LUCERO, Circuit Judge.
Burdened by the City of Pleasant Grove's ordinance establishing a solicitors licensing procedure, plaintiffs — individuals and entities engaged in selling Kirby vacuum cleaners through door-to-door solicitations — sued under 42 U.S.C. § 1983 claiming that the licensing ordinance violated their First Amendment commercial speech rights. The case proceeded to a preliminary injunction hearing, following which the district court found that, in addition to satisfying the other factors of the preliminary injunction test, plaintiffs have a substantial likelihood of showing that two provisions of the ordinance requiring solicitors to provide their fingerprints and post a $1,000 bond violate their commercial speech rights. We review the grant of such preliminary injunctions for abuse of discretion and conclude on the record before us that the district court did not abuse its discretion. We therefore
To "protect the local citizenship against crime and to preserve the private property, peace, and comfort of the occupants of the private residents [sic] in the city," Pleasant Grove enacted Chapter 5.48 of the Pleasant Grove City Code ("Ordinance"), which requires individuals to obtain a license before engaging in door-to-door solicitation. When applying for a license, solicitors must provide Pleasant Grove with, inter alia, the following: (1) proof of age, address, and a "legally recognized form of identification;" (2) two photographs of the applicant; (3) a set of fingerprints taken by the Department of Public Safety; (4) a $20 fee to cover the cost of processing the registration; (5) a $1,000 bond to be returned ninety days after "the solicitor informs the City that the [sic] or she has terminated solicitations within the City, unless the City has good cause to believe that legal action has been or may be brought against the solicitor related to the solicitation activities of the solicitor;" (6) a $100 annual fee; and (7) "such information as the police department shall reasonably require." In addition, Pleasant Grove requires solicitors to submit to a background check before obtaining a license.
Pacific Frontier, Inc. is a distributor of Kirby vacuum cleaners. It engages independent contractor dealers who perform door-to-door solicitations and in-home demonstrations of Kirby vacuums. Because it considered the costs of complying with the Ordinance's licensing requirements to be "prohibitive," Pacific Frontier declined to apply for a license in Pleasant Grove.
Seven of those who were arrested ("individual plaintiffs") joined three corporations — Pacific Frontier, J & L Distributing, Inc., and Redwood Division Pro Club 100%, Inc. — in filing a complaint in federal district court asserting that the Ordinance violated their First Amendment right to free speech and burdened interstate commerce. The plaintiffs sought, inter alia, a permanent injunction against further enforcement of the Ordinance, a declaratory judgment that the Ordinance is unconstitutional, and compensatory and special damages. In response, Pleasant Grove filed a motion to dismiss arguing that Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), required federal abstention due to the pending criminal actions against the individual plaintiffs. To avoid dismissal of their federal complaint, and their claims for relief under § 1983, the individual plaintiffs pled no contest to the criminal charges and agreed to pay the resulting fines under protest.
After deciding that Pleasant Grove's dismissal motion was moot, the district court proceeded to hear arguments on the plaintiffs' motion for a preliminary injunction. Plaintiffs did not challenge most of Pleasant Grove's licensing procedure, electing to seek an injunction against only three provisions: the Ordinance's annual fee, bond, and fingerprinting requirements. At the hearing, Captain Cody Cullimore of the Pleasant Grove City Police Department testified to prior crimes committed by door-to-door salespeople. Specifically, he related that the department had received complaints of thefts occurring when solicitors were performing demonstrations inside homes, one complaint of a solicitor committing sexual assault, and reports of residential burglaries after solicitors had canvassed a particular neighborhood. Additionally, Cullimore testified that solicitors had defrauded citizens by taking money for products and not delivering the goods. On cross-examination, he acknowledged that police involvement with solicitors, when compared to police responses to other businesses, was "minimal." In eleven years, the police department received 160 complaints relating to door-to-door solicitation. By contrast, in a ten month period in 1997, the department received over 2,000 complaints on "issues impacting business." Moreover, nearly half of the 160 calls about solicitors involved complaints that solicitors were operating without a license. Cullimore also admitted that there were no instances in which the fingerprints disclosed that a solicitor should not receive a license, and that the fingerprints had never been used to investigate or prosecute a crime.
