International Outdoor v City of Troy (6th Cir. September 4, 2020)

My last entry had to do with billboards, dealing with an interesting case from the Fifth Circuit Court of Appeals.  in this case is similar. I should mention also that both cases were brought to my attention by Sam Edwards, who has been really scouring the advance sheets for new and interesting cases.

International Outdoor v City of Troy, decided by the Sixth Circuit Court of Appeals, issued just yesterday, September 4, 2020, parallels the case we reviewed in the last entry. In this case, the trial court dismissed the a claim of prior restraint made by the sign company against the city because the claim had been mooted out as a result of some changes made to the sign regulations during the pendency of the litigation. I will not discuss the mootness issues although they are certainly interesting.

More interesting however in the context of this blog is the impact of Reed v Town of Gilbert, 576 US 155 (2015). I won’t get into the factual allegations beyond saying that the sign company alleged in particular that some signs were exempted from having to apply for a permit at all (including flags, temporary signs, real estate signs, garage, estate or yard sale signs, noncommercial and political signs, holiday or seasonal signs and construction signs were all included). In a footnote, the Sixth Circuit indicated that taking the complaint in the light most favorable to the plaintiff, the sign company alleged facts showing that it incurred costs that other applicants were exempt from because its proposed signs were not afforded the same favored treatment under the ordinance. From the standpoint of the Sixth Circuit, this conferred standing.

As I mentioned in the previous entry, because the Reed court concluded that “strict scrutiny applies either when a law is content based on its face or when the purpose and justification for the law are content based, a court must evaluate each question before concludes that the law is content neutral and thus subject to a lower level of scrutiny.” Reed at 166. The Sixth Circuit concluded that intermediate scrutiny generally applicable to commercial speech applies only to a speech regulation that is content neutral on its face. That is, a regulation of commercial speech that is not content neutral is still subject to strict scrutiny under Reed.

Much as the Fifth Circuit did in the Reagan National Advertising case discussed in the last entry, the Sixth Circuit then turned to look at several other circuit court decisions many of which concluded that the intermediate standard applicable to commercial speech still applied. See Central Hudson v Public Service Commission, 447 US 557 (1980). The Sixth Circuit distinguished many of those cases, and also pointed to Barr v American Association of Political Consultants, 140 S Ct 2335 (2020) applied strict scrutiny to a content-based restriction on robo calls to cell phones. In addition, the Sixth Circuit pointed out its own decision in Wagoner v City of Garfield Heights, 577 F. Appx 488 (6th Cir. 2014), cert granted and judgment vacated, 135 S Ct 2888 (2015). The Sixth Circuit had applied a practical test for assessing content neutrality concluding that in the Wagoner case, the city had satisfied the intermediate scrutiny applicable to such regulations. The Supreme Court did not agree, reversed, and remanded for consideration of Reed. This reversal by the Supreme Court had the act of solidifying the Sixth Circuit's conclusion that in the absence of content neutrality, the strict scrutiny test must apply.

In addition, the court also referenced its decision in Thomas v Bright, 937 F. 3d 721 (6th Cir. 2019), also discussed in the prior post, in which the owner of billboards in Tennessee challenged the on-premise restrictions found in the Tennessee Billboard Act. The Sixth Circuit invalidated the act as being contrary to Reed.

While the court acknowledged that both Wagoner and Thomas concerned non-commercial speech, "the regulations in both cases were deemed unconstitutional due to their content-based nature: they required an inspection of the message to determine whether it was political, as in Wagoner, or related to any on-premises activity, as in Thomas, in order to determine the sign’s permissibility under the regulations.”

In this case, the District Court concluded that the speech at issue, erecting advertising billboards, was commercial speech and therefore not subject to strict scrutiny. Furthermore the District Court held that the ordinance provisions satisfied intermediate scrutiny under Central Hudson.

