The Small Business Administration has been ordered to broaden its definition of the kinds of businesses it will assist. The reason: The old definition violated the constitutional guarantee of freedom of speech.
The irony of the case is that SBA got into the controversy precisely because officials there were trying to be sensitive to the First Amendment. Government money should not go to enterprises that publish or sell materials not in the public interest, they reasoned. But the Bill of Rights means that the government may not look at what someone wants to say and foster some and suppress others based on that content.
So the agency's solution was a rule that flatly denies SBA-backed loans to companies "engaged in the creation, origination, expression, dissemination, propagation, or distribution of ideas, values, thoughts, opinions or similar intellectual property, regardless of medium, form or content."
In practice, financing decisions were a bit more lenient than that language would suggest. There were exceptions for general-book and music distributors and publishers supported by advertising, for instance.
That meant that an entrepreneur could get SBA help in opening an all-purpose bookstore, but not one devoted to a particular topic. Using that standard, the agency turned down a loan application from the owner of a dinner theater. The producer sued, and on Nov. 12, the U.S. District Court in Denver, in Mission Trace v. SBA, threw out what the agency called the "opinion molder rule."
In fact, the rule does not let the agency off the hook, but forces it to look into just what kind of speech the would-be borrower plans to engage in, Judge Jim R. Carrigan noted. And it is not neutral: By okaying loans to commercial advertisers, for instance, it is favoring materialism over other attitudes toward property and wealth -- a favoritism that the First Amendment forbids, he wrote.
Carrigan did not conclude that the SBA has to underwrite every pornographic bookstore or strip joint planned for America's tenderloins. But he did say that the First Amendment demands that any decisions on the subject be tightly tied to clear social concerns and be based on narrowly written rules. A loan ban on outlets that would make sexually explicit material easily available to minors, for instance, would be permissible, he suggested.
In other cases, courts ruled that:
A real estate joint venture can be the kind of investment protected by federal securities laws. Some U.S. appellate courts say that statutes let defrauded investors sue only if the investment is one in which many persons bought similar shares. But the U.S. Court of Appeals in Denver took a more expansive view. Deciding a case in which an investor put up $80,000 for a half-interest in a subdivision development, the judges called the deal a "security" covered by the statutes. The indicators: The investor was promised a share in both operating profits and eventual capital gains.(McGill v. American Land, Nov. 12)
Workers can sue if their employer gets too snoopy. The Oregon Court of Appeals gave the go-ahead to a suit for "outrageous conduct" brought by a merchandising manager who claimed that he was fired from a chain store because he refused to stop dating a coworker. Not only was the social relationship not against store rules, the judges noted, but a jury also could infer that the manager's superiors wanted to hurt him, given evidence that the firing meant he lost 12 years worth of retirement benefits and that his bosses had questioned other employes about the suspected relationship.(Patton v. J. C. Penney, Oct. 9)
The Federal Trade Commission is stuck with its own lengthy procedures to win remedies for deceptive practices that companies have undertaken in the past. The agency has authority to go into federal court to seek injunctions against some violations of the FTC Act -- specifically, those that might bring real harm to consumers or other companies if not stopped immediately. It is a much quicker way to stop a scam than grinding the matter through the FTC's own administrative mill. But the U.S. Court of Appeals in San Francisco has limited that authority to ongoing violations and those that the commissioners believe are about to occur. When a company already has stopped the questionable scheme, the FTC cannot use the quick-court route to resolve a dispute, even if buyers continue to suffer from the old injuries.(FTC v. Evans Products, Nov. 5)
"Ladies day" discounts at bars or other businesses are unlawful. The California Supreme Court ruled that the state's civil-rights statutes bar such sex-based promotions, because those statutes demand that male and female patrons be treated equally.(Koire v. Metro Car Wash, Oct. 17)