JERRY BEEMAN et al., Plaintiffs and Respondents, v. ANTHEM PRESCRIPTION MANAGEMENT, LLC, et al., Defendants and Appellants. JERRY BEEMAN et al., Plaintiffs and Respondents, v. TDI MANAGED CARE SERVICES, INC., et al., Defendants and Appellants.
No. S203124
Supreme Court of California
Dec. 19, 2013
329, 330, 331, 332, 333, 334, 335, 336, 337, 338, 339, 340, 341, 342, 343, 344, 345, 346, 347, 348
Morrison & Foerster, Shirley M. Hufstedler and Benjamin J. Fox for Defendant and Appellant Argus Health Systems, Inc.
Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., Gail E. Lees, Christopher Chorba, Blaine H. Evanson; Husch Blackwell, Thomas M. Dee and Christopher A. Smith for Defendant and Appellant Express Scripts, Inc.
Morgan, Lewis & Bockius, Thomas M. Peterson, Molly Moriarty Lane and Richard S. Odom for Defendant and Appellant Anthem-Prescription Management, LLC.
Steptoe & Johnson, Martin D. Schneiderman and Jason Levin for Defendants and Appellants AdvancePCS, AdvancePCS Health L.P., PharmaCare Management Services, Inc., and TDI Managed Care Services, Inc.
Holland & Knight, Richard T. Williams and Tara L. Cooper for Defendants and Appellants PharmaCare and TDI Managed Care Services.
Heller Ehrman, Richard S. Goldstein, John M. Landry; Orrick, Herrington Sutcliffe and Richard S. Goldstein for Defendant and Appellant Medco Health Solutions, Inc.
Troutman Sanders, C. LeeAnn McCurry; Musick, Peeler & Garrett and Kent A. Halkett for Defendant and Appellant Benescript Services, Inc.
Pillsbury Winthrop Shaw Pittman, Thomas N. Makris and Brian D. Martin for Defendant and Appellant First Health Services Corp.
Snell & Wilmer and Sean M. Sherlock for Defendant and Appellant Restat, LLC.
Reed Smith, Kurt C. Peterson, Margaret M. Grignon, Kenneth N. Smersfelt, Judith E. Posner and Brett L. McClure for Defendant and Appellant Tmesys, Inc.
Sonnenschein Nath & Rosenthal, David S. Alverson, Stephen J. O‘Brien, Rachel M. Milazzo; SNR Denton, Stephen J. O‘Brien and Rachel M. Milazzo for Defendant and Appellant Cardinal Health MPB, Inc.
Hogan & Hartson, Hogan Lovells US and Neil R. O‘Hanlon for Defendant and Appellant Mede America Corporation.
Dykema Gossett, J. Kevin Snyder and Vivian I. Kim for Defendant and Appellant Prime Therapeutics.
Kirtland & Packard and Robert A. Muhlbach for Defendant and Appellant RX Solutions, Inc.
McDermott, Will & Emery, Robert Mallory and Matthew Oster for Defendant and Appellant WHP Health Initiatives.
Deborah J. La Fetra and Lana Harfoush for Pacific Legal Foundation as Amicus Curiae on behalf of Defendants and Appellants.
The Consumer Law Group, Alan M. Mansfield; Peitzman Weg and Michael A. Bowse for Plaintiffs and Respondents.
Seth E. Mermin, Thomas Bennigson and Timothy Sun for Consumer Action, Consumers for Auto Reliability and Safety, Public Health Law Center, Inc., and Public Good Law Center as Amici Curiae on behalf of Plaintiffs and Respondents.
OPINION
LIU, J.—We granted a request from the United States Court of Appeals for the Ninth Circuit, sitting en banc, to address the following issue of state law
As explained herein, we hold that
I.
In the panel decision now being reviewed en banc, the Ninth Circuit provided the following description of the parties to this litigation: “Plaintiffs own five independent retail pharmacies licensed in California. Defendants are current or former pharmacy benefit managers (‘PBMs‘). They ‘contract with third-party payors or health plan administrators such as insurers, HMOS, governmental entities, and employer groups to facilitate cost-effective delivery of prescription drugs to health plan members or other persons to whom the third-party payors provide prescription drug benefits.’ PBMs assist in the ‘processing of prepaid or insured prescription drug benefit claims submitted by a licensed California pharmacy or patron thereof.’ In other words, PBMs act as intermediaries between pharmacies and third-party payors such as health insurance companies. Pursuant to this role, PBMs may create networks of retail pharmacies that agree to accept certain reimbursement rates when they fill prescriptions for health plan members. According to Defendants, network reimbursements ‘generally are lower than what pharmacies would charge uninsured, cash-paying customers.‘” (Jerry Beeman and Pharmacy Services, Inc. v. Anthem Prescription Management (9th Cir. 2011) 652 F.3d 1085, 1090 (Beeman II).)
Section 2527, subdivision (c) requires prescription drug claims processors to “conduct[] or obtain[] the results of a study or studies which identifies the fees, separate from ingredient costs, of all, or of a statistically significant sample, of California pharmacies, for pharmaceutical dispensing services to private consumers. The study or studies shall meet reasonable professional standards of the statistical profession. The determination of the pharmacy‘s fee made for purposes of the study or studies shall be computed by reviewing a sample of the pharmacy‘s usual charges for a random or other representative sample of commonly prescribed drug products, subtracting the average wholesale price of drug ingredients, and averaging the resulting fees by dividing the aggregate of the fees by the number of prescriptions reviewed. A study report shall include a preface, an explanatory summary of the results and findings including a comparison of the fees of California pharmacies by setting forth the mean fee and standard deviation, the range of fees and fee percentiles (10th, 20th, 30th, 40th, 50th, 60th, 70th, 80th, 90th). This study or these studies shall be conducted or obtained no less often than every 24 months.”
Section 2527, subdivision (d) requires prescription drug claims processors to send the studies to their clients: “The study report or reports obtained pursuant to subdivision (c) shall be transmitted by certified mail by each prescription drug claims processor to the chief executive officer or designee, of each client for whom it performs claims processing services. Consistent with subdivision (c), the processor shall transmit the study or studies to clients no less often than every 24 months. [¶] Nothing in this section shall be construed to require a prescription drug claims processor to transmit to its clients more than two studies meeting the requirements of subdivision (c) during any such 24-month period. [¶] Effective January 1, 1986, a claims processor may comply with subdivision (c) and this subdivision, in the event
Section 2528 provides for civil enforcement of section 2527: “A violation of Section 2527 may result only in imposition of a civil remedy, which includes, but is not limited to, imposition of statutory damages of not less than one thousand dollars ($1,000) or more than ten thousand dollars ($10,000) depending on the severity or gravity of the violation, plus reasonable attorney‘s fees and costs, declaratory and injunctive relief, and any other relief which the court deems proper. Any owner of a licensed California pharmacy shall have standing to bring an action seeking a civil remedy pursuant to this section so long as his or her pharmacy has a contractual relationship with, or renders pharmaceutical services to, a beneficiary of a client of the prescription drug claims processor, against whom the action is brought provided that no such action may be commenced by the owner unless he or she has notified the processor in writing as to the nature of the alleged violation and the processor fails to remedy the violation within 30 days from the receipt of the notice or fails to undertake steps to remedy the violation within that period and complete the steps promptly thereafter.”