But the Sixth Circuit reversed because it felt that the district court applied the wrong standard. The Sign Ordinance imposed a content-based restriction by exempting certain types of messages from the permitting requirements, such as flags and temporary signs and the other signs I’ve listed above. Thus, the ordinance regulated both commercial and non-commercial speech but treated them differently, requiring the city to consider the content of the message before deciding which treatment should be afforded. For content-based restrictions on speech, strict scrutiny applies, not intermediate scrutiny.

Accordingly, the Sixth Circuit reversed the decision of the District Court dismissing the plaintiff’s claims against the content-based restrictions found in the sign regulations, and remanded for consideration of the Reed analysis.

Okay, then the question here is how often do you see such distinctions between flags, real estate signs construction signs, yard sale signs, holiday signs political signs where such signs are either required to obtain no permit, or have some lesser burden in obtaining permission. Fairly frequently it seems to me. Under this Sixth Circuit case, it seems that such differentiation may be entirely unlawful.

Reagan National Advertising v City of Austin, 2020 U.S. App. LEXIS 27276 (5th Cir. Aug. 25, 2020)

This interesting case is yet another development arising out of the Supreme Court decision in Reed v Town of Gilbert, 576 US 155 (2015). Two companies, both Reagan and Lamar Sign, sued the city when applications submitted to digitize off-premise signs were denied. Plaintiffs argued that the Sign Code distinction between on-premise and off-premise signs was a violation of the First Amendment. The lower court found in favor of the city, but the Fifth Circuit reversed, concluding that the distinction was content based, subject to strict scrutiny, and that there was no compelling governmental interest sufficient to justify the regulation.

The city Sign Code provided for the continuation of nonconforming off-premise signs but sign owners were not permitted to “change the method or technology used to convey a message” on an off-premise non-conforming sign. At the same time, the Sign Code permitted on-premise signs to be “electronically controlled changeable copy signs.” As a result, on-premise nondigital signs can be digitized, but off-premise nondigital signs cannot be. The stated purpose of the Sign Code was to protect the aesthetic value of the city and to protect public safety.

The trial court denied plaintiff’s request for declaratory judgment, concluded that the Sign Code was content neutral and satisfied intermediate scrutiny.

The first interesting aspect of this case has to do with the city’s argument that the case was moot because the city adopted new sign provisions after the lawsuit was filed. Plaintiffs argued that they filed their applications prior to the amendments and that under Texas state law, their applications for permits must be reviewed based on the regulations in effect at the time their applications were filed. See for example, Texas Local Government Code Annotated §245002 (a) (1). See also Reagan National Advertising of Austin v City of Cedar Park, 387 F Supp 3d 703, 706 n. 3 (WD Texas 2019) (“Texas law requires the permit applications be evaluated under the law as it existed at the time they were submitted, rather than under the new, revised sign code.”). The Fifth Circuit agreed with the plaintiffs.

Notice the distinction here between Texas and Tennessee law. It appears that under Tennessee law, although it’s not entirely clear, that there is no protection based simply on the application to the city for a permit; rather, the Tennessee Vested Property Rights Act, Tenn. Code Ann. § 13-4-310, only protects from and after the time that a development plan has been approved (not applied for) or that a building permit has been issued. So if the regulations change during the pendency of an application, theoretically the applicant must comply with the new regulations under Tennessee law.

The next issue before the court was whether the Sign Code was content-based or content neutral. Naturally, if the regulations are content neutral, then the intermediate level of scrutiny applicable to commercial speech would apply; otherwise, strict scrutiny would apply to any content-based regulation.

