The real estate board of New York, the city of
New York. Thank you Judge Livingston and may
it please the court, Sean Morata on behalf of
the plaintiff's appellants. We have two claims,
one under the First Amendment and one under the
Contracts Clause and I'll take them in that order.
On the First Amendment claim comes down to two
principles, which when accepted make the rest
of the First Amendment analysis follow up pretty
easily. First, it is illegal in the city of New
York under the Fair Act to offer tenant pay brokerage
services. The only thing that is illegal under
the Fair Act is advertising those tenant pay
brokerage services in connection with particular
apartments. Second, a broker advertising an apartment
with a landlord's permission is not an agent,
is not an employee, and is not a fiduciary or
otherwise working on the landlord's behalf. Rather,
an agent who advertises a listing with a landlord's
permission is merely advertising a listing with
a landlord's permission. That gives lie to the
city's tenant claim that tenant pay open listing
brokers are merely landlord's brokers by a different
name. Tying that to the legal principles. First,
under Sorrell, under 44 Liquor Mart, under Virginia
Board of Pharmacy, you can't, if you... you cannot
achieve non -speech goals by suppression of truthful,
non -misleading speech regarding legal services.
Second, if you can achieve the government's goals
without burdening speech, then you have to do
so. You can't use speech as your proxy. And that
ties into the three goals that the government
has put forward at various points with respect
to the Fair Act. The first goal they've put forward
in the committee report is aligning the principal
-agent relationship. But you could do that without
burdening speech by simply requiring, as the
Fair Act originally did, by requiring that the
party who hires the broker pay the broker. Second,
they've advanced, I think mostly in litigation,
an interest in tenant mobility, allowing tenants
more easily move from one apartment to the other.
But they achieve that goal, at least even arguably.
Only by presuming that what they have done is
they have barred tenant pay brokerage services,
but they have it the tenant mobility Issue is
mostly in litigation, but I thought that I mean
the bill sponsor and several council members
when I look at the record and help me understand
it if I'm missing something talked about increasing
housing mobility and there were advocacy groups
that Address the subject and submitted evidence
before the council Right, so there was a lot
of discussion about mobility, but I think there's
two problems. One, of course, individual statements
of various council members don't represent the
view of the council. I think the view of the
council is the one that's in the committee report,
which says, we are trying to align the principal
agent relationship. But the second answer, Judge
Livingston, is even if you accept there's mobility
interest, you don't solve it by banning speech.
Because remember, they haven't barred tenant
pay brokerage services. They've only said you
can't advertise it. And what the lesson from
Sorrell is, is that even if you have an interest,
an important interest in trying to make things
more affordable, you can't do that by banning
the speech at the side of the debate that you
think is making it more expensive. So in Sorrell,
the accusation was that if we allow these detailers
to go out armed with prescribing information,
they're going to talk doctors into prescribing
very expensive brand name drugs instead of cheaper,
just as effective, generic drugs. And they said,
the way we're going to bring down prices is we're
going to take away your ability to be armed with
this prescribing data. And what the Supreme Court
said was, you can't do that. If you want to try
to address the problem of high brand, you know,
prescribers prescribing high price brand name
drugs, you can do that. But you can't do it by
disarming the speech of one side of the debate.
That's what they're doing here. The city is saying
we don't like tenant pay. open listing brokers,
and therefore we're going to take away their
ability to advertise their services on places
like Street Easy. You can still go to a broker,
and a broker can still say, I'm going to show
you some apartments, but by the way, you're going
to have to pay me to do that. But the other side
of the debate, the land... It doesn't prohibit
the advertisement. I mean, it burdens the advertisement,
and that may be enough to bring this within First
Amendment scrutiny, but... But you can still
go ahead and advertise. You just can't get a
fee from a tenant after you do so. But what you
can't advertise is the perfectly legal service
of a tenant pay broker. So it's like saying,
for instance, you can advertise as an attorney.
But if you advertise as an attorney, you can't
collect a contingency fee from a plaintiff. Well,
you can still practice as an attorney, I guess.
But of course, what you've done is you've shut
down the perfectly legal practice of being a
contingency fee plaintiff's attorney. So I agree
with you, it may just be a burden, but if you
hold constant the legality of tenant pay brokerage
services, you have banned the advertisement.
