Title: Jakanna v. Montgomery Coun

State: maryland

Issuer: Maryland Supreme Court

Document:

Jakanna Woodworks, Inc. v. Montgomery County, Maryland - No. 18,
1996 Term
CONSTITUTIONAL LAW - Commercial Speech -- Chapter 30-10 of the
Montgomery County Code, which requires merchants to obtain a
license before advertising a "closing-out sale," impermissibly
infringes upon the constitutional rights of merchants to engage in
truthful and non-misleading commercial speech.
Circuit Court for Montgomery County
DCA No. 4125
IN THE COURT OF APPEALS OF MARYLAND
No. 18
  September Term, 1996
___________________________________
JAKANNA WOODWORKS, INC.
v.
MONTGOMERY COUNTY, MARYLAND
___________________________________
Bell, C. J.
Eldridge
Rodowsky
Chasanow
Karwacki
Raker
Wilner
JJ.
___________________________________
Opinion by Chasanow, J.
___________________________________
      Filed:  February 13, 1997    
            
The issue in this case is whether Chapter 30-10 of the
Montgomery County Code, which requires merchants to obtain a
license before advertising a "closing-out sale," impermissibly
infringes upon the constitutional rights of merchants to engage in
truthful and non-misleading commercial speech, both because Chapter
30-10 is not narrowly tailored to advance directly a substantial
government interest and because it constitutes a prior restraint on
speech.  For the reasons set forth below, we hold that Chapter 30-
10 does impermissibly impinge upon truthful and non-misleading
commercial speech and that it is unconstitutional.
I.
Petitioner is a small, family-owned furniture store.  The
store has been in operation for fifteen years in Rockville,
Maryland.  In April 1995, Petitioner's proprietors, Morton Jacobs
and his wife, Anna Wheeler, decided to look for a larger store with
additional space in which to display furniture and to store
inventory.  The proprietors found a suitable space across the
street from the Rockville store and entered into a lease in May of
1995.
In order to minimize inventory damage and moving costs, Jacobs
decided to attempt to sell all of his old inventory before the move
and to order all new inventory for the new store.  A successful
sale of the old inventory would require advertisement, and Jacobs
decided to place an advertisement in the MONTGOMERY GAZETTE.  The
-2-
     A "closing-out sale" is also defined as:
1
"any sale in connection with which the person
conducting the sale represents that the sale
is being conducted, or must be conducted, for
reasons of
(A) economic or business distress,
(B) inability to continue business at the same
location, or
advertisement, which appeared on May 17, 1995, read:
"PUBLIC NOTICE
FURNITURE LIQUIDATION
One of the metro area's largest wood furniture
specialty stores is selling off their entire
store and warehouse inventory[.]  Every Floor
Sample and Every Item In Stock Must Be Sold!
SELLING OUT TO THE BARE WALLS
NOTHING HELD BACK!"
The advertisement went on to list the store's address, its hours of
operation, and the prices of some of the furnishings that would be
available for purchase.  It is undisputed that the address, hours,
and prices listed in the advertisement were truthful.
Unbeknownst to Jacobs, by using the word "liquidation" in the
advertisement, and perhaps based on the advertisement's content, he
had advertised a "closing-out sale" in violation of Chapter 30-10
of the Montgomery County Code.
"`Closing-out 
sale' 
includes 
any 
sale
advertised, represented or held under the
designation of `going out of business,'
`discontinuance of business,' `selling out,'
`liquidation,' 
`lost 
our 
lease,' 
`must
vacate,' `forced out,' `removal' or any
similar designation but does not include the
closing out of an item of merchandise."1
-3-
(C) the age or health of an owner of the business."
MONTGOMERY COUNTY CODE, § 30-10(a)(1)(1994).
     Section 30-10(b)(1) provides:
2
"A person must not advertise or offer for sale
in 
the 
County 
merchandise 
under 
the
description of `closing-out sale' ... unless
the owner of the business obtains a license to
conduct the sale from the [Director of the
Office of Consumer Affairs]."
MONTGOMERY COUNTY CODE, § 30-10(b)(1).  Effective July 1, 1996, the
ordinance was amended, and the Department of Housing and Community
Affairs was substituted for the Office of Consumer Affairs.
MONTGOMERY COUNTY CODE, § 30-10(a)(2)(1994).  Chapter 30-10 prohibits
any person from advertising a "closing-out sale" without first
obtaining a license from the Director of the Office of Consumer
Affairs ("Director").  MONTGOMERY COUNTY CODE, § 30-10(b)(1).   To
2
receive such a license, one must file an application under oath and
pay an application fee.  MONTGOMERY COUNTY CODE, § 30-10(b)(2),(3).
The application, which must be filed no later than 14 days before
the opening date of the sale, must contain
"all relevant facts relating to the sale,
including:
(A)  the first and last dates of the
proposed sale;
(B)  the date when the owner of the
business intends to stop the operations of the
business at the location or locations listed
in the application;
(C) 
 
a 
complete 
inventory 
of 
the
merchandise to be sold;
(D)  a list of all persons with an
-4-
ownership interest in the business if the
business does not have publicly-traded shares;
(E)  the text of all advertising that
will be placed in print or electronic media in
connection with the proposed sale; and
(F)  all details necessary to locate
exactly and identify the merchandise to be
sold."
