Liberty Coins v. David Goodman

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 14a0064p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
LIBERTY COINS, LLC; JOHN MICHAEL TOMASO, ┐
Plaintiffs-Appellees, │
│
│ No. 13-3012
v. │
>
│
DAVID GOODMAN, Director, Ohio Department of │
Commerce; AMANDA MCCARTNEY, Consumer │
Finance Attorney, Division of Financial Institutions, │
Ohio Department of Commerce, │
Defendants-Appellants. │
┘
Appeal from the United States District Court
for the Southern District of Ohio at Columbus
No. 2:12-cv-00998—Michael H. Watson, District Judge.
Argued: October 11, 2013
Decided and Filed: April 8, 2014
Before: MERRITT and CLAY, Circuit Judges; and STAFFORD, District Judge*
_________________
COUNSEL
ARGUED: William J. Cole, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus,
Ohio, for Appellants. Maurice A. Thompson, 1851 CENTER FOR CONSTITUTIONAL LAW,
Columbus, Ohio, for Appellees. ON BRIEF: William J. Cole, Jennifer S. M. Croskey, OFFICE
OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Appellants. Maurice A.
Thompson, 1851 CENTER FOR CONSTITUTIONAL LAW, Columbus, Ohio, Curt C.
Hartman, THE LAW FIRM OF CURT C. HARTMAN, Amelia, Ohio, for Appellees. Timothy
Sandefur, PACIFIC LEGAL FOUNDATION, Sacramento, California, Paul M. Sherman, Erica
Smith, INSTITUTE FOR JUSTICE, Arlington, Virginia, for Amici Curiae.
*
The Honorable William H. Stafford, Jr., United States District Judge for the Northern District of Florida,
sitting by designation.
1
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 2
_________________
OPINION
_________________
CLAY, Circuit Judge. Defendants, David Goodman, Director of the Ohio Department of
Commerce, and Amanda McCartney, Consumer Finance Attorney of the Division of Financial
Institutions, Ohio Department of Commerce, are charged with enforcement of the Ohio Precious
Metals Dealers Act (“PMDA”), Ohio Revised Code § 4728. They appeal from an order entered
by the United States District Court for the Southern District of Ohio, Eastern Division, granting
Plaintiffs’ motion for a preliminary injunction, which was later modified in a separate order.
Finding that Plaintiffs were likely to succeed on the merits of their facial First Amendment
commercial speech claim at trial, the district court issued a preliminary injunction prohibiting
enforcement of the PMDA. We disagree with the district court’s interpretation of the Ohio
statute, and, for the reasons that follow, we REVERSE the district court’s order granting a
preliminary injunction, and REMAND for further proceedings consistent with this opinion.
I.
BACKGROUND
A. Procedural History
Plaintiffs, Liberty Coins, LLC, and John Michael Tomaso, filed a complaint in district
court pursuant to 42 U.S.C. § 1983 facially challenging the constitutionality of the PMDA, Ohio
Revised Code § 4728. In their complaint for declaratory and injunctive relief, claiming they
would suffer irreparable harm if a preliminary injunction were not issued, Plaintiffs allege that
the PMDA (1) facially violates the First Amendment commercial speech rights of businesses
dealing in precious metals throughout the state of Ohio; (2) is void for vagueness; and (3)
violates the Fourth Amendment rights of businesses through what they claim are overly
burdensome retention, reporting, and record-keeping requirements. See Ohio Rev. Code Ann.
§ 4728.06B08 (West 2014).
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 3
After a hearing held within two weeks after the filing of the complaint, the district court
granted a preliminary injunction based on a finding that the PMDA facially violates the First
Amendment of the United States Constitution because only those engaged in commercial speech
are subject to the statute’s licensing requirement; therefore, the district court found, Plaintiffs are
likely to succeed on the merits of their First Amendment claim at trial. Under this preliminary
injunction, the Consumer Finance Division of the Ohio Department of Commerce may not
enforce the PMDA’s licensing provision and therefore may not require that businesses dealing in
non-exempt precious metals obtain licenses or fine those, like Plaintiffs, who previously violated
the statute. Defendants sought a modification of the preliminary injunction based on whether a
portion of the PMDA could be severed from the statute as a whole. The district court granted the
modification in part and denied it in part.
Following that decision, Defendants timely appealed the district court’s order granting
the preliminary injunction and sought a stay of the enforcement of the preliminary injunction
from the district court. The motion for a stay of the preliminary injunction pending appeal was
denied by a three-judge panel of this Court. Reviewing the district court’s preliminary injunction
order for an abuse of discretion, the panel found that “[t]he district court’s conclusion that the
PMDA regulates commercial speech has some support in the case law, but is not dictated by
precedent.” Liberty Coins v. Goodman, No. 13-3012, slip op. at 2 (6th Cir. Mar. 26, 2013) (order
denying stay of preliminary injunction pending appeal). Therefore, the panel held, it was not an
abuse of the district court’s discretion to grant a preliminary injunction where the law is not yet
established on the issue presented. The preliminary injunction remains in force today.
Plaintiffs’ requests for permanent injunctive relief based on the First Amendment and for
temporary, preliminary, and permanent injunctive relief under the Fourth Amendment remain
pending before the district court. Therefore, this Court is only charged in this appeal with
deciding whether a preliminary injunction is proper on a facial First Amendment challenge of the
constitutionality of the PMDA.