The court first discussed the Supreme Court decision in Reed and noted that while the Reed decision did not purport to be creating new law, the federal courts have generally recognized that Reed announced a "sea change" in the traditional test for content neutrality. The court cited a number of other circuit opinions, including the Sixth Circuit: Wagoner v City of Garfield Heights, 675 F Appx 599 (6th Cir. 2017), and perhaps more interestingly, Thomas v. Bright, 937 F.3d 721, 737 (6th Cir. 2019), cert. denied, 2020 U.S. LEXIS 3558, 2020 WL 3865256 (July 9, 2020) which held that Tennessee's Billboard Regulation and Control Act of 1972, Tenn. Code Ann. §§ 54-21-101, et seq., "is not narrowly tailored to further a compelling interest and thus is an unconstitutional restriction on non-commercial speech." As many of you are aware, this decision and frankly the lower court decision which preceded it, seemed startling. Concluding that the entire regulatory scheme for controlling outdoor advertising signs was unconstitutional seemed, at least at the time, something of a stretch.

The court concluded that the Supreme Court decision in Reed meant that if a law is content based on its face, then it is subject to strict scrutiny regardless of the government’s content-neutral justification. See Reed, 576 US at 165. One difficulty with this approach is that Justice Alito in Reed concurred and specifically noted that regulations distinguishing between on-premise and off-premise signs should not be considered content-based. The Fifth Circuit, looking to the Sixth Circuit, observed that a restriction distinguishing between on-and off-premise signs could be content-neutral. A regulation that defines off-premise as any sign within 500 feet of a building is content-neutral. But if the off premise/on-premise distinction hinges on the content of the message, it is not a content-neutral restriction.

Thus, the Austin Sign Code must be evaluated under the clear rules set forth by the Reed majority. That makes the rest of the case fairly simple. The Sign Code determines on- versus off-premise by reading the sign and asking if it advertises a business, activity, product, or service not located on the site where the sign is installed. If the product or service is located on the same site than the sign is on-premise; otherwise it is off-premise.

In the Thomas v Bright case, the Sixth Circuit considered an almost identical question. Of course, the Sixth Circuit concluded that state officials were making content-based decisions in order to determine whether the outdoor advertising sign was on-premise or off-premise and invalidated the Tennessee Billboard Regulation and Control Act of 1972. A fairly monumental conclusion.

The Fifth Circuit mentioned that other circuits have reached different conclusions including the DC Circuit in Act Now to Stop War v District of Columbia, 846 F. 3d 391, 404 (DC Circuit 2017). In that case, the DC court reasoned that making a “cursory examination” of sign to determine whether it’s on- or off-premise did not render the statute or regulation content-based.

The Fifth Circuit disagreed. First, the court maintained that there are many cursory examinations which would simply fail. For example, suppose the regulation prevented a political sign for Candidate A, but permitted signs for Candidate B. Surely that would only take a cursory examination but also most assuredly, it would be facially unconstitutional. The court went on to examine this concept a little further, selecting several hypotheticals:

● Digital sign in front yard that says: “Sally makes quilts here and sells them at 3200 Main Street”

● Digital sign in the front yard that says “we love hamburgers” and contains the logo and address to a Whataburger location 2 miles away

● How can one determine whether a digital billboard that says “God loves you” is on- or off- premise?

You get the general idea. The court next considered whether the commercial speech exception applied under the circumstances of this case and concluded that it did not. The court essentially held just because most billboards display commercial messages does not mean that the sign regulation does not apply with equal force to both commercial and noncommercial messages. For example, recall that the Sixth Circuit decision involved billboards which were for the most part displaying noncommercial messages.

Finally, the purported justifications for the Sign Code provisions, protecting the aesthetic values and public safety, simply don’t hold up under the strict scrutiny test. There is no proof or argument that one type of sign was a greater eyesore than the other; furthermore, there was no proof that an off-premise digital sign posed a greater risk to public safety than in on-premise digital sign. As a result the relevant provisions of the Sign Code were declared unconstitutional as violative of the First Amendment.

I’d encourage you to read especially the Sixth Circuit decision in Thomas as well as this Fifth Circuit decision. They are quite interesting. Even more important is attempting to determine what impact this has on local land use planning regulations. Most zoning sign regulations have some dependence on the on- versus off-site distinction. In light of these cases, are those sign regulations still valid?

My thanks to my old friend, Sam Edwards, who told me about this very interesting case.