MONTGOMERY COUNTY CODE, § 30-10(b)(2)(A)-(F).  The penalty for
violating Chapter 30-10 is a $500 fine for every day that the
advertisement appears.  MONTGOMERY COUNTY CODE, §§ 1-19, 30-10(d).
The statute states that, after receiving all of the
information required by Chapter 30-10 and the application fee, the
Director "may" grant a license if she is "satisfied ... that the
proposed sale is consistent with the proposed advertising."
MONTGOMERY COUNTY CODE, § 30-10(b)(3).  The Director testified at trial
that, although not required to do so by the statute, she would make
an on-site investigation of an applicant's premises before deciding
whether to grant a license.  The inspections "could take a couple
of days."  Chapter 30-10 does not explicitly establish any time
within which the Director must announce his or her decision whether
to grant or deny a license.
Jacobs was not aware of the requirements of Chapter 30-10, and
he did not apply for a license before he placed his advertisement
in the MONTGOMERY GAZETTE.  As a result of his advertisement, Jacobs
was issued a citation, which provided that he could either stand
trial or pay a $500 fine.  The citation read:  "the word
-5-
[liquidation] can only be used in connection with a closing out
sale, which requires a License.  [Jakanna Woodworks] did not have
a License."  Petitioner chose to stand trial in the District Court
of Maryland rather than to pay the fine assessed, and the
proceedings took place in October of 1995.  The judge found that
Petitioner had violated Chapter 30-10 and imposed a $100 fine.  
Petitioner appealed the judgment to the Circuit Court for
Montgomery County, and a trial de novo was held in January of 1996
before Judge Pincus.  Petitioner argued that Chapter 30-10 was an
overly broad regulation of commercial speech and an invalid prior
restraint that violated the First and Fourteenth Amendments to the
United States Constitution and Article 40 of the Maryland
Declaration of Rights.  Petitioner argued that the circuit court
should apply a four-part, intermediate scrutiny test to resolve the
issue of overbreadth and that the court should examine whether the
statute provided sufficient procedural safeguards to determine
whether it was a valid prior restraint.
Montgomery County ("the County"), the defendant below, did not
address the overbreadth argument, and it only briefly addressed one
of Petitioner's prior restraint arguments.  Instead, it argued that
the ordinance should be presumed valid and that it had a "clear,
rational purpose to protect consumers."  Based on its belief that
advertisements containing the words listed in the ordinance often
are untruthful or misleading, the County enacted the ordinance to
-6-
protect consumers.  The Director confirmed, however, that a
citation was issued to Petitioner solely because the word
"liquidation" appeared in its advertisement and not because she
knew or suspected that the advertisement was false or misleading.
Petitioner was issued a citation because its advertisement, which
used one of the trigger words listed in the ordinance, fell within
the scope of Chapter 30-10 and, therefore, required a license.
At the close of all evidence, Judge Pincus, apparently
accepting the County's argument that no serious First Amendment
violation was at hand and that no overbreadth or prior restraint
analysis was required, concluded that Chapter 30-10 was a
"legitimate exercise of governmental power" and that the ordinance
served "a legitimate governmental interest."  The judge stated that
he could find nothing unreasonable about the law and found that it
did not violate either the U.S. Constitution or the Maryland
Declaration of Rights.  Judge Pincus imposed a $100 fine.
Because the Circuit Court for Montgomery County had already
provided appellate review of the District Court judgment,
Petitioner was not able to have the judgment of the Circuit Court
reviewed by the Court of Special Appeals.  Maryland Code (1974,
1995 Repl. Vol.), Courts & Judicial Proceedings, §§ 12-302, 12-305.
This Court granted Petitioner's petition for a writ of certiorari
in April of 1996.
II.
-7-
We begin by recalling that the First Amendment to the United
States Constitution applies to the states via the Fourteenth
Amendment, see Central Hudson Gas v. Public Service Comm'n, 447
U.S. 557, 561, 100 S.Ct 2343, 2349, 65 L.Ed.2d 341, 348 (1980);
Freedman v. State, 233 Md. 498, 501, 197 A.2d 232, 234 (1964),
rev'd on other grounds, 380 U.S. 51, 85 S.Ct. 734, 13 L.Ed.2d 649
(1965), and that the freedoms protected by Article 40 of the
Maryland Declaration of Rights have been interpreted by this Court
to be co-extensive with the freedoms protected by the First
Amendment.  Freedman, 233 Md. at 505, 197 A.2d at 235-36 ("The
guaranty of freedom of speech and press ordained in Art. 40 would
appear to be, in legal effect, substantially similar to that
enunciated in the First Amendment, and it is significant that Art.
40 has been treated by this Court as in pari materia with the First
Amendment.").  Thus, the issues in this case may be resolved by
applying United States Supreme Court case law interpreting the
First Amendment.  Several well-settled principles have emerged from
the Supreme Court's interpretation of the First Amendment, both as
to commercial speech and as to prior restraints on speech.
A.
