Federal appeals panel upholds ban on commercial sales in private homes

Thursday, May 4, 2000

The city of Coral Gables, Fla., can prohibit auctions of commercial goods in residential areas without violating the First Amendment, a federal appeals panel has ruled.

In April 1996, the city issued several citations to Jim Gall Auctioneers, Inc. for “conducting business from a residence” after the company held a three-day auction at a private residence during which various commercial goods were sold. The house itself was not offered for sale.

In May 1997, the city sent a letter to Gall saying that any future auctions of commercial goods at private residences would also be prohibited.

The auction company then sued the city in state court in September 1997, contending that the regulations violated its commercial-speech rights.

After the case was transferred to federal court, the city filed a motion to dismiss the suit. In May 1999, a federal district court sided with the city. The judge determined that the restrictions were narrowly drawn to protect the city’s substantial interest in preserving the aesthetics and privacy of residential areas.

On appeal, a three-judge panel of the 11th U.S. Circuit Court of Appeals agreed in Jim Gall Auctioneers, Inc. v. City of Coral Gables.

The unanimous appeals panel analyzed the city regulation under the U.S. Supreme Court’s test for commercial-speech restrictions, as set out in its 1980 decision Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n. Under Central Hudson, a regulation that impacts on truthful, non-misleading speech is constitutional if the regulation:

  • Serves a substantial government interest.
  • Advances the government interest in a direct and material manner.
  • Restricts no more speech than is necessary to accomplish its purpose.

“We see no reason to revisit the district court’s finding that the City has a substantial interest in maintaining the aesthetics and tranquility of its residential neighborhoods, as well as in regulating traffic flow,” the panel wrote it its April 27 opinion.

Gall argued that the city’s regulations were not directly related to advancing its interests because the city allowed garage sales and open houses. However, the appeals panel cited a prior 11th Circuit decision for the proposition that “the Constitution does not require the City to choose between curing all of its aesthetic problems or curing none at all.”

The panel then addressed the last prong of Central Hudson: whether the regulation was narrowly enough tailored. The panel noted that the regulation does not have to be the least restrictive means of serving the city’s interests. The panel said that the city had properly balanced the commercial interests of businesses and the city’s interests in “preserving the character of its residential neighborhoods.”

Calls to attorneys for the auction company and the city were not returned.