Since 2015, federal courts have been chipping away at the authority of state regulatory and licensing boards. And a new set of cases could help companies that are subject to the boards’ rules.
These cases challenge state regulations as violating the First Amendment. They will roll back limits on speech for many licensed professionals and let businesses offer advice and information services that used to be restricted to licensed professionals.
What happened in these cases?
In 2018, the Supreme Court struck down two California disclosure requirements related to family planning and abortion as unconstitutional. In that case, the Court rejected a broad set of professional speech limitations on the First Amendment. The Court ruled that state board limitations on speech were only justified where the limitation was either:
In two 2020 cases, the 5th U.S. Circuit Court of Appeals read those limitations narrowly. It questioned the legitimacy of professional regulations that limit speech, including those it previously said were lawful.
Last February, the 5th Circuit decided a case involving a company that converts existing legal descriptions of real property into computer-generated drawings and then sells them to community banks. The Mississippi Board of Licensure for Professional Engineers and Surveyors sued in state court to stop this business practice and to disgorge the company’s profits. The board argued the business was engaging in the unlicensed practice of surveying.
The company collaterally attacked the board’s regulations in a separate federal lawsuit. It argued the surveyor licensing requirements violated its First Amendment rights. That lawsuit was quickly dismissed by the trial court. The 5th Circuit reversed the trial court’s ruling but gave little guidance on how to evaluate the application of the First Amendment to the licensure requirement.
Last December, the 5th Circuit sent a case back to a Texas trial court to decide if one of the state’s rules violated the First Amendment. The rule requires veterinarians to see or have recently seen an animal before giving medical advice.
The vet who brought this case lost the same argument a few years ago. After the Supreme Court’s decision, he filed a new case, which was also quickly dismissed by the trial court. But the 5th Circuit resurrected his claim. It found persuasive his argument that a limit on when he could give advice violated his First Amendment rights. The appellate court sent that case back to the trial court for more fact finding.
What does this mean for businesses?
More litigation will be needed to find the boundary of any acceptable First Amendment limitations. But unless speech-limiting regulations only incidentally burden speech or are narrowly tailored to advance a compelling governmental interest, they are likely unconstitutional.
These rulings open the door for federal collateral challenges to state enforcement actions for licensees that may be subject to discipline. They also offer a path for businesses hoping to break into previously closed markets if their services are limited to giving advice or information. In the end, that is exactly what happened with the company that provided those real property descriptions. Just after the 5th Circuit decided the vet case, the company that brought the first suit announced a consent decree it entered with the Mississippi Board of Licensure for Professional Engineers and Surveyors that allowed it to keep operating.
Our Regulatory and Governmental Matters team will continue to monitor the First Amendment challenges to licensing and regulatory schemes. Please contact Andrew Coffman or any member of Phelps’ Regulatory and Governmental Matters team if you have questions or need advice and guidance.