Commercial speech is "expression related solely to the
economic interests of the speaker and its audience."  Central
Hudson, 447 U.S. at 561, 100 S.Ct at 2349, 65 L.Ed.2d at 348
-8-
(citing Virginia Pharmacy Board v. Virginia Citizens Consumer
Council, 425 U.S. 748, 762, 96 S.Ct. 1817, 1825-26, 48 L.Ed.2d 346,
359 (1976)).  Commercial speech is protected from unwarranted
governmental regulation, however, because commercial speech "not
only serves the economic interest of the speaker, but also furthers
the societal interest in the fullest possible dissemination of
information."  Central Hudson, 447 U.S. at 561-62, 100 S.Ct. at
2349, 65 L.Ed.2d at 348.  Because society benefits only from the
full dissemination of certain kinds of commercial speech, however,
"[t]he Constitution ... accords a lesser protection to commercial
speech than to other constitutionally guaranteed expression."
Central Hudson, 447 U.S. at 562-63, 100 S.Ct. at 2350, 65 L.Ed.2d
at 348-49 (citing Ohralik v. Ohio State Bar Assn., 436 U.S. 447,
456-57, 98 S.Ct. 1912, 1918-19, 56 L.Ed.2d 444, 453-54 (1978)).  
A governmental restriction on commercial speech will be
tolerated if the restriction satisfies the four-part, intermediate
scrutiny test enunciated by the Supreme Court in Central Hudson:
  
"At the outset, we must determine whether the
expression 
is 
protected 
by 
the 
First
Amendment.  For commercial speech to come
within that provision, it at least must
concern lawful activity and not be misleading.
Next, we ask whether the asserted governmental
interest is substantial.  If both inquiries
yield positive answers, we must determine
whether the regulation directly advances the
governmental interest asserted, and whether it
is not more extensive than is necessary to
serve that interest."
Central Hudson, 447 U.S. at 566, 100 S.Ct. at 2351, 65 L.Ed.2d at
-9-
351.  In Central Hudson, the Supreme Court struck down a regulation
of the Public Service Commission of the State of New York that
banned all forms of promotional advertising by an electrical
utility.  The Commission argued that the regulation served the
substantial state interests of promoting energy conservation and
ensuring fair rates.  Central Hudson, 447 U.S. at 559-60, 100 S.Ct.
at 2347-48, 65 L.Ed.2d at 346-47.  Promotional advertising, the
Commission argued, could send "misleading signals" to consumers by
appearing to promote energy consumption, which necessarily would be
detrimental to the state's goal of energy conservation.  Central
Hudson, 447 U.S. at 560, 100 S.Ct. at 2348, 65 L.Ed.2d at 347.
Also, the Commission stated that any additional electricity would
be more expensive to produce, yet the Commission argued that the
additional power would likely be sold at a cost lower than the cost
of generation.  Id.  All consumers would be forced to pay higher
rates to subsidize the lower pricing, and this would not serve the
state's goal of ensuring fair and efficient rates.  Id.
The Supreme Court analyzed the New York regulation pursuant to
the four-part test outlined above.  The Court explained that the
speech being banned, which was not inaccurate and did not concern
illegal activity, was entitled to First Amendment protection.
Central Hudson, 447 U.S. at 566-68, 100 S.Ct. at 2351-52, 65
L.Ed.2d at 351-52.  The Court agreed that the two governmental
interests served by the regulation, ensuring fair and efficient
-10-
rates and conserving energy, were substantial.  Central Hudson, 447
U.S. at 568-69, 100 S.Ct. at 2352-53, 65 L.Ed.2d at 352-53.  The
Court then stated that the regulation did not directly promote the
interest of ensuring fair and efficient rates but that the
regulation 
did 
directly 
advance 
the 
interest 
of 
energy
conservation.  Central Hudson, 447 U.S. at 569, 100 S.Ct. at 2353,
65 L.Ed.2d at 353.  The Court noted, however, that the complete ban
prohibited promotional advertising "that would cause no net
increase in total energy use" or that could have a beneficial
impact.  Central Hudson, 447 U.S. at 570, 100 S.Ct. at 2353, 65
L.Ed.2d at 353.  Thus, the Court declared the regulation to be
invalid because it was "more extensive than necessary to further
the State's interest in energy conservation."  See Central Hudson,
447 U.S. at 569-71, 100 S.Ct. at 2353-54, 65 L.Ed.2d at 353-54.  
The Central Hudson intermediate scrutiny test was recently
applied in Florida Bar v. Went For It, Inc., 515 U.S. ___, 115
S.Ct. 2371, 132 L.Ed.2d 541 (1995).  In Florida Bar, the Supreme
Court upheld two rules of the Florida Bar that, together,
prohibited lawyers from soliciting, directly or indirectly, victims
of an accident or disaster, or the relative of such victims, by
direct mail within 30 days of the accident or disaster.  Florida
Bar, 515 U.S. at ___, 115 S.Ct. at 2374, 132 L.Ed.2d at 547.  The
rules were adopted in response to the results of a two-year study,
conducted by the Florida Bar, of the effects of lawyer advertising
-11-
on public opinion.  Id.  The study revealed that "direct mail
solicitations in the wake of accidents are perceived by
[Floridians] as intrusive...."  See Florida Bar, 515 U.S. at ___,
115 S.Ct. at 2376, 132 L.Ed.2d at 550.  The Bar adopted the rules
to prevent Florida attorneys from engaging in "deplorable" conduct
that would further injure victims and their relatives and that
would degrade the already "flagging" reputations of the attorneys
themselves.  Florida Bar, 515 U.S. at ___, 115 S.Ct. at 2376, 132
L.Ed.2d at 549-50.  A Florida attorney and his wholly-owned lawyer
referral service challenged the constitutionality of the two rules
on First and Fourteenth Amendment grounds.  Florida Bar, 515 U.S.
at ___, 115 S.Ct. at 2374, 132 L.Ed.2d at 547.