Sections 2527 and 2528 were enacted in 1982. (Stats. 1982, ch. 296, § 1, pp. 936–938; Assem. Bill No. 2044 (1981–1982 Reg. Sess.) (Assembly Bill 2044).) The bill was sponsored by the California Pharmacists Association in an effort to increase the rate of reimbursement by third party payors. (Assem. Com. on Finance, Insurance & Commerce, Analysis of Assem. Bill No. 2044 (1981–1982 Reg. Sess.) for hearing on May 12, 1981, p. 6 (Bill Analysis).) Assembly Bill 2044 was prompted not only by a concern with the reimbursement rates to pharmacists (see Bill Analysis, at pp. 1–2) but also by the United States Supreme Court‘s 1979 decision holding that the federal antitrust exemption for the “business of insurance,” where regulated by state law, does not extend to contracts between insurers and pharmacies (Group Life & Health Ins. Co. v. Royal Drug Co. (1979) 440 U.S. 205 [59 L.Ed.2d 261, 99 S.Ct. 1067]; see Bill Analysis, at p. 5). As a result of that decision, pharmacists were unable to collectively bargain for fees or collectively refuse to participate in third party payment programs. (Bill Analysis, at pp. 5, 7.)
As introduced, Assembly Bill 2044 would have imposed specific prices on prescription drug claims processors by requiring nongovernmental third party payors to reimburse pharmacies for services rendered to group plan members at no less than the “usual charges of the pharmacy for the same or similar services to private consumers not covered by a group plan.” (Bill Analysis, supra, at
After failing to make it out of committee, Assembly Bill 2044 was amended to replace the minimum-reimbursement requirements with the current requirement that prescription drug claims processors conduct or obtain, and transmit to their clients, studies identifying the prevailing fees of California pharmacies for pharmaceutical dispensing services. (Assem. Bill 2044, as amended Jan. 18, 1982.) These changes were proposed by the original bill sponsor, the California Pharmacists Association. (See John H. Simons, Cal. Pharmacists Association, mem., Dec. 22, 1981, in Assem. Com. on Finance, Insurance & Commerce bill file.) As the bill‘s author explained in a letter to the Governor: “An interim hearing of the Assembly Finance, Insurance and Commerce Committee last November established that because of antitrust constraints, pharmacists are unable to negotiate directly with the underwriters or processors. And neither the underwriters or processors conduct statistical analyses of pharmacy pricing levels prior to adopting a reimbursement policy. [¶] These findings caused me to amend [Assembly Bill] 2044 to include essentially the provisions that are now before you . . . . [¶] I am hopeful that the legislation will serve to break the reimbursement logjam that has temporarily strained relationships between pharmacists, underwriters and claims processors.” (Assemblymember Bill Lancaster, letter to Governor, June 14, 1982, Governor‘s chaptered bill files.) The Department of Insurance offered this analysis of the enrolled bill: “[T]he bill is significantly limited in scope . . . . [¶] We point out that the bill is fairly innocuous in its impact, since it merely requires a study to be made and distributed to clients, and does not require any action to be taken based on the study. Nevertheless, it may help identify areas for cost-containment in the future.” (Dept. of Ins., Enrolled Bill Rep. on Assem. Bill No. 2044 (1981–1982 Reg. Sess.) p. 2.)
Although section 2528 provides for private enforcement of section 2527, it does not appear that the statute prompted any litigation until 2002, when plaintiffs initiated a series of suits in federal and state court. In its request for this court‘s review, the Ninth Circuit, sitting en banc, provided this account: “Plaintiffs filed class action complaints against defendant prescription drug claims processors in the Central District of California in 2002 and 2004 (the
“In the Beeman cases, the Ninth Circuit panel concluded that Plaintiffs had standing, reversed the district court and remanded for further proceedings. See Beeman v. TDI Managed Care [Services, Inc. (2006)] 449 F.3d 1035, 1037 . . . . On remand, Defendants moved for judgment on the pleadings, arguing that section 2527 unconstitutionally compels speech in violation of both the United States and California Constitutions. Defendants based their constitutional arguments on the decisions in Bradley, ARP [Pharmacy Services], and A.A.M. [Health Group, Inc. v. Argus Health Systems, Inc. (Feb. 28, 2007, B183468) [nonpub. opn.]]. Each of those California Court of Appeal decisions holds the reporting requirement of section 2527 unconstitutional under
“The majority of a three-judge panel of this court also declined to follow the intermediate California court decisions striking down section 2527 as unconstitutional under California‘s free speech clause. Instead, it independently assessed the constitutionality of the statute under First Amendment principles, reasoning that the California Supreme Court would decide the state constitutional question ‘by relying, primarily, if not exclusively, on First Amendment precedent.’ Beeman [II, supra], 652 F.3d at 1094. The majority identified two critical errors in the Court of Appeal decisions that it was convinced the California Supreme Court would not make: (1) giving insufficient weight to Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47 [164 L.Ed.2d 156, 126 S.Ct. 1297] (2006) . . . and (2) misinterpreting Riley v. National Federation of the Blind of North Carolina, Inc., 487 U.S. 781 [101 L.Ed.2d 669, 108 S.Ct. 2667] (1988).
The Ninth Circuit explained the need for guidance from this court as follows: “The outcome of this appeal is dictated by the scope of the free speech clause of the California Constitution as applied to section 2527. This constitutional question is critical to California‘s interest in consistent enforcement and interpretation of its constitution and laws in both state and federal courts. It is only because the panel‘s Beeman [II] decision has been withdrawn that the result that section 2527 is enforceable in federal, but not state, courts has been avoided. The majority of the three judge panel acknowledged that this situation, if left in place, would lead to forum shopping and the inconsistent enforcement of state law. [(See Erie R. Co. v. Tompkins (1938) 304 U.S. 64, 74–78 [82 L.Ed. 1188, 58 S.Ct. 817].)] Without the California Supreme Court‘s examination of this question, the risk remains that the en banc court would follow the lead of the panel majority to the same end. If, of course, the California Supreme Court itself were to agree with the panel majority, then it too would conclude that the statute is constitutional, and its decision would control in California state and federal courts. The conflicting views of the law in the panel opinion illustrate the importance of this question in the context of (1) whether our court is bound to follow the precedent of ARP Pharmacy [Services], and (2) to what degree, if any, federal First Amendment precedent affects the constitutionality of section 2527 under California‘s free speech clause.” (Beeman III, supra, 689 F.3d at p. 1007.)
We granted review in order to resolve this question of state constitutional law.
II.
The free speech guarantee of the California Constitution provides: “Every person may freely speak, write and publish his or her sentiments on all subjects, being responsible for the abuse of this right. A law may not restrain or abridge liberty of speech or press.” (
Applying this approach here, we examine the constitutionality of section 2527 by disentangling two questions: Does the statute‘s requirement that prescription drug claims processors transmit information on pharmacy fees to their clients implicate the right to freedom of speech under the California Constitution? If so, what level of judicial scrutiny applies to section 2527‘s speech requirement? We address the first question in this part and, answering it in the affirmative, turn to the second question in part III. below.
