Too often, government officials are more concerned about protecting special interests than they are the rights of entrepreneurs. That was the case in San Juan County, Wash., where the County council passed a law designed to shut down hardworking entrepreneur Gary Franco, a longtime produce vendor.
The ordinance, passed at the behest of politically connected brick-and-mortar businesses, required vendors to obtain a government permit and pay $50 per day for the right to earn their living. Were that not bad enough, to obtain the permit, vendors were required to receive the consent of competing brick-and-mortar businesses. In other words, the ordinance gave business owners the right to veto their competition.
While the County maintained that requiring a permit to vend was necessary to protect the public health and safety, it didn’t force all vendors to obtain a permit. Rather, it carved out exemptions for its own favored categories of vendors—for example, farmers who sold their own produce; ice cream trucks; and nonprofit and charitable groups, such as the Lions Club or Kiwanis. Vendors like Gary posed no more of a problem than these favored, exempt vendors, yet they were still required to pay the government and obtain the blessing of their competitors in order to earn an honest living.
Assisted by the Institute for Justice Washington Chapter (IJ-WA), Gary challenged San Juan’s ordinance in order to vindicate the right of all Washingtonians to earn an honest living free of the kind of economic protectionism behind San Juan’s unconstitutional ordinance. During the course of the litigation, however, the County adopted a new ordinance which, in some respects, was even worse than the original. Frustrated by his inability to earn an honest living in his own country, Gary moved to Europe, where, ironically, he has found greater economic opportunity. In light of the ordinance and Gary’s moving overseas, IJ-WA voluntarily dismissed the case in September 2010.
IJ is investigating this and other similar vending regulations in Washington and may file similar challenges in the future.
Entrepreneurs are the backbone of the American economy. When government respects their right to earn an honest living, everyone is better off—entrepreneurs, consumers, and the community.
Too often, however, government officials are more concerned about protecting established interests than they are the rights of entrepreneurs. At the behest of powerful business interests, they pass laws designed to thwart competition and consolidate power in the hands of a few. That is exactly what happened this summer in San Juan County, Washington.
At the urging of a handful of brick-and-mortar business owners, the San Juan County Council passed an ordinance designed to force certain sidewalk vendors out of business. The ordinance requires these hardworking entrepreneurs to obtain a government permit and pay $50 per day for the right to earn their living. Were that not bad enough, to obtain the permit, the vendors must receive the consent of competing brick-and-mortar businesses. In other words, the ordinance gives business owners the right to veto their competition.
One of the hardworking vendors harmed by the ordinance is Gary Franco. Gary has been selling produce in and around San Juan County since the 1970s. Now, however, his right to earn an honest living has been placed at the mercy of bureaucrats and politically connected special interests.
That is about to change. Assisted by the Institute for Justice Washington Chapter, Gary is challenging San Juan’s ordinance in order to vindicate the right of all Washingtonians to earn an honest living free of the kind of economic protectionism behind San Juan’s unconstitutional ordinance.
Gary Franco: Quintessential Entrepreneur
Gary Franco is a true entrepreneur. Since the 1970s, he’s earned an honest living selling produce in public spots in and around San Juan County. Gary grows some of the produce on his own small farm but purchases most of it from fellow farmers. It’s all Washington-grown, and Gary’s customers love both the product and the service he offers them.
From June through September, Gary’s days are grueling. He wakes at 4:30 a.m., six days a week, to make sure he and his pick-up truck are on the first ferry from Lopez Island to the mainland. Arriving at 7:20 a.m., he drives down into the fertile Skagit Valley, where he meets up with farmers to purchase whatever is fresh that day. Usually it’s berries—strawberries, blueberries, raspberries—picked that morning. Sometimes he’ll stop by a produce stand and pick up some “stone” fruit—apricots, nectarines, cherries—brought over the mountains from farms in Yakima, Chelan, or Wenatchee the day before.
