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Business Owners Have Rights, Too

In the 303 Creative case before the Supreme Court, Colorado officials assert that all proprietors who open their services to the public have a duty to serve any potential customer on demand. But public accommodation laws do not give customers a general right to be served. Proprietors may terminate a customer’s license and refuse service for any good reason, as long as it is rationally related to the purposes of the business and not an arbitrary or inherently illicit classification, such as race.

If you choose to serve others, do you forfeit your property rights? Most people who serve the public using their own talents and resources, either for profit or charitable motivations, believe that they have the right to decide what goods and services to offer and on what terms. So, for example, a bookstore owner may decide not to carry material that he deems pornographic. A landlady may have a policy of not leasing to unmarried, cohabiting couples. An order of nuns who operate a parochial school may decide not to recognize a pro-abortion student group, or teach a sex education curriculum that affirms same-sex activity.

In other words, most people engaged in commerce believe that they have private rights to set the terms of their commercial activity, and that our fundamental law has always recognized and enforced such rights. Not so, say a group of influential law professors, including Joseph Singer of Harvard and Elizabeth Sepper of the University of Texas. These teachers of the law assert in law review articles and amicus briefs that businesses open to the public do not have rights to exclude and define the terms of service, and never did in our common-law legal tradition. Instead, they assert, segregationists invented those rights after Reconstruction. Before Reconstruction, all businesses and premises which opened to the public had a general duty to serve all comers.

Now this no-right-to-exclude assertion has found its way into a merits brief in a case pending at the U.S. Supreme Court, 303 Creative v. Elenis. The case concerns a Colorado law that prohibits certain acts of discrimination in the offering of goods and services. The case is one of several in recent years to pit an allegation of discrimination against fundamental civil liberties such as freedom of expression, liberties of religious exercise and conscience, and private property rights. The most well known of these are the so-called wedding vendor cases. They involve proprietors who refuse to affirm, by their commercial conduct, messages they believe to be false, usually concerning marriage and sexuality. They are often sued by potential customers who allege that they are denied goods and services on terms equal to other customers.

In 303 Creative, Colorado officials assert that all proprietors who open their services to the public have a duty to serve any potential customer on demand—the same no-right-to-exclude assertion advanced by Professors Singer and Sepper. This assertion raises the stakes of conflicts over civil rights in places of public accommodation. If the Colorado officials are right, the impact will be significant: it will mean that many business owners and charities do not have the right to decide their terms of service.

Courts struggle to resolve these conflicts in a principled and satisfying way. The Supreme Court has punted in two such cases (one from Colorado and another from Washington), avoiding the fundamental legal and constitutional questions by directing state courts to ensure that non-religious business owners are held to the same legal standards as religious proprietors. But the conflicts are not going away, as the dispute in 303 Creative illustrates.

 

Common Law and Commerce

Fortunately, the common law provides a way for the Court to avoid choosing one civil right over another, because the no-right-to-exclude assertion is wrong. As I argued in a brief in 303 Creative, and explain at length in a new scholarly article, the common law (as well as public accommodations statutes based on the common law) does not impose a general duty to serve on all proprietors who are open to the public. Since the English common-law practice was expanded and formalized in the thirteenth century, and probably before then, our fundamental, common law has always differentiated between purely private property, public accommodations in privately owned property, common carriers, and public monopolies. Each category of proprietor has different rights and duties.

The first category is an owner of purely private property. This person who has not invited the public in (a homeowner, for example) can exclude anyone for any reason, or no reason at all. This right is an inherent aspect of the owner’s property right and has been enforceable in common law for nearly a millennium. Far from an innovation invented by late-nineteenth-century segregationists, the right to exclude from private property is one of the oldest and most fundamental of our civil rights.

The second category to come into our legal history is known as a personal license. A property owner who promises a service to a particular person has a duty to fulfill the promise after being paid. This duty is part of what we today call the law of contract, and it came into the common law in the thirteenth century. The duty to honor one’s promised undertaking is limited by the terms of the agreement, and is personal between the contracting parties. It does not give rise to a general duty to perform the same service for others.

Third, a category that has emerged in more recent centuries is the general license, a privilege that an owner may confer on the public either to enter the premises or to purchase goods or services on terms established by the owner. This license, the source of modern public accommodation laws, is not a property right belonging to the customer. It is a privilege the proprietor may revoke for any good reason.

The common law developed a way to protect general licenses only in the seventeenth century with the creation of a new legal action to enforce implied promises. This came many centuries after legal protections for the owner’s right to exclude: therefore, between the customer’s license and the proprietor’s right to set the terms of service, the customer’s license is the relative newcomer. The proprietor’s right, on the other hand, is less contingent and more firmly established in law. The common law favors the proprietor’s liberty.

