Nasir Pasha, Esq.

Does Macy’s Tell Gimbels? Safelite Revisits Free Speech

Obviously not, or you wouldn’t have to Google “Gimbles”.  We’ll save you the effort.

Gimbles was a New York department store, a block away from Macy’s, and the competition between the two was legendary. You can guess who won, but even today, the question, “Does Macy’s Tell Gimbles?” lives on to mean “Does one business share its secrets with a rival?”  The answer is “no.”

The Second Circuit recently looked a variation on this question, which might be phrased as, “Does Macy’s have to tell customers about Gimbels, by name?”  And the answer is the same. Chalk one up for commercial free speech.

Just to be contrarian, though, let’s also consider this question from the standpoint of small, local, auto glass installers who, in Safelite Group, Inc. v. Jepsen, stand in for Gimbels.  Is this a free speech issue or is it really an anti-monopoly question?  What about the question from the consumer’s viewpoint, “Wouldn’t we be better off with Macy’s and  Gimbels?

The History of Safelite

This case has a number of twists and turns, so it’s helpful to lay out the history.

Step One:  Connecticut had previously adopted General Statute § 38a-354, an anti-steering law, which prohibited automobile insurers and claims administrators from directing repairs to specific shops.  It also required them to give notice of the right to choose on appraisals and estimates.

Step Two:  Connecticut then passed Public Act 13-67, “An Act Concerning Automotive Glass Work” to amend the existing law.  The amendment prohibited insurance company claims representatives or third-party administrators from directing someone with an auto glass claim to a shop that was  affiliated with the insurance company or administrator unless the administrator also provided the name of at least one additional licensed glass shop in the area.

PA-67 was intended to protect local mom-and-pop Connecticut auto glass installers from being squeezed out of the marketplace by Safelite.

Step Three:  Safelite Solutions is a third party claims administrator for a number of auto insurance companies, and its practice is to refer repairs to its Safelite AutoGlass affiliates.  Safelite sought a preliminary injunction to prevent implementation of PA-67, claiming that it was a violation of free speech, and interfered with interstate commerce.

Step Four:  Safelite’s motion was denied by the District Court in December of 2013.  Safelite appealed, and the Second Circuit Court of Appeals vacated the District Court’s order and granted the injunction on September 4.

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What the Second Circuit Decided

The Second Circuit recognized that Connecticut has a legitimate interest in protecting customer satisfaction, and under some circumstances, it might be legitimate to curtail a business’s right to free speech (or right not to speak, in this situation) to protect that interest. Laws that require manufacturers to list the ingredients in a product or the calories of menu items were offered as examples of legitimate disclosure requirements.

However, the disclosure required by PA-67 overstepped the mark because it required sharing information about a competitor’s service and because there were other means, less burdensome to Safelite, to achieve the same degree of consumer protection. The implication is that General Statute § 38a-354, prior to amendment, did enough.

What the Second Circuit Didn’t Do

The Second Circuit never really gets to the interstate commerce issue, which is curious in a number of ways. PA-67 was never seriously thought of as a consumer protection law.  It was, plainly and openly, a small business protection law.  Does Connecticut have a legitimate interest in protecting small businesses? Does it or does any state have an interest in discouraging monopoly power? The other side of that coin, of course, is protectionism, which is difficult to argue for between states.

Maybe it’s just a generalized affection for the underdog, but among New Yorkers, at least, there seems to be some nostalgia for Gimbles, or at least the idea of Gimbles, as a counterweight to the  monolithic Macy’s.

State and local legislation to protect small business seems necessary to protect economic diversity. PA-67 with its single minded focus on one industry and one national competitor may have mis-fired, but similarly protective legislation may emerge. It is important not to lose track of these developments in increasingly strange and esoteric world of commercial free speech litigation.

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