After loading his pick-up with fruit, Gary heads back to the ferry terminal at Anacortes. He catches the 10:05 back to the islands and exits the ferry at whatever island he plans to sell on that day. For the last few years, Eastsound on Orcas Island has been his best location. Gary drives to his spot for the day, sets up a table on the sidewalk, unloads the fruit from his pick-up, and starts selling around noon.
Gary’s customers include everyone from local families to tourists to mom-and-pop restaurant owners who use his berries in their pies. They love the selection he offers them. For some, his low prices are the main attraction; Gary’s fruit is typically half the price of supermarket fruit. For others, it’s the freshness of his produce, which has usually been picked that very morning. And for others, the main selling point is the fact that all of the produce is Washington-grown; many customers like the idea of supporting Washington farmers when they buy from Gary. In short, Gary contributes to the diversity of products available on the San Juan Islands and provides choices that consumers would not otherwise have.
In the late afternoon, when the sales start tapering off, Gary breaks down his table, loads his truck, and catches the 6:25 p.m. ferry back to his home on Lopez Island. He then gets ready to do it all over again in the morning.
San Juan County Plays Favorites and Suppresses Enterprise
In the summer of 2009, the living that Gary had been earning since the 1970s was put in jeopardy by his own local government. Responding to the complaints of a small but powerful group of brick-and-mortar business owners, the San Juan County Council passed an ordinance designed to shut down Gary and vendors like him.[i]
Adopted on July 14, 2009, the ordinance requires vendors who operate in public places within certain areas of the county[ii] to obtain a government permit. The applicant must pay $50 for each day he wishes to sell—that is, the applicant must pay the government $50 per day for the right to earn a living.[iii]
To make matters worse—much worse—a vendor must obtain the “[w]ritten consent of all business owners within 25 feet of the application site” in order to receive a permit.[iv] In other words, the ordinance gives brick-and-mortar business owners the power to veto their competition (and a vendor’s right to earn a living).
And just in case a vendor were to consider risking it and selling without his competitors’ blessing and a government-issued permit, he’d better think twice: Vending without a permit incurs a fine of $250 . . . per hour![v]
The county council claimed the ordinance was necessary to protect the public health and safety. But the text of the ordinance—particularly the business-owner veto provision—makes clear it was motivated by naked economic protectionism. Were there any doubt on that point, just consider some of the comments made during the public hearing on the ordinance:
- A councilmember maintained that consent of neighboring business owners should be required for a permit because “the business owners are the people who are really concerned about this.”[vi]
- The sheriff testified that he had received numerous calls from business owners complaining that vending was “peeling off some of their own business.”[vii]
- A shop owner insisted that, because vendors don’t have the same expenses that brick-and-mortar businesses have, such as rent and utilities, the council should “level [the] playing field.”[viii]
- A commercial landlord grumbled that it was “very frustrating” for him “to have a vendor set up within thirty feet of the rental space that I can’t rent . . . and make lots of money.”[ix]
A local newspaper editorial published the morning the ordinance was adopted perhaps best summarized its protectionist purpose: “Because sidewalk vendors don’t have the costs of maintaining a storefront, they can often charge less for their products—sometimes just a few feet away from a local shop. . . . The county ordinance is intended to help level the playing field.”[x]
To be sure, there are some vendors the County likes. To protect them the same way it protected brick-and-mortar businesses, the council exempted these vendors from the permit requirement. The exemptions cover such favored activities as vending by civic and charitable groups (including, specifically, the Lions Club, Kiwanis, Girl Scouts, and lemonade stands); by farmers selling their own produce; and by mobile vendors, such as ice cream trucks.[xi]
These exemptions undermine the council’s claim that the permit requirement is necessary for health and safety reasons. After all, vending to earn a living presents no greater danger than vending to raise money for the Kiwanis or Lions Club. Vending fruit from a friend’s farm is no more hazardous than vending fruit from one’s own farm. And vending from a table is just as safe as vending from an ice cream truck that moves every few minutes; if anything, it’s safer.
