Daily Development for Friday, August 6, 1999

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

 CONSTITUTIONAL LAW; FREE SPEECH; SHOPPING CENTERS; TIME, PLACE & MANNER REGULATION: New Jersey court rejects California "narrowly tailored standards" test, permits restrictions on leafleting that include insurance and hold harmless requirements, but requires justification for such requirements based upon the nature of the applicant and its proposed activities.

The Green Party of New Jersey v. Hartz Mountain Industries, Inc., 1999 WL 562149 (N.J.Super.A.D. 8/3/99) There are very few appellate cases involving time place and manner restrictions, especially outside of California, and this decision, assuming it is not appealed and reversed, will be a potent weapon for shopping center owners in dealing with speech activities on their premises.

It begins with the notion, already establishing in New Jersey, that regional shopping centers are public fora and that their owners are required to make reasonable accommodation for those desiring to conduct speech activities on their premises. This was decided in New Jersey Coalition Against War in the Middle East v. J.M.B. Realty Corp., 138 N.J. 326, (1994), cert den. 516 U.S. 812 (1995), a case in which the instant mall owners were named defendants. Similar to the famous Pruneyard decision, the Coalition case was based upon the free speech provisions of the New Jersey Constitution, and not the U.S. Constitution.

 Plaintiffs in this case were seeking to circulate petitions to obtain recognition of their political party in the state. This activity was of the type recognized as worthy of protection under the Coalition decision, which had stated that malls had a duty to accommodate "leafleting and associated speech in support of, or in opposition to, causes, candidates, and parties political and societal." Coalition had stated that there was not duty to permit "placards, pickets, parades and demonstrations; it does not include anything other than normal speech and then only such as is necessary to the effectiveness of the leafleting." Specifically excluded was the sale or literature or the solicitation of funds (except as contained in leaflets themselves). But Coalition had permitted mall owners to establish "time place and manner" rules:

 "The centers' power to impose regulations concerning the time, place, and manner of exercising the right of free speech is extremely broad. We assume that in most cases malls can limit the time of leafleting to specific days, and a specific number of days. Certainly no individual or group will be entitled to be present any more often than is necessary to convey the message. [the court went on to acknowledge that regulation could not be such as to prevent communication of the message where a particular day or time was critical such as the day before and election]."

The mall owners in the instant case imposed two regulations that the Green Party found difficult to live with: First, the mall restricted speech activities to one day per group per year. (The mall had in the past granted special exemptions where the applicant demonstrated special requirements for more time.) Second, the mall required that each applicant hold harmless the mall for any liability arising from activities relating to the applicant's activities and in addition provide evidence of liability insurance in the amount of $1 million.

Although the record is uncertain on the issue, the Green Party claimed that such insurance would have cost it $665 for the one day it sought access to the mall. It claimed it could not afford to pay this amount, in part because it restricted donations from any one individual to $250, so no one person could provide the insurance, and it was expending its donations on other matters and had small amounts in its accounts.

The Green Party, which apparently consisted originally mainly of activists related to Ralph Nader organization, promptly brought suit challenging the mall's requirements. It obtained a preliminary order requiring the mall to permit it to conduct its leafleting.

Later, the trial court took additional evidence and made a permanent determination as to the validity of the mall policies, even though by that time the Green Party had completed its efforts to get recognition, and the immediate need for leafleting for that purpose was over. The court agreed to decide the case as it involved matters of "substantial public importance." The trial court judge found that both the "one day a year" restriction and the insurance and hold harmless requirement were per se bars to effective free speech, applying the standard used in California that the mall owners had a duty to "narrowly tailor" any restrictions to promote the mall's substantial interests.

On appeal: Held: Reversed. The appeals court rejected the notion that the "narrowly tailored" standard applied in New Jersey, and confirmed that both frequency and liability regulations could be valid and reasonable business judgments by the mall, when designed to protect its business interests and not directed at any particular group or form of speech.

The appeals court synthesized a two pronged approach to the evaluation of a mall's regulations on speech activities: "(1) Is the regulation a reasonable means for assuring a private business , operating as a regional shopping center, that the constitutionally permitted freedom of speech activity does not interfere with the shopping centers business? In other words, was the regulation a reasonable exercise of business judgment? (2) Applying the regulation to the circumstances presented, is the effectiveness of the applicant's proposed exercise of freedom of speech rights sufficiently maintained?"

The court specifically rejected the application of what it called the "California standard" established in HCHH Assocs. v. Citizens for Representative Gov't, 238 Cal. Rptr. 841 (Cal. App. 1988), requiring that speech regulations be "narrowly focussed in the traditional manner," although it cited other California authority providing a broader standard when, as here, there are fewer relationships between the private mall and governmental activity than there were in HCHH, where the mall was part of a downtown redevelopment project.

