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American Future Systems Inc. v. Pennsylvania State University


September 21, 1982


688 F.2d 907.

Seitz, Chief Judge, Aldisert, Adams, Gibbons, Hunter, Weis, Garth, Higginbotham, Sloviter and Becker, Circuit Judges. Judge Adams dissents from the denial of rehearing, and makes the following statement. Judges Aldisert, Hunter, Weis and Garth join in this statement.

Author: Sloviter


The petition for rehearing filed by appellees, The Pennsylvania State University, Board of Trustees of The Pennsylvania State University, John W. Oswald and M. Lee Upcraft, in the above entitled case having been submitted to the judges who participated in the decision of this court and to all the other available circuit judges of the circuit in regular active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is denied.


SLOVITER, Circuit Judge.

Under ordinary circumstances, the petition for rehearing and for rehearing in banc filed by appellees ("Penn State") which raises issues previously raised and rejected by an undivided panel of this court in its decision would not warrant any comment in conjunction with the order denying said petition. However, because five members of this court have joined in a statement which does not suggest that the panel's statement of the applicable law is incorrect, and have nonetheless voted for rehearing in banc notwithstanding our general policy to the contrary, see Internal Operating Procedures of the Third Circuit, Ch. VIII. B (1980), this may create some confusion when the case is remanded to the district court. Therefore a reiteration of the issues raised in the appeal, addressed in the opinion and decided by the court is called for.

The statement of Judge Adams that the opinion in this case may cause state universities to "lose a significant portion of their control over commercial activity on their campuses" overstates the issue, the record and the opinion in this case. Neither in AFS I nor AFS II was this court presented with the issue of the scope of a state university's power to close its residence halls to all commercial activity.

The issue decided by the court in AFS I was the validity of the distinction made by Penn State between the group demonstration and the consummation of sales. All of the parties, including counsel for Penn State, agreed at oral argument before this court that the issue of Penn State's restriction on the content of the group demonstration had not been raised or decided in AFS I. In AFS II, the court was faced with that issue, the right of the University to review the material which AFS would present in the group demonstration and to prevent AFS from including material referring to price, guarantee and payment plans in its group demonstration. Since the restriction which Penn State has placed on AFS is a content-based restriction on the material that it may include in its group demonstration, Judge Adams' statement that "The primary restriction [placed on plaintiff] appears to be that sales may not be consummated in the common areas of a dormitory" is surprising. Furthermore, a content-based restriction can hardly be characterized as a "minimal limit".

The suggestion implicit in Judge Adams' statement that the opinion in AFS II may narrow the range of options open to a state university interested in resisting use of the school premises to promote sales of merchandise overlooks the significant fact that Penn State, for whatever reason, has not resisted such sales. The record and the opinion in this case show that Penn State permits group demonstrations in common areas and consummation of the commercial transaction in the individual students' rooms. The district court granted summary judgment for Penn State on the challenge by AFS to Penn State's actions in restricting the content of the group demonstrations in common areas and on the students' challenge to the prohibition of group demonstrations in their dormitory rooms. AFS II held the summary judgment as to the AFS claim could not be upheld because Penn State had "failed to show a substantial state interest, much less a plausible explanation, for its policy differentiating between the nature of the information contained in the AFS demonstration." American Future Systems, Inc. v. The Pennsylvania State University, 688 F.2d 907, 913 (3d Cir. 1982). It also held that there was no evidence in the record to justify the restriction with regard to the dormitory rooms because Penn State had not introduced any relevant evidence in this case in that regard. Id. slip op. at 15.

The opinion can hardly be considered to have enunciated either a new or disputed legal principle by requiring that a state university desirous of regulating commercial speech must show that such regulation furthers substantial state interests. In the most recent Supreme Court decision omitted from the series of cases referred to by Judge Adams, the Court cautioned that although a state may regulate commercial speech, "the First and Fourteenth Amendments require that they do so with care and in a manner no more extensive than reasonably necessary to further substantial interests." The Court stated that states retain the authority to regulate advertising that "is inherently misleading or that has proven to be misleading in practice" and to promulgate "carefully drawn restrictions" which further other substantial state interest. In re R- M. J-, 455 U.S. 191, 207, 71 L. Ed. 2d 64, 102 S. Ct. 929, 939 (1982). See also Ad World, Inc. v. Township of Doylestown, 672 F.2d 1136, 1139 n.6 (3d Cir.), cert. denied, 456 U.S. 975, 102 S. Ct. 2240, 72 L. Ed. 2d 850 (1982).