And that's the important point here. Getting
to the issue of the city's, whether the city's
interests are substantial, you focus on the stated
purpose in the bill, that it's to properly align
the principal agent relationship in the rental
market. But isn't that - overall purpose to improve
mobility, to increase affordability. It may not
be effective in dealing with the housing crisis,
but isn't the purpose designed to do more than
just? There's a reason behind realigning the
principal agent relationship. So how can you
just focus on that and not recognize that The
testimony and the evidence and the investigation
done by the council all go to this issue of addressing
the problem that it's difficult for people to
move when they have to pay huge brokerage fees.
I think my easiest answer to that question is
to say, even if I spot you that that's the purpose
and it's an important purpose, they still haven't
shown the fit. Because if what you're trying
to do is you're trying to solve the fact that
people have to pay these fees Banning speech
doesn't achieve that goal and it doesn't and
you can achieve that it's not banning speech,
right? It's banning the the who pays for the
brokerage fee now it I Understand your argument
that it impacts First Amendment because it has
an impact on commercial speech But that's not
the the when looking applying the task, you look
at what is the substantial interest of the city.
And I'm more focused, we're sort of beyond the,
assume there's a First Amendment. Right. So if
I spot you the interest, then they have to show
the tailoring also under central Hudson. And
that's where so many laws have failed and where
I think that's where, quite frankly, this law
fails because it doesn't show why burdening the
speech of the brokers, maybe if you don't want
to say banning, at least significantly burdening
the speech of tenant pay brokers is going to
achieve any of the things that they do except
by saying that, well, if we burden the speech,
we've eliminated tenant pay broker fees. But
if that's the goal, then you can address the
issue of tenant pay broker fees directly. That's
the lesson of Sorel, a 44 Liquor Mart, and a
Virginia Board of Pharmacy. But the test isn't
whether it's going to be effective or whether
there's a better way to do it. It's whether the
way that's been the infringement is tailored
to address the issue, right? It is, but it's
a very rigorous tailoring. I mean, what Thompson
versus Western State Medical Center said is that
if you can achieve the goal without burdening
speech or burdening less speech, that's what
you have to do. And so when you look at things
like Central Hudson and Thompson and all the
others, they go through and say, here are lots
of other things you could do to achieve the goal.
It's not rational basis review where you say,
look, I know it's not perfect, but we give deference
because you're burdening First Amendment interests.
I do also have the contracts claim. I had a question
about that. I mean, the city is says in its briefing
that you've identified one contract and that
there's now. a moodness issue. Could you address
that point? Certainly, Your Honor. Of course,
when we presented the five contracts in the district
court, we didn't know when the de Cristo court
would decide the case. We didn't know when this
court would hear the case. I think what I'd say
is if the court would like another contract from
us that goes beyond October 31st, we are more
than happy to present it. But on the record,
as it came to this court, we had a perfectly
fine set of contracts. It was just the passage
of time. So if the court wants us to address
that issue, we're more than happy to do it. I
don't know what you mean by that. We're here
to adjudicate your case on a record that's before
us. Right, and on the record... You're offering
us a different record. Well, the problem seems
to be that the mootness issue only occurred on
Halloween when the last contract that we... I
don't even know if it's a mootness issue, Your
Honor, because it's not mootness as to the case.
It's maybe at most as the preliminary injunctive
relief, because the claim is you don't have a
particular contract that this injunction would
apply to. We pleaded in the complaint that there
are countless contracts of which... But I thought
the Fair Act precluded... entering into any future
contracts that involve this type of payment.
So how can you allege there's a current contract
unless it was one that was created before the
act was passed and somehow is still ongoing?
Otherwise it is moot, isn't it? And there are
contracts that meet that definition. The injunction
we are asking for under the contracts clause
claim is only for contracts that predate the
effective, the - That are still ongoing today.
That are still executory today. But you're offering
a contract that wasn't part of your case. Oh,
but it was part of our, I mean at the time that
the district court ruled, I mean our contracts
were still executory. What happened, I mean -
But what they are faulting us for is not presenting
a contract, not understanding that the district
court would rule when it was, and the court would
hold argument, and this court would hold argument
when it did. If this court had held argument
two months prior, we wouldn't have this issue.