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 4
B. Factual Background
Plaintiffs are John Michael Tomaso and Liberty Coins, LLC, an Ohio Limited Liability
Company with its principal place of business and storefront in Delaware County, Ohio. Tomaso
owns and operates Liberty Coins, which buys, sells, and trades silver and gold jewelry, hallmark
bars, ingots, numismatics, and other related items. Liberty Coins advertises its goods and
services through a number of means, including a storefront and signage, newspaper
advertisements, and business card distribution. These various forms of advertisements indicate
that the business buys, sells, and trades gold and silver items.
Since 1921, the state of Ohio has, in some form, prohibited businesses from engaging in
the purchasing of precious metals without a license. As Defendants assert in this case, the Ohio
legislature sought to regulate businesses potentially dealing in stolen goods. The statute in
question states that except as otherwise provided, “no person shall act as a precious metals dealer
without first having obtained a license from the division of financial institutions in the
department of commerce.” Ohio Rev. Code Ann. § 4728.02 (West 2014). Once licensed, each
individual or entity
shall keep and use books and forms approved by the superintendent of financial
institutions, which shall disclose, at the time of each purchase, a full and accurate
description including identifying letters of marks thereon of the articles
purchased, with the name, age, place of residence, driver’s or commercial driver’s
license number or other personal identification, and a short physical description of
the person of the seller. The licensee also shall write in the book the name of the
maker.
Ohio Rev. Code Ann. § 4728.06 (West 2014). Additionally, the licensee “shall keep the books
in numerical order at all times at the licensed location, open to the inspection of the . . . head of
the local police department [or others charged with such authority]. Upon demand . . . the
licensee shall produce and show an article thus listed and described.” Id. Each licensee must
also make available “a description of all articles received by the licensee on the business day
immediately preceding, together with the number of the receipt issued.” Ohio Rev. Code Ann. §
4728.07 (West 2014).
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 5
In addition to the statute’s reporting and record-keeping requirements, licensed precious
metals dealers must comply with additional requirements. For example, “[n]o person licensed
under [the PMDA] shall purchase any articles from any minor, or from any person intoxicated or
under the influence of a controlled substance, from any person who is known or believed by the
licensee to be a thief, or a receiver of stolen property.” Ohio Rev. Code Ann. § 4728.08 (West
2014). Once the licensee purchases precious metals, the PMDA requires that the licensee retain
those articles for at least “five days after the date of purchase.” Ohio Rev. Code Ann.
§ 4728.09(A) (West 2014). Thereafter, if the head of the local police department has probable
cause to believe that an item listed in the licensee’s daily reports has been stolen, he will notify
the licensee, who must retain the item for thirty days, unless otherwise notified by the local
police department. Ohio Rev. Code Ann. § 4728.09(B) (West 2014). Any person who fails to
comply with the PMDA’s requirements is subject to civil action by injured parties. Additionally,
dealers who fail to comply with the PMDA’s provisions are guilty of a misdemeanor for the first
offense and a felony of the fifth degree for each subsequent offense, and they are fined
accordingly. Ohio Rev. Code Ann. § 4728.99 (West 2014).
The PMDA’s requirements apply to any party that holds itself out to the public as
willing to purchase precious metals. In 1982, the Ohio General Assembly amended the Ohio
Pawnbroker Act (Ohio Revised Code Chapter 4727) to more clearly define “precious metals
dealer,” and in 1986, this definition was separated out into the newly enacted Precious Metals
Dealers Act (Ohio Revised Code Chapter 4728). This version of the statute defined a precious
metals dealer as “a person who is engaged in the business of purchasing articles made of or
containing gold, silver, platinum, or other precious metals or jewels of any description if, in any
manner, including any form of advertisement or solicitation of customers, he holds himself out to
the public as willing to purchase such articles.” 1986 Ohio Legis. Serv. Ann. 5-963 (West). The
statute was subsequently altered to include female and gender-neutral pronouns.1 Currently,
under the statute, any individual or business that formally holds itself out to the public through
1
The current version of the PMDA defines a precious metals dealer as “a person who is engaged in the
business of purchasing articles made of or containing . . . precious metals or jewels of any description if, in any
manner, including any form of advertisement or solicitation of customers, the person holds himself, herself, or itself
out to the public as willing to purchase such articles.” Ohio Rev. Code Ann. § 4728.01 (West 2014).
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 6
advertisement, solicitation, or other means, must have a license before operating its business. To
obtain a license, a precious metals dealer must disclose personal, professional, and financial
information to the State and demonstrate good character and good reputation. Ohio Rev. Code
Ann. § 4728.03(A), (B) (West 2014). The statute states, “[T]he department of commerce may
grant a precious metals dealer’s license to any person of good character, having experience and
fitness in the capacity involved, who demonstrates a net worth of at least ten thousand dollars
and the ability to maintain that net worth during the licensure period.” Ohio Rev. Code Ann.
§ 4728.03(B)(1) (West 2014).
Pursuant to the PMDA, the State has continued to prohibit unlicensed precious metals
dealers from formally purchasing non-exempt precious metals from the public and has recently
ramped up enforcement efforts under the statute.
In August 2012, Brian Landis (“Landis”), the Chief Examiner of the Consumer Finance
Division of the Ohio Department of Commerce, reviewed an anonymous letter directing his
attention to Tomaso and Liberty Coins. After reviewing this letter, Landis visited Liberty Coins
on August 24, 2012. He documented this visit by taking photographs of the store front and the
inside of the store. The photographs were specifically targeted at the store’s signage, which
announced to the public that Liberty Coins was open for business and listed the services and
goods that were available inside the store. Landis indicated to Tomaso that Liberty Coins was
operating as a precious metals dealer in violation of the PMDA and that Plaintiffs must comply
with the statute, otherwise they would face fines and criminal charges. Plaintiffs were given
until September 7, 2012, to comply with the order.
