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Federal Court: Ohio Precious Metals Dealers Licensing Scheme Unconstitutional

Act regulates business in response to constitutionally-protected advertising, and prohibits legitimate purchases of gold and silver

Columbus, OH – A federal court late yesterday ruled that Ohio’s regulatory scheme governing those purchasing gold, silver, and other precious metals – the Precious Metals Dealers Act- violates the First Amendment.

The ruling, made by Judge Watson of the Columbus division of the Southern District of Ohio, paves the way for Ohio businesses, most prominently coin dealers, to resume purchases of items containing gold and silver content, and in particular, to resume advertising their interest in purchasing inventory consisting of precious metals, free from concern over confiscatory prosecution, fines and regulations.

The 1851 Center for Constitutional Law took up the coin dealers’ case and challenged the state law after the Ohio Department of Commerce threatened to shut down Liberty Coins, of Delaware, Ohio, if it refused to pay considerable fines and obtain a government license to advertise its business.

The lawsuit had sought recognition that the First Amendment applies to and protects “commercial speech,” such as coin dealers’ advertising, and that the Act’s prohibition of advertising by coin dealers was not a means of reducing gold and silver-related theft.

The lawsuit had also made claims asserting that requirements that business owners demonstrate that they have “good character,” “sufficient reputation,” “sufficient financial responsibility,” and “sufficient experience” prior to being permitted to run their businesses were unconstitutionally vague; and that the Act’s authorization of warrantless searches of business owners’ property and records at any time without notice violated their Fourth Amendment rights.

In his 28 page decision, Judge Watson, explaining that “the Act only prohibits the unlicensed buying of precious metals when commercial speech is involved,” emphasized that “a broad injunction completely prohibiting enforcement of the licensing provision is warranted.”

The order, an across-the-board rebuke to Ohio’s regulations and the cavalier enforcement tactics the Ohio Department of Commerce has against Ohio’s small businesses over the past year, concluded as follows:

  • The Department of Commerce failed to show “how holding one’s self out as willing to purchase precious metals contributed to the evils the State seeks to prevent. Moreover, Defendants have not shown how requiring a license only for purchasers of precious metals who engage in commercial speech directly and materially advance those interests.”
  • “[The state] has not shown that forcing those who engage in commercial speech to obtain a license is reasonable,” and “the restriction on commercial speech is more extensive than necessary.”
  • The Department of Commerce “incorrectly” asserts “that the law prevents fraud, money laundering, theft and terrorism by requiring those who wish to engage in the business of buying from the public gold, silver, and other precious metals to be licensed.”
  • “The breadth and number of exemptions undercuts the Defendants’ argument that the licensing scheme is narrowly tailored to protect against theft, fraud, or terrorism.”

The Court added that the Department of Commerce’s aggressive reading of the regulations was “nonsensical,” and that Ohio coin dealers and others “are unable to actually purchase precious metals without facing prosecution due to Defendants’ incorrect interpretation of the Act.”

“We are just trying to make it safe for small businesses to operate in Ohio – – a mission that we wish our state government would share, rather than thwart,” said Maurice Thompson, Executive Director of the 1851 Center. “This Act and those enforcing it treat small businesses who make gold and silver available as public utilities at best, and criminals at worst, irrespective of whether they have done harm.”

Heightened enforcement of the PMDA by the Department of Commerce, under the control of the Kasich Administration, comes in response to accelerated lobbying and financial contributions to candidates by the pawn brokers industry, which is exempt from the regulations, and a direct competitor of those who are subject to the Act. The enforcement, which would have put many coin dealers out of business, also comes at a time of rising precious metals prices, where an increasing number of Ohioans seek to use gold and silver to protect their savings against potential inflation caused by federal government increases in the money supply.

Thompson added “the state misguidedly seeks to advance its mission of ‘preventing theft and resale of precious metals’ through gag orders, warrantless searches, and criminalization of innocent small businesses. Fortunately, the First Amendment allows us to protect Ohioans’ rights to engage in truthful promotion of their businesses.”

Read the Court’s Order Granting Liberty Coins’ Motion for Preliminary Injunction HERE.


