Sunday, September 6, 2020

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. 


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