After Plaintiffs failed to respond, Landis transferred the case to Defendant Amanda
McCartney in the Ohio Department of Commerce’s legal department sometime around
September 24, 2012. A few days later, around October 1, 2012, McCartney sent a letter to
Plaintiff Tomaso stating as follows: “Liberty Coins has held itself out to the public as willing to
purchase precious metals via signage at the store location.” Due to that activity, McCartney
stated, Liberty Coins had violated the PMDA by operating as a precious metals dealer without a
license. Additionally, the letter pointed out that Tomaso had failed to respond to the Division of
Financial Institutions’ inquiry into the violation. The letter gave Liberty Coins twenty-one days
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 7
to produce business records that would “demonstrate the amount of precious metal [the] business
ha[d] purchased from the public over the last twelve (12) months.” This would allow Defendants
to assess a proper fine consistent with the amount of unlicensed business conducted by Plaintiffs
during the period of noncompliance. The letter also advised that if Plaintiffs did not respond to
the letter, they might face a cease and desist order and a fine of up to $10,000. Additionally,
Plaintiffs’ failure to respond could reflect negatively on a future license application.
Tomaso responded to McCartney’s letter sometime around October 17, 2012, requesting
clarification of her demands. One of the questions Tomaso posed in his letter was whether
Liberty Coins could continue to operate the business consistent with the PMDA’s requirements if
all advertising was removed from the building and other forms of business solicitation ceased.
McCartney indicated in response that “[s]imply ceasing advertising [would] not eliminate the
need for a license [and c]easing precious metals business in its entirety [was] the only way [to]
forego the need for a license.” She later stated in an email that Plaintiffs “cannot buy any gold or
silver without a license. [They] must cease all illegal activities immediately as each violation is
subject to a $10,000 fine and criminal sanctions [under the PMDA].” While their motion for a
preliminary injunction was pending, Plaintiffs ceased all advertising and purchasing of non-
exempt gold and silver, consistent with McCartney’s directives.
II.
DISCUSSION
In this appeal, Defendants challenge the district court’s finding that there is a strong
likelihood Plaintiffs will prevail on their facial challenge of the PMDA’s constitutionality at trial.
Because the district court has not yet ruled on Plaintiffs’ requests for permanent injunctive relief
based on the First Amendment or their claims regarding the Fourth Amendment, this Court does
not address those issues.2
2
In its opinion granting the preliminary injunction, the district court stated that “[b]ecause the Court finds
Plaintiffs are likely to prevail on a facial challenge to the Act, the Court does not consider whether the Act has been
unconstitutionally applied to Plaintiffs in particular or whether Plaintiffs have standing to bring such a claim.”
Liberty Coins v. Goodman, No. 2:12BcvB998, 2012 WL 9335828, at *2 (S.D. Ohio Dec. 5, 2012).
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 8
A. Standard of Review
Plaintiffs assert that the proper standard of review in this case is for abuse of discretion.
“It is well settled that the scope of review on appeal from the denial or granting of a preliminary
injunction is limited to a determination of whether the District Court abused its discretion.”
Mason County Medical Ass’n v. Knebel, 563 F.2d 256, 260–61 (6th Cir. 1977). Under such a
standard, “[t]he district court’s determination will be disturbed only if the district court relied
upon clearly erroneous findings of fact, improperly applied the governing law, or used an
erroneous legal standard.” McNeilly v. Land, 684 F.3d 611, 614 (6th Cir. 2012) (internal
quotation marks omitted). In deciding issues related to whether the district court erred in its
factual determinations, this Court applies an abuse of discretion standard. It is the province of
the district court to view and weigh the evidence, and an appellate court should only disturb the
district court’s conclusions as to the sufficiency of evidence presented by Defendants if its
decision was clearly erroneous. Leary v. Daeschner, 228 F.3d 729, 736 (6th Cir. 2000).
However, “[w]hen a party seeks a preliminary injunction on the basis of a potential
constitutional violation, ‘the likelihood of success on the merits often will be the determinative
factor.’” Obama for America v. Husted, 697 F.3d 423, 436 (6th Cir. 2012) (quoting Jones v.
Caruso, 569 F.3d 258, 265 (6th Cir. 2009)). In such a case, the likelihood of success on the
merits is a legal question and there is little dispute of the facts in the record. Hamilton’s Bogarts,
Inc. v. Michigan, 501 F.3d 644, 649 (6th Cir. 2007). “Because the ‘determination of whether the
movant is likely to succeed on the merits is a question of law and is accordingly reviewed de
novo,’ the standard of review for a district court decision regarding a preliminary injunction with
First Amendment implications is de novo.” Bays v. City of Fairborn, 668 F.3d 814, 819 (6th Cir.
2012) (quoting Certified Restoration Dry Cleaning Network, LLC v. Tenke Corp., 511 F.3d 535,
541 (6th Cir. 2007)).
The main issues presented on appeal in the instant case are questions of law, potentially
implicating the First Amendment. Therefore, this Court reviews de novo the district court’s
application of the law and ultimate decision to grant a preliminary injunction.