December 7, 2012: Bloomberg Businessweek: Ohio gold, silver dealers’ law blocked by judge

December 7, 2012: Ohio Watchdog: OH: Judge blocks catch-22 in state law that threatened entire industry

December 6, 2012: WYTV 33 News: Ohio gold, silver dealers’ law blocked by judge

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Federal Court Enjoins Shaker Heights from Blocking Message of Tax-Increase Opponents

Cleveland, OH – A federal court enjoined the City of Shaker Heights from further harassment of Shaker Heights residents city officials silenced through threat of a frivolous trademark lawsuit. The threat had come in retaliation for the citizens’ opposition to the City of Shaker Heights’ attempt to increase income taxes on residents through an August 7 vote.

The Northern District of Ohio Judge Christopher Boyko ordered that the City “shall take no action which interferes in any way with Plaintiffs’ use of the Shaker Heights Taxpayers Union Logo. . .

This Order comes in response to legal action filed on behalf of the Shaker Heights Taxpayers Union (“SHTU”). This legal action included a demand for an immediate injunction prohibiting city officials from engaging in any further threats, intimidation, or retaliation in response to the taxpayers’ legitimate exercise of their constitutional rights

Shaker Heights resident Mark Zetzer formed the SHTU to advocate against the City’s placement of a personal income tax increase on the August 7 ballot, arguing that Shaker Heights taxes were already the highest in the state. In addition Mr. Zetzer designed for the group a logo that parodies the City of Shaker Heights logo by replacing the City logo’s leaves with dollar signs, to represent City officials’ use of taxation as a first-resort (see the logo below).

Even though federal courts have repeatedly confirmed that the First Amendment trumps trademark law in the field of political speech, just as Mr. Zetzer’s message was beginning to gain traction, the City of Shaker Heights sent Mr. Zetzer a “Demand to Cease and Desist,” threatening that “[f]ailure to stop [use of the SHTU logo] will result in the City taking legal action to protect its trademark, including a request for an award of damages.”

In response, SHTU had been forced to stop using the logo in its campaign.

“This case featured an appalling attempt by city officials to silence anyone who stands in the way of their access to more of Shaker Heights residents’ earnings,” said Maurice Thompson, Executive Director of the 1851 Center. “The Court’s Order preserves the rights of Ohioans to effectively criticize their local governments, particularly as they push for more taxes, and further acknowledges that political speech parodying one’s government cannot be abridged.”

Added Thompson, “Conducting frivolous legal activity on city time is not just unethical – – it’s also a waste of public funds. If the City simply abstained from paying government employees to engage in activities such as instituting official-appearing legal threats to silence opposing viewpoints in the heat of an election, there would likely be no need to impose additional taxes on Shaker Heights residents.”

July 27, 2012: Cleveland.com: Judge says Shaker Heights can’t stop anti-tax group’s use of logo

 

The 1851 Center’s Complaint can be viewed here.

The Motion for a Preliminary Injunction is available here.

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Update: Estate Tax Repeal Signed into Law, Expires January 1, 2013

The legislature has passed a state budget that includes the repeal of Ohio’s Estate Tax.  Special thanks to the team at http://www.endohioestatetax.com/ for their leadership in accomplishing a feat that no liberty group before them had accomplished:  the elimination of a statewide tax.  In drafting the initiative and representing the effort, the 1851 Center was simply the professional scaffolding around this inspiring all-volunteer effort. Read more

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Jackson v. Bartec

This case is brought on behalf of Zeno’s Victorian Village, a family-owned Columbus tavern.

The Center argues the smoking ban unconstitutionally deprives business owners of fundamental property rights. It also argues that the state health officials’ methods while enforcing the ban exceed their constitutional authority and is at odds with the plain language of the ban.

“Irrespective of what one thinks of the merits of this law, it was never intended to result in the indiscriminate imposition of $5,000 citations on innocent business owners,” said 1851 Center Executive Director Maurice Thompson. “These enforcement complications are largely a function of trying to fit a square peg into a round hole: local taverns are not public property, and owners of these properties have a right to decide how their indoor air is used, just as potential patrons have a right to freely enter or exit.”