As noted, section 2527 requires prescription drug claims processors to conduct or obtain, and to transmit to their clients, the results of studies identifying the fees charged by California pharmacies to private customers. The information at issue—a “study report” that includes “a preface, an explanatory summary of the results and findings” that provide various statistics comparing pharmacy fees (
The text of California‘s free speech guarantee makes clear that the freedom to speak extends to “all subjects.” (
Further, it is well established that freedom of speech under article I includes both the right to speak and the right to refrain from speaking. “Article I‘s right to freedom of speech, like the First Amendment‘s, is implicated in speaking itself. Because speech results from what a speaker chooses to say and what he chooses not to say, the right in question comprises both a right to speak freely and also a right to refrain from doing so at all, and is therefore put at risk both by prohibiting a speaker from saying what he otherwise would say and also by compelling him to say what he otherwise would not say.” (Gerawan I, supra, 24 Cal.4th at p. 491.) In Gerawan I, we observed that when article I was originally adopted in 1849, “the prevailing political, legal, and social culture was that of Jacksonian democracy,” a culture that valued “equality and open opportunity, economic individualism, and wide and unrestrained commercial speech.” (Gerawan I, at p. 495.) Informed by article I‘s text and the historical context of its adoption, we held—in a departure from then controlling First Amendment precedent (Gerawan I, at pp. 497–509 [discussing Glickman v. Wileman Brothers & Elliott, Inc. (1997) 521 U.S. 457 [138 L.Ed.2d 585, 117 S.Ct. 2130] (Glickman)])—that a government order requiring a plum grower to fund generic advertising about plums implicates (but does not necessarily violate) the right to freedom of speech under
This understanding draws further support from principles articulated by the United States Supreme Court in interpreting “freedom of speech” under the First Amendment. The high court precedent involving speech that most closely approximates the factual information at issue in section 2527 is Sorrell v. IMS Health Inc. (2011) 564 U.S. 552 [180 L.Ed.2d 544, 131 S.Ct. 2653] (Sorrell). There, the high court considered a First Amendment challenge to a Vermont law “restrict[ing] the sale, disclosure, and use of pharmacy records that reveal the prescribing practices of individual doctors.” (564 U.S. at p. 557.) In discussing whether the “prescriber-identifying information” should be characterized as “a mere ‘commodity’ or as protected speech, the high court noted the general rule that “the creation and dissemination of information are speech within the meaning of the First Amendment.” (Id. at pp. 570–571.) The high court then said: “Facts, after all, are the beginning
In support of its suggestion that factual information qualifies as protected speech, the high court in Sorrell cited Rubin v. Coors Brewing Co. (1995) 514 U.S. 476 [131 L.Ed.2d 532, 115 S.Ct. 1585] (Rubin), which invalidated a federal regulation banning disclosure of alcohol content on beer labels. (See Sorrell, supra, 564 U.S. at p. 570.) In Rubin, there was no dispute that the brewing company sought “to disclose only truthful, verifiable, and nonmisleading factual information about alcohol content on its beer labels.” (Rubin, at p. 483.) The high court concluded that the factual information about alcohol content was protected commercial speech and that restrictions on such speech require substantial justification, which the government in that case failed to provide. (Id. at pp. 481–486.)
The Ninth Circuit panel here recognized that the government “may not prohibit speakers from disseminating facts” but determined that it is “quite different” for the government to compel factual speech. (Beeman II, supra, 652 F.3d at p. 1100, fn. 14.) Citing Rumsfeld v. Forum for Academic and Institutional Rights, Inc., supra, 547 U.S. 47 (FAIR) and Riley v. National Federation of Blind, supra, 487 U.S. 781 (Riley), the Ninth Circuit panel concluded that “not all fact-based disclosure requirements are subject to First Amendment scrutiny. Instead, such requirements implicate the First Amendment only if they affect the content of the message or speech by forcing the speaker to endorse a particular viewpoint or by chilling or burdening a message that the speaker would otherwise choose to make.” (Beeman II, at pp. 1099–1100, fn. omitted.) Respectfully, we do not believe FAIR or Riley supports the Ninth Circuit panel‘s conclusion that the reporting requirements of section 2527 “are not subject to any form of First Amendment scrutiny.” (Beeman II, at p. 1106.)
FAIR rejected a First Amendment challenge by various law schools to the 1996 Solomon Amendment‘s requirement that institutions of higher education, as a condition of receiving federal funds, provide military recruiters the same access provided to other recruiters. (
In rejecting the law schools’ compelled speech claim, FAIR did not hold that compelled statements of fact fall outside the ambit of First Amendment protection. To the contrary, the high court said that “these compelled statements of fact (‘The U.S. Army recruiter will meet interested students in Room 123 at 11 a.m.‘), like compelled statements of opinion, are subject to First Amendment scrutiny.” (FAIR, supra, 547 U.S. at p. 62, italics added.) FAIR concluded that such compelled speech withstands First Amendment scrutiny because it does not force a school to speak the government‘s message or otherwise affect a school‘s ability to express its own viewpoints (547 U.S. at pp. 62–65) and because the speech is “only ‘compelled’ if, and to the extent, the school provides such speech for other recruiters” (id. at p. 62).
In Riley, the high court invalidated a North Carolina statute that, among other things, required professional fundraisers to disclose, “‘[d]uring any solicitation and before requesting or appealing either directly or indirectly for any charitable contribution,‘” the percentage of charitable collections actually remitted to charities over the past 12 months. (Riley, supra, 487 U.S. at p. 786, fn. 3, quoting N.C. Gen. Stat. § 131C-16.1.) In describing this requirement, the high court said: “Mandating speech that a speaker would not otherwise make necessarily alters the content of the speech. We therefore consider the Act as a content-based regulation of speech.” (Riley, at p. 795.) The high court then addressed the parties’ dispute as to whether the disclosure requirement should be analyzed under the intermediate scrutiny standard applicable to commercial speech or under the strict scrutiny standard applicable to fully protected expression. In that discussion, the high court said that “even assuming, without deciding, that such speech in the abstract is indeed merely ‘commercial,’ we do not believe that the speech retains its commercial character when it is inextricably intertwined with otherwise fully protected speech,” i.e., charitable solicitations. (Id. at p. 796.) Accordingly, Riley
Contrary to the Ninth Circuit panel‘s suggestion (Beeman II, supra, 652 F.3d at pp. 1098–1099), Riley did not hold that the compelled factual disclosure at issue was subject to First Amendment scrutiny only because it was “inextricably intertwined with otherwise fully protected speech,” i.e., charitable solicitations. (Riley, supra, 487 U.S. at p. 796.) The high court in Riley made the latter observation in the course of addressing what level of First Amendment scrutiny should apply to the disclosure requirement, not whether First Amendment scrutiny should apply at all. Before addressing what level of scrutiny should apply, the high court had already concluded that the disclosure requirement was “a content-based regulation of speech” because “[m]andating speech that a speaker would not otherwise make necessarily alters the content of the speech.” (Riley, at p. 795.)
The high court‘s analyses in the cases discussed above support the conclusion that the principle of freedom of speech protects “‘[e]ven dry information, devoid of advocacy, political relevance, or artistic expression. . . .’ [Citation.]” (DVD Copy Control Assn., Inc. v. Bunner (2003) 31 Cal.4th 864, 876 [4 Cal.Rptr.3d 69, 75 P.3d 1].) The express compass of California‘s free speech clause—“Every person may freely speak, write and publish his or her sentiments on all subjects . . . .” (
III.
A determination that a statute “implicates [the] right to freedom of speech under article I does not mean that it violates such right.” (Gerawan I, supra, 24 Cal.4th at p. 517.) We now consider what level of judicial scrutiny applies to section 2527‘s requirement that prescription drug claims processors transmit to their clients a biennial study report on pharmacy fees.
The free speech jurisprudence of our court and the United States Supreme Court reveals no simple formula for deciding what level of scrutiny to apply to a particular speech regulation. Instead, the case law has distinguished carefully among various contexts in which compelled speech occurs and has sensitively considered the effects of compelled speech on both speakers and their audiences. (See Riley, supra, 487 U.S. at p. 796 [“Our lodestars in deciding what level of scrutiny to apply to a compelled statement must be the nature of the speech taken as a whole and the effect of the compelled
A.
