* Circuit Judge of the Third Circuit, sitting by designation.

1 United States Court of Appeals,

Fifth Circuit.

No. 93-3288.

JOE CONTE TOYOTA, INC., Plaintiff-Appellant,

v.

LOUISIANA MOTOR VEHICLE COMMISSION, et al., Defendants-Appellees.

July 5, 1994.

Appeal from t he United States District Court for the Eastern

District of Louisiana.

Before ALDISERT * , REYNALDO G. GARZA and DUHÉ, Circuit Judges.

ALDISERT, Circuit Judge:

This appeal by Joe Conte Toyota, Inc. from a district court

judgment dismissing its suit against members of the Louisiana Motor

Vehicle Commission requires us to decide whether the court

cor rectly upheld the constitutionality of a state regulation

prohibiting any automobile advertis ements which contain the term

"invoice" on the ground that the term is inherently misleading and,

the refore, beyond First Amendment protection. We uphold the

const itutionality of the regulation and we will affirm the

judgment.

Jurisdiction was proper in the trial court based on 28 U.S.C.

§ 1331. This court has jurisdiction under 28 U.S.C. § 1291.

Appeal was timely filed under Rule 4(a) of the Federal Rules of

Appellate Procedure.

I.2

Section 20 of the Rules and Regulations promulgated by the

Commission prohibits the use of the term "invoice " in any

advertisement for the sale of a motor vehicle. La.Rev.Stat.Ann. §

32:1253(E). The regulations permit an automobile dealer to

advertise the actual proposed selling price of a car or an amount

above or below the "Manufacturer's Suggested Retail Price," the

standardized price set by the industry for any model car with the

same equipment. The asserted purpose of the regulation is to

eliminate misleading advertisements.

Appellant proposed to run the following advertisement in a

local newspaper offering automobiles for sale:

$49.00 OVER FACTORY INVOICE *

The advertisement copy included a disclaimer:

* Dealer invoice may not reflect actual dealer cost.

Appellant proposed an alternate disclaimer stating:

* Invoice price indicates amount dealer paid distributor for

car. Due to various factory rebates, holdbacks and

incentives, actual dealer cost is low er than invoice

price.

Challenging Section 20 of the Rules and Regulations, Joe Conte

Toyota filed a complaint in the district court seeking to enjoin

the members of the Motor Vehicle Commission from abridging its

right to free speech and seeking a declaratory judgment that the

term "invoice," as used in the proposed advertisement, is

constitutionally protected speech.

In dismissing the complaint, the district court concluded that

the t erm "invoice" as used in this context was inherently

misleading and, therefore, not entitled to First Amendment3

protection.

The p arties agree that the proposed advertisement is

commercial speech and that the Supreme Court has laid out a

blu eprint for determining whether certain commercial speech is

entitled to First Amendment protection:

In commercial speech cases, the n, a four-part analysis has

developed. 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 inquires 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 H udson Gas & Elec. Corp. v. Public Serv. Comm'n of New

York, 447 U.S. 557, 566, 100 S.Ct. 2343, 2351, 65 L.Ed.2d 341

(1980).

Appellant contends that the district court erred in finding

the term "invoice" inherently misleading and, consequently, that it

erred in not considering the remaining pr ongs of the commercial

speech test. Had it conducted a full inquiry, Appellant contends,

the court would have concluded that a wholesale ban on the term

"invoice" was more extensive than necessary to serv e the state's

substantial interest in protecting the public.

II.

In cases raising First Amendment issues, we must " "make an

independent examination of the whole record.' " N ew York Times Co.

v. Sullivan, 376 U.S. 254, 285, 84 S.Ct . 710, 728-29, 11 L.Ed.2d

686 (1964) (quoting Edwards v. South Carolina, 372 U.S. 229, 235,

83 S.Ct. 680, 683, 9 L.Ed.2d 697 (1963)). This examination4

includes an independent review of the trier of fact's findings in

s upport of that judgment. S ee, e.g., N.A.A.C.P. v. Claiborne

Hardware Co., 458 U.S. 886, 102 S.Ct. 3409, 73 L.Ed.2d 1215 (1982).

Close scrutiny by a reviewing court of certain factual findings is

necessary "in cases involving restrictions on the freedom of speech

protected by the First Amendment, particularl y in those cases in

which it is contended that the communication in issue is within one

of the few classes of "unprotected' speech." B ose Corp. v.