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 9
B. Standard for Issuing a Preliminary Injunction
When determining the appropriateness of a preliminary injunction, a court must examine
four factors. First, the court must determine “whether the plaintiff has established a substantial
likelihood or probability of success on the merits” of his claim. Winnett v. Caterpillar, Inc.,
609 F.3d 404, 408 (6th Cir. 2010) (internal quotation marks omitted). Second, the court will
determine “whether the [plaintiff] would suffer irreparable injury” if a preliminary injunction did
not issue. Bays, 668 F.3d at 818–19 (citing Tenke Corp., 511 F.3d at 542). Third, the court
determines “whether the injunction would cause substantial harm to others.” Id. at 819. And
finally, a court must consider “whether the public interest would be served” if the court were to
grant the requested injunction. Id.
Each of these factors “[should] be balanced against one another and should not be
considered prerequisites to the grant of a preliminary injunction.” Leary, 228 F.3d at 736. In the
context of a First Amendment claim, the balancing of these factors is skewed toward an
emphasis on the first factor. As this Circuit has previously stated,
When a party seeks a preliminary injunction on the basis of the potential violation
of the First Amendment, the likelihood of success on the merits often will be the
determinative factor. With regard to the factor of irreparable injury, for example,
it is well-settled that “loss of First Amendment freedoms . . . unquestionably
constitutes irreparable injury.”
Connection Distrib. Co. v. Reno, 154 F.3d 281, 288 (6th Cir. 1998) (quoting Elrod v. Burns,
427 U.S. 347, 373 (1976) (plurality)). In cases implicating the First Amendment, the other three
factors often hinge on this first factor. “[T]he determination of where the public interest lies [] is
dependent on a determination of the likelihood of success on the merits of the First Amendment
challenge because it is always in the public interest to prevent the violation of a party’s
constitutional rights.” Id. at 288 (internal quotation marks omitted). Similarly, “because the
questions of harm to the parties and the public interest generally cannot be addressed properly in
the First Amendment context without first determining if there is a constitutional violation, the
crucial inquiry often is, and will be in this case, whether the statute at issue is likely to be found
constitutional.” Id. (citing Congregation Lubavitch v. City of Cincinnati, 923 F.2d 458, 460 (6th
Cir. 1991)). Therefore, as Plaintiffs have asserted a deprivation of the First Amendment right to
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 10
free speech, this Court’s emphasis is on Plaintiffs’ likelihood of success on the merits. Because
this Court neither agrees with the district court’s interpretation of the PMDA nor believes
Plaintiffs have a strong likelihood of prevailing on their First Amendment claim at trial, we find
that the district court erred in granting a preliminary injunction halting enforcement of the
PMDA.
C. Likelihood of Success on the Merits
1. Facial Challenge
This Court has before it a facial challenge of the PMDA. Generally, the party asserting a
facial challenge to a statute must establish that “no set of circumstances exists under which [it]
would be valid.” U.S. v. Salerno, 481 U.S. 739, 745 (1987). However, “[w]here a plaintiff
makes a facial challenge under the First Amendment to a statute’s constitutionality, the ‘facial
challenge’ is an ‘overbreadth challenge.’” Speet v. Schuette, 726 F.3d 867, 872 (6th Cir. 2013)
(quoting Connection Distrib. Co. v. Holder, 557 F.3d 321, 335 (6th Cir. 2009) (en banc)).
Therefore, “[i]nstead of having to prove that no circumstances exist in which the enforcement of
the statute would be constitutional, the plaintiff bears a lesser burden: to demonstrate that a
substantial number of instances exist in which the law cannot be applied constitutionally.” Id.(internal quotation marks omitted); see also New York State Club Ass’n v. City of New York,
487 U.S. 1, 14 (1988) (“To succeed in its challenge, appellant must demonstrate from the text of
[the law] and from actual fact that a substantial number of instances exist in which the [l]aw
cannot be applied constitutionally.”).3
2. The PMDA is a Valid Regulation of Business
The PMDA is, first and foremost, a licensing statute. It is a statute calculated to regulate
individuals and entities that hold themselves out to the public as willing to purchase precious
metals. Each subsection of the statute is tailored to achieve this goal. The manner by which the
state of Ohio defines a precious metals dealer is meant to distinguish between those who operate
3
We have not found it necessary, in this opinion, to address the issue of whether the law and the facts of
this case would accommodate an as-applied challenge, and leave that issue for another day.
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 11
as businesses that are open to the public and those who make isolated, casual precious metals
purchases.
Ohio’s method of regulating precious metals dealers is not unique. In fact, numerous
other states have enacted business regulations that contain similar language. In North Carolina,
for example, a statute regulating cash converters defines a currency converter as “[a] person
engaged in the business of purchasing goods from the public for cash at a permanently located
retail store who holds himself or herself out to the public by signs, advertising, or other methods
as engaging in that business.” N.C. Gen. Stat. Ann. § 66-387 (West 2013).4 Nebraska has also
implemented a licensing scheme that controls individuals who hold themselves out to the public
as engaging in their respective professions. Through its Cosmetology, Electrology, Esthetics,
Nail Technology, and Body Art Practice Act, Nebraska has made it unlawful for any unlicensed
person or entity “[t]o operate or advertise or hold oneself out as operating a cosmetology
establishment in which any of the practices of cosmetology or the teaching of any of the
practices of cosmetology are carried out.” Neb. Rev. Stat. § 38-1058 (2013). Arkansas regulates
geologists in a similar manner. In Arkansas, “[i]t shall be unlawful for any person to publicly
practice geology . . . in th[e] state or to use in connection with his or her name, or otherwise
assume, or advertise, any title or description tending to convey the impression that he or she is a
registered geologist unless the person has been registered or exempted [under the statute].” Ark.