The decision in this case leaves open to Penn State the opportunity on remand to produce evidence to show a substantial state interest to support its policy. In light of the incomplete record in this case and the preliminary stage at which this issue reached the court, it would hardly promote judicial economy and efficiency to have in banc consideration of the abstract issue alluded to by Judge Adams with respect to a state university's power to resist commercial activity.

JUDGE ADAMS dissents from the denial of rehearing, and makes the following statement:

Prior to 1975, commercial speech had no sanctuary in the First Amendment. Then in Bigelow v. Virginia, 421 U.S. 809, 44 L. Ed. 2d 600, 95 S. Ct. 2222 (1975), the Supreme Court held that the First Amendment protected the right of a Virginia newspaper to run advertisements which announced that abortions were legal in New York and offered the services of a New York referral agency. The statute in question banned all publications that prompted the procuring of an abortion. The court emphasized the great public interest in the subject matter. A year later, in Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748, 48 L. Ed. 2d 346, 96 S. Ct. 1817 (1976), the Court relied on Bigelow to hold that a Virginia statute that completely barred pharmacists from advertising the sale of prescription drugs was unconstitutional. A primary reason for this result was the Court's concern that "the poor, the sick, and the aged" might be substantially disadvantaged by this law. The lack of important information regarding needed medication could seriously limit their "enjoyment of basic necessities [of life]." 425 U.S. at 763-64.

The Supreme Court's next decision in this area was Bates v. State Bar, 433 U.S. 350, 53 L. Ed. 2d 810, 97 S. Ct. 2691 (1977), which struck down an Arizona Supreme Court rule which completely prohibited any advertising by a lawyer. One of the essential predicates of the Bates decision was that many citizens in Arizona and elsewhere were not obtaining legal assistance even when they needed counsel because of their fears regarding the price of such advice or because of their inability to locate a competent attorney.

In Ohralik v. Ohio State Bar, 436 U.S. 447, 56 L. Ed. 2d 444, 98 S. Ct. 1912 (1978), the court ruled that a state may forbid in-person solicitation of prospective clients by lawyers for pecuniary gain, and noted the distinction between commercial and noncommercial speech. Speaking for the Court, Justice Blackmun said:

We have not discarded the "commonsense" distinction between speech proposing a commercial transaction, which occurs in an area traditionally subject to government regulation, and other varieties of speech. Virginia Pharmacy. To require a party of constitutional protection for commercial and noncommercial speech alike could invite dilution, simply by a leveling process, of the force of the Amendment's guarantee with respect to the latter kind of speech. Rather than subject the First Amendment to such a devitalization, we instead have afforded commercial speech a limited measure of protection, commensurate with its subordinate position in the scale of First Amendment values, while allowing modes of regulation that might be impermissible in the realm of noncommercial [expression].

In our case, a governmental unit, here a state university, has not barred completely any advertising regarding plaintiff's products. Nothing prevents the plaintiff from communicating price information by placing signs on the school's bulletin boards or mailing circulars to the students, or even coming on the premises and presenting their merchandise to the students. The primary restriction seems to be that sales may not be consummated in the common areas of a dormitory. Penn State apparently has attempted to implement this restriction by placing minimal limits on the format of the group demonstration. No one has shown the great need for permitting sales of merchandise to be conducted in this manner.

I have a serious question whether a reasonable reading of Bigelow, Virginia Pharmacy, Bates, and Ohralik can yield a conclusion that a state university is constitutionally limited to a narrow range of options in regulating third parties permitted on school premises to promote sales of merchandise. I believe this matter should be addressed by the entire Court and the subject carefully considered before signals are sent to state universities indicating that they may well lose a significant portion of their control over commercial activity on their campuses.

I am concerned that, unless the courts are prepared to step back and take a careful review of the precedents, the extension of a juridical concept by a dry and remorseless logic can carry us to a position never contemplated by the Supreme Court when this doctrine was first propounded. Moreover, it is a position totally incompatible with our societal concerns.*fn1

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