The state of California has not yet decided whether to appeal a federal court ruling earlier this month that found a real estate law violates First Amendment rights.

The Sacramento court decision, by U.S.

The state of California has not yet decided whether to appeal a federal court ruling earlier this month that found a real estate law violates First Amendment rights.

The Sacramento court decision, by U.S. District Court Judge Morrison England Jr., found that it is unconstitutional for the state to demand that Web sites obtain a real estate broker’s license to publish real estate ads and information while exempting newspapers from this same requirement.

Tom Pool, a spokesman for the state Department of Real Estate, said this week that the state is still considering whether to pursue an appeal. A meeting is planned between state legal representatives and California Real Estate Commissioner Jeff Davi, Pool said, and the state has 30 days to respond to the judge’s decision.

Davi, owner and managing broker of A.G. Davi Ltd. since 1989, was appointed as commissioner in October. He served as state director of the California Association of Realtors from 1994-97 and from 2003-04.

June Barlow, general counsel for the California Association of Realtors, said that the judge’s decision “raises more questions than it answers.”

 

“The real question is: When does a very robust Internet site cross the line from just raw advertising to brokerage activity. There really isn’t any guidance from this decision on that question, but it did clearly say that real estate can be regulated,” she said. “What is important is that the consumer is protected, especially in the Internet world where you don’t know where the location of the providers are all the time.”

 

She said the decision on whether to appeal is up to the Department of Real Estate, and the association has not taken a formal position on whether it would support an appeal.

The ruling was welcomed by New York-based ForSaleByOwner.com, a Web site established in 1997 that allows home buyers and home sellers to link online. ForSaleByOwner.com had challenged the law in May 2003, and the Institute for Justice represented the company in the lawsuit. The Institute for Justice is a libertarian public-interest law firm that has a mission to represent “entrepreneurs who seek to earn an honest living free from arbitrary and oppressive government interference.”

In early 2001, the California Department of Real Estate began vigorously enforcing the licensing law against “for-sale-by-owner” and classified advertising Web sites that allow individuals to buy and sell homes without a real estate broker.

“This is censorship, pure and simple,” said Steve Simpson, a senior lawyer for the Institute for Justice. “The First Amendment guarantees that Americans may speak their minds and communicate information without the approval of government censors. Allowing licensing officials to make distinctions among publications cannot be permitted if speech is truly to be free.”

The court agreed, finding the state’s effort to distinguish between newspapers and independent Web sites “totally unpersuasive.”

“(T)here appears to be no justification whatsoever for any distinction between the two mediums,” the court stated. “Even if a distinction was warranted in 1959, when the (newspaper exemption was passed), that does not mean that the same rationale for exempting newspapers remains viable in 2004, given the vast advances in technology that have occurred in the meantime.”

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The court also stated, “while Defendants vaguely attempt to paint newspapers as geographically situated and relatively more stable than Internet companies, they have not established why this should require Web sites like FSBOs to obtain a California broker’s license when online services doing exactly the same thing are not subject to any licensing requirement so long as they are operated by a ‘newspaper.’

”Defendants provide no reasonable explanation whatsoever for this requirement, let alone a compelling interest to justify it.”

ForSaleByOwner.com President Damon Giglio said in a statement, “It’s great that the law is starting to catch up with technology.”

The federal court case was the first to extend First Amendment protections to Internet publishers.

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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