City Attorney Christine Peterson, author of the Ordinance, explained that the fingerprint requirement deterred solicitors from committing crime. In support of the bond requirement, she testified that "quite often door-to-door salespeople will collect money at the door for a product, and then we can't find them.... And in my mind that was a safeguard for the citizens to allow them to have some sort of recourse in case they were bilked out of money." She acknowledged that no citizen has ever made a claim on the bond. Moreover, plaintiffs presented unrefuted evidence that Pleasant Grove has no procedure in place through which an aggrieved citizen can assert a claim on the bond.
On consideration of the evidence and arguments, the district court enjoined
Before turning to the merits of the court's ruling, we must address Pleasant Grove's argument that plaintiffs lack standing to contest the Ordinance's constitutionality.
In Association of Community Organizations for Reform Now, ("ACORN") v. Golden, 744 F.2d 739 (10th Cir.1984), we heard a challenge to a municipal ordinance requiring activists to obtain an exemption prior to engaging in door-to-door canvassing. The City of Golden argued that "ACORN should be required to apply for and be denied an exemption before bringing a facial challenge to the ordinance." Id. at 744. We held that "[a]pplying for and being denied a license or an exemption is not a condition precedent to bringing a facial challenge to an unconstitutional law." Id. Further, we concluded that "[t]his principle is not limited to cases in which an individual or organization is defending against criminal charges. It also permits such facial challenges by suits for injunctive or declaratory relief against laws requiring an exemption or permit." Id. The Supreme Court has also heard First Amendment challenges to door-to-door canvassing permit requirements where the plaintiffs did not apply for a permit. Watchtower Bible and Tract Soc'y of N.Y. v. Village of Stratton, 536 U.S. 150, 122 S.Ct. 2080, 153 L.Ed.2d 205 (2002). We conclude that our decision in ACORN should extend to cases involving commercial speech.
Although failure to apply for a license does not serve as a barrier to the facial challenge of an ordinance, plaintiffs must nonetheless meet the ordinary requirements for standing. Under these requirements, plaintiffs must establish that they have suffered an "injury in fact," that there is a causal connection between the
Plaintiffs in the case before us have suffered an injury in fact. Although claim of a "subjective chill," Laird v. Tatum, 408 U.S. 1, 13-14, 92 S.Ct. 2318, 33 L.Ed.2d 154 (1972), is insufficient to gain standing, a litigant who suffers an "ongoing injury resulting from the statute's chilling effect on his desire to exercise his First Amendment rights" does have standing to sue. Wilson v. Stocker, 819 F.2d 943, 946 (10th Cir.1987).
Thus we are satisfied that Article III's standing requirement permit plaintiffs to bring this action, leading us to consider Pleasant Grove's argument that prudential considerations counsel against our hearing this case. Pleasant Grove argues that because the individual plaintiffs pled no contest in city court to the charge of soliciting without a license, all plaintiffs — including the corporate entities — are precluded from seeking an injunction against enforcement of the Ordinance in federal court. We may answer whether the district court abused its discretion in granting injunctive relief so long as any one of the plaintiffs could properly have sought the injunction below. Because issue preclusion does not apply to at least one of the plaintiffs — J & L Distributing — we will consider the merits of this case without determining whether the other plaintiffs are precluded from presenting their claims for relief.
Federal courts must "give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so." Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980). In Utah, issue preclusion requires the presence of all four of the following factors:
None of the individual plaintiffs who entered pleas of no contest were in any way associated with J & L Distributing, much less "so identified in interest" with that corporation that they "represent the same legal right." Searle Bros., 588 P.2d at 691. As J & L Distributing was not "a party to or in privity with a party to the prior adjudication," it is not precluded from challenging the Ordinance's constitutionality. Collins, 52 P.3d at 1270.
Although a preliminary injunction is an exceptional form of relief, we cannot
To obtain a preliminary injunction, a movant must show: (1) substantial likelihood of prevailing on the merits; (2) irreparable injury if the injunction is denied; (3) greater injury to the movant absent the injunction than that which the opposing party will suffer under the injunction; and (4) lack of adverseness to the public interest. Utah Licensed Bev. Ass'n v. Leavitt, 256 F.3d 1061, 1065-66 (10th Cir.2001). Any motion for injunctive relief that seeks to alter the status quo, such as the motion in this case, "must be more closely scrutinized to assure that the exigencies of the case support the granting of a remedy that is extraordinary even in the normal course." O Centro Espirita Beneficiente Uniao Do Vegetal v. Ashcroft, 389 F.3d 973, 975 (10th Cir.2004) (en banc), cert. granted sub nom Gonzales v. O Centro Espirita Beneficiente Uniao Do Vegetal, ___ U.S. ___, 125 S.Ct. 1846, 161 L.Ed.2d 723 (2005).