The 1851 Center believes this will be Ohio’s most important decision on property rights since the Ohio Supreme Court decided Norwood v. Horney in 2006, prohibiting takings of private property for economic development. “In Norwood, the Court called Ohioans’ property rights, including the right to use property, ‘fundamental’ and ‘sacrosanct,’” said Thompson. “This case will determine whether the Court really meant that.”

Historical Overview

In September, 2009, the 1851 Center offered to defend Zeno’s pro bono, challenging the constitutionality and enforcement of the Ohio smoking ban, after the Attorney General’s office filed a lawsuit to make an example of Zeno’s. The Center sought an injunction to prevent the Ohio Attorney General from seizing Zeno’s tavern and its assets to collect on faulty smoking ban citations. The suit was part of the 1851 Center’s ongoing defense of tavern owners unfairly victimized by the state’s smoking ban.

The legal center argued Ohio’s smoking ban unconstitutionally deprives business owners of fundamental property rights. It also argued that the state health officials’ methods while enforcing the ban exceeded their constitutional authority and is at odds with the plain language of the ban.

A Franklin County Common Pleas court agreed and ruled that state and local health officials had overstepped their authority in enforcing the law. “When an individual is asked to stop smoking but refuses, liability is transferred from the property owner to the individual,” wrote Judge David E. Cain in his February 2010 decision.

The Ohio attorney general appealed the decision to the Tenth District Court of Appeals, which overturned the lower court and prompted the current appeal to the Ohio Supreme Court.

“The Health Department and its designees have and continue to exceed their limited executive branch authority when they employ a policy of strict liability for the presence of smoking against Ohio’s business and property owners,” wrote Thompson in the Ohio Supreme Court filing.

Oral Arguments were made before the Ohio Supreme Court in October, 2011; we are currently awaiting the court’s decision.

Partners in Action

The Ohio Licensed Beverage Association, Buckeye Liquor Permit Holders Association, Ohio Liberty Council, COAST, and the Ohio Freedom Alliance filed amicus briefs with the high court supporting the 1851 Center’s position, and asking the Court to review the case.

Case Timeline

October 19, 2011 – Oral Arguments before the Ohio Supreme Court

March 6, 2011 – High Court Agrees to Review Smoking Ban Constitutionality

The Supreme Court of Ohio has agreed to become the first state supreme court in the nation to determine whether a statewide smoking ban violates bar owners’ property rights. The Court has also agreed to review whether the Ohio Department of Health has consistently exceeded its authority in fining business owners under the ban.

January 4, 2011 – Legal Center Asks High Court to Accept Smoking Ban Challenge

The 1851 Center for Constitutional Law, a public interest law firm, yesterday asked the Ohio Supreme Court to make a final determination on the legality of Ohio’s state smoking ban, and its enforcement. The legal center argues that state health officials’ misguided enforcement of the law violates Ohio constitutional protections, and unduly punishes innocent business owners. Also, the center argues the law itself is unconstitutional, when applied to certain types of bars. A copy of the court filing is available here.

February 5, 2010 – State Smoking Ban Enforcement Declared Unlawful

Ohio Department of Health officials and the Attorney General have substantially overstepped their authority in enforcing the state’s smoking ban law, a Franklin County Common Pleas Court ruled. In a cased won by the 1851 Center for Constitutional Law, a non-profit constitutional rights advocacy firm, Judge David E. Cain vacated all fines against Columbus bar Zeno’s. The decision renders the state’s current enforcement of the Ohio Smoke Free Workplace Act invalid and will require government officials to readdress its tactics.

Specifically, the court determined current enforcement of the state smoking ban unduly punishes innocent business owners. In explaining the decision, Judge Cain wrote, “when an individual is asked to stop smoking but refuses, liability is transferred from the property owner to the individual.”

“Law-abiding business owners have a right to operate their establishments free from the tyranny of government officials who overstep their authority and trample personal property rights, all while in pursuit of the extraction of fees,” said 1851 Center Director Maurice Thompson. “This decision should give pause to officials who cavalierly issue $5,000 fines without regard for the negative economic impact their actions impose on law-abiding small business owners.”

