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ForSaleByOwner.com scores lawsuit victory
Federal court declares California online real estate licensing
law unconstitutional
Monday, November 22, 2004
Inman News 
A federal judge in Sacramento last week ruled in favor of Web
publisher ForSaleByOwner.com and the Institute for Justice in
a First Amendment lawsuit challenging California's demand that Web
sites obtain a real estate broker's license to publish real estate
advertising and information.
The court concluded that the law, which requires Web sites to
obtain a license but exempts newspapers that publish the same
information, was "wholly arbitrary" and violated the First Amendment
guarantees of free speech and freedom of the press.
"The First Amendment rights of Internet publishers have taken a
big step forward," said Steve Simpson, a senior attorney with the
Institute for Justice, which represents ForSaleByOwner.com for free.
"States will now think twice before concluding that the Internet is
a second-class citizen to traditional media."
Tom Poole, a spokesman for the California Department of Real
Estate couldn't comment on whether the state would appeal the
decision, saying the outcome is still under review.
The New York-based ForSaleByOwner.com in May 2003 filed the suit
challenging the law. The law requires Web sites to obtain a real
estate broker's license because they enable individuals to advertise
homes for sale on the Internet and they publish information of
interest to buyers and sellers.
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In early 2001, the California Department of Real Estate began
vigorously enforcing the licensing law against "for-sale-by-owner"
and classified advertising Web sites that allow individuals to buy
and sell homes without a real estate broker. According to the
Institute for Justice, the Department said during the course of the
lawsuit that Web sites cannot claim it is "easy" to buy and sell
homes without a real estate broker or publish other information with
which officials disagree.
"This is censorship, pure and simple," said Simpson. "The First
Amendment guarantees that Americans may speak their minds and
communicate information without the approval of government censors.
Allowing licensing officials to make distinctions among publications
cannot be permitted if speech is truly to be free."
The court agreed, finding the state's effort to distinguish
between newspapers and independent Web sites "totally unpersuasive."
"(T)here appears to be no justification whatsoever for any
distinction between the two mediums," the court stated. "Even if a
distinction was warranted in 1959, when the (newspaper exemption was
passed), that does not mean that the same rationale for exempting
newspapers remains viable in 2004, given the vast advances in
technology that have occurred in the meantime."
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To the state's claim that newspapers are somehow more trustworthy
than Web sites, the court stated, "while Defendants vaguely attempt
to paint newspapers as geographically situated and relatively more
stable than Internet companies, they have not established why this
should require Web sites like FSBO's to obtain a California broker's
license when online services doing exactly the same thing are not
subject to any licensing requirement so long as they are operated by
a 'newspaper.' Defendants provide no reasonable explanation
whatsoever for this requirement, let alone a compelling interest to
justify it."
ForSaleByOwner.com and similar services enable consumers to buy and sell
real estate without the help of a real estate broker or agent. The
Institute for Justice views the court decision as a win to consumers
who wish to save money by attempting to sell their home on their
own.
"It's great that the law is starting to catch up with
technology," ForSaleByOwner.com President Damon Giglio said in a
statement.
The Institute for Justice says this is an important case with
broad implications for e-commerce. The federal court case was the
first to extend First Amendment protections to Internet
publishers.
***
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