New York State Association of Realtors, Inc. And Clifford Hall v. Gail S. Shaffer, Individually and as Secretary of State of the State of New York

27 F.3d 834, 1994 U.S. App. LEXIS 15774
CourtCourt of Appeals for the Second Circuit
DecidedJune 23, 1994
Docket1276, Docket 93-9160
StatusPublished
Cited by46 cases

This text of 27 F.3d 834 (New York State Association of Realtors, Inc. And Clifford Hall v. Gail S. Shaffer, Individually and as Secretary of State of the State of New York) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New York State Association of Realtors, Inc. And Clifford Hall v. Gail S. Shaffer, Individually and as Secretary of State of the State of New York, 27 F.3d 834, 1994 U.S. App. LEXIS 15774 (2d Cir. 1994).

Opinions

MESKILL, Circuit Judge:

This appeal requires us to decide primarily whether a regulation banning the solicitation of residential property owners by real estate brokers and salespersons in designated geographic areas, ostensibly as a means for combating the evil known as “blockbusting,” violates the free speech rights of realtors under the First Amendment to the Constitution. In concluding that it did not, the United States District Court for the Eastern District of New York, Spatt, J., declared, inter alia, the statute authorizing the creation of so-called nonsolicitation zones or areas, N.Y. Real Prop. Law § 442-h (McKinney 1994) (section 442-h), and two regulations, N.Y. Comp.Codes R. & Regs. tit. 19, § 178 (19 N.Y.C.C.R.R. § 178 or nonsolicitation regulation), establishing and enforcing the specific nonsolicitation zones at issue here, and N.Y. Comp.Codes R. & Regs. tit. 19, § 175.17(a) (19 N.Y.C.C.R.R. § 175.17(a) or antiblockbusting regulation), defining and prohibiting the practice of blockbusting, constitutionally valid both facially and as applied. See 833 F.Supp. 165. Since we need not focus on the facial validity of section 442-h to decide this appeal, we confine our inquiry primarily to the narrower issue of whether the nonsolicitation regulation constitutes an impermissible restriction on commercial speech. To that end, we conclude that such a regulation violates the First Amendment rights of realtors in this case. Accordingly, we reverse and remand.

BACKGROUND

Blockbusting is a practice whereby real estate agents artificially stimulate sales of residential property by making'representations to homeowners regarding the migration of a particular racial, ethnic, religious, or social group into the neighborhood. In its most systematic and crudest form, blockbusting entails the “churning” of a local real estate market, a practice in which real estate brokers engage in frenzied solicitation practices that prey upon the racial and ethnic fears of persons residing in transitional [836]*836neighborhoods as a means for increasing the volume of residential real estate transactions. While realtors gain the benefit of the commissions generated by the increase in sales, homeowners and communities suffer the detriment of declining property values and neighborhood instability brought on by panic selling, the fanning of racial tensions and promoting of ethnic stereotypes.

Although often difficult to prove, the practice of blockbusting has not gone unnoticed by federal and local governments. Indeed, federal, state, and municipal governments have instituted a variety of legislative initiatives aimed at combating and 'eliminating it. See, e.g., 42 U.S.C. § 3604(e); N.Y. Exec. Law § 296(3-b); IH.Rev.Stat. ch. 720, § 590/1 (1994); see also South-Suburban Hous. Ctr. v. Greater South Suburban Bd. of Realtors, 935 F.2d 868, 875-76 (7th Cir.1991) (describing the components and purpose of four different municipal ordinances restricting real estate solicitations in an effort to promote stability in communities), cert. denied, — U.S. -, 112 S.Ct. 971, 117 L.Ed.2d 136 (1992); Heights Community Congress v. Hilltop Realty, 774 F.2d 135, 137-38 (6th Cir.1985) (noting city’s efforts to promote racial openness and combat heavy real estate solicitations through municipal ordinances), cert. denied, 475 U.S. 1019, 106 S.Ct. 1206, 89 L.Ed.2d 318 (1986); Greater Baltimore Bd. of Realtors v. Baltimore County, 752 F.Supp. 193, 195 (D.Md.1990) (discussing county wide ordinances aimed at prohibiting blockbusting and related solicitation activity).

At issue here is one such initiative arising out of New York State’s twenty-plus year campaign to combat blockbusting. Accordingly, a brief history of that particular effort is helpful in understanding the context in which we decide this appeal today.

A. Regulations Prior to 1989

In 1969, the New York Legislature outlawed the practice of blockbusting. See N.Y. Exec. Law § 296(3-b). The task of enforcing the prohibition fell to the Office of the Secretary of State of New York (Secretary), who, under New York law, is charged with the general regulation of real estate brokers, including licensing and discipline. N.Y. Real Prop. Law §§ 441, 441-c; N.Y. Exec. Law § 91. Pursuant to that regulatory authority, the Secretary promulgated the antiblockbust-ing regulation defining the parameters of forbidden solicitation activity, 19 N.Y.C.C.R.R. § 175.17(a), the antiblockbust-ing regulation, and an enforcement provision creating cease and desist orders whereby homeowners residing in blockbusting prone communities could notify the state in writing that they did not want to be solicited by brokers seeking to sell or lease their property, 19 N.Y. Comp.Codes R. & Regs. tit. 19, § 175.17(b) (19 N.Y.C.C.R.R. § 175.17(b) or cease and desist regulation). To implement the cease and desist regulation, the Secretary published the list of those homeowners who requested that realtors refrain from soliciting them and the realtors were then prohibited from contacting those persons. The real estate industry, however, was free to solicit homeowners who did not request to be placed on the cease and desist regulation list.

Perceiving blockbusting to be serious in certain communities, the Secretary began in 1971 to promulgate administrative regulations restricting outright most forms of solicitation by realtors in specified geographic areas (nonsolicitation orders). These nonsol-ieitation orders, which were not unlike the restriction at issue on this appeal, were challenged in several state court proceedings with mixed results.

In Hawley v. Cuomo, 46 N.Y.2d 990, 389 N.E.2d 827, 416 N.Y.S.2d 232 (1979), disgruntled realtors chaHenged a broad nonsoli-eitation order covering certain neighborhoods located in an area encompassing Kings and Queens Counties. The Court of Appeals, citing the Secretary’s failure to show that “prohibited racial blockbusting tactics were prevalent” or “even ... that such practices were imminent” in the area encompassed by an order “so broad in geographic scope[,]” struck down the regulation as “arbitrary and capricious” and “an abuse of [administrative] discretion” under New York law. 46 N.Y.2d at 991-92, 389 N.E.2d at 828, 416 N.Y.S.2d at 233.

Eight years later, the Appellate Division upheld the suspension of a realtor’s license [837]*837for violating a nonsolicitation order covering designated areas in Queens County. Russo v. Shaffer, 131 A.D.2d 853, 517 N.Y.S.2d 212 (2d Dep’t 1987). The Court found that “the non-solicitation order did not violate the petitioners’ right to commercial free speech” because the governmental interest in preventing blockbusting was substantial, the interest was directly advanced by the nonsolicitation order, and the goal of combating blockbusting “could not have been as well served by an order less restrictive of commercial speech.” 131 A.D.2d at 853-54, 517 N.Y.S.2d at 213.

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27 F.3d 834, 1994 U.S. App. LEXIS 15774, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-york-state-association-of-realtors-inc-and-clifford-hall-v-gail-s-ca2-1994.