Safeguarding Truthful, Harmless Speech

HB 1784: Safeguarding Truthful, Harmless Speech Testimony Presented Before the Missouri House Professional Registration and Licensing Committee on March 28, 2012

by Dave Roland

Chairman Brandom, Vice-Chairman Burlison, and members of the committee, I thank you for the opportunity to offer this testimony. My name is Dave Roland and I am the Director of Litigation and co-founder of the Freedom Center of Missouri, a non-profit, non-partisan law firm dedicated to research, litigation, and education in defense of state and federal constitutional principles. I have spent my entire career focusing on constitutional law while working with groups such as the Freedom Forum’s First Amendment Center, the Becket Fund for Religious Liberty, the Institute for Justice, and, just prior to founding the Freedom Center, with the ShowMe Institute. I am offering this testimony to explain why Missouri’s current real estate licensing laws violate both the First Amendment and Article I, section 8 of the Missouri Constitution, and to urge the passage of HB 1784 in order to remedy these constitutional deficiencies.

Kansas City Premier Apartments Until recently, I represented Kansas City Premier Apartments (KCPA), an internet-based service that helps members of the public by providing them with information about living and

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renting apartments in the Kansas City area.1 The business has several components, including an online database of apartment advertisements, a search function that allows visitors to view properties that match criteria of their own choosing, an online roommate-matching service, a collection of information about the advantages of living in Kansas City, a blog, and other social media outlets that help rental property owners keep prospective renters informed about their complexes. Using these tools, KCPA provides people who may not be familiar with the area easy access to a variety of factual information that can help them decide where they want to rent.

KCPA also hires independent contractors that prospective renters can speak to if they want assistance setting appointments to visit properties, getting directions to those properties, or if they have specific questions about the Kansas City area and its various rental options. KCPA’s services are free to the public.2 It does not collect rents or security deposits for property owners, nor does it handle tenant complaints for the properties. It does not prepare, review or execute contracts or other legal documents. It does not “show” apartments, and until the government forced the company to hire a licensed realtor to oversee the company no one associated with the company held themselves out as a licensed real estate broker or salesperson. All KCPA does is communicate truthful, harmless, and useful information to people interested in receiving it.

How Chapter 339 Is Being Enforced The Missouri Real Estate Commission is the government agency responsible for enforcing Missouri’s statutes regulating real estate brokers and salespersons. Those statutes make it unlawful for citizens to negotiate the rental or leasing of real estate (Mo. Stat. § 339.010.1(3)); to 1

I represented KCPA and its owners pro bono. I have never requested and they have never paid any fees for my assistance, including my statements here today.

2 Under its original businessmodel, if a renter told a property owner that they found that property through KCPA, the property owner would give KCPAa percentage of the first month’s rent.

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assist in the negotiation of any transaction intended to result in the leasing or rental of real estate (Mo. Stat. § 339.010.1(8));3 to list real estate for lease or rent (Mo. Stat. § 339.010.1(4)); 4 or to assist in the “procuring of prospects” that might result in the leasing or rental of real estate (Mo. Stat. § 339.010.1(7)),5 unless the State has granted permission for them to do so. See Mo. Stat. §§ 339.020 (unlicensed practice unlawful), 339.010.7 (establishing twelve categories of citizens exempted from the licensure requirements). Any violation of these provisions is a Class B misdemeanor, Mo. Stat. § 339.170, and may also result in a civil action initiated by the MREC. Mo. Stat. § 339.180.

Before KCPA began operating, its president contacted the MREC and asked if the business model required licensure; she was told that her proposed activities occupied a “grey area” of the law, but was given no further guidance. KCPA began operating without a license. In seven years of operation KCPA never received a complaint from any person they had assisted—but because one licensed realtor (who just so happened to have formerly employed KCPA’s president) complained to the MREC, the MREC sent letters threatening legal action — including criminal prosecution — against the company’s staff if they continued to help people. KCPA responded to the State’s threat by initiating a lawsuit against the MREC, arguing in part that Mo. Stat. §§ 339.010.1(3), (4), (7), (8), and 339.010.7 restricted speech within the protections of the First Amendment.

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The MREC argued that the statute’s use of the word “negotiate” includes any communication that merely informs another person what a landlord charges in rent or what amenities a property provides.

4 The Attorney General’s office actually told the Missouri Supreme Court that even the “Apartment Finder” magazines that can be found in almost every convenience store are technically illegal under current Missouri law.