The Court explained that the speech the Bar sought to regulate
was not misleading and, therefore, that the rules could be
tolerated only if they survived intermediate scrutiny under the
Central Hudson test.  Florida Bar, 515 U.S. at ___, 115 S.Ct. at
2375-76, 132 L.Ed.2d at 549.  The Court easily concluded that the
rules served the substantial interest of "protecting the privacy
and tranquility of personal injury victims and their loved ones
against intrusive, unsolicited contact by lawyers," Florida Bar,
515 U.S. at ___, 115 S.Ct. at 2376-77, 132 L.Ed.2d at 549-50, as
well as the interest of preserving the integrity of the legal
profession.  Florida Bar, 515 U.S. at ___, 115 S.Ct. at 2381, 132
L.Ed.2d at 556.  A summary of the Bar's two-year study of the
-12-
effects of lawyer advertising on public opinion, which contained
anecdotal and statistical data supporting the Bar's position, was
submitted to the Court, and the summary convinced the Court that
the rules directly and materially advanced the Bar's interest.  See
Florida Bar, 515 U.S. at ___, 115 S.Ct. at 2377-79, 132 L.Ed.2d at
550-52.  Finally, the Court held that because solicitations were
banned for such a brief time, and because ample opportunities to
obtain similar information elsewhere during the temporary ban
existed, the rules were "reasonably well-tailored to [the Bar's]
stated objective...."  Florida Bar, 515 U.S. at ___, 115 S.Ct. at
2380, 132 L.Ed.2d at 555.  The Court concluded with a summary of
its holdings:
"The Bar has [a] substantial interest both in
protecting injured Floridians from invasive
conduct by lawyers and in preventing the
erosion of confidence in the profession that
such repeated invasions have engendered.  The
Bar's 
proffered 
study, 
unrebutted 
by
respondents 
below, 
provides 
evidence
indicating that the harms it targets are far
from illusory.  The palliative devised by the
Bar to address these harms is narrow both in
scope and duration.  The Constitution, in our
view, requires nothing more."
Florida Bar, 515 U.S. at ___, 115 S.Ct. at 2381, 132 L.Ed.2d at
556.
B.
A statute, ordinance, or regulation that prevents expression
-13-
unless and until a license or permit is obtained from a
governmental official or group is a prior restraint on speech.
See, e.g., Saia v. New York, 334 U.S. 558, 559-60, 68 S.Ct. 1148,
1149, 92 L.Ed. 1574, 1577 (1948); Shuttlesworth v. Birmingham, 394
U.S. 147, 150-51, 89 S.Ct. 935, 938-39, 22 L.Ed.2d 162, 167 (1969).
Prior restraints "present[ the] danger of unduly suppressing
protected expression," see Freedman v. Maryland, 380 U.S. at 54, 85
S.Ct. at 737, 13 L.Ed.2d at 652, and therefore, "bear[] a heavy
presumption against [their] constitutional validity."  Bantam Books
v. Sullivan, 372 U.S. 58, 70, 83 S.Ct 631, 639, 9 L.Ed.2d 584, 593
(1963).  That heavy burden may be rebutted, however, and a prior
restraint on speech may be tolerated, if adequate procedural
safeguards exist to protect against unduly suppressing protected
speech.  Freedman, 380 U.S. at 58-60, 85 S.Ct. at 738-39, 13
L.Ed.2d at 654-55.  
In Freedman, the Court struck down a Maryland statute that
prohibited, among other things, the sale or exhibition of any film
without a license from the State Board of Censors.  380 U.S. at 52,
85 S.Ct. at 735, 13 L.Ed.2d at 651.  Freedman, a filmmaker,
challenged the statute on the ground that it risked unduly
suppressing protected expression because any exhibition of a film
was prohibited until the Board reached a decision or, if the Board
denied a license, until the exhibitor could pursue a time-consuming
appeal in the Maryland courts.  Freedman, 380 U.S. at 54-55, 85
-14-
S.Ct. at 737, 13 L.Ed.2d at 652.  Thus, speech that might later be
held, after judicial review, to be protected by the First Amendment
potentially could be suppressed for a lengthy period of time.
To avoid such an occurrence, the Supreme Court outlined three
procedural safeguards that a prior restraint on speech must contain
if it is to be upheld against a First Amendment challenge:  
"(1) any restraint prior to judicial review
can be imposed only for a specified brief
period during which the status quo must be
maintained; (2) expeditious judicial review of
that decision must be available; and (3) the
censor must bear the burden of going to court
to suppress the speech and must bear the
burden of proof once in court."
FW/PBS, Inc. v. Dallas, 493 U.S. 215, 227, 110 S.Ct. 596, 606, 107
L.Ed.2d 603, 619 (1990)(citing Freedman, 380 U.S. at 58-60, 85
S.Ct. at 739, 13 L.Ed.2d at 654-55).  The Court struck down the
Maryland film statute as an unconstitutional prior restraint on
speech because the statute failed to provide any of these
safeguards.