Code Ann. § 17-32-301(a) (West 2014).5
4
North Carolina also regulates its precious metals dealers in a similar manner, defining a precious metals
dealer as “a person who purchases precious metals from the public . . . and holds himself or herself out to the public
by signs, advertising, or other methods as engaging in such purchases.” N.C. Gen. Stat. Ann. § 66-406 (West 2013).
5
For additional examples of regulatory statutes, see, e.g., Ga. Code Ann. § 7-7-1 (West 2013) (defining a
mortgage broker as one who “in the regular course of business . . . [h]olds himself out as being able to make
mortgage loans . . . [or] buy or sell mortgage loans”); N.Y. Arts & Cult. Aff. Law § 60.01 (McKinney 2014)
(defining a sports collectibles dealer as “a person who is in the business of selling . . . or a person who by his
occupation holds himself out as having knowledge or skill peculiar to such collectibles”); Mo. Ann. Stat. § 400.2-
104 (West 2014) (defining a merchant in Missouri as a “person who deals in goods of the kind or otherwise by his
occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the
transaction”); Minn. Stat. Ann. § 148.632 (West 2014) (exempting from Minnesota’s dietitian and nutritionist
licensing requirement individuals who train under registered dietitians and who “do[] not hold out as a dietitian or
nutritionist unless so licensed”); Alaska Stat. Ann. § 08.06.180 (West 2013) (prohibiting those who are not properly
licensed from “practic[ing] psychology or hold[ing] out publicly as a psychologist or as practicing psychology”).
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 12
Like each of these statutes, the PMDA uses “holding oneself out” to distinguish between
those who Defendants wish to regulate and those who should and must remain free from
regulation by nature of the infrequency and informality of their precious metals transactions.
The Nebraska legislature did not wish to regulate young girls who paint each others’ nails at a
slumber party and the Georgia legislature likely does not seek to regulate a parent who provides
a loan for his child to purchase a home. See Neb. Rev. Stat. § 38-1058 (2013); Ga. Code Ann. §
7-7-1 (West 2013). Likewise, the Ohio General Assembly sought to distinguish between the
typical person who casually stops at a garage sale “to engage in the business of purchasing” non-
exempt articles and businesses with storefronts that have a presence in the community and
formally announce to the public that they are open for business. The state of Ohio used its police
power to regulate those individuals and entities by requiring that they obtain a license and
comply with requirements placed on all licensed precious metals dealers. Plaintiffs missed the
point of the statute when they argued before the district court that “the drafters could have easily
dispensed with the promotional speech requirement altogether and written the PMDA to regulate
‘any person who actually purchases metals.’” Had the drafters employed such language, the
statute would have applied far too broadly, to those who make infrequent purchases in casual
environments and do not hold themselves out to the public as willing to make such purchases.
Instead, the State regulates those who have storefronts or otherwise indicate to the public that
they are open for business, whether through signage, business cards, word of mouth, newspaper
advertisements, conducting public transactions, or a large window to the street with precious
metals displays.
3. Business Regulation Subject to Rational Basis Review
Long ago, the Supreme Court recognized that “[t]he power of the state to provide for the
general welfare of its people authorizes it to prescribe all such regulations as in its judgment will
secure or tend to secure them against the consequences of ignorance and incapacity, as well as of
deception and fraud.” Dent v. West Virginia, 129 U.S. 114, 122 (1889). This regulatory power
is often exercised through the enactment of licensing statutes, as evidenced by the abbreviated
list of state licensing schemes alluded to above. As Justice Jackson explained in his concurring
opinion in Thomas v. Collins,
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The modern state owes and attempts to perform a duty to protect the public from
those who seek for one purpose or another to obtain its money . . . . [T]he state
may have an interest in shielding the public against the untrustworthy, the
incompetent, or the irresponsible, or against unauthorized representation of
agency. A usual method of performing this function is through a licensing system
. . . . Very many are the interests which the state may protect against the practice
of an occupation . . . .
323 U.S. 516, 545 (1945) (Jackson, J., concurring). As a result, where a regulatory scheme
neither implicates a fundamental right nor creates a suspect classification, rational basis review
applies.
The PMDA is just such a statute that neither burdens a fundamental right, nor creates a
suspect classification. It merely constitutes a regulatory scheme meant to protect the safety and
welfare of the public through the regulation of professional conduct. Rational basis review
therefore applies. See Doe. v. Mich. Dep’t of State Police, 490 F.3d 491, 501 (6th Cir. 2007).
In Martinez v. Goddard, 521 F.Supp.2d 1002 (D. Ariz. 2007), a federal district court in
Arizona upheld the state’s statutory licensing scheme regulating contractors in the construction
industry. The regulation at issue required that any individuals wishing to engage in construction
work obtain a license. Id. at 1004–05. The plaintiff, an unlicensed contractor, asserted that the
statute improperly distinguished between licensed and unlicensed contractors, hindered his
constitutional rights, and failed to achieve its purpose. Although this case was challenged on
substantive due process and equal protection grounds, the test applied by the court applies here
as well, where no fundamental constitutional right is at issue. The court applied rational basis
review because the statute neither burdened a fundamental right nor created a suspect
classification deserving of heightened scrutiny, and “the claims at issue in th[e] case [only]
pertain[ed] to economic liberties.” Id. at 1006. The district court upheld the statute because the
regulatory scheme was rationally related to a legitimate state interest. Id. at 1009.6
6
See also Doe, 490 F.3d at 501 (6th Cir. 2007) (“We evaluate statutes that do not implicate a plaintiff’s
fundamental rights by utilizing a rational-basis standard of review”); Star Scientific Inc. v. Beales, 278 F.3d 339 (4th
Cir. 2002) (applying rational basis review to determine whether the economic legislation at issue was rationally
related to a legitimate government interest); Christy v. Hodel, 857 F.2d 1324, 1331–32 (9th Cir. 1988) (“[I]n the area
of economics and social welfare, the legislative classification satisfies requirements of equal protection if it has
some ‘reasonable basis’ and if any state of facts can be conceived to justify it”); Nat’l Ass’n for Advancement of
Psychoanalysis v. Cal. Bd. of Psychology, 228 F.3d 1043, 1050 (9th Cir. 2000) (quoting City of New Orleans v.