The leading cases on compelled speech reflect the principle that no law may require a speaker to adopt a political or ideological viewpoint imposed by government. In Board of Education v. Barnette, supra, 319 U.S. 624 (Barnette), the high court struck down a West Virginia law requiring children in public schools to salute the flag and recite the Pledge of Allegiance. The court explained that “the compulsory flag salute and pledge requires affirmation of a belief and an attitude of mind. . . . To sustain the compulsory flag salute we are required to say that a Bill of Rights which guards the individual‘s right to speak his own mind, left it open to public authorities to compel him to utter what is not in his mind.” (Id. at pp. 633–634.) Barnette famously said: “If there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein.” (Id. at p. 642.)
Three decades later, the high court in Wooley v. Maynard, supra, 430 U.S. 705 (Wooley) applied similar reasoning to invalidate a New Hampshire law prohibiting persons from covering up the state motto “Live Free or Die” on their car license plates. The appellees, who were Jehovah‘s Witnesses, claimed that the motto violated their moral and religious beliefs, and “New Hampshire‘s statute in effect require[d] that appellees use their private property as a ‘mobile billboard’ for the State‘s ideological message—or suffer a penalty. . . .” (Id. at p. 715.) Citing Barnette, the high court explained: “A system which secures the right to proselytize religious, political, and ideological causes must also guarantee the concomitant right to decline to foster such
And just recently, the high court in Agency for Int‘l. Development v. Alliance for Open Society Int‘l, Inc. (2013) 570 U.S. 205 [186 L.Ed.2d 398, 133 S.Ct. 2321] held unconstitutional a federal law requiring nongovernmental organizations, as a condition of receiving federal funds to combat HIV/AIDS, to have a policy explicitly opposing prostitution. Again citing Barnette, the high court said the law offends the First Amendment because it “requires [organizations] to pledge allegiance to the Government‘s policy of eradicating prostitution.” (Alliance for Open Society, at p. 218 [133 S.Ct. at p. 2332]; see id. at pp. 215–216 [133 S.Ct. at p. 2330] [the law “demand[s] that funding recipients adopt—as their own—the Government‘s view on an issue of public concern“].)
In addition to invalidating laws that require speakers to adopt or endorse the government‘s political or ideological message, the high court‘s compelled speech jurisprudence has struck down laws requiring a speaker to carry another person‘s message with which the speaker disagrees. The paradigmatic case is Miami Herald Publishing Co. v. Tornillo (1974) 418 U.S. 241 [41 L.Ed.2d 730, 94 S.Ct. 2831] (Tornillo), which invalidated a Florida statute requiring newspapers that criticize a political candidate to provide free and equal space for the candidate to respond. The high court explained that the statute unconstitutionally interfered with “the exercise of editorial control and judgment,” which includes “[t]he choice of material to go into a newspaper” and its “treatment of public issues and public officials—whether fair or unfair.” (Id. at p. 258.) Under the statute, a newspaper must “print that which it would not otherwise print” (id. at p. 256), or “editors might well conclude that the safe course is to avoid controversy” by refraining from criticizing political candidates in the first place (id. at p. 257). Either way, the statute undermined the ability of newspapers to advance their own political or electoral views. (Id. at pp. 255–257; see Turner Broadcasting System, Inc. v. FCC (1994) 512 U.S. 622, 640–641 [129 L.Ed.2d 497, 114 S.Ct. 2445] [“laws that single out the press, or certain elements thereof, for special treatment . . . are always subject to at least some degree of heightened First Amendment scrutiny“].)
In Pacific Gas & Elec. Co. v. Public Util. Comm‘n (1986) 475 U.S. 1 [89 L.Ed.2d 1, 106 S.Ct. 903] (PG&E), the high court struck down a California agency‘s order that required a utility company, in its billing envelopes, to include third party materials critical of the utility‘s views. The plurality opinion observed that the order “discriminates on the basis of the viewpoints of the selected speakers” (id. at p. 12 (plur. opn. of Powell, J.)) by
In addition to “true ‘compelled-speech’ cases, in which an individual is obliged personally to express a message he disagrees with,” the high court has applied similar reasoning to sustain First Amendment challenges in “‘compelled-subsidy’ cases, in which an individual is required by the government to subsidize a message he disagrees with, expressed by a private entity.” (Johanns v. Livestock Marketing Assn. (2005) 544 U.S. 550, 557 [161 L.Ed.2d 896, 125 S.Ct. 2055].) In United States v. United Foods, Inc. (2001) 533 U.S. 405 [150 L.Ed.2d 438, 121 S.Ct. 2334], the high court invalidated an assessment on mushroom producers that the Secretary of Agriculture imposed to fund generic advertisements promoting mushroom sales. By expressing “[t]he message . . . that mushrooms are worth consuming whether or not they are branded,” the generic advertising was at odds with “Respondent[‘s] [desire] to convey the message that its brand of mushrooms is superior to those grown by other producers.” (Id. at p. 411; see id. at pp. 410–411 [“First Amendment concerns apply here because of the requirement that producers subsidize speech with which they disagree.“].) Similarly, as noted, this court in Gerawan II held under the California free speech clause that intermediate scrutiny applied to a plum marketing order that compelled a plum producer with a distinctive brand to fund speech—again, generic advertising—with which it disagreed. (See Gerawan II, supra, 33 Cal.4th at p. 10 [plaintiff plum grower alleged that “it ‘disagrees’ with, and indeed ‘abhors,’ the generic advertising, otherwise undescribed, both on political and ideological grounds, as ‘socialistic’ and ‘collectivist,’ and also on commercial grounds,
The statute at issue in this case,
In attempting to analogize this case to the compelled speech precedents above, defendants argue that
Although defendants object to transmitting the study reports to their clients, they do not identify any disagreement with the study reports themselves. As noted,
Nor do defendants convincingly argue that
More importantly, even if pharmacists were to use the study reports to advance their own policy views on reimbursement rates, the objective data in the reports are not themselves reasonably construed as conveying a political position that reimbursement rates are too low. The study reports may reveal that pharmacy fees charged to private customers are typically higher than network reimbursement rates. But this fact, which is already known and undisputed by the parties, entails no particular view on whether reimbursement rates should be increased, decreased, or kept the same—an issue implicating broader questions of health care economics and the proper balance among policy objectives such as ensuring access and containing costs.
Nor do we believe that defendants’ transmission of the reports would cause their clients or anyone else to believe that defendants support the pharmacists’ policy views. Justice Corrigan notes that although defendants “may have no quarrel regarding the accuracy of the data required to be reported,” “they vehemently disagree that this data is at all relevant in determining proper reimbursement rates....” (Conc. & dis., post, at p. 377.) But
Defendants further contend, relying on Riley, that the same level of scrutiny applies to compelled statements of fact as to compelled statements of
Unlike the disclosure requirement at issue in Riley,
B.