Since 
Freedman, 
Supreme 
Court 
cases 
concerning 
prior
restraints have tended to focus on two evils:  (1) a scheme that
places unfettered discretion in the hands of a government official
or group to grant or deny a permit or license, and (2) a scheme
that does not place limits on the time within which the decision
maker must issue the permit or license.  FW/PBS, 493 U.S. at 225-
26, 110 S.Ct. at 604-05, 107 L.Ed.2d at 618.  A scheme that places
unfettered discretion in the hands of a government official or
-15-
group to grant or deny a permit or license to engage in a right
that is guaranteed by the First Amendment is an impermissible prior
restraint on speech.  Staub v. Baxley, 355 U.S. 313, 325, 78 S.Ct.
277, 284, 2 L.Ed.2d 302, 313 (1958).
"It is settled by a long line of recent
decisions of this Court that an ordinance
which ... makes the peaceful enjoyment of
freedoms which the Constitution guarantees
contingent upon the uncontrolled will of an
official -- as by requiring a permit or
license which may be granted or withheld in
the discretion of such official -- is an
unconstitutional censorship or prior restraint
upon the enjoyment of those freedoms."
Staub, 355 U.S. at 322, 78 S.Ct. at 282, 2 L.Ed.2d at 311. 
For example, in Lakewood v. Plain Dealer, 486 U.S. 750, 108
S.Ct. 2138, 100 L.Ed.2d 771 (1988), the Supreme Court invalidated
portions of an ordinance regulating the placement of news racks in
the City of Lakewood, Ohio.  The ordinance allowed newspaper
dispensing machines to be placed on city sidewalks only with a
permit, and the ordinance gave authority to Lakewood's mayor to
grant or deny permit applications.  Lakewood, 486 U.S. at 753, 108
S.Ct. at 2142, 100 L.Ed.2d at 780.  The ordinance stated:  "`The
Mayor shall either deny the application, stating the reasons for
such denial or grant said permit subject to following terms....'"
Id. at n.2 (quoting LAKEWOOD, OHIO, CODIFIED ORDINANCES § 901.181
(1984)).  A list of terms followed, one of which stated:  "`such
other terms and conditions deemed necessary and reasonable by the
Mayor.'"  Id.  This broad language negated whatever limits on
-16-
mayoral discretion might have been imposed by the specific terms
and conditions listed.  Thus, the Court stated:  "It is apparent
that the face of the ordinance itself contains no explicit limits
on the Mayor's discretion."  Lakewood, 486 U.S. at 769, 108 S.Ct.
at 2150, 100 L.Ed.2d at 791.
The Court, furthermore, expressly disapproved of the City's
argument that the Court should presume that the mayor would only
deny a permit application for reasons relating to the health,
safety, or welfare of the citizens of Lakewood.  Lakewood, 486 U.S.
at 770, 108 S.Ct. at 2151, 100 L.Ed.2d at 791.  The City argued
that additional terms and conditions, similarly, would only be
imposed for reasons relating to the health, safety, or welfare of
Lakewood citizens.  Id.  In response to these arguments the Court
explained:
"This presumes the Mayor will act in good
faith and adhere to standards absent from the
statute's face.  But this is the very
presumption that the doctrine forbidding
unbridled discretion disallows."  (Citation
omitted).    
Id.  The Court declared the portions of the ordinance that granted
unfettered discretion to the mayor to deny a permit application or
to condition the grant of a permit on any additional terms he
deemed necessary and reasonable to be facially invalid.  Lakewood,
486 U.S. at 772, 108 S.Ct. at 2152, 100 L.Ed.2d at 792.
The Supreme Court has stated that the failure to limit the
time within which a governmental official must decide whether to
-17-
grant or deny a permit or license creates the same danger as
allowing a governmental official to exercise unfettered discretion.
 FW/PBS, 493 U.S. at 226-27, 110 S.Ct. at 605, 107 L.Ed.2d at 619
(citing Freedman, 380 U.S. at 56-57, 85 S.Ct. at 737, 13 L.Ed.2d at
649).  In FW/PBS, a Texas ordinance that regulated sexually-
oriented businesses was invalidated because it lacked adequate
procedural safeguards.  493 U.S. at 225-29, 110 S.Ct. at 604-06,
107 L.Ed.2d at 618-20.  Although there was no majority opinion as
to exactly what procedural safeguards should have been required,
six Justices were able to agree that two of the Freedman safeguards
were essential and that the Texas ordinance should be invalidated
because it lacked one of those safeguards.  FW/PBS, 493 U.S. at
225-30, 238-39, 110 S.Ct. at 604-07, 611, 107 L.Ed.2d at 618-21,
626-27.  
The Texas ordinance subjected sexually-oriented businesses to
a combination of zoning, licensing, and inspection requirements.
FW/PBS, 493 U.S. at 220-21, 110 S.Ct. at 602, 107 L.Ed.2d at 615.
In FW/PBS, the Court considered whether "the licensing scheme
fail[ed] to set a time limit within which the licensing authority
must issue a license and, therefore, creates the likelihood of
arbitrary denials and the concomitant suppression of speech."