Applying the broad standard it thus synthesized, the court had little trouble validating the mall regulations in principle here. The "one day a year" rule clearly was consistent with protection of the mall's interests, as the space occupied by the leafletters was space that the mall occasionally leased to kiosk and pushcart operators. The policy did not inhibit The Green Party's speech activities especially because the mall permitted exceptions where mall attendance on the given day was insufficient to accomplish the applicant's goals.

The court acknowledged that the insurance requirement was "more troublesome." The special concern, of course, was that the cost of insurance was relatively high, inhibiting free speech on the basis of wealth, and thus restricting the rights of small groups and individuals. The court reviewed a number of California cases that had required that the mall justify an insurance requirement by an analysis of the danger presented by the group in question, based upon prior experience with this or similar groups. It reviewed a number of cases from other jurisdictions striking down insurance requirements imposed by public agencies as a prerequisite to exercise of free speech. It ultimately rejected some of the California cases because, as indicated, it viewed those cases as imposing a more stringent standard than existed in New Jersey. It rejected the public agency cases because the danger of liability to a private owner, not shielded by sovereign immunity and lacking law enforcement powers, is significantly greater.

Ultimately, the court concluded that malls could impose insurance requirements for exercise of speech activities. It set certain standards applicable to such requirements:

 "In analyzing whether insurance should be required, and the precise amount, affected malls may take into account various factors such as (1) the identity of the applicant and the individuals who will participate in the activity at the mall; (2) other locations where the participants engage in similar activity in the current and previous years and any injuries to person or property that occurred; (3) the size of the group and its assets; (4) the number of people who will be leafleting on behalf of the group at a mal at the same time or at any one time; and (5) the insurance requirements imposed on other short time occupiers of space at the mall."

The court stated that the list of factors above is not exhaustive, and that the amount of insurance must be a good faith business judgment. The mall owner "should take into account criteria for waivers where there are eligible groups that truly would not be able to afford the cost of insurance." The court elsewhere noted that the fact that The Green Party had small amounts in its bank account may have reflected its spending priorities, rather than its true wealth.

Similarly, the court concluded that the hold harmless requirement was an "objectively reasonable means of deferring risk of loss," and apparently indicated a willingness to permit such a requirement subject to the standards set forth above.

The court finally noted that a lengthy "black out period" in which no leafleting is permitted during periods of heavy mall traffic may be permissible, but should take into account special speech needs, such as the weekend before a general election.

In sum, because the trial court had held that the insurance and hold harmless requirements were per se impediments to free speech rights, the court reversed. But it clearly indicated that the mall operators have a burden to justify their requirements and may have a greater duty to tailor those requirements to particular applications, within the broad standard of "business judgment."

Comment 1: Although Hartz Mountain was vindicated in its "one day a year" policy, it and other mall operators can't be happy about the insurance and hold harmless discussion in the court's decision. It appears that the court is going to require a case by case determination, subject every time to judicial review, of the validity of its insurance requirements. The court further suggested that in some cases the mall operator should require pricing a rider to its own insurance coverage and passing that cost along, rather than requiring outside insurance. Sooner or later the time and cost of all these activities will be swallowed by the mall operators. It can't all be passed through. Further, the risk of a major lawsuit from a contentious speech advocate because of a mistaken judgment by a relatively low level employee may cause malls to drop the insurance and hold harmless requirements altogether, and simply grumble about it.

Comment 2: Granted, once we conclude that the mall operators are "public" for purposes of honoring free speech claims, we have to recognize that we've got a specially protected fundamental right that requires careful treatment. But the solutions proposed by the court here seem neither practical from an economic standpoint (as pointed out above) nor from a speech standpoint. Although the court says that the decisions made must be objective and neutral, the factors that it requires the mall operators to take into account necessarily will lead them to make decisions involving the nature of the groups and the content of their speech.

If a mall executive agrees with the message the group intends to deliver, he is far less likely to perceive that the group will present a danger of disruption and liability he would if the group is strange or even hostile to his sensibilities. Right to life groups, for instance, although they have a long history of violent confrontation in many areas, may be passed through, while gay rights advocates may not. Or, for that matter, vice versa. Perhaps a better answer is an attempt by some group such as the ICSC to establish some kind of general standards for insurance risks based upon neutral factors, such as the size of groups and the kind of activity proposed, and work with the industry to get reasonable insurance quotes for this kind of activity so that the costs are not really exclusionary. There may be cases where the content is so scary that the mall still will have to make an individual judgment, but it would seem better to limit these cases to the rare exception, and treat the rest through a standardized national practice.

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