Although
Just as we have consulted First Amendment doctrine to inform our determination of the boundary between commercial and noncommercial speech under article I (see Kasky, supra, 27 Cal.4th at pp. 959-962, 969), here we examine First Amendment case law to inform our determination of the level of scrutiny applicable to the compelled commercial speech in this case under article I. Although regulation of commercial speech is conventionally understood to trigger intermediate scrutiny under the First Amendment (Central Hudson, supra, 447 U.S. at p. 566), the United States Supreme Court has not automatically applied intermediate scrutiny to all regulations affecting commercial speech. This is perhaps unsurprising given the breadth and elasticity of what is commercial speech, as well as the diversity of regulations arising in the commercial setting. (See Ohralik, supra, 436 U.S. at p. 456 [commercial speech “occurs in an area traditionally subject to government regulation“].) As explained below, the principles that motivate the commercial speech doctrine lead us to conclude that
At the outset, we observe that the intermediate scrutiny standard for commercial speech arose in the context of restrictions on truthful, nonmisleading statements about products and services, and the high court has consistently applied intermediate scrutiny to prohibitions on such speech used for marketing or advertising. (See Va. Pharmacy Board v. Va. Consumer Council (1976) 425 U.S. 748, 761-770 (Virginia Pharmacy Board); Central Hudson, supra, 447 U.S. at pp. 563-566; 44 Liquormart, 517 U.S. at pp. 501-504; Lorillard Tobacco Co. v. Reilly (2001) 533 U.S. 525, 553-554; Sorrell, supra, 564 U.S. at pp. 563-566.) In stating the rationale for heightened scrutiny of laws restricting commercial speech, the high court has emphasized the importance of the “free flow of commercial information” (Virginia Pharmacy Board, at p. 765), “the informational function of advertising” (Central Hudson, at p. 563), and “consumer choice” (44 Liquormart, at p. 503). The commercial speech doctrine looks skeptically upon the paternalistic “assumption that the public will respond ‘irrationally’ to the truth.” (Ibid.; see Sorrell, at p. 577 [“the fear that
In evaluating regulations on commercial speech, the high court has distinguished between speech restrictions and compelled disclosures, and has adjusted its level of scrutiny accordingly. In Zauderer v. Office of Disciplinary Counsel (1985) 471 U.S. 626 (Zauderer), an Ohio attorney placed an advertisement in various newspapers offering to represent, on a contingent fee basis, women who had suffered injuries from using a contraceptive device. The Office of Disciplinary Counsel of the Supreme Court of Ohio filed a complaint against the attorney, alleging that the advertisement was deceptive and thus violated a state disciplinary rule because it failed to inform clients they would be liable for costs, as opposed to legal fees, even if their claims were unsuccessful. The attorney argued that Ohio‘s disciplinary rule violated the First Amendment by requiring him to include information in his advertisement that he did not wish to include. The high court disagreed, explaining that the attorney‘s arguments “overlook[ed] material differences between disclosure requirements and outright prohibitions on speech.” (Zauderer, 471 U.S. at p. 650.) “In requiring attorneys who advertise their willingness to represent clients on a contingent-fee basis to state that the client may have to bear certain expenses even if he loses,” the high court reasoned, “... Ohio has not attempted to prevent attorneys from conveying
Declining to apply either the strict scrutiny applicable to compelled political speech or the intermediate scrutiny applicable to prohibitions on commercial speech, the high court in Zauderer explained: “Ohio has not attempted to ‘prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein.’ [ (Barnette, supra, 319 U.S. at p. 642.) ] The State has attempted only to prescribe what shall be orthodox in commercial advertising, and its prescription has taken the form of a requirement that appellant include in his advertising purely factual and uncontroversial information about the terms under which his services will be available. Because the extension of First Amendment protection to commercial speech is justified principally by the value to consumers of the information such speech provides, see [ (Virginia Pharmacy Board, supra, 425 U.S. 748) ], appellant‘s constitutionally protected interest in not providing any particular factual information in his advertising is minimal. Thus, in virtually all our commercial speech decisions to date, we have emphasized that because disclosure requirements trench much more narrowly on an advertiser‘s interests than do flat prohibitions on speech, ‘warning[s] or disclaimer[s] might be appropriately required... in order to dissipate the possibility of consumer confusion or deception.’ ” (Zauderer, supra, 471 U.S. at p. 651.)
The Zauderer court concluded: “We do not suggest that disclosure requirements do not implicate the advertiser‘s First Amendment rights at all. We recognize that unjustified or unduly burdensome disclosure requirements might offend the First Amendment by chilling protected commercial speech. But we hold that an advertiser‘s rights are adequately protected as long as disclosure requirements are reasonably related to the State‘s interest in preventing deception of consumers.” (Zauderer, supra, 471 U.S. at p. 651.) Noting that “restraints on commercial speech” are subject to ” ‘least restrictive means’ analysis” under Central Hudson‘s intermediate scrutiny standard, the high court made clear that the level of scrutiny applicable to disclosure requirements is less rigorous: “we do not think it appropriate to strike down such requirements merely because other possible means by which the State might achieve its purposes can be hypothesized” or because a disclosure requirement “is ‘underinclusive‘—that is,... it does not get at all facets of the problem it is designed to ameliorate.” (Zauderer, at p. 652, fn. 14.) The Ohio disciplinary rule, the court held, “easily passes muster” under the rational basis standard. (Id. at p. 652.)
We find the reasoning above to be sound: Laws requiring a commercial speaker to make purely factual disclosures related to its business affairs, whether to prevent deception or simply to promote informational transparency, have a “purpose... consistent with the reasons for according constitutional protection to commercial speech.” (44 Liquormart, supra, 517 U.S. at p. 501.) Because such laws facilitate rather than impede the “free flow of commercial information” (Virginia Pharmacy Board, supra, 425 U.S. at p. 765), they do not warrant intermediate scrutiny. Instead, we hold that rational basis review is the proper standard for evaluating such laws under California‘s free speech clause.
C.
Justice Corrigan says we cite “no California case applying rational basis review to a law implicating free speech under our Constitution.” (Conc. & dis. opn., post, at p. 369.) But that simply reflects “[t]he absence, over many years, of free speech challenges” to the “hundreds of [California] statutory provisions and regulations... enacted or adopted in a great variety of contexts that require individuals or entities to ascertain and disclose factual information that the individual or entity might otherwise choose not to disclose.” (Conc. opn., post, at pp. 367, 366.) Apparently there is a first time for everything, including this novel claim under California‘s free speech clause.
Applying rational basis review, the Second Circuit held that the required labeling of mercury-containing products did not violate the First Amendment. “Vermont‘s interest in protecting human health and the environment from mercury poisoning is a legitimate and significant public goal,” the court held. (National Electrical, supra, 272 F.3d at p. 115.) Although the compelled disclosure “was not intended to prevent ‘consumer confusion or deception’ per se,” it was “rationally related to the state‘s goal of reducing mercury contamination” because it would increase consumer awareness of the need to properly dispose of mercury-containing products. (Ibid.) The court distinguished its prior holding in Internat. Dairy Foods Assn. v. Amestoy (2d Cir. 1996) 92 F.3d 67 (Amestoy), which applied intermediate scrutiny to a Vermont law that required labeling of products from cows treated with
The Second Circuit reaffirmed its reasoning in National Electrical eight years later in New York State Restaurant Assn. v. New York City Board of Health (2009) 556 F.3d 114, which rejected a First Amendment challenge to a city regulation requiring restaurants to post calorie content information on their menus. The court again held that rational basis review applies to factual disclosure requirements designed to inform consumers, whether or not also designed to prevent deception. (See 556 F.3d at pp. 132-133 [neither Zauderer nor subsequent authority limits rational basis review only to disclosures designed to prevent deception].)