A municipality has the burden of justifying its regulation even on a motion to enjoin enforcement of an ordinance. Utah Licensed Bev., 256 F.3d at 1073. Because Pleasant Grove has not met its burden in this case, plaintiffs have shown a substantial likelihood of prevailing on the merits.
To defend a regulation against a First Amendment challenge, a municipality must assert "a substantial interest to be achieved by restrictions on commercial speech." Cent. Hudson Gas & Elec. Corp. v. Public Serv. Comm'n, 447 U.S. 557, 564, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). Additionally, the restriction must directly advance that substantial interest. If the regulation "provides only ineffective or remote support for the government's purpose," it will not be upheld. Id. Finally, the regulation is unconstitutional "if the governmental interest could be served as well by a more limited restriction on commercial
Pleasant Grove's asserted interest in passing the Ordinance is to "protect the local citizenship against crime and to preserve the private property, peace, and comfort of the occupants of the private residents [sic] in the city." All parties concede that Pleasant Grove has asserted substantial interests to be achieved by the Ordinance,
First, we conclude that the district court did not abuse its discretion in finding that Pleasant Grove failed to meet its burden of showing a "reasonable fit" between its asserted interest and the bond provision. Mainstream Mktg. Servs. v. FTC, 358 F.3d 1228, 1237 (10th Cir.2004). Pleasant Grove defends the bond as necessary to protect consumers who may pay for a product but do not receive it or to compensate homeowners whose property is damaged during the course of an in-home sales demonstration. Belying Pleasant Grove's defense is plaintiffs' uncontested factual allegation that the city has no mechanism through which an aggrieved resident could make a claim on a bond. This fact alone confirms the district court's conclusion that the bond provision does not "provide effective support for the government's purposes." Id. at 1238. Pleasant Grove has also failed to show why state criminal laws are inadequate to deter fraud, or why state tort law provides insufficient relief to homeowners whose property may be inadvertently damaged. Furthermore, other provisions of the Ordinance, such as the background check, make it less likely that residents will confront salespersons who engage in fraudulent or tortious activity. See American Target, 199 F.3d at 1249 ("vigorous oversight diminish[es] the likely need for a victim compensation fund. An ounce of prevention here is preferable to a pound of cure."). Pleasant Grove has
In addition, other ordinances, such as the National Institute of Municipal Law Officers' ("NIMLO") model ordinance upon which the Pleasant Grove ordinance was based, reveal that "the governmental interest could be served as well by a more limited restriction on commercial speech." Cent. Hudson, 447 U.S. at 564, 100 S.Ct. 2343. The NIMLO ordinance applies a bond requirement only to those solicitors who require cash deposits or the signing of finance agreements for the future delivery of goods. Provo, Utah's solicitation ordinance features the same limitation as the NIMLO ordinance. Provo City Code § 6.09.020. Therefore, a substantially narrower restriction of speech — one that exempts from the bond requirement solicitors like Pacific Frontier who exchange goods for payment at the time of sale and therefore do not present a risk of absconding with a cash deposit — would adequately serve Pleasant Grove's interests. See Mainstream Marketing, 358 F.3d at 1238 (government fails to prove reasonable fit where "substantially narrower restrictions would have worked just as well."). Based on the foregoing, we conclude that the district court did not abuse its discretion in finding that plaintiffs have a substantial likelihood of demonstrating that the bond provision violates the First Amendment.
Second, we cannot conclude that the district court abused its discretion in finding that the city failed to meet its burden of defending the Ordinance's fingerprint requirement.
Although Stratton involved religious speech, and the Court explicitly acknowledged that the village's arguments might justify a regulation of commercial speech, the Court's analysis persuades us that Pleasant Grove has not met its burden in this case. See id. at 165, 122 S.Ct. 2080. Pleasant Grove enforces compliance with posted "No Soliciting" signs, and requires proof of age, address, and identification, two photographs, and a background check of all applicants. Indeed, solicitors applying for a license are required to supply all "such information as the police department shall reasonably require." Plaintiffs do not challenge any of those requirements, which may assure adequately citizens' privacy and provide law enforcement with the means of identifying potential criminals and deterring crime.