Like the grant of veto power to brick-and-mortar businesses, the exemptions make clear that the ordinance was not at all motivated by public health and safety concerns. Rather, the County sought to protect those businesses it favors at the expense of those it does not.
And the County achieved its goal: Gary Franco is off the sidewalks of San Juan County.
The Legal Challenge: The Right to Earn an Honest Living
Now Gary is teaming up with the Institute for Justice Washington Chapter to challenge San Juan’s ordinance under the Washington Constitution. Gary’s fight against San Juan County goes to the very core of our cherished constitutional right to earn an honest living free from unreasonable government interference. Gary wants nothing more than the opportunity to sell fresh produce to the people of the county without unreasonable intrusion by the government and without having to receive permission from competing business owners.
Luckily, the Washington Constitution protects individuals like Gary from the kind of economic protectionism behind San Juan’s ordinance. Article I, section 12 of the state constitution—the “Privileges or Immunities” Clause—provides, “No law shall be passed granting to any citizen, class of citizens, or corporation other than municipal, privileges or immunities which upon the same terms shall not equally belong to all citizens, or corporations.”[xii]
The purpose of the Privileges or Immunities Clause is to “prevent people from seeking certain privileges or benefits to the disadvantage of others.”[xiii] From the earliest days of statehood, the Washington Supreme Court counted the right to earn a living among the “privileges” with respect to which the government cannot play favorites.[xiv] Thus, throughout the early 20th century, the court routinely struck down regulations that burdened the economic liberty of some citizens while granting special favors to others. For example, the court held unconstitutional laws that:
- prohibited the peddling of fruit and vegetables but exempted farmers selling their own produce[xv];
- imposed a license requirement on the sale of cigars by vending machines but not on sales by merchants[xvi];
- imposed a 10-day “hold” period on merchandise sold by secondhand dealers but not on secondhand stoves and furniture[xvii];
- imposed license fees on solid fuel dealers but not on liquid fuel dealers[xviii];
- imposed a license requirement on non-resident photographers but not on resident photographers[xix]; and
- imposed license fees on peddlers but exempted honorably discharged veterans.[xx]
- In these early cases, the court carefully scrutinized the legislation at issue, examining the record to determine the legislature’s true purpose in enacting the law; deeming certain purposes, such as protectionism, impermissible; and, when a permissible purpose existed, ensuring that the law bore a reasonable relation to that purpose.[xxi]
In the second half of the 20th century, however, the Washington Supreme Court began following a disturbing trend that had emerged in federal constitutional jurisprudence. Beginning with the infamous Slaughter-House Cases[xxii], which gave carte blanche to the states to enact shameful Jim Crow-era laws restricting economic opportunities for black Americans, and increasingly during the New Deal era, the U.S. Supreme Court abdicated its obligation to protect Americans’ right to earn an honest living. The Washington Supreme Court followed suit, despite the fact that the state’s Privileges or Immunities Clause provided a layer of protection separate and distinct from that of the federal constitution.[xxiii]
Under this watered down approach to the right to earn a living, a court would uphold a law that restricted economic liberty so long as it could imagine some legitimate purpose for the law (even if not the legislature’s actual purpose in passing it) and could conceive of some set of circumstances, no matter how unlikely, under which the law might advance that hypothetical purpose.[xxiv] In short, the protection afforded a citizen’s right to earn an honest living became essentially no protection at all, but rather knee-jerk deference to the government.
A sign of hope emerged in 2004. In Grant County Fire Protection District No. 5 v. City of Moses Lake[xxv], the Washington Supreme Court for the first time held that the state Privileges or Immunities Clause warrants a constitutional analysis independent of the federal Constitution.[xxvi] Moreover, in discussing the “privileges and immunities” to which this independent analysis applies, the court invoked an early 20th-century case that listed, among other things, the right to “carry on business.”[xxvii] But because the 2004 case did not itself involve that right, the court did not have to address the level of protection that the newly liberated Privileges or Immunities Clause affords it.