The District of Columbia Circuit similarly applied rational basis review to uphold the disclosures required by
The plaintiff argued that “its inability to control what the Commission does with investment information divulged in the course of an application for confidential treatment or an exemption request [was] a form of compelled speech.” (Full Value, supra, 633 F.3d at p. 1108.) While acknowledging that “[t]he freedom of thought protected by the First Amendment against state action ‘includes both the right to speak freely and the right to refrain from speaking at all’ ” (ibid., quoting Wooley, supra, 430 U.S. at p. 714), the court concluded that the required disclosures did not raise serious constitutional concerns: “Here the Commission—not the public—is Full Value‘s only
The Ninth Circuit took a similar approach in upholding a federal Clean Water Act (
The Ninth Circuit disagreed: “We conclude that the purpose of the challenged provisions is legitimate and consistent with the regulatory goals of the overall scheme of the Clean Water Act, [citation], and does not offend the First Amendment. The State may not constitutionally require an individual to disseminate an ideological message, [citation], but requiring a provider of storm sewers that discharge into national waters to educate the public about the impacts of stormwater discharge on water bodies and to inform affected parties, including the public, about the hazards of improper waste disposal falls short of compelling such speech.” (Environmental Defense, supra, 344 F.3d at p. 849, fn. omitted.) Relying on Zauderer, the court contrasted the public education requirement with the compelled speech in Barnette and Wooley, and said that “[i]nforming the public about safe toxin disposal is non-ideological; it involves no ‘compelled recitation of a message’ and no ‘affirmation of belief.’ [Citation.]” (Environmental Defense, at pp. 849-850.) The court further observed that the rule did not “prohibit the MS4 from stating its own views about the proper means of managing toxic materials, or even about the [rule] itself. Nor is the MS4 prevented from identifying its dissemination of public information as required by federal law, or from making available federally produced informational materials on the subject and identifying them as such.” (Id. at p. 850.)
Another example is Pharmaceutical Care Management Assn. v. Rowe (1st Cir. 2005) 429 F.3d 294 (Rowe), where a national association of pharmacy
In a concurring opinion, Chief Judge Boudin said, “What is at stake here... is simply routine disclosure of economically significant information designed to forward ordinary regulatory purposes—in this case, protecting covered entities from questionable PBM business practices. There are literally thousands of similar regulations on the books—such as product labeling laws, environmental spill reporting, accident reports by common carriers, SEC reporting as to corporate losses and (most obviously) the requirement to file tax returns to government units who use the information to the obvious disadvantage of the taxpayer. [][] The idea that these thousands of routine regulations require an extensive First Amendment analysis is mistaken.” (Rowe, supra, 429 F.3d at p. 316 (conc. opn. of Boudin, C. J.).)
We find the authorities above persuasive. The same reasons that federal appellate courts have given for applying rational basis review under the First Amendment to laws like
Like
Defendants contend that
Justice Corrigan contends that “[w]hether one large, sophisticated corporate entity provides such information to a similarly sophisticated entity within the context of a private agreement should be a matter left to negotiation between them, just like any other provision of a contract between corporations. ... Simply put, the government has taken sides, resorting to compelled speech to promote its vision of what this private contract should look like.” (Conc. & dis. opn., post, at p. 376.) Justice Corrigan says this is “paternalism writ large” (id. at p. 378), even as she urges this court to erect a constitutional shield to protect sophisticated business entities from a state-mandated report that they are entirely free to ignore.
The reality is that
Our holding today does not “all but eviscerate the commercial speech protections of article I.” (Conc. & dis. opn., post, at p. 377.) Laws that restrict commercial speech remain subject to heightened scrutiny, as do laws that compel a commercial speaker to adopt, endorse, or subsidize a message or viewpoint with which it disagrees. (See Gerawan II, supra, 33 Cal.4th at p. 10.) Further, there is nothing ” ‘incongruous’ ” (conc. & dis. opn., post, at p. 371) about holding that
D.
Under rational basis review, a statute “comes to us bearing a strong presumption of validity.” (FCC v. Beach Communications, Inc. (1993) 508 U.S. 307, 314.) “So long as the challenged [regulation] ‘bear[s] some rational relationship to a conceivable legitimate state purpose’ [citations], it will pass muster; once we identify ‘plausible reasons’ for [the regulation] ‘our inquiry is at an end’ [citation].” (California Grocers Assn. v. City of Los Angeles (2011) 52 Cal.4th 177, 209.)
Defendants do not contend that
CONCLUSION
For the reasons above, we answer the Ninth Circuit‘s question as follows:
Kennard, J., Baxter, J., and Werdegar, J., concurred.
CANTIL-SAKAUYE, C. J., Concurring.--I concur fully in the majority opinion‘s conclusion that
In finding that
As the majority opinion recognizes, article I, section 2 provides in relevant part: “Every person may freely speak, write and publish his or her sentiments on all subjects, being responsible for the abuse of this right. A law may not restrain or abridge liberty of speech or press.” (
I acknowledge that there are unquestionably circumstances in which a statute that compels speech will implicate the protections of article I, section 2—for example, when a statute requires an individual to pledge allegiance to or express belief in a political, ideological, or philosophical position with which he or she disagrees, or when the compelled disclosure is so intertwined with protected speech that it is likely to chill such protected speech. In my view, however, it is not accurate to state that, as a general matter, article I, section 2 was intended, or should be interpreted, to afford a broad constitutional right to withhold information. There are other state constitutional provisions that are ordinarily associated with a right of nondisclosure—the privilege against self-incrimination and the right of privacy, for example—but it strains credulity to suggest that an individual who refuses to provide factual information when questioned at trial or at a legislative hearing or who declines to provide information required on a tax return or in order to obtain a permit is, by such refusal, exercising his or her right of free speech. As the earliest California cases applying the state constitutional free speech clause make clear, “[t]he purpose of this provision of the constitution was the abolishment of censorship...” (Dailey v. Superior Court (1896) 112 Cal. 94, 97; see In re Shortridge (1893) 99 Cal. 526, 533-535), not to establish a fundamental constitutional right to decline to provide information.
In the past, article I, section 2 has been interpreted expansively to protect the right to speak freely (see, e.g., Robins v. Pruneyard Shopping Center (1979) 23 Cal.3d 899, 908-911; Dailey v. Superior Court, supra, 112 Cal. at pp. 97-99), but the state free speech clause has not historically been understood or interpreted as affording a parallel broad constitutional right “not to speak” when an individual or entity is required by a statute or regulation to disclose factual information. Throughout California‘s history, hundreds of statutory provisions and regulations have been enacted or adopted in a great variety of contexts that require individuals or entities to ascertain and disclose factual information that the individual or entity might otherwise choose not to disclose. For example, disclosure of a significant amount of information is required whenever an individual or entity seeks to obtain a permit or license (see, e.g.,
This is not to say that there are no instances in which a statute that compels speech will implicate the interests that the state free speech clause is intended to protect and will therefore properly be analyzed under the principles generally applicable to other free speech claims. For example, a statute that requires an individual to express belief in an ideological or philosophical precept with which the individual disagrees (cf., e.g., Board of Education v. Barnette (1943) 319 U.S. 624, 631-642 [compulsory flag salute and pledge of allegiance]), or that requires a commercial entity to financially subsidize a promotional advertisement that the entity does not endorse and that is drafted by the entity‘s competitors (Gerawan I, supra, 24 Cal.4th at pp. 510-511 [required subsidizing of generic plum marketing campaign]), is properly found to implicate the interests protected by the free speech clause. Similarly, a statute that requires the disclosure of information under circumstances that realistically pose a chilling effect on the exercise of constitutionally protected speech is also properly subject to evaluation under constitutional free speech principles. (Cf., e.g., N. A. A. C. P. v. Alabama (1958) 357 U.S. 449, 460-463 [disclosure of membership list of controversial political organization].)
But I believe it is not accurate to maintain, as the language in Gerawan I suggests, that every statute that requires an individual or entity to disclose factual information that the individual or entity would not otherwise disclose falls within the bounds of the state free speech clause. Instead, because the overwhelming majority of statutes or regulations that require an individual or entity to ascertain and disclose factual information do not threaten or otherwise put at risk the protection that the state free speech clause was intended to provide, I believe that a statute that simply requires the ascertainment and disclosure of factual information should be viewed, presumptively, as not implicating the state constitutional free speech clause. Only when there are special circumstances indicating that the required disclosure potentially threatens an interest that the free speech clause was intended to protect should the statute be scrutinized under the free speech guarantee embodied in article I, section 2.