Consumers Union of United States, Inc., 466 U.S. 485, 503, 104

S .Ct. 1949, 1961, 80 L.Ed.2d 502 (1984). "Independent appellate

review of such facts assures that the suppression of protected

speech—particularly unpopular or controversial speech—is not

insulated from close scrutiny by the straightforward application of

the clearly-erroneous rule. The rule thus reflects a special

solicitude for claims that the protections afford ed by the First

Amendment have been unduly abridged." P lanned Parenthood Ass'n v.

Chicago Transit Auth., 767 F.2d 1225, 1229 (7th Cir.1985).

III.

We first must ascertain what is meant by the term "misleading"

as used by the Court in Central Hudson. We find initial guidance

in In re R.M.J., 455 U.S. 191, 203, 102 S.Ct. 929, 937, 71 L.Ed.2d

64 (1982), a commercial speech case in which the Court recognized

different gradations of misleading commerci al speech and their

effect on the Central Hudson analysis:

Truthful advertising related to lawful activities is entitled

to the protections of the First Amendment. But when the

particular content or method of the advertising suggests that

it is inherently misleading or when experience has proved that5

in fact such advertising is subject to abuse, the States may

impose appropriate restrictions. Misleading advertising may

be prohibited entirely. But the States may not place an

absolute prohibition on certain types of potentially

misleading inf ormation ... if the information also may be

presented in a way that is not deceptive.

(emphasis added).

The Court in In re R.M. J. suggested that "inherently"

misleading advertising may be b anned outright, but "potentially"

mis leading advertising may not. In attempting to understand the

distinction, we derive additional guidance from a later commercial

speech case, Peel v. Attorney Disciplinary Commission, 496 U.S. 91,

110 S.Ct. 2281, 110 L.Ed.2d 83 (1990).

Although there was no majority opinion in Peel, the opinions

of several justices shed some light on the hierarchy of misleading

commercial speech. Furthermore, the Court identified a third

category of misleading commercial speech, "actually misleading."

Id. (Stevens, J.).

Justice Stevens, in an opinion joined by Justice Brennan,

Justice Blackmu n and Justice Kennedy, suggested that commercial

speech is "actually" misleading when there is evidence of

deception. I d. at 106, 110 S.Ct. at 1694. Justice Marshall agreed

that a statement is "actually" misleading when the record contains

evidence that recipients of commercial speech "actually ha[ve] been

misled by the statement." I d. at 112, 110 S.Ct. at 1697 (Marshall,

J. and Brennan, J., concurring).

A statement is "inherently" misleading when, notwithstanding

a lack of evidence of actual deception in the record, "the

particular method by which the information is imparted to consumers6

is inherently conducive to deception and coercion." I d. (Marshall,

J. and Brennan, J., concurrin g). Included is "commercial speech

that is devoid of intrinsic meaning." I d. (Marshall, J. and

Brennan, J., concurring). In her dissent, Justice O'Connor added

that "inh erently misleading" means "inherently likely to deceive

the public." I d. at 121, 110 S

. Ct. at 1702 (O'Connor, J.,

Rehnquist, C.J. and Scalia, J., dissenting). Citing I n re R.M.J.,

Justice Marshall noted that states may prohibit actually or

inherently misleading commercial speech entirely. I d. at 111, 110

S.Ct. at 1697 (Marshall, J. and Brennan, J., concurring).

From all of this we conclude that a statement is actually or

inherently misleading when it deceives or is inherently likely to

deceive.

IV.

Ample evidence in the record supports the conclusion that the

term "invoice" as used in the proposed advertisement at a minimum

is likely to deceive and is therefore inherently misleading.

Joe Conte, the principal of the corporate Appellant, testified

that many consumers mistakenly believed that the difference between

invoice price and the sale price constituted the dealer's profit.

Raymond Brandt, a car dealer with 10 year s experience,

testified that "invoice" in relation to price has no fixed meaning

among car dealers and that "invoice" price varies over time and

from dealer to dealer.

Arthur Tait, a car dealer since 1951, testified that "$49.00

over invoice" gives no information that the consumer can use in7

judging the price of a vehicle.