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 14
Similarly, in Office of Prof’l Regulation v. McElroy, 824 A.2d 567, 568 (Vt. 2003), the
plaintiff, an unlicensed individual acting as a real estate broker in the state of Vermont,
challenged the state’s licensing scheme, asserting that although he was unlicensed, he had a First
Amendment right to advertise properties as a real estate agent and that he could not be
reprimanded for doing so without a license. The court upheld the statute as a constitutional
exercise of the State’s police power. The statute did not implicate protected First Amendment
speech because “[h]e [was] not being restrained from publishing advertisements; he [was] being
restrained from publishing misleading statements about his own status as a broker.” Id. at 571.
The State could constitutionally prevent an unlicensed real estate broker from advertising houses
and his availability as a broker.
To prevail under rational basis review, Defendants need only demonstrate that the
statute’s classification and the licensing requirement are rationally related to a legitimate
government interest. City of Cleburne, Tex. v. Cleburne Living Ctr., 473 U.S. 432, 440 (1985);
Northville Downs v. Granholm, 622 F.3d 579, 586 (6th Cir. 2010). Generally, “[w]hen social or
economic legislation is at issue [and a fundamental right is not implicated], the Equal Protection
Clause allows the States wide latitude.” Cleburne, 473 U.S. at 440 (citing United States R.R.
Ret. Bd. of Fritz, 449 U.S. 166, 174 (1980)).
Unless a classification trammels fundamental personal rights or is drawn upon
inherently suspect distinctions such as race, religion, or alienage, [the Supreme
Court’s] decisions presume the constitutionality of the statutory discriminations
and require only that the [statute] challenged be rationally related to a legitimate
state interest. States are accorded wide latitude in the regulation of their local
economies under their police powers, and rational distinctions may be made with
substantially less than mathematical exactitude.
City of New Orleans v. Dukes, 427 U.S. 297, 303 (1976); see also Ziss Bros. Constr. Co., v. City
of Independence, Ohio, 439 F. App’x 467, 476 (6th Cir. 2011) (“Government action subject to
rational basis review will not be deemed to lack rational justification simply because it is not
Dukes, 427 U.S. 297, 303 (1976)) (“Because we conclude that the licensing scheme neither utilizes a suspect
classification nor implicates a fundamental right, we now examine whether it is ‘rationally related to a legitimate
state interest.’”).
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 15
made with mathematical nicety or because in practice it results in some inequality.”) (internal
quotation marks omitted).
Under rational basis review, a law is upheld so long as it is rationally related to a
legitimate government purpose. There is a strong presumption of constitutionality and the
regulation will be upheld so long as its goal is permissible and the means by which it is designed
to achieve that goal are rational. Nat’l Ass’n for Advancement of Psychoanalysis, 228 F.3d at
1050. “This standard is highly deferential; courts hold statutes unconstitutional under this
standard of review only in rare or exceptional circumstances.” Doe, 490 F.3d at 501. “Under
rational basis scrutiny, government action amounts to a constitutional violation only if it is so
unrelated to the achievement of any combination of legitimate purposes that the court can only
conclude that the government’s actions were irrational.” Michael v. Ghee, 498 F.3d 372, 379
(6th Cir. 2007) (internal quotation marks omitted). Finally, under rational basis review, the
government “has no obligation to produce evidence to sustain the rationality of its action; its
choice is presumptively valid and ‘may be based on rational speculation unsupported by
evidence or empirical data.’” TriHealth, Inc. v. Bd. of Comm’rs, 430 F.3d 783, 790 (6th Cir.
2005) (quoting FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 315 (1993)).7
Plaintiffs are unlikely to prevail on the merits of their claim under rational basis review.
Defendants asserted in their briefs that the Ohio legislature’s purpose in enacting and
subsequently amending and enforcing the PMDA was to protect consumers and the public from
theft, fraud, money laundering, fencing, to restrict the flow of stolen goods, and to prevent
terrorism. Even Plaintiffs concede that such a government purpose is legitimate, even
compelling. Liberty Coins v. Goodman, No. 2:12BcvB998, 2012 WL 9335828, at *8 (S.D. Ohio
Dec. 5, 2012).