 

As the English Court of King’s Bench affirmed in 1793 (nearly a century before the end of Reconstruction in the American South), a business owner’s undertaking is voluntary, and there is “no custom of the realm, or legal obligation, to compel him to perform [any] work.” That liberty distinguishes the private business owner “from a common carrier, porter, and ferryman, who are bound from their situations in life to perform the work tendered to them.” Any business owner who is not engaged in a public calling as a matter of bailment law or as the result of a monopoly franchise, therefore, “is not bound by any such obligation.”

The fourth and final category of business enterprises, mentioned in that 1793 decision, includes those under the titles of common carriers, farriers, and innkeepers. These businesses do have a general duty to serve all comers. Their duties arise out of the customary law that we today associate with property, torts, and public franchises. Some businesses have general obligations as custodians of others’ persons and property under the common law doctrine known as bailments. This includes common carriers (think of railroads and taxi cabs) and innkeepers (hotels). Some, such as letter carriers, operate under a franchise grant from the political sovereign. Others, such as public utilities, enjoy a monopoly market position. The duties of these enterprises arise not out of personal promises or general undertakings, but rather from the nature and character of the enterprise and the customary law that governed those enterprises in medieval England. But their duties do not govern most business and charitable ventures.

Depending on which category proprietors belong to, the common law imposes different limitations on their liberty to refuse service. The law does not scrutinize private ownership or personal undertakings. When it comes to the third category (public accommodation owners), the law presumptively defers to their judgments, and only enforces the general license when a customer has been excluded or denied service for no “good reason,” in the language of common law jurists. Only common carrier businesses that have agreed in advance to accept custody of goods or persons, such as railroads, or that hold public rights to conduct business, such as letter carriers, have a general obligation to serve all comers. And even they may establish terms in advance that excuse them from facilitating illegal or immoral activity.

Applying the Common Law

Many state statutes governing public accommodations maintain these classifications. For example, state laws often limit discrimination rules to places of public accommodation and address public utilities under entirely different statutes. As a leading scholar of the subject pointed out decades ago, had state legislatures intended for non-discrimination rules to apply to all businesses they would have said so, rather than limiting coverage of the laws to places of public accommodation.

When courts read state public accommodation statutes charitably, as they are obligated to do, they find in such laws that customers have no general right to be served, even in places of public accommodation. Proprietors may terminate a customer’s license and refuse service for any good reason. In common law, race is never a good reason. But otherwise, what counts as a valid reason can be quite idiosyncratic to each business, even personal to the proprietor, as long as it is rationally related to the purposes of the business and not an arbitrary or inherently illicit classification, such as race.

Many states enacted civil rights statutes after the Civil War, and others did so in the twentieth century. Those statutes prohibit racial discrimination in common carriers and places of public accommodation as a matter of law. The statutes did not change the law. Because race is an inherently arbitrary reason to refuse admission or service, the statutes declare expressly what the common law always prohibited implicitly as a matter of reason. Nor did the statutes alter the fundamental distinction between purely private undertakings, general licenses, and undertakings such as common carriers and utilities. All are prohibited from discriminating because of race. But private property owners who hold open to the public retain their rights to decide the terms of service in cases other than race, as long as their decisions are reasonable.

In recent years, states have amended their statutes to add other prohibited reasons, such as religion, sex, and sexual orientation. Again, these changes do not alter the basic structure of the doctrine. They simply increase the number of reasons for which an owner may not refuse service. In any particular case, the key issue is whether the owner acted for the prohibited reason. The law prohibits intentional discrimination. So, for example, a deli that sells ham does not discriminate for the reason of religion, though its inclusion of pork-based meat on its menu may disparately affect different religious groups.

 

In doubtful cases, another common-law institution enters to dissolve the tension: the jury. In a public accommodation dispute, the key inquiries are (1) what was the proprietor’s intention—her motivation for refusing service as a matter of fact—and (2) whether her asserted reason is a good reason, which is to say, rational. Both of those are questions for juries to resolve in each case. There is no general right to be served because there is no one, univocal, legal answer to the question whether customers may be served. The question is whether this proprietor was reasonable in refusing service to this customer in this case, in light of the type of business she operates and the purposes for which she holds open to the public. The proprietor enjoys a presumption of innocence, so the disappointed customer bears the burden of proving both that the proprietor acted for a discriminatory reason and that the reason was a bad reason.

In these ways, the common law avoids the zero-sum conflict between public accommodation rights and constitutional rights. 303 Creative and its conscientious owner, Lorie Smith, have the legal right to decide the terms on which they will serve the public. They design websites as personal licenses. Though they have conferred on the public a general license to inquire about using 303 Creative’s services, they may decide which websites to design in obedience to Lorie’s conscience as long as they do not refuse anyone service because of their race or sexual orientation; they would refuse if any customer—of any race, gay or straight—were asking them to affirm a same-sex wedding by providing services for it. The law does not require businesses to choose between serving others and obeying their conscience.

There is no right to be served. Juries can identify invidious acts of discrimination. And the courts should not be in the business of creating avoidable conflicts with First Amendment rights.

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