STORY

Current Status of Lawsuit: Federal First Amendment lawsuit filed on September 25, 2023

The Story 

Particularly since the COVID-19 pandemic, more and more Americans use the internet to buy goods, conduct meetings, and even consult with their doctors. As one form of e-commerce, online auctions have grown significantly in popularity over the past decade. Consumers, entrepreneurs, and clients alike have benefitted from an auction marketplace that entirely exists online, precisely because it is a marketplace largely free from the burdens and costs associated with more traditional commerce. Tennessee embraced innovation in 2006 when it exempted online auctions from its licensing requirement for traditional, brick-and-mortar auctioneers. In 2019, however, licensed auctioneers successfully lobbied the Tennessee General Assembly to protect traditional auctioneers from competition. For the first time, Tennessee imposed a licensing requirement for innovative online auctioneers. 

Will McLemore embodies innovation and the entrepreneurial spirit. In 2006, he started one of the first—if not the first—online auction companies in Tennessee. Since then, McLemore Auction Company has served countless customers through online auctions. Will is a trendsetter. In the last decade, more and more auctioneers have moved from “bid calling” at a physical location to serving more customers more conveniently at an online auction. The people who work at McLemore Auction Company are central to its success. These auctioneers—many of whom are unlicensed— have reliably conducted online auctions for satisfied customers for many years. 

Until now, unlicensed auctioneers could conduct online auctions without the threat of civil and criminal punishment. The practice was legal until Tennessee enacted PC 471, which imposed a licensing requirement for online auctions, in 2019. Represented free-of-charge by the Beacon Center of Tennessee, Will filed a lawsuit and obtained a court decision stopping the law from going into effect. The Court of Appeals reversed that decision, however, allowing the Tennessee online auction licensing requirement to go into effect for the first time ever. The Court of Appeals did not address Will’s First Amendment claim, and Will’s new lawsuit asks a federal court to once again halt the unconstitutional licensing requirement for online auctions. 

Three other plaintiffs in the lawsuit are unlicensed online auctioneers Blake Kimball, Ron Brajkovich, and Justin Smith, who have worked reliably with Will and established important relationships with McLemore Auction Company’s customers. They have conducted hundreds of online auctions to the satisfaction of their customers, some of whom ask for them by name. The Tennessee online auction licensing requirement threatens the unlicensed auctioneers with the loss of their employment, fines, and even jail time. Will, Blake, Ron, and Justin are standing up for their constitutional rights and the principle that their speech should not lose constitutional protection just because they are using it to earn an honest living. 

The Problem

When Tennessee decided to shoehorn online auctions into the licensing regime for traditional auctions, there was no reason why. In fact, in 2018, the Tennessee legislature convened a task force to study the issue. The task force reviewed the available data, which showed very few consumer complaints for online auctions. Indeed, the majority of the over 100 complaints compiled over a three-year period were about traditional auctions. The extended-time online auctions that Will conducted garnered a total of just three complaints over three years. Rather than leave the issue alone, the task force ignored its own data and pushed the online auction licensure requirement anyway. 

Even worse, the law targets extended-time online auctions for disfavored treatment. On one hand, it requires anyone conducting an extended-time online auction to get a license. On the other hand, it specifically exempts fixed-time online auctions—such as eBay—from the licensure requirement. 

The Solution

The First Amendment protects the right to earn a living by speaking. Countless Americans—from web designers, to reporters, to tour guides, to authors, to lawyers—make their living in just this way. Online auctioneers speak to earn their living. It is impossible to conduct auctions without speech, and online auctioneers—who auction items to audiences who cannot physically see them—must engage in even more speech. Online auctioneers routinely create narratives designed to both accurately describe the items up for auction and to appeal to consumers by detailing an item’s practical, cultural, or historical significance.   

Because online auctioneering consists of speech, it is protected by the First Amendment. The First Amendment requires the government to justify laws that burden speech by showing that there is an important governmental interest and that its speech restrictions are carefully tailored toward furthering that interest. The government cannot meet that burden in this case. 

First, the government cannot show that the Tennessee online auction licensure requirement is backed by any real interest in protecting consumers from unscrupulous practices. The simple fact is that online auctioneers have been permitted to conduct online auctions without a license for nearly two decades without trouble. Numbers from Tennessee’s own task force confirms that not many people even complain about online auctions. In other words, many successful online auctioneers have served Tennessee consumers for years; there is no reason for the government to suddenly impose a burden on their right to earn a living now. 

Second, even if the government could advance a significant interest in prohibiting the long-established practice of unlicensed online auctions, that interest would be undercut by the long list of activities exempted from the licensure requirement. For instance, the government cannot explain why the interest in consumer protection would not be just as strong with respect to large companies like eBay as it purportedly is for small businesses like McLemore Auction Company. The exemptions reveal that the real interest behind the Tennessee online auction licensure requirement isn’t consumer welfare, but economic protectionism. The Constitution prohibits the government from enacting laws merely to favor powerful businesses over innovative upstarts. Under our Constitution, everyone has the right to earn an honest living. 

Case Documents

Complaint

Motion for Preliminary Injunction

Defendants’ Motion to Dismiss

Plaintiffs’ Opposition to Motion to Dismiss

Case Contact

Wen Fa is Director of Legal Affairs for the Beacon Center of Tennessee.