The PMDA’s licensing requirement is rationally related to that legitimate government
purpose. The government need not present reams of evidence to prove that the regulation
directly and materially advances the governmental purpose. TriHealth, 430 F.3d at 790. Instead,
7
“This standard of review is ‘a paradigm of judicial restraint,’ growing out of recognition that ‘equal
protection is not a license for courts to judge the wisdom, fairness or logic of legislative choices.’” TriHealth,
430 F.3d at 791 (quoting Beach Commc’ns, 508 U.S. at 313–14).
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 16
there need only be some rational relationship between the government’s purpose and the means
the government has chosen to achieve that purpose. Schweiker v. Wilson, 450 U.S. 221, 235
(1981). Here, it was reasonable for the Ohio legislature to have distinguished between
businesses that hold themselves out to the public as formally, frequently, or routinely dealing in
precious metals and those who merely purchase precious metals informally, infrequently, and for
their own personal use. The former are more likely to deal in large quantities of precious metals
and move stolen goods through the marketplace. It was reasonable for the legislature to have
believed that a licensing requirement and the close monitoring of those who are licensed would
curtail the amount of stolen goods in the marketplace and aid the police in their attempt to
recover stolen goods in a timely manner. Plaintiffs have not offered evidence to demonstrate that
the PMDA is not a rational method for achieving the government’s legitimate interest in
protecting the public from theft or fraud. Therefore, under rational basis review, Plaintiffs are
unlikely to prevail on the merits, and they are not entitled to a preliminary injunction in their
favor.
4. The PMDA and the “Holding Out” Requirement
Plaintiffs improperly assert and the district court improperly found that the PMDA
burdens commercial speech and is therefore governed by the test laid out in Central Hudson Gas
& Elec. Corp. v. Pub. Serv. Comm’n of New York, 447 U.S. 557 (1980). Plaintiffs point to a
number of cases in which courts have applied heightened scrutiny to strike down statutes
regulating a profession while also directly burdening commercial speech. However, many of the
cases relied on by Plaintiffs neither address nor even ask the question now before this Court:
whether the statute regulates commercial speech or simply regulates economic activity.
Additionally, these cases are distinguishable on their facts.
In the as-applied challenge in Parker v. Commonwealth of Kentucky, Bd. of Dentistry,
818 F.2d 504, 506 (6th Cir. 1987), this Court struck down a statute under which “a general
practitioner [was] not prohibited from performing dental services in the area of specialization,
[but was] prohibited . . . from holding himself out to the public as a specialist.” Although the
statute was meant to prevent the public from being misled by non-specialists’ advertising, this
Court deemed the statute an unconstitutional burden on speech: “If a state regulates speech
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 17
which is potentially misleading . . . ‘the preferred remedy is more disclosure, rather than less.’”
Id. at 509 (quoting Bates v. State Bar of Arizona, 433 U.S. 350, 375 (1977)).8 In Thompson v.
W. States Med. Ctr., 535 U.S. 357 (2002), the Supreme Court dealt with a similar regulation in
the context of prescription drugs. The Food and Drug Administration Modernization Act
(“FDAMA”), 111 Stat. 2328, 21 U.S.C. § 353a, allowed pharmacies to produce and sell
compounded drugs without FDA approval. However, once pharmacies elected to advertise the
availability of those compounded drugs to the medical community and to the public at large, they
were required to seek FDA approval. The statute was designed to allow for small quantities of
unapproved, experimental compounded drugs to enter the marketplace free from regulation. Id.
at 370–71. Once pharmacies advertised the availability of compounded drugs, increasing the
amount of experimental, unapproved drugs in the marketplace, the FDA approval requirement
was triggered. The Court struck down this provision of the statute as an unconstitutional burden
on protected First Amendment commercial speech, finding that advertising was “the trigger for
requiring FDA approval” and that the regulation did not pass constitutional muster under the
Central Hudson test. Id. at 370.
In both Parker and Thompson, the Courts applied the Central Hudson test without first
determining whether the statute implicated protected commercial speech or economic interests.9
8
See also Abramson v. Gonzalez, 949 F.2d 1567, 1570 (11th Cir. 1992) (holding that it is a violation of the
First Amendment to allow an unlicensed individual to practice psychology or one of the related fields while
prohibiting that person from “holding himself or herself out by any title or description incorporating [certain]
words”); Byrum v. Landreth, 566 F.3d 442, 449 (5th Cir. 2009) (holding unconstitutional a regulation prohibiting
certain forms of advertising by unlicensed individuals who are legally entitled to engage in interior design); Roberts
v. Farrell, 630 F.Supp.2d 242, 255 (D. Conn. 2009) (holding unconstitutional a Connecticut statute preventing
unlicensed interior designers from referring to themselves as “interior designers,” but allowing them to lawfully
perform interior design services without a license); Wang v. Pataki, 396 F.Supp.2d 446 (S.D.N.Y. 2005) (applying
the Central Hudson test to New York’s apartment information vendor law, which limited the information vendors
could include in apartment advertisements).
9
Plaintiffs also cite Pagan v. Fruchey, 492 F.3d 766 (6th Cir. 2007) (en banc), as support for their argument
that the PMDA burdens commercial speech. This case is unpersuasive as it, too, does not answer the question
before this Court and is distinguishable by its facts. In Pagan, this Court considered an as-applied challenge of the
constitutionality of a municipal ordinance prohibiting residents from parking on public streets. Although the
defendants asserted that the parking ordinance merely regulated the conduct of parking, they conceded that the city
was only concerned with the display of “For Sale” signs and only enforced the ordinance against those who engaged
in this particular type of commercial speech, not against all residents who parked their cars on the side of the road.
