Filed: Jul. 05, 1994
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals, Fifth Circuit. No. 93-3288. JOE CONTE TOYOTA, INC., Plaintiff-Appellant, v. LOUISIANA MOTOR VEHICLE COMMISSION, et al., Defendants-Appellees. July 5, 1994. Appeal from the United States District Court for the Eastern District of Louisiana. Before ALDISERT*, REYNALDO G. GARZA and DUHÉ, Circuit Judges. ALDISERT, Circuit Judge: This appeal by Joe Conte Toyota, Inc. from a district court judgment dismissing its suit against members of the Louisiana Motor Vehicle Commi
Summary: United States Court of Appeals, Fifth Circuit. No. 93-3288. JOE CONTE TOYOTA, INC., Plaintiff-Appellant, v. LOUISIANA MOTOR VEHICLE COMMISSION, et al., Defendants-Appellees. July 5, 1994. Appeal from the United States District Court for the Eastern District of Louisiana. Before ALDISERT*, REYNALDO G. GARZA and DUHÉ, Circuit Judges. ALDISERT, Circuit Judge: This appeal by Joe Conte Toyota, Inc. from a district court judgment dismissing its suit against members of the Louisiana Motor Vehicle Commis..
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United States Court of Appeals,
Fifth Circuit.
No. 93-3288.
JOE CONTE TOYOTA, INC., Plaintiff-Appellant,
v.
LOUISIANA MOTOR VEHICLE COMMISSION, et al., Defendants-Appellees.
July 5, 1994.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before ALDISERT*, REYNALDO G. GARZA and DUHÉ, Circuit Judges.
ALDISERT, Circuit Judge:
This appeal by Joe Conte Toyota, Inc. from a district court
judgment dismissing its suit against members of the Louisiana Motor
Vehicle Commission requires us to decide whether the court
correctly upheld the constitutionality of a state regulation
prohibiting any automobile advertisements which contain the term
"invoice" on the ground that the term is inherently misleading and,
therefore, beyond First Amendment protection. We uphold the
constitutionality of the regulation and we will affirm the
judgment.
Jurisdiction was proper in the trial court based on 28 U.S.C.
§ 1331. This court has jurisdiction under 28 U.S.C. § 1291.
Appeal was timely filed under Rule 4(a) of the Federal Rules of
Appellate Procedure.
I.
*
Circuit Judge of the Third Circuit, sitting by designation.
1
Section 20 of the Rules and Regulations promulgated by the
Commission prohibits the use of the term "invoice" in any
advertisement for the sale of a motor vehicle. La.Rev.Stat.Ann. §
32:1253(E). The regulations permit an automobile dealer to
advertise the actual proposed selling price of a car or an amount
above or below the "Manufacturer's Suggested Retail Price," the
standardized price set by the industry for any model car with the
same equipment. The asserted purpose of the regulation is to
eliminate misleading advertisements.
Appellant proposed to run the following advertisement in a
local newspaper offering automobiles for sale:
$49.00 OVER FACTORY INVOICE *
The advertisement copy included a disclaimer:
* Dealer invoice may not reflect actual dealer cost.
Appellant proposed an alternate disclaimer stating:
* Invoice price indicates amount dealer paid distributor for
car. Due to various factory rebates, holdbacks and
incentives, actual dealer cost is lower than invoice
price.
Challenging Section 20 of the Rules and Regulations, Joe Conte
Toyota filed a complaint in the district court seeking to enjoin
the members of the Motor Vehicle Commission from abridging its
right to free speech and seeking a declaratory judgment that the
term "invoice," as used in the proposed advertisement, is
constitutionally protected speech.
In dismissing the complaint, the district court concluded that
the term "invoice" as used in this context was inherently
misleading and, therefore, not entitled to First Amendment
2
protection.
The parties agree that the proposed advertisement is
commercial speech and that the Supreme Court has laid out a
blueprint for determining whether certain commercial speech is
entitled to First Amendment protection:
In commercial speech cases, then, a four-part analysis has
developed. At the outset, we must determine whether the
expression is protected by the First Amendment. For
commercial speech to come within that provision, it at least
must concern lawful activity and not be misleading. Next, we
ask whether the asserted governmental interest is substantial.
If both inquires yield positive answers, we must determine
whether the regulation directly advances the governmental
interest asserted, and whether it is not more extensive than
is necessary to serve that interest.
Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of New
York, 447 U.S. 557, 566,
100 S. Ct. 2343, 2351,
65 L. Ed. 2d 341
(1980).
Appellant contends that the district court erred in finding
the term "invoice" inherently misleading and, consequently, that it
erred in not considering the remaining prongs of the commercial
speech test. Had it conducted a full inquiry, Appellant contends,
the court would have concluded that a wholesale ban on the term
"invoice" was more extensive than necessary to serve the state's
substantial interest in protecting the public.