In the five years since, the Washington Supreme Court has had multiple opportunities to examine the Privilege or Immunities Clause’s application to the right to carry on business—that is, the right to earn an honest living. It has avoided the issue on each occasion.[xxviii]
Gary Franco’s challenge to San Juan County’s vending ordinance squarely presents the crucial question that the court has avoided: Does Washington’s Privileges or Immunities Clause provide meaningful protection to the right to earn an honest living? The goal of Gary’s case is to have that question answered with a resounding “Yes” and thereby revitalize the pro-economic liberty jurisprudence of the early 20th century.
Founded in 1991, the Institute for Justice is a public interest law firm that advances a rule of law under which individuals can control their destinies as free and responsible members of society. Through litigation, communication, outreach and strategic research, IJ secures protection for individual liberty and extends the benefits of freedom to those whose full enjoyment is denied by government.
IJ filed Franco v. San Juan County on September 16, 2009, in the San Juan County Superior Court in Friday Harbor, Wash. IJ Washington Chapter (IJ-WA) Staff Attorney Michael Bindas will lead the litigation team, assisted by IJ-WA Executive Director William Maurer and IJ-WA Staff Attorney Jeanette Petersen. Bindas is currently lead counsel for the DeBoom, Apodaca and Hamilton families, who are challenging Washington’s discriminatory ban on special education services at religious schools, and for St. Louis activist Jim Roos, who is challenging St. Louis’s attempt to force the removal of a mural protesting the city’s abuse of its eminent domain power. Bindas previously represented Seattle entrepreneurs Blayne and Julie McAferty when the City of Seattle tried to use an irrational land use regulation to force the closure of their bed-and-breakfast. Maurer is currently lead counsel in a challenge to Arizona’s public campaign financing scheme and recently won a 9-0 decision from the Washington Supreme Court defeating an attempt by local governments to treat talk radio commentary as an “in-kind” campaign contribution subject to regulation. He and Petersen also successfully challenged a Redmond, Wash., ordinance that banned portable signs for certain businesses and represented hairbraider Benta Diaw in a constitutional challenge that resulted in the liberation of braiders from Washington’s irrational cosmetology licensing requirements.
The Institute for Justice has scored victories for entrepreneurs across the nation, including:
Swedenburg v. Kelly—In May 2005, IJ won an important U.S. Supreme Court decision striking down a protectionist New York law that had prohibited out-of-state wineries from shipping to New York consumers.
Craigmiles v. Giles—This IJ suit led a federal court to strike down Tennessee’s casket sales licensing scheme as unconstitutional—a decision later upheld unanimously by the 6th U.S. Circuit Court of Appeals. This marked the first federal appeals court victory for economic liberty since the New Deal.
McAferty v. City of Seattle—Filed by IJ’s Washington Chapter in 2005, this case challenged a Seattle regulation that made it illegal to make certain alterations to your home in order to facilitate its use as a bed-and-breakfast—alterations that were perfectly permissible for other uses. In 2007, Seattle repealed the regulation.
Diaw v. Washington State Cosmetology, Barbering, Esthetics, and Manicuring Advisory Board—After being sued by IJ’s Washington Chapter, Washington State’s Department of Licensing filed an “Interpretative Statement” freeing braiders from the state’s cosmetology licensing requirements.
Minneapolis Taxi Owners Coalition, Inc. v. City of Minneapolis—In 2009, on behalf of Minneapolis entrepreneur Luis Paucar, IJ’s Minnesota Chapter helped defeat a taxi-owner cartel’s challenge to free market reforms in the Minneapolis taxi industry.
Clemens v. Maryland State Board of Veterinary Medical Examiner—Mercedes Clemens was threatened with thousands of dollars in fines and criminal prosecution unless she stopped massaging horses. IJ filed suit with her and, in 2009, had a Maryland judge declare that it was “illegal” for the government to force Mercedes to shut down her equine massage practice.