5 Janet Carder, the Executive Director of the MREC stated under oath that Chapter 339 would make it a criminal offense for someone to help their mother find a rental property if the mother so much as baked a cake in appreciation. From the deposition of Janet Carder taken February 20, 2008: Q: So, for example, if my mother recently rented something, and I helped her with that and made a list or showed her things or, you know, things of that nature and if I was paid for that… would that then require me to have a license to do that?

A: Yes, if you’re going to do it for compensation. Shame on you, but yes… If you’re going to do compensation that would—I think that would probably raise to the level of real estate brokerage.

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Missouri Courts Fail To Protect Free Speech After the trial, the Platte County Circuit Court found that the MREC had not proven that any of the information KCPA provided about rental properties was false or misleading, and at trial the government’s own expert witness admitted that the kind of information KCPA was sharing was not complicated, did not require special training, and was not likely to harm anyone.

Despite these facts, the trial court ruled that the challenged provisions did not violate the First Amendment. At the Missouri Supreme Court, five of the seven judges voted to affirm the trial court’s judgment. The majority acknowledged that the challenged statutory provisions restricted KCPA’s speech, and it also conceded that KCPA’s speech is truthful and nonmisleading – yet it still ruled that the First Amendment did not apply.6 Chief Justice Teitelman and Judge Wolff registered a powerful dissent, emphasizing that Chapter 339’s provisions unjustifiably prevent KCPA from conveying truthful, nonmisleading speech. Noting that the Missouri Supreme Court’s responsibility is to apply the principle of the U.S. Supreme Court’s precedents, “not to pay homage to them while disregarding them,” the dissent argued that because the speech restrictions at issue targeted both content (speech on the subject of real property) and speaker (prohibitions only apply to those the Government has not given permission to speak), the speech restrictions warranted heightened judicial scrutiny. The dissent proceeded to apply the test required by the U.S. Supreme Court, citing Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 71 (1983), for the proposition that “[t]he party seeking to uphold a restriction on commercial speech carries the burden of justifying it.” Pointing out that the MREC had not shown “any studies or anecdotal evidence illustrating that having a license 6

The majority flatly ignored more than thirty years of U.S. Supreme Court rulings requiring the government to bear the burden of putting on evidence that shows why a speech restriction is necessary to further an important government interest. As the dissent pointed out, the Attorney General’s office had not introduced any such evidence – and in fact had argued that it should not be required to do so.

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prevents fraud and deception,” the dissent argued that the government had not met its required constitutional burden. The dissent also noted that the government could have accomplished any legitimate interest it might have simply by banning all false or deceptive speech about real estate.

The dissent correctly concluded that the current law’s broad restrictions on KCPA’s truthful, harmless speech cannot be squared with the First Amendment.

Truthful, Harmless Speech Should Not Be a Criminal Offense In the wake of Kansas City Premier Apartments, Inc. v. Missouri Real Estate Commission, Chapter 339 allows the government to imprison Missourians simply for sharing truthful, harmless information that helps a friend find a place to live. This is offensive to both the First Amendment and to Article I, section 8 of the Missouri Constitution, which reads: “That no law shall be passed impairing the freedom of speech, no matter by what means communicated: that every person shall be free to say, write or publish, or otherwise communicate whatever he will on any subject, being responsible for all abuses of that liberty.” The Missouri Supreme Court at one time recognized the scope and significance of this constitutional limit on government, stating that “[l]anguage could not be broader, nor prohibition nor protection more amply comprehensive,” Marx & Haas Jeans Clothing Co. v. Watson, 67 S.W. 391 (Mo. banc 1902), and clarifying that “[a]nything which makes the exercise of a right more expensive or less convenient, more difficult or less effective, impairs that right.” Ex parte Harrison, 110 S.W. 709, 710 (Mo. 1908).

But in Kansas City Premier Apartments, Inc. v. Missouri Real Estate

Commission, the Missouri Supreme Court all but utterly abandoned Article I, Section 8, stating that this provision no longer protects speech if the government claims to be exercising its police power. The Missouri Supreme Court may have abandoned our state constitution, but in HB 1784

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the General Assembly has an opportunity to uphold its own constitutional duty to ensure that Missourians need not fear that sharing truthful, harmless information with their fellow citizens will get themselves hauled into court.

Conclusion If passed, HB 1784 would still allow the government to punish any person who might spread false or misleading information about real estate. It would even allow the government to punish truthful speech if the government can show that the truthful speech will result in a specific, quantifiable injury to the person receiving the information. I respectfully submit that there are no circumstances whatsoever in which the government has any legitimate interest in criminalizing truthful, harmless speech. This bill gives the General Assembly an opportunity to end at least one threat to Missourians’ freedom of speech. It is my sincere hope that you will do so.

Thank you very much for your time and consideration.

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