WTVN 610 Bob Conners WTVN 610 Bob Conners

October 14, 2011 – Toledo Blade: Budget cut may yield weakened smoke ban

October 14, 2011 – Washington Examiner: Ohio High Court to Hear Smoking Ban Case 

April 7, 2011 – Columbus Dispatch: High Court to Weigh Smoking Ban Fines

April 7, 2011 – Dayton Daily News: Smoking ban challenge to be taken up by Ohio Supreme Court

April 7, 2011 – Toledo Blade: Ohio Supreme Court to weigh ban on smoking

April 6, 2011 – Fox19: Ohio Supreme Court to review smoking ban constitutionality

April 6, 2011 – Bloomberg Businessweek: Ohio High Court to Hear Challenge to Smoking Ban

January 4, 2011 – Columbus Business First: Smoking ban detractor wants Ohio Supreme Court to weigh in

Sept 6, 2011 – 1851 Center’s reply brief

June 27, 2011 – Merit Brief filed in Ohio Supreme Court

February 22, 2010 – Trial court decision

January 3, 2010 – Motion for Jurisdiction

 

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Cincinnati Public Schools v. Conners

Cincinnati Public Schools has a policy of prohibiting the use of vacant public school buildings by charter schools and private schools.

Historical Overview

Theodore Roosevelt School, in Cincinnati, had purchased an unused school building located in the Fairmount neighborhood, where all CPS schools are in academic emergency status and 80 percent of families are minorities and live in poverty. The school opened in August, 2010, serving 210 students and employing 45 staff members.

CPS sued Dr. Conners, the operator of Theodore Roosevelt, attempting to enforce a deed restriction and shut down the school. The 1851 Center asserted such a restriction is void by Ohio’s public policy in favor of school choice and cheats taxpayers of sales revenue from the buildings.

Both the Hamilton County Court of Common Pleas and Appellate Court ruled in favor of Dr. Conners, affirming the following: CPS’s deed restriction is void due to Ohio’s public policy in favor of transferring taxpayer-owned school buildings to community schools; statewide public policy favors effectuating parental choice and educational opportunity through community schools; and Theodore Roosevelt is entitled to retain possession of the school and continue its operation.

“Our expectation is that the Supreme Court will decide to uphold a landmark ruling in favor of school choice in Ohio, and against adversarial school districts who attempt to block alternative schools’ right to exist,” said 1851 Center Executive Director Maurice Thompson. “Deed restrictions like the one struck down in this case were devised simply to stop new charter schools from opening in Cincinnati, so that CPS could retain students and protect its state funds. In its brief, CPS compares itself to a ‘gas station’ or ‘hotel’ that has a right to use hardball tactics against its competition. It seems to have forgotten that it’s a public school that exists to educate children, rather than to amass revenue.”

Partners in Action

Joining the 1851 Center in defending school choice, as amicus parties, are the Ohio Alliance for Public Charter Schools, the Black Alliance for Educational Opportunities, School Choice Ohio, the Ohio Coalition for Quality Education, and the National Alliance for Public Charter Schools. Joining Cincinnati Public Schools is the controversial government-funded lobbying organization The Ohio School Boards Association.

Timeline

February 7, 2011: Ohio Supreme Court hears Oral Arguments in Conners

The Ohio Supreme Court heard oral arguments in Cincinnati Public Schools v. Conners at 9:30a.m. on February 7, 2011. 

September 24, 2011: Ohio Supreme Court Will Review CPS v. Conners

The Ohio Supreme Court has granted certorari and will review this case. This will likely be the final resolution of the case.

March 11, 2011: Court of Appeals: CPS Deed Restrictions Against Charter and Private Schools Illegal 

Cincinnati Public Schools’ (CPS) policy of prohibiting the sale of unused available public school buildings to charter schools and private schools is unlawful and must end, today ruled the Court of Appeals for the First District Court of Appeals, Hamilton County.  This decision further rebuffs CPS efforts to shut down Theodore Roosevelt Community School and others, and is a victory for charter and private school operators throughout the state.