FW/PBS, 493 U.S. at 223, 110 S.Ct. at 603, 107 L.Ed.2d at 616.  At
first glance, the ordinance appeared to ensure a prompt decision;
the ordinance granted power to the chief of police to grant or deny
-18-
a license and required that the decision be made within 30 days
after an application was submitted.  FW/PBS, 493 U.S. at 227, 110
S.Ct. at 605, 107 L.Ed.2d at 619.  
Another provision in the ordinance, however, stated that the
chief of police could not issue a license until all of the required
inspections were completed.  Id.  Under the ordinance, sexually
oriented businesses were required to be inspected by the health
department, fire department, and the building official before a
license could be granted.  Id.  The ordinance, however, did not
specify a time within which the authorities were required to
complete their inspections.  Id.  Thus, a prospective licensee
actually had no assurance that the decision to deny or grant a
license would be made in a brief and reasonable period of time. 
A majority of the Justices agreed that the ordinance violated
Freedman's requirement that the decision to grant a license be made
within a brief and reasonable period of time.  FW/PBS, 493 U.S. at
225-30, 238-39, 110 S.Ct. at 604-07, 611, 107 L.Ed.2d at 618-21,
626-27.  The Court invalidated the Texas ordinance stating that
"the city's regulatory scheme allows indefinite postponement of the
issuance of a license" in violation of Freedman.  FW/PBS, 493 U.S.
at 227, 110 S.Ct. at 606, 107 L.Ed.2d at 619.
III.
Montgomery County characterizes Chapter 30-10 as a consumer
-19-
protection statute that regulates misleading commercial speech.
Contrary to its position below, the County apparently accepts that
this case must be analyzed under the Central Hudson test and argues
that Petitioner's advertisement fails the first element of that
test, which requires that the speech to be regulated not be
misleading.  The County, however, seems to view every advertisement
concerning "closing-out" sales as inherently misleading.  
Petitioner concedes that consumers often equate liquidation or
distress sales with deep discounts and good bargains.  The words
singled out in the statute all signify that a merchant is ceasing
all operations, either of his or her own volition, or at someone
else's demand, or is in economic distress.  But sometimes, a
merchant who advertises a "closing-out" sale is not in economic
distress or is not being forced to cease all operations.  For
example, Petitioner's advertisement was part of a plan to expand
its business.  The County apparently concludes, however, that upon
reading the advertisement, consumers could have assumed that
Petitioner was in distress or was closing permanently and that it
would offer exceptionally low prices on its merchandise.  If
Petitioner had submitted a copy of its advertisement for review by
the Director, she could have determined whether the advertisement
was unacceptably misleading.
In its brief, the County contends that Petitioner's
advertisement is misleading and states:  "The deceptiveness of
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[Petitioner's] advertisement is apparent on its face" because it
uses the words "Public Notice," which "give the impression that the
sale is being conducted by some official entity or that the sale is
in the nature of a foreclosure or bankruptcy sale."  Petitioner was
not conducting such a sale, however, and the County argues that
persons who saw the advertisement could have been unfairly misled.
At oral argument, the County argued that the advertisement was
actually untruthful because it said in several different ways that
all of Petitioner's inventory had to be sold.  At trial, however,
the proprietor testified that all of Petitioner's inventory was not
sold and that the unsold inventory was taken to the new store.
Without regard to its earlier assertion that "closing-out" sales
are inherently misleading, the County seems to suggest that if
Petitioner had sold all of its inventory the advertisement would
not have been misleading.  The County claims that the advertisement
was a misrepresentation calculated to deceive the public, and it
apparently does so because Petitioner did not use every means
possible to rid itself of all inventory.
Assuming arguendo that the remaining elements of the Central
Hudson test must be examined, the County argues that Chapter 30-10
is constitutional because it satisfies those elements.  "[T]he
unequivocal intent of the County's statute is to protect consumers
from fraudulent and misleading business practices."  The County
contends that the substantiality of this interest has been
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established as a matter of law through several case holdings, such
as Florida Bar v. Went For It, Inc., 515 U.S. ___, ___, 115 S.Ct
2371, 2376, 132 L.Ed.2d 541, 549 (1995)("Under Central Hudson, the
government may freely regulate commercial speech that ... is
misleading.") and Friedman v. Rogers, 440 U.S. 1, 15, 99 S.Ct. 887,
897, 59 L.Ed.2d 100, 113 (1979)("It is clear that the State's
interest in protecting the public from the deceptive and misleading
use of optometrical trade names is substantial and well
demonstrated.").
In support of its claim that Chapter 30-10 directly advances
its interest, the County states:  "the statute requires that the
merchant provide specific information to the Office of Consumer
Affairs so that [it] may determine whether that merchant is
conducting a legitimate distress sale."  If the Director finds that
the merchant is not conducting a legitimate distress sale, she can
protect the public by denying a license to place the advertisement.
Finally, the County contends that Chapter 30-10 is narrowly
tailored because of its use of "triggering words."  Only certain
words trigger the applicability of Chapter 30-10, those that are
inherently misleading to consumers. These triggering words, e.g.,
"liquidation," "going out of business," "lost our lease," all imply
distress, non-voluntariness and perhaps the need to sell at any
price.  Thus, the County argues that Chapter 30-10 is narrowly
tailored and will burden only advertisements that are actually
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fraudulent or that use inherently misleading words.