Therefore, the Court did not engage in an analysis of whether the statute’s language burdened commercial speech,
instead finding that in that as-applied challenge, “even if [it] construed the literal language of [the subsection] as not
implicating the First Amendment, Glendale concedes that it enforces the ordinance in a manner that does.” Id. at
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 18
In Thompson, for example, both of the parties “agree[d] that the advertising and soliciting
prohibited by the FDAMA constitute[d] commercial speech,” and the Court began its analysis by
applying Central Hudson to determine whether the statute impermissibly regulated that
commercial speech. 535 U.S. at 366. In Parker, too, this Court assumed that the statute in
question regulated speech and only determined whether the speech was protected before
proceeding to a Central Hudson analysis.10 Therefore, these cases fail to provide much guidance
for the parties in this case inasmuch as the business activity of Plaintiffs falls within the purview
of the PMDA, the primary purpose of which is to regulate the conduct of precious metals dealers.
Additionally, these cases are distinguishable by their facts. Under the PMDA, any
business holding itself out as willing to purchase non-exempt goods must be licensed, regardless
of the way in which it holds itself out. Parties like Plaintiffs are not able to operate as businesses
in the marketplace without a license. The PMDA does not require the infrequent garage sale-
goer to obtain a license, but it does require any party that holds itself out to the public for the
purpose of operating a precious metals business to obtain the required license. The statute
proscribes business conduct and economic activity, not speech. Without first obtaining a license
from the State, a precious metals dealer may not have a storefront with or without signage, may
not spread word to the public that it is open for business, may not place advertisements in the
newspaper, and may not function as an open, public, and visible business.
Although at first glance, the PMDA appears analogous to the FDAMA and the Kentucky
statute regulating dentists, those cases are inapposite in this context. In Thompson, pharmacists
legally produced compounded drugs but could not advertise them to the public. The statute did
not proscribe any conduct unless a pharmacist advertised the compounded drug. In Parker,
dentists could legally perform specialized procedures for the public but were unable to hold
themselves out as available to do so. In the instant case, Plaintiffs and others similarly situated
772. In the instant case, Defendants do not concede that the PMDA is enforced in a manner that violates the First
Amendment, and Plaintiffs have not carried their burden as they are required to do for a facial challenge by
demonstrating that a substantial number of instances exist in which the PMDA is enforced in an unconstitutional
manner. New York State Club Ass’n, 487 U.S. at 14.
10
See Parker, 818 F.2d at 509 (explaining that “advertising which is false, misleading or deceptive, or
which proposes an illegal transaction, is not protected by the First Amendment from state regulation.”).
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 19
are prohibited from functioning as businesses open to the public for the purchase of precious
metals unless they obtain licenses. The PMDA regulates all precious metals businesses
operating in a manner that is open and accessible to the public. Precious metals dealers must
obtain licenses and comply with the PMDA’s reporting, retention, and record-keeping
requirements, regardless of whether they advertise or post signage. In this case, the underlying
conduct of the unlicensed precious metals dealer is prohibited, as distinguished from the cases
cited by Plaintiffs.
The PMDA does not burden the commercial speech rights of unlicensed precious metals
dealers because such dealers do not have a constitutional right to advertise or operate an
unlicensed business that is not in compliance with the reasonable requirements of Ohio law.
Such dealers cannot “hold themselves out” to the public without a license, regardless of whether
they advertise. This case does not turn on advertising or solicitation, it turns on whether the
business in question holds itself out to the public, which can occur by posting a sign, placing
goods in an open window, simply conducting business in a manner that is visible to the public, or
otherwise making its wares available to the public. This Court properly applies rational basis
review in concluding that the statute does not violate Plaintiffs’ First Amendment rights.
D. Other Preliminary Injunction Factors
1. Irreparable Injury in the Absence of a Preliminary Injunction
Because this Court finds that Plaintiffs are not likely to succeed on the merits of their
First Amendment claim at trial, this factor weighs against affirming the district court’s order
granting a preliminary injunction. Plaintiffs do not have a constitutional right to engage in the
unlicensed business of precious metals dealing and they therefore do not have a First
Amendment right to advertise that they engage in such business when they lack a license to do
so. Although Plaintiffs and other similarly situated individuals and entities will have to obtain
licenses to comply with the PMDA in the absence of a preliminary injunction, this burden does
not rise to the level of a constitutional violation.
No. 13-3012 Liberty Coins, LLC, et al. v. Goodman, et al. Page 20
2. Substantial Harm to Others Caused by a Preliminary Injunction
Additionally, because the PMDA constitutes a valid exercise of the State’s police power,
this factor weighs in favor of reversing the district court and vacating the preliminary injunction.
If the government has a legitimate, and even compelling or substantial, interest in regulating
precious metals dealers to protect the public from theft, fraud, money laundering, fencing, and
even terrorism, as Plaintiffs concede, then the absence of such a regulation could cause
substantial harm to others. Although the district court found that Defendants presented
insufficient evidence to demonstrate a proper “fit” between the PMDA’s licensing requirement
and the governmental interest, as required under Central Hudson, such a fit need not be
demonstrated under rational basis review. In the instant case, where it is reasonable for the Ohio
legislature to have concluded that businesses dealing in potentially substantial quantities of
precious metals are likely to move stolen items through the marketplace, the absence of such a
licensing scheme could result in substantial harm to others.
3. Public Interest Not Served by a Preliminary Injunction
Finally, under this last factor, because the PMDA constitutes a valid exercise of the
State’s police power and does not impermissibly burden a constitutional right, the issuance of a
preliminary injunction fails to serve the public interest. Instead, the public interest would be
served by enforcement of the PMDA.
III.
CONCLUSION
For the foregoing reasons, we REVERSE the district court’s order granting a preliminary
injunction blocking enforcement of the PMDA, and REMAND for further proceedings
consistent with this opinion.