CPS appealed after a victory by the 1851 Center for Constitutional Law on behalf of Theodore Roosevelt Community School, a Cincinnati charter school CPS had sued to shut down.  The Court of Appeals decision, authored by Judge Sundermann, states: “We conclude that the trial court properly determined that the facilitation of community schools having access to classroom space was clear Ohio public policy. And the deed restriction that sought to prevent the use of the property for educational purposes was void as against this clear policy.”

The Court further stated:  “[w]e are not persuaded by CPS’s argument that the property was not ‘suitable’ for classroom use.  This argument is belied by the deed restriction itself, which allows the possibility that the restriction would not apply should CPS itself decide to use the property for school purposes in the future.”

This additional ruling exposing CPS to the loss of millions of dollars in funding from the Ohio School Facilities Commission (OSFC), which requires that school districts follow all state rules related to charter schools, including heeding charter schools’ right of first refusal to purchase all property “suitable for use as classroom space,” in order to be eligible for OSFC funding.  The fate of this funding is still in dispute, in a second case brought by the 1851 Center and the Ohio Coalition for Quality Education, pending before Judge Ruehlman in Hamilton County.

The court’s ruling affirms:

  • CPS’s deed restriction is void due to Ohio’s public policy in favor of transferring taxpayer-owned school buildings to community schools;
  • CPS’s deed restriction is void because it is in derogation of a statewide public policy in favor of effectuating parental choice and educational opportunity through community schools;
  • Although the deed restriction is void, Theodore Roosevelt is entitled to retain possession of the school, and continue its operation; and
  • CPS school buildings with such prohibitive deed restrictions are suitable for use as classroom space.

October 14, 2010: Cincinnati Public Schools Continues Charter School Vendetta in Appellate Court 

On October 14, the 1851 Center filed its brief in response to Cincinnati Public Schools’ appeal of a trial court ruling invalidating its efforts to eliminate school choice options in Cincinnati’s poorest communities.

In May, Ohio’s school choice movement won a significant victory when Hamilton County Common Pleas Court Judge Robert P. Ruehlman ruled that Cincinnati Public Schools (CPS) violated state law through its policy of prohibiting the sale of unused available public school buildings to charter and private schools.

The Theodore Roosevelt School opened in August 2010. However, CPS has appealed the case, now before the First Appellate District in Hamilton County. The school building was previously unused, and is located in the Fairmount neighborhood, where all CPS schools are in academic emergency, and 80 percent of families are of minority status and live in poverty.

CPS is attempting to enforce a deed restriction prohibiting the use of school buildings previously owned by CPS for use by a charter or private school. The school district likens itself to a private hotel or gas station that can prohibit “competitors” from acquiring its old buildings. However, those buildings are taxpayer-owned, and being sold at a considerable loss due to the deed restriction.

The 1851 Center countered that such a restriction is void by Ohio’s public policy in favor of school choice, and cheats taxpayers of sales revenue from the buildings. The trial court agreed with the 1851 Center.

“CPS is not a private business or individual: it is a taxpayer supported entity that should not target the state’s program of education, i.e. community schools, as ‘competing,’” the 1851 Center wrote in its filing with the appeals court.

The 1851 Center is joined by the Ohio Alliance for Public Charter Schools (OAPCS), which has filed an amicus brief in the action.

“Securing adequate and affordable facilities remains one of the greatest challenges to Ohio’s charter schools,” OAPCS wrote in its amicus brief. “The Cincinnati Public School District’s attempt here to prevent a public school from operating where a different public school once existed unlawfully exacerbates these facilities challenges and, at the same time, needlessly prevents students from getting a public education at the school of their choice.

July 06, 2010: Cincinnati Public Schools Blocked from Discriminating Against Charter and Private Schools

On July 6, Judge Ruehlman denied CPS’s desperate last-ditch effort to derail Theodore Roosevelt School’s opening by denying CPS’ Motion to Stay. This clears the way for the school to open in August; area families have already enrolled over 200 children. The school will employ approximately 40 people.

A Public Records Request by the 1851 Center reveals that CPS has already paid its hand-picked law firm over $32,000 in Cincinnati taxpayers’ money for the case, at an average rate of approximately $200 per hour, and at times as much as $256 per hour.