CORRIGAN, J., Concurring and Dissenting.—I agree with the majority that
My disagreement with the majority concerns the appropriate standard of review, which is more than simply a dry legal formalism. When the government seeks to prohibit or compel speech, the standard of review is an important safeguard. It requires the government to justify, to varying degrees of rigor, why it should be permitted to do so. In my view, the majority sets the bar for this safeguard too low. There are, broadly, three potential standards: strict scrutiny, intermediate scrutiny, and, least protective, a rational basis justification.
At the outset, it is important to be clear as to our task. We are interpreting a provision of the
Initially, the majority cites no California case applying rational basis review to a law implicating free speech under our Constitution. It relies instead on various federal authorities. However, in determining the proper standard of review, we must first examine our Gerawan cases, which addressed both the protections afforded commercial speech and the relevant standard of review. There, we considered the constitutionality of a government marketing program that required plum growers to fund generic advertising for plums. We acknowledged in Gerawan I that the United States Supreme Court in Glickman v. Wileman Brothers & Elliott, Inc. (1997) 521 U.S. 457 [138 L.Ed.2d 585, 117 S.Ct. 2130] had held that a similar program did not implicate the
Gerawan I explained that the state free speech provision, from its inception, protected commercial speech, many decades before the United States Supreme Court recognized any commercial speech right in the
Protection of economic speech is not absolute. “[A]rticle I‘s right to freedom of speech allows compelling one who engages in commercial speech to say through advertising what he otherwise would not say, even about a lawful product or service, in order to render his message truthful and not misleading.” (Gerawan I, supra, 24 Cal.4th at p. 509.) However, Gerawan I concluded that the marketing program at issue compelled funding of “generic advertising that is intended not to prevent or correct any otherwise false or misleading message in the interest of consumer protection, but solely to develop markets and promote sales in the interest of producer welfare.” (Id. at p. 510.) We remanded the matter to the Court of Appeal, leaving undetermined the proper standard of review. (Id. at p. 517.)
We addressed that issue in Gerawan II and concluded the proper standard was “the intermediate scrutiny standard articulated by the United States Supreme Court in Central Hudson Gas & Elec. v. Public Serv. Comm‘n [(1980)] 447 U.S. 557 [65 L.Ed.2d 341, 100 S.Ct. 2343].” (Gerawan II, supra, 33 Cal.4th at p. 6.) We observed that “[i]n light of our recognition in Gerawan I that the generic advertising program does in fact implicate the free speech clause, . . . we believe it would be incongruous to subject the program to only minimal scrutiny.” (Id. at p. 21.) Finding persuasive Justice Souter‘s dissenting opinion in Glickman, we stated, “the conclusion of the Glickman majority that the compelled funding of generic advertising requires only minimal scrutiny is at variance with the general rule that intrusion into free speech rights requires substantial justification, even when the intrusion is incidental to the enforcement of a content-neutral law. [Citation.] The requirement of substantial justification is further supported by the fact that the right to free speech under the
The majority‘s application of the rational basis standard is inconsistent with the language and history of
The reasoning of the Gerawan cases cannot simply be distinguished away on their facts. Although the present case involves the compulsion to speak rather than the compulsion to fund speech, Gerawan I made no distinction between the two. (See Gerawan I, supra, 24 Cal.4th at p. 491.) Indeed, the funding of speech was objectionable there because it implicated the right not to speak. (Id. at p. 514 [“One does not speak freely when one is restrained from speaking. But neither does one speak freely when one is compelled to speak.“].) That is precisely the right implicated here, as the majority acknowledges. (See maj. opn., ante, at pp. 340-345.)
Because free speech is implicated, Gerawan II teaches that the applicable standard is intermediate scrutiny. In formulating the proper test for intermediate scrutiny under our constitution, Gerawan II concluded the test of Central Hudson Gas & Elec. v. Public Serv. Comm‘n, supra, 447 U.S. 557 (
The Gerawan cases noted some narrow exceptions to this rule, but none apply here. As the majority acknowledges (see maj. opn., ante, at p. 356), section 2527 does not compel speech for the purpose of correcting false or misleading statements. (See Gerawan II, supra, 33 Cal.4th at p. 22.) Gerawan I observed, if “the commercial speaker‘s message is already truthful and nonmisleading, however, compulsion of speech is not supported by the consumer protection rationale, but must be supported, if at all, by some rationale applicable to all speech, noncommercial as well as commercial.” (Gerawan I, supra, 24 Cal.4th at p. 498.)
No such general rationale exists here. Section 2527 is “not self-evidently incidental to the functioning of some important, legislatively established institution, such as a union shop or an integrated state bar . . . .” (Gerawan II, supra, 33 Cal.4th at p. 22.) In the
There is no question here that section 2527 is not part of a greater regulatory scheme. It is a stand-alone statute enacted, as the majority
The majority suggests another exception to the application of intermediate scrutiny with respect to a statute compelling speech: the promotion of “informational transparency.” (Maj. opn., ante, at p. 356.) But no such exception exists. Even assuming the federal cases cited by the majority are relevant here, they do not support this exception. The majority quotes 44 Liquormart, Inc. v. Rhode Island (1996) 517 U.S. 484 [134 L.Ed.2d 711, 116 S.Ct. 1495], which stated: “When a State regulates commercial messages to protect consumers from misleading, deceptive, or aggressive sales practices, or requires the disclosure of beneficial consumer information, the purpose of its regulation is consistent with the reasons for according constitutional protection to commercial speech and therefore justifies less than strict review.” (Id. at p. 501, italics added; see maj. opn., ante, at p. 356.) The majority reads too much into the italicized language. 44 Liquormart had nothing to do with any type of disclosure, involving instead a complete ban on price advertising of alcohol. The plurality cited other recognized exceptions to the application of intermediate scrutiny, including regulation designed to curb “misleading, deceptive, or aggressive sales practices.” (44 Liquormart, at p. 501.) Thus, its reference to the “disclosure of beneficial consumer information” (ibid.) must also have been a reference to an established exception to the ordinary intermediate scrutiny standard, namely, consumer protection. However, that established exception is not as broad as this statement would suggest.
The examples cited by the majority bear this out. The five lower federal court cases discussed by the majority (see maj. opn., ante, at pp. 356-360) purported to apply Zauderer v. Office of Disciplinary Counsel (1985) 471 U.S. 626 [85 L.Ed.2d 652, 105 S.Ct. 2265] (Zauderer). That case involved an attorney disciplinary rule requiring that “any advertisement that mentions contingent-fee rates must ‘disclos[e] whether percentages are computed before or after deduction of court costs and expenses’ . . . .” (Id. at p. 633.) In applying rational basis review rather than intermediate scrutiny, Zauderer reasoned: “The State has attempted only to prescribe what shall be orthodox in commercial advertising, and its prescription has taken the form of a requirement that appellant include in his advertising purely factual and uncontroversial information about the terms under which his services will be available. Because the extension of
Under Zauderer, the principal rationales for applying a lower standard of review for compelled commercial speech are that speakers had no compelling right to refrain from disclosing accurate information about their goods or services, and such disclosures aided consumers by forestalling misleading or fraudulent statements. Indeed, Zauderer held “that an advertiser‘s rights are adequately protected as long as disclosure requirements are reasonably related to the State‘s interest in preventing deception of consumers.” (Zauderer, supra, 471 U.S. at p. 651, italics added.) Thus, Zauderer did not contemplate that all disclosures of factual information should be subject to the lowest standard of review, but only those principally designed to protect consumers.