Well, wasn't there evidence? I mean, Bond New
York alleged it had many tenant pay exclusive
listing arrangements. There were affidavits that
said that these contracts go beyond a year. So
that's right. There's not a specific contract,
but there's definitely. evidence before us that
these contracts exist. That's absolutely right,
Judge Livingston. There is evidence that say
these contracts do exist and they go for a while.
The response we got was, well, show us a contract.
So we gave them five contracts. It just so happens
that the five contracts that we pulled as exemplars
happened to have expired, the last one expired
on Halloween. But that doesn't take away from
the fact that there is evidence that there are
contracts that do fit the definition of what
would fall within the contracts claim. It's just
that I don't have a particular contract for a
specific building. Why wouldn't you have given
the court a contract that went on for, you know,
presumably indefinitely? Although I suppose they
now violate the law, wouldn't they? What? I don't
think people enter into indefinite relationships
or don't enter into limitless relationships because
you want the ability to reassess your relationship
with your broker. The fact that the five contracts
we pulled just didn't happen to fall within the
range of when this case was decided and argued,
I think is a coincidence of the contracts we
pulled. But we had to, at the time we compiled
this record, they were within the period that
they would have checked. It just happened to
be that Halloween was the last one. So your representation
to this court is that there are contracts that
are still ongoing? Yes. Like they don't expire
in two weeks or a month? I have asked directly,
and I have been told that if the court wants
a particular contract that is still executory,
we can get that. And as Judge Livingston mentioned,
there is more. general testimony and affidavits
in the record that said, these contracts, some
of them do go for quite some time, and there
are contracts that would fall within the injunction.
I agree that as time goes on, the number of contracts
the injunction would apply to are fewer and fewer
as contracts time out, but that's just a fact
of how contracts close claims work. shorter than
my friend. May it please the court, my name is
Jameson Davies for the Appellees. This court
should affirm the district's court orders denying
a preliminary injunction and dismissing the plaintiff's
First Amendment claims and denying a preliminary
injunction as a contrast clause claim. Plaintiffs
lost the policy battle and now attempt to recast
their policy objections as constitutional ones.
But these attempts fail as the district court
properly held. First, as the First Amendment
claim, the Fair Act simply does not affect speech.
The law doesn't bar the publication of anything
by anyone. Sorry, I apologize. Instead, it merely
provides that if a broker lists an apartment
with the landlord's permission, the broker cannot
later on engage in the conduct of collecting
the fee from the broker. It's a conduct regulation,
not a speech regulation. Well, how do you square
that with the US versus national treasury case
expressions here designed versus Schneiderman?
How do you square that position? You know, I
know it's regulating payment and not speech,
but how can you say it doesn't impact on speech?
Sure, so those cases talk about banning being
paid for the speech itself. So if you look at
the Treasury Employees Union case, that barred
people from getting paid for giving speeches
or writing books. If you look at the Veterans
Guardians case, they talk about that barred people
from getting compensation for their speech, for
consulting with veterans on these claims. Well,
aren't the brokers getting compensation in their
fees, in part, for their speech, for advertising
and listing? Exactly right. they're getting compensation
for consummating the transaction. The speech
is a predicate to that, but the regulatory object
and what they're getting compensation for is
the deal. So if you look to something like Clementine,
where the theater said, you know, this is making
it less profitable for us to engage in the speech
of putting on a play, the squirt said, no, that's,
you know, the fact that it's merely making your
speech less profitable is not a First Amendment
issue unless the regulatory object of the law
is to regulate speech itself. And here, the regulatory
object of the law is to regulate the conduct.
Didn't Clementine just essentially, it involved
a theater, so there was speech at issue, but
it was a generally applicable law about holding
public events and the need to check vaccination
status before you hold such events, right? It
was a generally applicable law, but I think the
rationale works here. And here, this law is.
You know, it's not generally applicable only
in the sense that to regulate brokers, you have
to regulate brokers. It wouldn't, you know, you
can't. In theory, it applies to everybody, but
brokers are the only relevant constituency who
could be regulated by this because they have
to be licensed by the state, et cetera. Well,
I mean, here, it regulates brokers and it prohibits
them from charging a fee to a particular class
of people they would otherwise charge. because
of their speech. I mean, that's the way that
seems pretty far afield to me from Clementine.
So help me understand what I'm missing. Sure.
I wouldn't say it's because of their speech.