This is quite a sum, considering that Dr. Conners only paid $30,000 for the school building and the 1851 Center offered CPS an opportunity to settle beforehand. In addition, the amount also does not include the fees yet to be paid for the pending appeal.

May 28, 2010: Common Pleas Court says Cincinnati Public Schools Violated State Law 

Cincinnati Public Schools’ (CPS) policy of prohibiting the sale of unused available public school buildings to charter schools and private schools violates state law, yesterday ruled Hamilton County Common Pleas Court Judge Robert P. Ruehlman. The judge issued the ruling immediately from the bench.

In his ruling, Judge Ruehlman called CPS’s deed restrictions anti-competitive and acknowledged that CPS was merely attempting to suppress competition from charter and other alternative schools, and thwart school choice for the parents and children of Cincinnati.

The ruling halts CPS’s restrictive practice and opens the district to the loss of hundreds of millions of dollars in funding from the Ohio School Facilities Commission (OSFC). Last week, OSFC member State Rep. Kris Jordan moved to stop state facilities funding to CPS because of its purported violations. Jordan, prompted by the 1851 Center’s legal action against CPS, informed the commission the school district forfeited its statutory right to project funding because of repeated violations of state charter schools provisions. The court’s ruling bolsters Jordan’s assertion.

The court’s ruling affirms:

  • A contract term that violates public policy is void;
  • A contract term that hinders the purpose of a statute is void;
  • CPS’s deed restriction is void due to Ohio’s public policy in favor of transferring taxpayer-owned school buildings to community schools;
  • CPS’s deed restriction is void because it is in derogation of a statewide public policy in favor of effectuating parental choice and educational opportunity through community schools; and
  • Although the deed restriction is void, the conveyance must remain valid.

 

June 1, 2010: Cincinnati Enquirer: Judge Sets Charter School Precedent

March 11, 2011: Appellate Court’s ruling

October 14, 2010: OAPCS’s amicus brief

October 14, 2010: Appellate merit brief

March, 2010: Motion for judgment

March, 2010: Response to original complaint

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Drees Company v. Hamilton Township

Ohio Townships do not have the power to levy taxes.  That’s why they call them “fees.” This case argues that “fees” on new homeowners and developers are really taxes and are unconstitutional.

Timeline

February 14, 2011 – 1851 Center Files Amicus Brief at Ohio Supreme Court

On February 14, 2011, the 1851 Center for Constitutional Law filed an amicus brief with the Ohio Supreme Court, on its own behalf and on behalf of the Tax Foundation. The brief argues that Ohio townships, which do not have the power to levy taxes, cannot levy back-door taxes on new homeowners and developers merely by labeling those taxes as “impact fees.”

December 15, 2010 – The Ohio Supreme Court Accepts the Case on Appeal

February 1, 2010 –  1851 Center Files Amicus Brief at Appellate Court

The 1851 Center filed an amicus brief with the Twelfth District Court Appeals, arguing that Ohio townships, which do not have the power to levy taxes, cannot levy back-door taxes on new homeowners and developers merely by labeling those taxes as “impact fees.”

Media

March 3, 2011 – Listen to Maurice Thompson on the Tax Policy Podcast here.

Documents

February 14, 2011: 1851 Center’s Amicus Brief (Ohio Supreme Court)

February 1, 2010: 1851 Center’s Amicus Brief (Appellate Court)

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Ohio Grocer’s Association v. Wilkins

In May 2009, the 1851 Center filed an amicus brief in Ohio Grocers Association v. Wilkins. The brief argues that Ohio’s Commercial Activities Tax is an unconstitutional excise tax on food. It  is levied on Ohio grocers based on the amount of food they sell and grocers then pass the cost of the tax on to Ohioans when they purchase food.  The 1851 Center was recruited by the principal attorneys for the Ohio Grocers Association and worked in tandem with the Tax Foundation to explain the economics of the tax to the Supreme Court of Ohio.  Unfortunately the Supreme Court of Ohio recently overturned the Court of Appeals and ruled against the Ohio Grocers.

May 26, 2009: Ohio Grocers Amicus Brief