II.
In cases raising First Amendment issues, we must " "make an
independent examination of the whole record.' " New York Times Co.
v. Sullivan, 376 U.S. 254, 285,
84 S. Ct. 710, 728-29,
11 L. Ed. 2d
686 (1964) (quoting Edwards v. South Carolina,
372 U.S. 229, 235,
83 S. Ct. 680, 683,
9 L. Ed. 2d 697 (1963)). This examination
3
includes an independent review of the trier of fact's findings in
support of that judgment. See, e.g., N.A.A.C.P. v. Claiborne
Hardware Co., 458 U.S. 886,
102 S. Ct. 3409,
73 L. Ed. 2d 1215 (1982).
Close scrutiny by a reviewing court of certain factual findings is
necessary "in cases involving restrictions on the freedom of speech
protected by the First Amendment, particularly in those cases in
which it is contended that the communication in issue is within one
of the few classes of "unprotected' speech." Bose Corp. v.
Consumers Union of United States, Inc.,
466 U.S. 485, 503,
104
S. Ct. 1949, 1961,
80 L. Ed. 2d 502 (1984). "Independent appellate
review of such facts assures that the suppression of protected
speech—particularly unpopular or controversial speech—is not
insulated from close scrutiny by the straightforward application of
the clearly-erroneous rule. The rule thus reflects a special
solicitude for claims that the protections afforded by the First
Amendment have been unduly abridged." Planned Parenthood Ass'n v.
Chicago Transit Auth.,
767 F.2d 1225, 1229 (7th Cir.1985).
III.
We first must ascertain what is meant by the term "misleading"
as used by the Court in Central Hudson. We find initial guidance
in In re R.M.J., 455 U.S. 191, 203,
102 S. Ct. 929, 937,
71 L. Ed. 2d
64 (1982), a commercial speech case in which the Court recognized
different gradations of misleading commercial speech and their
effect on the Central Hudson analysis:
Truthful advertising related to lawful activities is entitled
to the protections of the First Amendment. But when the
particular content or method of the advertising suggests that
it is inherently misleading or when experience has proved that
4
in fact such advertising is subject to abuse, the States may
impose appropriate restrictions. Misleading advertising may
be prohibited entirely. But the States may not place an
absolute prohibition on certain types of potentially
misleading information ... if the information also may be
presented in a way that is not deceptive.
(emphasis added).
The Court in In re R.M.J. suggested that "inherently"
misleading advertising may be banned outright, but "potentially"
misleading advertising may not. In attempting to understand the
distinction, we derive additional guidance from a later commercial
speech case, Peel v. Attorney Disciplinary Commission, 496 U.S. 91,
110 S. Ct. 2281,
110 L. Ed. 2d 83 (1990).
Although there was no majority opinion in Peel, the opinions
of several justices shed some light on the hierarchy of misleading
commercial speech. Furthermore, the Court identified a third
category of misleading commercial speech, "actually misleading."
Id. (Stevens, J.).
Justice Stevens, in an opinion joined by Justice Brennan,
Justice Blackmun and Justice Kennedy, suggested that commercial
speech is "actually" misleading when there is evidence of
deception. Id. at 106, 110 S.Ct. at 1694. Justice Marshall agreed
that a statement is "actually" misleading when the record contains
evidence that recipients of commercial speech "actually ha[ve] been
misled by the statement."
Id. at 112, 110 S.Ct. at 1697 (Marshall,
J. and Brennan, J., concurring).
A statement is "inherently" misleading when, notwithstanding
a lack of evidence of actual deception in the record, "the
particular method by which the information is imparted to consumers
5
is inherently conducive to deception and coercion." Id. (Marshall,
J. and Brennan, J., concurring). Included is "commercial speech
that is devoid of intrinsic meaning."
Id. (Marshall, J. and
Brennan, J., concurring). In her dissent, Justice O'Connor added
that "inherently misleading" means "inherently likely to deceive
the public."
Id. at 121, 110 S.Ct. at 1702 (O'Connor, J.,
Rehnquist, C.J. and Scalia, J., dissenting). Citing In re R.M.J.,
Justice Marshall noted that states may prohibit actually or
inherently misleading commercial speech entirely.
Id. at 111, 110
S.Ct. at 1697 (Marshall, J. and Brennan, J., concurring).
From all of this we conclude that a statement is actually or
inherently misleading when it deceives or is inherently likely to
deceive.
IV.
Ample evidence in the record supports the conclusion that the
term "invoice" as used in the proposed advertisement at a minimum
is likely to deceive and is therefore inherently misleading.
Joe Conte, the principal of the corporate Appellant, testified
that many consumers mistakenly believed that the difference between
invoice price and the sale price constituted the dealer's profit.