Even where the consumer is shown a ma nufacturer invoice, a

sample invoice from Joe Conte Toyota shows no less than four

different "invoice prices": "[A] base vehicle price at dealer's

cost of $14,1 90.00, a base vehicle price with accessories at

dealer's cost of $16,407.30, a total vehicle price with advertising

e xpense, inland freight and handling at dealer's cost of

$16,929.30, and a net dealer invoice amount of $16,860.00." Brief

for Appellee at 11.

In addition, we note that the main text of the proposed

advertisement used the term "factory invoice" and the disclaimer,

"dealer invoice." Appellant's alternative disclaimer introduced

still another expression, the "amount dealer paid distributor."

Thus, in the proposed advertisement, the invoices and amounts are

attributed to three different sources—the dealer, the factory and

the distributor. At best this is difficult for a reader to follow,

at worst it is unrelievedly confusing.

The district court concluded that Appellant's proposed

advertisement "conveys no useful information to the consumer." J oe

Conte Toyota, Inc. v. Benson, No. 92-0993, 1993 WL 114507 at *1

(E.D.La. April 6, 1993). It also found that:

Due to holdbacks, incentives, and rebates, the invoice amount

bears little relation to the dealer's true cost. To the

extent that the term "invoice" provides any information to the

consumer, it is misleading; its use can only be intended to

confu se the invoice amount with the dealer's actual cost.

Plaintiff in effect concedes this when it offers to explain in

its proposed ads that the term "invoice" does not mean what it

appears to mean.

Id. The court concluded that, because use of the word "invoice" is1 Appellant attempts to distinguish Barry and argues that

"the advertisement at issue in Barry contained absolutely no

disclaimer or explanatory language. Here, Conte proposed clearly

8 "calculated to confuse the consumer," it is "inherently misleading

and not entitled to protection under the First Amendment.

Accordingly, the stat e may constitutionally ban its use by

plaintiff in plaintiff's advertising." Id. (footnote omitted).

V.

The Supreme Court of New Jersey is currently the only

appellate court to address the constitutionality of a prohibition

of the term "invoice" in automobile advertising. The New Jersey

Court held that the terms "dealer invoice" and "invoice" in

automobile advertisements were misleading and beyond First

Amendment protection. Barry v. Arrow Pontiac, Inc., 100 N.J. 57,

494 A.2d 804 (1985). The Court held:

[T]he term "dealer invoice" has no fixed, ascertainable

meaning to the average consumer.... [T]he cost as advertised

is not the ultimate cost of the automobile to the dealer. In

the context of the sale of new automobiles, we find that the

terms "cost," "inventory," and "invoice" are equally

amorphous, and hence equally misleading to the public....

[I]t is important that consumers be protected from

misleading information. ... Hence we conclude that the term

"dealer invoice,"

... comes within the scope and intendment of

that reg ulation and the Act and that the advertising is

misleading and deceptive to the consuming public.

Inasmuch as we find the advertisement to be misleading,

we hold that the regulation does not infringe upon

[advertiser's] First Amendment right to engage in commercial

speech.

Id. at 71-72, 494 A.2d 804.

We are persuaded by the reasoning of the New Jersey Supreme

Court. 1 We are satisfied that the proposed advertising copy withworded disclaimers." Brief for Appellant at 9. Not only is this

disclaimer argument of questionable relevance, but Appellant's

statement in its brief is not supported by the record in Barry.

As the dissent in a lower court decision noted, Barry v. Arrow

Pontiac, Inc., 193 N.J.Super. 613, 626, 475 A.2d 632 (1984)

(Botter, J., dissenting), and as the New Jersey Supreme Court

confirmed, Barry, 100 N.J. at 77, 494 A.2d 804 (Clifford, J. and

Stein, J., dissenting):

It is advantageous for buyers to know at least the

amount of the dealer's invoice price. If the fear is

that they will not avail themselves of information in

the public domain, namely, that dealer invoice price

does not mean actual cost, a simple remedy can be

supplied by tailoring the regulation to meet this need.

It is worth repeating that the invoice in evidence

contains this notice to prospective buyers.

(emphasis added).

9 the suggested alternative disclaimers is inherently misleading.

Because there is ample evidence on the record to support the

district court's find ing that use of the word "invoice" in

automobile advertisement is inherently misleading, its conclusion

that the commercial speech in question fell beyond First Amendment

protection was not in error. Consequently, there was no need for

the court to consider the remaining prongs of the Central Hudson

test.

VI.

The judgment of the district court is AFFIRMED.