DoorDash, Inc. v. City Of New York

Background

New York City enacted Local Law No. 2021/090, called the Customer Data Law, concerning food orders placed through third-party delivery platforms. The law allows a restaurant to request customer data from a delivery service. The service must then provide the customer’s name, telephone number, email address, delivery address, and order contents in a machine-readable format, separated by customer, at least monthly.

The law presumes that a diner consents to disclosure unless the diner opts out. It also prevents a delivery service from limiting a restaurant’s ability to download, retain, or use the data for marketing and other purposes. Restaurants may not sell or disclose the data for financial benefit without the customer’s express consent, must allow customers to withdraw consent, and must delete the data upon request.

DoorDash, Portier, and Grubhub are delivery services covered by the law. In their marketplace products, they generally gave restaurants only a customer’s first name, the first initial of the surname, and order contents, with some additional information provided for certain orders or under negotiated agreements. The services argued that the law violated the First Amendment, the Fifth Amendment’s Takings Clause, the Contract Clause, and New York’s Constitution. The City agreed to stay enforcement against the plaintiffs while the case was pending.

The parties filed cross-motions for summary judgment. Earlier in the case, the plaintiffs voluntarily dismissed claims based on the Dormant Commerce Clause, due process, equal protection, and New York preemption law.

First Amendment analysis

The court held that the Customer Data Law regulates speech because it requires delivery services to disclose information in their possession and restricts how they may use that information. The court relied on the principle that creating and disseminating information can receive First Amendment protection. It rejected the City’s argument that the services were merely passive intermediaries. According to the court, the services exercised discretion over whether and how to disclose customer data under their privacy policies and business practices.

The court characterized the required disclosures as commercial speech. The disclosures occurred in commercial transactions and involved data that was economically valuable to the delivery services and useful to restaurants for marketing and business decisions. The court declined to apply the more deferential review used for certain factual disclosures in advertisements because the law required disclosure to restaurants that had competitive aspects in their relationship with the delivery services, rather than disclosure to the general public about the terms of the services.

The court applied intermediate scrutiny, a constitutional test requiring the government to show that a commercial-speech restriction serves a substantial governmental interest, directly advances that interest, and is not more extensive than necessary. The court did not decide whether strict scrutiny also applied because the law failed even intermediate scrutiny.

The City identified interests in protecting restaurants, promoting fair competition, and addressing alleged delivery-service practices such as limiting restaurants’ access to customer data, promoting competing restaurants, and listing false information about restaurants. The court found that the City had not shown that the Customer Data Law would materially affect the latter two practices. The law did not restrict delivery services’ own use of customer data, and any effect from making it easier for restaurants to leave the platforms was too remote because restaurants could already leave.

The court also found that the City had not sufficiently shown that withholding customer data harmed the restaurant industry. The delivery services already offered restaurants access to customers, advertising tools, analytics, and products that helped restaurants build their own websites and retain customer data. The court therefore described the City’s asserted interest in addressing the alleged data-withholding harm as too speculative.

Finally, the court held that the law was not adequately tailored. It identified less restrictive alternatives, including opt-in programs, financial incentives for data sharing, subsidies for restaurant ordering platforms, and more targeted regulation addressing specific concerns. The City had not shown that those alternatives would be ineffective or that compelling disclosure of the data was proportionate to the identified harms.

Disposition

The court concluded that the Customer Data Law violated the First Amendment. It granted the plaintiffs’ motion for summary judgment on the First Amendment claim and denied the City’s cross-motion for summary judgment on that claim.

The court stated that this ruling prohibited the City from enforcing the Customer Data Law against the plaintiffs and provided the ultimate relief they sought. It therefore did not decide the Takings Clause, Contract Clause, or New York constitutional claims. The plaintiffs’ motion and the City’s cross-motion on the remaining claims were denied as moot.

The classification is mixed because the court reached the merits of the First Amendment claim while disposing of the remaining claims as moot.