Two arguments have been advanced by the County as to why
Chapter 30-10 is a valid prior restraint on speech.  The first is
that Chapter 30-10 provides "narrow, objective and definite"
standards to guide the Director in her decision to grant or
withhold a license.  See Shuttlesworth, 394 U.S. at 150-51, 89
S.Ct. at 938-39, 22 L.Ed.2d at 167 (stating that "a law subjecting
the exercise of First Amendment freedoms to the prior restraint of
a license, without narrow, objective, and definite standards to
guide the licensing authority, is unconstitutional").  Chapter 30-
10 requires that certain information be submitted with each
application.  The Director is supposed to examine this information
and she may grant a license if she is "satisfied ... that the
proposed sale is consistent with the proposed advertising."
MONTGOMERY COUNTY CODE, § 30-10(b)(3).  The County characterizes these
requests for information as guidelines that satisfy the requirement
that the Director's discretion be limited and states that, with a
few limited exceptions clearly outlined in the statute, "[i]f the
application contains the required information, is accompanied by
the application fee, and is filed within the time period provided,
the license is granted if the proposed advertisement is found to be
consistent with the proposed sale."  
The County also argues that the ordinance is not an invalid
prior restraint because it ensures that a license will be issued
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11/04/98 - 1:44PM
within a brief and reasonable period of time.  Chapter 30-10
requires anyone who wishes to advertise a "closing-out" sale to
apply for a license to do so 14 days before the sale is scheduled
to begin.  Thus, the County concludes:  "Although not expressly
stated as such, [the ordinance] contemplates that a decision on the
application for a license will be made in fourteen days or less in
order to permit the sale to begin as scheduled."  (Emphasis added).
It also explained that every attempt is made to issue a decision
within the 14 day window and that, in practice, the decision is
typically made in "`a couple of days'" after an on-site inspection
of the premises of the sale is held.
IV.
Petitioner first argues that the Circuit Court for Montgomery
County applied the incorrect standard of judicial review to
Montgomery County's ordinance.  Although the applicability of the
Central Hudson test was argued before the circuit court, Judge
Pincus failed to apply that test.  The court found Chapter 30-10 to
be a "legitimate exercise of governmental power" that served "a
legitimate governmental interest" and stated that there was
"nothing unreasonable" about the law.  Thus, it seems that the
circuit court applied a standard of review analogous to the
rational basis test.  As discussed previously, the correct test to
apply to statutes that require licensure before engaging in
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11/04/98 - 1:44PM
commercial speech is the four-part Central Hudson test.
The circuit court did not make any findings of fact upon which
we might rely as to the elements of the Central Hudson test.  Even
if the trial court had made factual findings, however, it would be
our obligation to make an independent review of the record.
Bachellar v. Maryland, 397 U.S. 564, 566, 90 S.Ct. 1312, 1313, 25
L.Ed.2d 570, 573 (1970).
"Since petitioners argue that their conduct
was 
constitutionally 
protected, 
we 
have
examined the record for ourselves.  When `a
claim of constitutionally protected right is
involved, it "remains our duty ... to make an
independent 
examination 
of 
the 
whole
record."'" 
Id. (citing Cox v. Louisiana, 379 U.S. 536, 545 n.8, 85 S.Ct. 453,
459 n.8, 13 L.Ed.2d 471, 478 n.8 (1965)); see also Edwards v. South
Carolina, 372 U.S. 229, 235, 83 S.Ct. 680, 683, 9 L.Ed.2d 697, 701-
02 (1963); New York Times v. Sullivan, 376 U.S. 254, 284-85, 84
S.Ct. 710, 728-29, 11 L.Ed.2d 686, 709 (1964).
A.
The burden of proof as to the first element of the Central
Hudson test, whether the speech regulated by Chapter 30-10 is
misleading, is on Petitioner.  Petitioner argued at trial and on
appeal that the advertisement was not misleading.  The County
seemed to stipulate at trial that Petitioner's advertisement was
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11/04/98 - 1:44PM
truthful and non-misleading, but even if, as the County now
contends, no such stipulation was made, it has not produced any
evidence 
upon 
which 
this 
Court 
would 
conclude 
that 
the
advertisement was untruthful or misleading.
We disagree with several of the arguments advanced by the
County suggesting that Petitioner's advertisement was untrue or
misleading.  The first is that advertisements of "closing-out"
sales are inherently misleading.  Clearly, some merchants who use
the trigger words in Chapter 30-10 are legitimately in distress or
are truly closing their businesses permanently.  Such people need
the benefits of advertising their sales, and consumers will not be
deceived by advertisements of this sort.  We also disagree that
Petitioner's advertisement was inherently misleading because it
used the words "Public Notice."  The advertisement merely gives
notice to the public of an impending sale and implies no more than
that.  Finally, we cannot say that the advertisement should be
considered untruthful simply because Petitioner's entire inventory
was not sold.  Petitioner wanted to sell out "to the bare walls,"
and it would have benefitted from doing so.  The County has not
suggested that Petitioner did anything to prevent the sale of its
entire inventory.  Petitioner stated that the entire inventory did
not sell because there were not enough interested buyers.  It may
be unreasonable to expect that a merchant would ever know whether
there will be enough interested buyers to purchase a merchant's
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11/04/98 - 1:44PM
entire inventory 14 days before a sale begins, which is the time
that advertisements must be submitted to the Director under Chapter
30-10.