Contrary to the majority‘s reasoning, section 2527 is not a disclosure statute warranting application of the Zauderer rationale. As described by the dissenting opinion in the Ninth Circuit‘s panel decision, the provision is “an unusual law without clear analogies in existing precedent. . . . Essentially, it requires Business A to speak about Business B to Business C. Unlike a disclosure law, it does not require that regulated entities divulge information about themselves to the public, but rather that they privately produce information about third parties to their clients. [Citation.] Moreover, § 2527 is a stand-alone law that does nothing more than mandate speech. It is not ancillary to any comprehensive economic regulatory scheme. [Citation.]” (Beeman v. Anthem Prescription Management (9th Cir. 2011) 652 F.3d 1085, 1108 (dis. opn. of Wardlaw, J.), judg. vacated (9th Cir. 2011) 661 F.3d 1199.)
Nothing in the language or spirit of Zauderer justifies deviating from intermediate scrutiny as required by Gerawan II. Section 2527 does not require a disclosure intended to prevent misleading or fraudulent speech.1
Nor does it require a disclosure aimed at consumer protection or public health.2 Further distinguishing it from a traditional consumer disclosure statute, the provision does not require information about the entity compelled to speak or about the underlying transaction at issue. The statute compels prescription drug claims processors to compile data concerning prices charged by unrelated third parties in transactions involving uninsured patients at retail. These transactions have nothing to do with insurance claims or reimbursements. Indeed, the sole purpose of requiring the transmittal of this data is to “persuade insurers to increase their reimbursement rates to pharmacies to more closely match the private-pay fees.” (ARP Pharmacy Services, Inc. v. Gallagher Bassett Services, Inc. (2006) 138 Cal.App.4th 1307, 1320 [42 Cal.Rptr.3d 256] (ARP Pharmacy Services).)
The majority‘s attempt to analogize section 2527 to various consumer disclosure statutes is not sustainable. At their core, ordinary disclosure laws are intended to level the playing field between economic actors of uneven strength. These disclosure laws usually require businesses to provide pertinent information to consumers, information about the businesses or their products that are readily and easily ascertained by the businesses themselves but would be prohibitively difficult for consumers to obtain on their own. These disclosures give consumers information that illuminates and clarifies the nature of the transactions they face, i.e., they attempt to tell consumers what they are getting themselves into before they do so. Armed with this type of information, consumers are placed in a position closer to equal footing with those businesses.
Rather than leveling the scale, section 2527 serves to tip the scale in one direction. The statute is not intended to make two unequal actors more equal, but rather is intended to affect the outcome of negotiations between two equal actors. There is no doubt that the parties affected by the provision, prescription drug claims processors and payers, are sophisticated business entities. If insurance companies deemed information regarding retail drug pricing
The majority seeks to bolster its position by asserting that section 2527 has a “public purpose,” noting that increased reimbursement rates might increase pharmacy participation, thus providing consumers more choice. (Maj. opn., ante, at p. 362; see ARP Pharmacy Services, supra, 138 Cal.App.4th at p. 1320.) One would hope that when the Legislature passes any law it does so with appropriate public regard. Simply because a provision has some kind of perceived public interest does not transform it into a consumer or public protection statute justifying a lower standard of review under Zauderer. The Legislature may determine that having higher reimbursement rates would ultimately benefit the public. The Legislature may pass any number of laws to this end, including directly regulating reimbursement rates. But the Legislature‘s preference, by itself, does not justify intrusion into protected speech rights. For example, the government‘s stance against prostitution, while supporting the passage of criminal laws prohibiting prostitution,3 does not justify conditioning government funding upon adopting a policy against prostitution. (See Agency for Int‘l Development v. Alliance for Open Society Int‘l, Inc. (2013) 570 U.S. ___ [186 L.Ed.2d 398, 133 S.Ct. 2321, 2327-2332].) The government‘s stance against smoking, while supporting increased taxes on cigarettes or a ban on cigarette smoking in certain public places,4 does not justify compelled speech in the form of graphic images intended to further “an ongoing effort to discourage consumers from buying”
The majority suggests that applying intermediate scrutiny here would “mak[e] the free speech clause into a warrant for courts to superintend the Legislature‘s economic policy judgments.” (Maj. opn., ante, at p. 360.) Not so. Section 2527 is a unique and unprecedented statute. It is nothing like any other disclosure statute and does not serve the leveling function usually provided by such statutes. It does not require a disclosure to prevent consumer confusion or fraud, further public health or safety, or inform the public about a particular transaction or entity. Nor is it part of a comprehensive regulatory scheme; it is a single statute directed only at speech, in one industry, designed to influence contractual bargaining between sophisticated business entities. The statute involves none of the factors previously cited to warrant a lesser standard of review. The majority fails to explain how application of the intermediate scrutiny standard of Gerawan II under such circumstances would call into question the legitimacy of any other true disclosure statute. Contrary to the majority‘s reasoning, judicial restraint counsels against deviating from our precedents by applying a lesser and unwarranted standard of review.
The majority asserts that section 2527 does not “reflect paternalism toward participants in the marketplace” (maj. opn., ante, at p. 354), but merely requires prescription drug claims processors to provide objective information with which “they do not identify any disagreement” (maj. opn., ante, at p. 349). The latter assertion is somewhat misleading. Prescription drug claims processors may have no quarrel regarding the accuracy of the data required to be reported. However, they vehemently disagree that this data is at all relevant in determining proper reimbursement rates and that they can be forced to compile and disseminate it. The statute‘s requirement reflects the government‘s conclusion that such information is relevant in setting reimbursement rates and should be considered, even when these contractual
Applying the Central Hudson standard to our constitutional free speech provision, intermediate scrutiny review asks: (1) Is the speech protected under article I? (2) Is the asserted governmental interest substantial? If one gives affirmative answers to these questions, then: (3) Does the law directly advance the asserted governmental interest? (4) Is it more extensive than required to serve that interest? (Gerawan II, supra, 33 Cal.4th at p. 22; Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 952 [119 Cal.Rptr.2d 296, 45 P.3d 243]; see Central Hudson, supra, 447 U.S. at p. 566.)
Section 2527 fails this test. With respect to the first prong, the statute involves protected speech, as the majority agrees.
Whether the asserted governmental interest supporting the provision is substantial may be debated. As noted, “[t]he theory was that if insurers paid the pharmacies dispensing fees closer to the amount paid by uninsured consumers, pharmacies would be more likely to continue to contract with insurers, and insured consumers would be able to have their prescriptions filled at the pharmacies of their choice.” (ARP Pharmacy Services, supra, 138 Cal.App.4th at p. 1320.)
Even assuming the government‘s interest in raising reimbursement rates is substantial, section 2527 fails to directly advance this interest. There is no question that the Legislature has the authority to directly regulate the rate paid by insurance companies to pharmacies, without any impingement upon free speech. As the majority acknowledges, the Legislature declined to pass such a law. (Maj. opn., ante, at pp. 337-338.) Failing at that, the Legislature passed a statute that compelled speech in a way that the majority acknowledges “could potentially affect prescription drug reimbursement rates.” (Maj. opn., ante, at p. 352.) “The mere transmission of the information, unaccompanied by any requirement that it be considered, utilized, or even read by the insurers, seems poorly designed to accomplish the state‘s goal.” (ARP Pharmacy Services, supra, 138 Cal.App.4th at p. 1320.) Such an ineffectual law hardly justifies the statute‘s intrusion into free speech rights.
Further, the fit between the governmental goal of increasing reimbursement rates and section 2527‘s speech requirement is not sufficiently close to pass
In sum, our Constitution has a rich history of protecting commercial speech, one that predates the protections of the
Chin, J., concurred.