Bell v. Pinal County Board of Supervisors—In 2007, IJ’s Arizona Chapter represented a family-owned restaurant in successfully challenging Pinal County’s attempt to use an obscure ban on outdoor dancing to force the restaurant out of business.
Anderson v. Minnesota Board of Barber and Cosmetology Examiners—Filed in 2005, this case challenged Minnesota’s cosmetology regulations, which required African hairbraiders to enroll in 1,550 hours of government-mandated “training,” none of which included even an hour of instruction in braiding. As a result of IJ’s litigation, hairbraiders in the state may now practice without obtaining a license.
For more information, please contact:
Bob Ewing (Assistant Director of Communications) Institute for Justice 901 North Glebe Road, Suite 900 Arlington, VA 22203
(703) 682-9320 [email protected]
[vi] Hearing on Ordinance 21-2009 Before the San Juan County Council (July 14, 2009) (statement of Councilmember Rich Peterson) (video available at http://www.avcaptureall.com/tabid/85/mid/811/ctl/view/vguid/ 224ce0de-808f-4315-8ffc-123bbcdf9fee/Default.aspx).
Vendors shall be exempt from the license required under this chapter when engaged in the following activities:
A. Sales of newspapers;
B. Transient vendors who do not remain in the same place for more than five minutes, such as peddlers and ice cream trucks where goods and wares are carried from place to place;
C. Sales and activities of charitable, religious or fraternal, nonprofit organizations, corporations which have received tax exempt status under 26 USC Section 501(c)(3), or other similar civic, charitable or nonprofit organizations (such as Girl Scouts, Lions, Kiwanis, youth groups, school groups, child lemonade stands, etc.);
D. Farmers, gardeners and other persons who produce and offer for sale their own fruits, vegetables, berries, eggs or any farm produce and which edibles are raised, harvested, produced or manufactured by such persons, and resale and consignment is not exempt, and;
E. Sales by persons approved in connection with County-authorized events such as farmer’s markets, fairs, art fairs, parades.
[xiv] See, e.g., State v. Vance, 29 Wash. 435, 458 (1902) (identifying the right to “carry on business” as a “privilege”); see also Grant County Fire Prot. Dist. No. 5, 150 Wn.2d at 813 (quoting Vance); Am. Legion Post #149 v. Wash. State Dep’t of Health, 164 Wn.2d 570, 608 (2008) (“[E]ngaging in business . . . is a privilege for purposes of article I, section 12.”).
[xxi] See, e.g., State ex rel. Bacich v. Huse, 187 Wash. 75, 84 (1936) (holding that where a privilege is conferred on a particular class, the classification must be based on “real and substantial differences bearing a natural, reasonable, and just relation to the subject-matter of the act in respect to which the classification is made”), overruled on other grounds, Puget Sound Gillnetters Ass’n v. Moos, 92 Wn.2d 939 (1979).
[xxiii] See, e.g., Am. Network, Inc. v. Wash. Utils. & Transp. Comm’n, 113 Wn.2d 59, 77-82 (1989) (“The privileges and immunities clause of the Washington State Constitution (article 1, section 12) and the equal protection clause of the Fourteenth Amendment are substantially identical and have been considered by this court as one issue.”).
[xxiv] See Jonathan Thompson, The Washington Constitution’s Prohibition on Special Privileges and Immunities: Real Bite for ‘Equal Protection’ Review of Regulatory Legislation?, 69 Temple L. Rev. 1247, 1247-48 & nn.3 & 4, 1257-58 (1996); see also Am. Network, Inc., 113 Wn.2d at 77-82.
[xxviii] E.g., Am. Legion Post #149 v. Wash. State Dep’t of Health, 164 Wn.2d 570, 608 (2008) (re-characterizing the right in play from the right to “engag[e] in business” to the right to “[s]mok[e] inside a place of employment”); Ventenbergs v. City of Seattle, 163 Wn.2d 92, 103-04 & nn.9 & 10 (2008) (holding that “the right to hold specific private employment” was not implicated because the type of business at issue—construction and demolition waste hauling—was a “governmental service”).
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