As to the other three elements of the Central Hudson test, the
burden of proof rests on the County to prove that Chapter 30-10
directly advances a substantial government interest and is not any
more extensive than necessary to achieve that interest.  The County
has argued at trial and on appeal that its interest is in
protecting consumers from false or misleading advertisements.  The
Supreme Court has recognized that protecting consumers from such
advertisements is a substantial governmental interest.  See, e.g.,
Friedman, 440 U.S. at 15, 99 S.Ct. at 897, 59 L.Ed.2d at 113. 
Chapter 30-10 does not, however, directly advance the County's
interest in protecting consumers from deceptive advertising.  The
restriction of common words such as "liquidation" will do little to
prevent false advertising.  In fact, the Director conceded at trial
that Petitioner was issued a citation for using the word
liquidation in its unlicensed advertisement and not because the
advertisement was false or misleading.  Words such as "liquidation"
and "going out of business" also seem to this Court to be no more
misleading than words such as "50% off," which do not require a
license.
Finally, the ordinance is not narrowly drafted to achieve its
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11/04/98 - 1:44PM
ends.  In addition to regulating deceptive advertisements, the
ordinance 
also 
regulates 
speech 
similar 
to 
Petitioner's
advertisement, which contains only truthful and non-misleading
information.  Consumers would not need to be protected from
commercial speech of this nature.  Rather, consumers benefit from
the fullest possible dissemination of information of this kind.
Central Hudson, 447 U.S. at 561-62, 100 S.Ct. at 2349, 65 L.Ed.2d
at 348.
It is entirely possible to draft narrowly a statute that will
protect consumers from deceptive advertisements, and the Maryland
legislature has done so.  For example, Maryland Code (1975, 1990
Repl. Vol.), Commercial Law Art., § 11-703 prohibits any person
from "advertis[ing] falsely in the conduct of any business, trade,
or commerce, or in the provision of any service."  Maryland Code
(1975, 1990 Repl. Vol.), Commercial Law Art., § 13-303 prohibits
any person from engaging in unfair or deceptive trade practices in
the conduct of several consumer transactions.  By regulating
conduct, these statutes protect consumers from deceptive and
misleading 
advertisements 
without 
also 
unconstitutionally
restricting protected speech.
B.  
Chapter 30-10 is an invalid
prior restraint on speech that vests the Director with unfettered
discretion to grant or deny a license.  The County has argued that
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11/04/98 - 1:44PM
the Director does not have unfettered discretion because her
decision must be made in accordance with the specific criteria
listed in § 30-10(b)(2)(A)-(F) of the Montgomery County Code and
that, if an applicant meets all of the criteria in that section,
the Director must grant the license.  But Chapter 30-10 states that
the application for a license must include such information; it
does not explicitly require that the Director do anything with the
information provided.  Furthermore, even after the applicant has
provided all of the required information, Chapter 30-10 states the
Director "may" grant a license if she is "satisfied ... that the
proposed sale is consistent with the proposed advertising."  Thus,
the factor which determines whether an applicant will be granted a
license is the Director's "satisfaction," a term that is not
"narrow, objective, or definite."  See Shuttlesworth, 394 U.S. at
150-51, 89 S.Ct. at 938-39, 22 L.Ed.2d at 167.  The listed criteria
may be helpful to the Director, but they do not limit her
discretion.
The ordinance also lacks adequate constraints on the time
within which the Director may make a decision.  The ordinance
states that one who wishes to advertise a "closing-out" sale must
apply for a license to do so at least 14 days before the sale is to
begin.  We disagree with the County's conclusion that this
provision is, in effect, a limitation on the Director's decision-
making time that is brief and reasonable.  The ordinance does not
explicitly establish a 14-day limit, and the Director faces no
penalty for failing to render a decision within 14 days.  Even if
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a court were to find that the Director regularly renders her
decisions within 14 days, that court could not assume that she
would always adhere to self-imposed time limits.  See Lakewood, 486
U.S. at 770, 108 S.Ct. at 2151, 100 L.Ed.2d at 791.  Freedman
requires that the time limitation be either explicitly stated in
the ordinance itself or established by authoritative judicial
construction.  Freedman, 380 U.S. at 58-59, 85 S.Ct. at 739, 13
L.Ed.2d at 654-55.  Neither has been done with regard to Montgomery
County's ordinance.
V.
The judgment of the Circuit Court for Montgomery County must
be reversed.  We hold that Chapter 30-10 is invalid as an overly
broad regulation of commercial speech to the extent that the
ordinance does not directly advance the County's stated interest
and is more extensive than necessary to achieve the stated
interest.  Chapter 30-10 is also invalid as a prior restraint that
(1) grants a governmental official unfettered discretion to
suppress protected speech, and (2) fails to place an adequate
limitation on the amount of time the official may take to determine
whether to grant or deny a permit.
JUDGMENT OF THE CIRCUIT COURT
FOR MONTGOMERY COUNTY REVERSED.
COSTS TO BE PAID BY MONTGOMERY
COUNTY.