Raymond Brandt, a car dealer with 10 years experience,
testified that "invoice" in relation to price has no fixed meaning
among car dealers and that "invoice" price varies over time and
from dealer to dealer.
Arthur Tait, a car dealer since 1951, testified that "$49.00
over invoice" gives no information that the consumer can use in
6
judging the price of a vehicle.
Even where the consumer is shown a manufacturer invoice, a
sample invoice from Joe Conte Toyota shows no less than four
different "invoice prices": "[A] base vehicle price at dealer's
cost of $14,190.00, a base vehicle price with accessories at
dealer's cost of $16,407.30, a total vehicle price with advertising
expense, inland freight and handling at dealer's cost of
$16,929.30, and a net dealer invoice amount of $16,860.00." Brief
for Appellee at 11.
In addition, we note that the main text of the proposed
advertisement used the term "factory invoice" and the disclaimer,
"dealer invoice." Appellant's alternative disclaimer introduced
still another expression, the "amount dealer paid distributor."
Thus, in the proposed advertisement, the invoices and amounts are
attributed to three different sources—the dealer, the factory and
the distributor. At best this is difficult for a reader to follow,
at worst it is unrelievedly confusing.
The district court concluded that Appellant's proposed
advertisement "conveys no useful information to the consumer." Joe
Conte Toyota, Inc. v. Benson, No. 92-0993, 1993 WL 114507 at *1
(E.D.La. April 6, 1993). It also found that:
Due to holdbacks, incentives, and rebates, the invoice amount
bears little relation to the dealer's true cost. To the
extent that the term "invoice" provides any information to the
consumer, it is misleading; its use can only be intended to
confuse the invoice amount with the dealer's actual cost.
Plaintiff in effect concedes this when it offers to explain in
its proposed ads that the term "invoice" does not mean what it
appears to mean.
Id. The court concluded that, because use of the word "invoice" is
7
"calculated to confuse the consumer," it is "inherently misleading
and not entitled to protection under the First Amendment.
Accordingly, the state may constitutionally ban its use by
plaintiff in plaintiff's advertising." Id. (footnote omitted).
V.
The Supreme Court of New Jersey is currently the only
appellate court to address the constitutionality of a prohibition
of the term "invoice" in automobile advertising. The New Jersey
Court held that the terms "dealer invoice" and "invoice" in
automobile advertisements were misleading and beyond First
Amendment protection. Barry v. Arrow Pontiac, Inc., 100 N.J. 57,
494 A.2d 804 (1985). The Court held:
[T]he term "dealer invoice" has no fixed, ascertainable
meaning to the average consumer.... [T]he cost as advertised
is not the ultimate cost of the automobile to the dealer. In
the context of the sale of new automobiles, we find that the
terms "cost," "inventory," and "invoice" are equally
amorphous, and hence equally misleading to the public....
[I]t is important that consumers be protected from
misleading information.... Hence we conclude that the term
"dealer invoice," ... comes within the scope and intendment of
that regulation and the Act and that the advertising is
misleading and deceptive to the consuming public.
Inasmuch as we find the advertisement to be misleading,
we hold that the regulation does not infringe upon
[advertiser's] First Amendment right to engage in commercial
speech.
Id. at 71-72, 494 A.2d 804.
We are persuaded by the reasoning of the New Jersey Supreme
Court.1 We are satisfied that the proposed advertising copy with
1
Appellant attempts to distinguish Barry and argues that
"the advertisement at issue in Barry contained absolutely no
disclaimer or explanatory language. Here, Conte proposed clearly
8
the suggested alternative disclaimers is inherently misleading.
Because there is ample evidence on the record to support the
district court's finding that use of the word "invoice" in
automobile advertisement is inherently misleading, its conclusion
that the commercial speech in question fell beyond First Amendment
protection was not in error. Consequently, there was no need for
the court to consider the remaining prongs of the Central Hudson
test.
VI.
The judgment of the district court is AFFIRMED.
worded disclaimers." Brief for Appellant at 9. Not only is this
disclaimer argument of questionable relevance, but Appellant's
statement in its brief is not supported by the record in Barry.
As the dissent in a lower court decision noted, Barry v. Arrow
Pontiac, Inc., 193 N.J.Super. 613, 626, 475 A.2d 632 (1984)
(Botter, J., dissenting), and as the New Jersey Supreme Court
confirmed,
Barry, 100 N.J. at 77,
494 A.2d 804 (Clifford, J. and
Stein, J., dissenting):
It is advantageous for buyers to know at least the
amount of the dealer's invoice price. If the fear is
that they will not avail themselves of information in
the public domain, namely, that dealer invoice price
does not mean actual cost, a simple remedy can be
supplied by tailoring the regulation to meet this need.
It is worth repeating that the invoice in evidence
contains this notice to prospective buyers.
(emphasis added).
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