Pleasant Grove protests, however, that the fingerprint requirement uniquely furthers its interest in crime prevention and investigation. For support, Pleasant Grove relies on Captain Cullimore's testimony that fingerprinting applicants allows Pleasant Grove to "potentially" identify culprits in residential burglary investigations. City Attorney Peterson testified that the fingerprint requirement effectively deters criminal activity. When asked the basis for her belief, she stated "well, the fact that if I was a salesperson and going door-to-door and I knew that somebody can identify me by my fingerprints, obviously I would be less likely to commit a crime in the neighborhood and leave my fingerprints."
Yet, to defend successfully the fingerprint requirement, Pleasant Grove must show that its restriction has had more than "some impact" on the alleged harm. Greater New Orleans Broadcasting Ass'n, 527 U.S. at 189, 119 S.Ct. 1923. Quite to the contrary, Pleasant Grove failed to establish below that its fingerprint requirement has had any impact on crime committed by solicitors. Although the city has used the background check to deny a license to a solicitor, information gained from an applicant's fingerprints has never contributed to the basis for a denial. Nor has Pleasant Grove produced any evidence of whether or how it uses fingerprints to investigate applicants. Additionally, a solicitor's fingerprints have never been used to investigate or prosecute a crime. Indeed, Pleasant Grove did not describe its method of taking fingerprints or whether its method reliably assists in the investigation of crime. See, e.g., Nat'l People's Action v. Village of Wilmette, 914 F.2d 1008, 1012-13 (7th Cir.1990) (affirming injunction against fingerprint requirement of solicitation license on First Amendment grounds because record does not establish that village can use the fingerprints to conduct background checks or investigate crimes, village has never used fingerprints for either purpose, and background checks are possible through other means). Any speculation that fingerprints would assist with crime prevention is further undercut by evidence that residential burglaries committed in Pleasant Grove by those posing as solicitors involved individuals who
Municipalities have substantial interests in protecting their citizens from crime committed by door-to-door solicitors and in preserving the privacy of their residents. Conditioning a solicitation license on the posting of a bond or the submission of fingerprints may legitimately advance these substantial interests and comport with the First Amendment's strictures, so long as a city shows that it faces real harms, which are materially palliated by the requirements. In this case, the district court below concluded that Pleasant Grove failed to meet its burden of defending the bond and fingerprint requirements at issue. After reviewing the record, we are compelled to agree. Nothing about the trial court's ruling can be said to be "arbitrary, capricious, whimsical, or manifestly unreasonable." Austin, 231 F.3d at 1281.
Having concluded that the district court did not abuse its discretion in finding that plaintiffs have a substantial likelihood of succeeding on the merits, thus satisfying the first prong of the preliminary injunction test, we now address the second prong and evaluate plaintiffs' argument that they will suffer irreparable harm if denied an injunction on the bond and fingerprint provisions. The district court concluded that "[b]ecause Plaintiffs have established that the Ordinance deprives them of their First Amendment rights, they are entitled to a presumption of irreparable injury." "[L]oss of First Amendment freedoms, for even minimal periods of time, unquestionably constitutes irreparable injury." Elrod v. Burns, 427 U.S. 347, 373, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976). We therefore assume that plaintiffs have suffered irreparable injury when a government deprives plaintiffs of their commercial speech rights. See Utah Licensed Bev., 256 F.3d at 1076.
Pleasant Grove argues that although courts should presume that restrictions on commercial speech result in
We reject Pleasant Grove's argument that depriving plaintiffs of their First Amendment rights does not amount to irreparable injury simply because they can secure monetary compensation for both lost profits and the cost of complying with the Ordinance. Implicit in its argument is the notion that the value of commercial speech is limited to the pecuniary gain that can be secured through its exercise. This approach "attaches more importance to the distinction between commercial and noncommercial speech than our cases warrant and seriously underestimates the value of commercial speech." Cincinnati v. Discovery Network, 507 U.S. 410, 419, 113 S.Ct. 1505, 123 L.Ed.2d 99 (1993). Commercial speech merits First Amendment protection not simply because it enables sellers to hawk their wares and gain a profit, but because it equips consumers with valuable information and because it contributes to the efficiency of a market economy. See Bates v. State Bar of Arizona, 433 U.S. 350, 364, 97 S.Ct. 2691, 53 L.Ed.2d 810 (1977). Operating in an economy featuring informed consumers and an efficient allocation of resources clearly benefits both sellers and buyers. Therefore, the injury incurred through the deprivation of commercial speech rights cannot be quantified solely in terms of transaction costs and lost profits to a single market participant. Accordingly, the district court did not abuse its discretion in concluding that plaintiffs suffered irreparable injury through the loss of their First Amendment rights.
