CHICAGO (CN) - Visa and MasterCard were "victims of government coercion" when they caved to a Chicagoland sheriff's "request" to stop doing business with online classified website Backpage.com, the Seventh Circuit ruled.
While Cook County, Ill., Sheriff Thomas Dart "has a First Amendment right to express his views about Backpage, a public official who tries to shut down an avenue of expression of ideas and opinions through 'actual or threatened imposition of government power or sanction' is violating the First Amendment," Judge Richard Posner said, writing for a three-judge panel.
The panel said there was no doubt Dart acted in his official capacity when he sent a letter to Visa and MasterCard urging them to stop doing business with Backpage.com.
The sheriff's action infringed on millions of users' free speech rights, the court said.
The website is the second largest online classified ad service in the United States after Craigslist.
Dart's letters requested that the credit card companies "cease and desist" allowing their cards to be "used to place ads on websites like Backpage.com, which we have objectively found to promote prostitution and facilitate online sex trafficking."
Dart wrote that the companies have a "moral, social, and legal right" to address the problem of prostitution, which, he noted, also often leads to the exploitation of children.
"It has become increasingly indefensible for any corporation to continue to willfully play a central role in an industry that reaps its cash from the victimization of women and girls across the world," Dart wrote, implying that Visa and MasterCard could be legally liable as criminal accomplices to child sex trafficking.
Within 48 hours of receiving Dart's letter, both credit card companies elected to disallow the use of their cards on all of Backpage.com, leaving the website with very limited payment options. To prevent losing customers, Backpage stopped charging for ad placement, but it cannot remain in business long without ad revenue.
Dart reverted to this informal tactic after Backage won several lawsuits over the criminalization of sex ads on First Amendment free speech grounds.
U.S. District Judge John Tharp issued a temporary restraining order against Dart in July, but later denied Backpage a preliminary injunction.
The Seventh Circuit reversed the decision Monday, and ordered an injunction issued against Dart.
"The 'I' [in Dart's letters] is Sheriff Dart, not private citizen Dart - the letter was signed by 'Thomas Dart, Cook County Sheriff.' And the letter was not merely an expression of Sheriff Dart's opinion. It was designed to compel the credit card companies to act by inserting Dart into the discussion; he'll be chatting them up," Posner wrote in a 20-page ruling.
While Visa submitted an affidavit claiming it was not coerced by Dart's letter, Posner said the letter's impact was "obvious."
"What would one expect an executive of Visa to say? 'I am afraid of the guy?'" the judge wrote.
Immediately after sending the letter, Dart followed up with a thinly veiled threat, according to the ruling.
"The day after Dart sent the letter, his director of communications emailed Visa that he 'wanted to give fair warning that we will be having a press conference tomorrow morning ... Obviously the tone of the press conference will change considerably if your executives see fit to sever ties with Backpage and its imitators. Of course we would need to know tonight if that is the case so that we can ensure the Sheriff's messaging celebrates Visa's change in direction as opposed to pointing out its ties to sex trafficking' (emphasis added)," the ruling states. "In an ensuing exchange of messages between two Visa employees, one said: 'Yes, love the subtle messages they've been sending us that could easily be taken for blackmail.'"
Posner said the credit card companies were "victims of government coercion," as there is no proof Backpage has done anything illegal that would lead to third-party liability.
The judge specifically cited one Backpage ad in the adult section for a professional dominatrix's services, and questioned how this ad could endanger women or children, or violate any law against prostitution.
Even if a majority of ads in the adult section of Backpage are for sex, not all such ads are for illegal sex, according to the ruling.
"As a citizen or father, or in any other private capacity, Sheriff Dart can denounce Backpage to his heart's content. And even in his official capacity the sheriff can express his distaste for Backpage and its look-alikes; that is, he can exercise what is called '[freedom of] government speech,'" Posner wrote.
But as a public official, Sheriff Dart may not engage in "official bullying" by using his government authority to censor legal advertisements, the judge said.
"Some public officials doubtless disapprove of bars, or pets and therefore pet supplies, or yard sales, or lawyers, or 'plug the band' (a listing of music performances that includes such dubious offerings as 'SUPERCELL Rocks Halloween at The Matchbox Bar & Grill'), or men dating men or women dating women," but their private opinions cannot form the basis of government action, the ruling states. (Parentheses in original.)
Posner ordered the lower court to issue an injunction prohibiting Dart from threatening any credit card or payment processing company that provides financial services to Backpage.
He also ordered Dart to immediately transmit a copy of his order to Visa and MasterCard.
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