I would just say that there is a predicate speech
act that happens. And there's a lot of times
that happens. There's a lot of laws that have
some incidental effect on speech. This court's
decision in the Ku Klux Klan case that we cite,
and numerous others. The fact that there is some
decrease in speech or some effect on speech isn't
the question. The question is whether the regulatory
object of the law is to bar speech. Assuming
for the moment that it did impact on speech,
can we get to the second issue, which is your
position that the Fair Act survives the intermediate
scrutiny test, which you claim should be applied,
not the test in Sorel. Right. I mean, I think
the test in Sorel is sort of a misnomer because
Sorel didn't a different test as this court is
recognizing Hugo. But yes, we satisfy intermediate
scrutiny. The law addresses several substantial
government interests. It directly advances those
interests, and it's not more extensive than necessary.
I think it's important to take a step back as
well. This case is talking about A2, a particular
subdivision, at least as to the First Amendment
claim. But when you're talking about the law's
interests and how it addresses them, that was
a sub piece of the law that addressed a specific
potential loophole that the council identified
during the course of addressing this law or addressing
the issue. But, you know, the law as a whole
is what we're looking at. But A2 dealt with the
reality of, you know, as the council investigated,
as numerous people testified, is you show up,
you're given, you've already paid potentially
a non -refundable fee. You're given a huge stack
of papers to sign. The bottom paper says, oh,
by the way, I was acting as your agent, so you
have to pay me. And that, the council recognized
that that's not really a... Correct true agency
relationship that it was an exploitative transaction
as even a revenue broker specified. It's an exploitative
transaction So that what the a2 piece? Seals
that loophole and says, you know, even if you're
nominally acting as the tenants agent if you've
Advertised on behalf of the landlord if you're
really working for the landlord Then you have
to be paid by the landlord. Why is that please?
Why is that necessary? to address the policy
interests that the regulation is aimed at. I
mean, why not just prohibit the conduct, prohibit
having tenant fees? I think it's necessary in
the sense that the city council, as is in the
record throughout, they didn't want to ban tenant
brokers. You can still go and have a tenant broker.
They can go and work on your behalf. So the council
was navigating where they wanted to continue
to have real state brokers who worked on behalf
of tenants, but they didn't want this situation
that they'd identified through their investigations.
And I think it's important to note that their
investigation, they had 50 people go out and
not one of them got an agreement at the outset
saying, oh, by the way, this is the fee, I am
working on your behalf. So it's addressing the
real world situation here. And I think it was...
charting a path between completely banning the
fees, which they objected to, you know, the city
council was addressing their objections in adding
this piece, revenue's objections, revenue brokers'
objections. And in the antiquities case that
we cite from this court says, you know, it doesn't
have to be a perfect fit. It has to be a reasonable
fit. And there's deference given to the city's
identification of the issues and its conclusions
about whether or not the law is likely to satisfy
those concerns. And that's also in view as well.
and I think, you know, we've identified 3 issues
that really don't dispute us on the variance
and transparency issue. They sort of barely dispute
us by making arguments about the record on the
housing mobility issue. But I think even if you
look to the committee report only, which I don't
think there's any reason to suggest that the
legislative history is limited to committee report.
The committee report, as the district court concluded,
and I'll point you to 672 and 673 of the record,
talked about the housing mobility issues. You
know, they're cherry picking one sentence out
of the committee report, but that was throughout
the committee report. And the district court
concluded that as well, both in the order on
appeal here and the later order denying a motion
for a stay pending appeal. Can you address the
contracts clause issue in the mootness? Sure.
So they, one, I think it's important to step
back. On this issue, in their reply, they cite
a motion to dismiss case. But we're past motion
dismissed. They bear the burden on a preliminary
injunction of showing irreparable harm. to show
irreparable harm, they have to show that there
are some contracts out there that would be affected
by the preliminary injunction that they seek.
And they haven't done so. They put in five contracts,
four of which were already post the date that
they say is the cutoff. So really, only one contract
was ever at issue, potentially. That contract
has expired. And so there's really no indication.
And they bear the burden on this issue. As we
point out in the Giuliani case, they have to
provide some evidence. preliminary injunction
is going to have some effect. There's some irreparable
harm that they can show. If you look to the affidavit
they're talking about, I think the one they're
talking about is on 938 of the record. It really
doesn't say anything about it. It says we have
some contracts. They might extend for a while.