Because Pleasant Grove failed to show that the bond or fingerprint requirements materially advance its interests, the district court found that the city would not be seriously injured through the issuance of an injunction. Thus, the court concluded on the third factor of the preliminary injunction test that the threatened injury to plaintiffs' First Amendment rights outweighs any harm that Pleasant Grove would suffer through the issuance of an injunction. We agree.
Pleasant Grove argues that without the ability to collect a bond, it may have to incur substantial costs in tracking down solicitors who damage private property within the city and then flee. Although Pleasant Grove has identified a potential harm, the fact that the city has never compensated a citizen through the bond — and has no mechanism for doing so — makes it less likely that the city will in fact suffer such an injury during the pendency of this litigation. Moreover, using a background check and the other prophylactic measures contained in the Ordinance further diminishes the likelihood of harm. Even if Pleasant Grove demonstrated that it is likely to incur the cost of tracking down a tortfeasing solicitor, the district court did not abuse its discretion in finding that the constitutional harm plaintiffs will
Under the final prong of the preliminary injunction test, plaintiffs must show that issuing a preliminary injunction would not be adverse to the public interest. They have succeeded in doing so. Vindicating First Amendment freedoms is clearly in the public interest. See Utah Licensed Bev., 256 F.3d at 1076 ("Because we have held that Utah's challenged statutes also unconstitutionally limit free speech, we conclude that enjoining their enforcement is an appropriate remedy not adverse to the public interest."); Elam Constr., Inc. v. Regional Transp. Dist., 129 F.3d 1343, 1347 (10th Cir.1997) ("The public interest also favors plaintiffs' assertion of their First Amendment rights."). Having reviewed all four factors of the preliminary injunction test, we are satisfied that the district court did not abuse its discretion in preliminarily enjoining enforcement of the Ordinance's bond and fingerprint provisions.
On cross-appeal, plaintiffs argue that the district court erred by concluding that the Ordinance's annual fee provision was no longer at issue in the litigation, and urge us to instruct the district court to enjoin enforcement of the fee requirement. Furthermore, plaintiffs assert that the district court should have enjoined enforcement of the Ordinance because it unconstitutionally burdens interstate commerce. We conclude that neither argument is properly before us in this appeal of the district court's grant of a preliminary injunction. On remand, the court below should rule on these arguments.
With regard to the fee, the Ordinance provides that potential licensees must pay a $100 annual fee for a license. A Pleasant Grove employee produced an information sheet that erroneously instructed city employees to charge a fee of $100 per week. Plaintiffs sought an injunction against enforcement of the fee provision as applied on a weekly basis. Pleasant Grove discovered and acknowledged its mistake prior to the hearing on plaintiffs' motion for a preliminary injunction and assured the court that they have amended their practice and now comport with the terms of the Ordinance. The court concluded that the licensing fee no longer presented an issue on the motion for a preliminary injunction, although it indicated at the hearing that the erroneously imposed fee requirement may nonetheless be considered at later stages of the litigation. Plaintiffs contend on appeal that the district court should have enjoined enforcement of the properly applied fee provision. Because neither party had sufficient opportunity to develop evidence or argument regarding the properly imposed fee requirement, and the district court did not rule on the issue, we decline to instruct the district court to enjoin this provision of the Ordinance.
In their motion for a preliminary injunction, plaintiffs based their claim for an injunction solely on an alleged infringement of their First Amendment freedoms. Nevertheless, in their memorandum supporting the motion for a preliminary injunction, plaintiffs argued in addition that
Pursuant to 10th Circuit Rule 28.2(C)(2), parties must "cite the precise reference in the record where the issue was raised and ruled on." Doing so allows us to examine the district court's reasons for its decision. Where an issue has been raised, but not ruled on, proper judicial administration generally favors remand for the district court to examine the issue initially. See, e.g., Singleton v. Wulff, 428 U.S. 106, 120, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976) ("It is the general rule ... that a federal appellate court does not consider an issue not passed upon below."); In re R. Eric Peterson Constr. Co., Inc., 951 F.2d 1175, 1182 (10th Cir.1991) ("The district court never reached this issue.... We therefore remand this issue to the district court"). We see no reason to deviate from that practice in this case. Because the court below ruled on neither the challenge to the annual fee provision nor plaintiffs' Commerce Clause argument, we remand for the district court to address these issues.
Edenfield v. Fane, 507 U.S. 761, 766, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993).