that a financial newsletter was entitled to a constitutional defense of absence of actual malice in a defamation case); State ex rel. Sports Management News, Inc. v. Nachtigal, 921 P.2d 1304, 1307-08 (Or. 1996) (holding that the publisher of a newsletter reporting on the sporting goods industry was entitled to a peremptory writ striking down a prior restraint on publication); In re Photo Marketing Ass'n Intl., 327 N.W.2d 515 (Mich. Ct. App. 1982) (finding that a First Amendment privilege against disclosure of confidential information applied to writers of technical news). Accordingly, disseminators of nonpersonalized financial information like the plaintiff publishers here are entitled to the same First Amendment protections as any other members of the press. This conclusion applies with added force to prior restraints, which constitute "the most serious and the least tolerable infringement on First Amendment rights." Nebraska Press, 427 U.S. at 559; see also Alexander, 509 U.S. at 554 ("[W]e have interpreted the First Amendment as providing greater protection from prior restraints than from subsequent punishments.") (citing Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 558-559 (1975)). III. The public dissemination of information about commodities trading is not “commercial speech.” Although in certain circumstances commercial speech may receive less First Amendment protection than noncommercial speech, the speech here is noncommercial speech that is entitled to the highest level of First Amendment protection. The category "commercial speech" is limited to statements that "are made only in the context of commercial transactions." Central Hudson Gas & Electric Corp. v. Public Serv. Comm'n, 447 U.S. 557, 563 n.5 (1980); see also 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 499 (1996) ("[T]he State's power to regulate commercial transactions justifies its concomitant power to regulate commercial speech that is 'linked inextricably' to those transactions.") (citations omitted); Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations, 413 U.S. 376, 385 (1973) (stating that commercial speech is that which does "no more than propose a commercial transaction") (citing Valentine v. Chrestensen, 316 U.S. 52 (1942)). The plaintiffs in the instant case comment upon and analyze commercial transactions but neither propose such transactions nor provide personalized financial services or advice to those who intend to engage in them. Their speech is thus entitled to full First Amendment protection. See SEC v. Wall St. Publishing Institute, Inc., 851 F.2d 365, 372 (D.C. Cir. 1988) ("[W]e do not see a clear fit between the commercial speech doctrine and the publications that the SEC here seeks to regulate."), cert. denied sub nom. Wall Street Publishing Inst., Inc. v. SEC, 489 U.S. 1066 (1989). Moreover, the "economic motivation" of speakers does not transform their statements "into commercial speech." National Life Ins., 793 F. Supp. at 645 (recognizing that promotional materials disseminated by a specialized financial newsletter do not constitute commercial speech). Therefore, the fact that plaintiffs sell their speech or advertise their publications does not alter the fact that their speech is afforded the highest level of First Amendment protection. See Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 761 (1976) ("[S]peech does not lose its First Amendment protection because money is spent to project it, as in a paid advertisement of one form or another.") (citations omitted). The Reporters Committee for Freedom of the Press urges this Court to affirm the district court's judgment. Respectfully submitted,
Gregg P. Leslie
Certificate of Service I certify that on January 7,2000, I served the foregoing Brief Amicus Curiae upon the following counsel of record, by causing to be deposited a true copy thereof in the United States mail, postage prepaid, in an envelope addressed to them:
C. Robert Paul
Scott Bullock
Gregg P. Leslie
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