It doesn't say really that they're going to be
contracts that were entered into before the cutoff
date and expire afterwards. And I think also,
even if there are some that might be going on,
Maybe they can point to some. It's important
to note also that the two things, which is that
they're not allowed under New York State law
to have automatically revolving exclusive listing
agreements. So there's going to be cutoff dates
for all of these at some point. If you look to
the ones they put in, they're usually six months
or a year. That seems to be the industry standard.
So they're likely to expire anyways. And sanitation
recycling says if there's a limited time left
on these contracts, it's much less likely there's
going to be a substantial impairment caused by
the law. I assume that we get past your mootness
point. And could you address on the contract
claim the fact that an earlier version of the
act, I think, did provide that it would apply
to transactions entered into after the law's
effective date? I mean, why was there any need
to reach these contracts that we're talking about?
Sure. So what the council was concerned with
was that folks would, you know, during the pendency
of the law would rush to enter into a very long
-term contracts that would essentially put them
outside of the law's scope. Wouldn't they be
vulnerable to a foreseeability? I think they
still would be vulnerable to the foreseeability
attack potentially. The concession that this
was foreseeable as of the date of the law's introduction
didn't come until litigation. I think the council
could reasonably have concluded that if they'd
passed that law, revenue would be here making
the opposite argument that it wasn't foreseeable
until the law was actually in effect. So I think
they don't have to assume that revenue is going
to make that concession later on in litigation.
And I also want to note that these are sort of
strange contracts in terms of substantial impairment,
because it's a contract between two parties that
just says, by the way, a third party is going
to have to pay the fee. Who's not a part of this
contract, we don't even know who it is yet. So
the fact that they're being impaired from being
paid by someone who's not even a part of the
contract, who they have at most a very contingent
right to collect from, I don't think there's
a significant impairment in that sense. Unless
there are any further questions, we'd urge the
court to affirm. We'll hear about it. Thank you,
Your Honor. I want to start by addressing the
loophole that my friend on the other side seems
to think that the publication bar, the publication
burden addresses. But the simple problem with
that is that if the city's investigation found
that some people who are tenants agents are not
living up to their obligations, you should hold
them to their obligations. So take, for example,
the tenants agent who only discloses his. his
status at the closing. Well actually, New York
Real Property Law 443 requires that the first
substantive contact between the broker and the
tenant, they be given a disclosure form that
says whose behalf I'm working on. Well, if they're
not complying with that law, you should hold
them to comply with that law. If you think there
are additional prophylactic measures that need
to be taken to disclose who you're working on
behalf of, maybe you can do that. But what you
can't do is say that, well, we're not going to
let you advertise your particular apartments
and still collect tenant pay brokerage fees,
which is, again, perfectly legal under New York
law. It's only when you have engaged in speech
as a precedent to that that your right to collect
from the tenant is taken away. So at most, what
the CASE investigation shows is you should deal
with brokers who are not doing their jobs, it's
not that you should be burdening speech. Second,
with respect to transparency, the city acknowledged
on JA 678 that we are addressing transparency
through a separate provision of the law that
requires that you clearly disclose on any listing
who the fees are going to be paid by and what
they are. And that solves transparency because
it's now on the street easy listing before you
ever contact the broker, which is what the city's
investigation revealed, which is I wasn't aware
of the fee until I was to the closing. Finally,
with respect to the contract claim, there is,
as has been pointed out, general information
in the record that there are many contracts.
The fact that the particular ones that we gave
are not still effective doesn't take away from
the fact that there is still evidence to survive.
Where is that evidence of the contracts and their
exact date? Well, it's not their exact date,
Your Honor. It's the bond affirmation, it's the
bond declaration, and then the declaration that
my friend pointed out, which says that we have
these exclusive listing agreements that continue
for a long - I looked at that. If it was page
938, it said one year and the latest January
2025, the latest listing. So what the bond declaration
says is many of them last one year, some last
beyond it. I agree with you that he does not
say, I have a particular building and it is still
continuing to this particular date. So none of
them is identified? There is not a particular
building identified. I will give you that. Sorry?
There is not a particular building for which
we are the exclusive broker for. There's not
a particular contract identified. I'm sorry,
Your Honor? There's not a particular contract
identified. There is not a particular contract.
I will give you that much, yes. Thank you. Thank
you both and we'll take the matter under advisement.