Important Legal Cases

The billboard industry is one of the most litigious in the country. Many battles between outdoor advertising companies and communities have played out in the courts.

City of Austin v. Reagan

On April 21, 2022, the U.S. Supreme Court ruled 6-3 in favor of the City of Austin in its case against Reagan National Advertising. A detailed summary of the case can be found here.

Other Important Cases

Metromedia, Inc. et al. v. City of San Diego (1981)
Reed et al v. Town of Gilbert, AZ (2015)
Thomas v. Bright (2019)
Adams Outdoor Advertising v. Pennsylvania Dept. of Transportation (2019)
International Outdoor, Inc. v. City of Troy, Michigan (2020)
Naser Jewelers v. City of Concord (2008)
State of Texas v. Clear Channel Outdoor (2015)

Metromedia, Inc., et al. v. City of San Diego, 453 U.S. 490 (1981)

Issues

  • On-premises vs. off-premises signs
  • First Amendment protections relating to commercial vs. non-commercial speech

Summary

San Diego enacted an ordinance prohibiting billboards. Its stated purpose was to eliminate hazards to pedestrians and motorists brought about by distracting sign displays and to preserve and improve the appearance of the City. In its plurality opinion, the Court summed up the effect of the ordinance as follows: “The occupant of property may advertise his own goods or services [i.e., on-premises commercial speech]; he may not advertise the goods or services of others [i.e., off-premises commercial speech], nor may he display most noncommercial messages [with twelve stated exceptions].” 490 U.S. at 503.

The plurality opinion concluded that the ordinance’s regulation of commercial speech meets constitutional requirements. The Court noted that the twin goals that the ordinance seeks to further—traffic safety and the appearance of the city—are substantial government goals. Although the billboard company questioned whether the distinction between onsite and offsite advertising on the same property is justifiable in terms of either esthetics or traffic safety, the Court explained that this argument has been rejected, at least implicitly, in all of the cases sustaining the distinction between offsite and onsite commercial advertising. Noting that San Diego has chosen to value one kind of commercial speech—onsite advertising—more than another kind of commercial speech—offsite advertising, the Court said that it did not reject that judgment, and held that offsite commercial billboards may be prohibited while onsite commercial billboards are permitted.

In contrast, the Court disagreed with the ordinance’s general ban on signs carrying noncommercial messages, regardless of the ordinance’s twelve exceptions. The Court held that because some noncommercial messages may be conveyed on billboards throughout the commercial and industrial zones, San Diego must similarly allow billboards conveying other noncommercial messages throughout those zones. Because of the City’s ban on noncommercial messages, the Court concluded that San Diego’s ordinance is unconstitutional because it reaches too far into the realm of protected speech.

Reed v. Town of Gilbert, Arizona et al., 576 U.S. 155 (2015)

Issues

  • Content-based vs. content neutral-sign sign ordinance restrictions
  • Content-based restrictions are subject to strict scrutiny under the First Amendment

Summary

The Town of Gilbert, Arizona’s Sign Code prohibits the display of outdoor signs anywhere within the Town without a permit, but it then exempts 23 categories of signs from that requirement. The Court discussed three categories of signs subject to the exemptions, namely, ideological signs (treated most favorably), political signs (treated less favorably than ideological signs) and temporary directional signs related to a qualifying event, e.g., assemblies of non-profit organizations (treated less favorably than political signs).

On June 18, 2015, the sign code was reversed and remanded in a 9-0 ruling. The Court found that on its face, the Sign Code is a content-based regulation of speech, and the Court said it had no need to consider the government’s justifications or purposes for enacting the Code to determine whether it is subject to strict scrutiny. Further, the Court found that the content-based restrictions on speech can stand only if they survive strict scrutiny, which requires the Government to prove that the restriction furthers a compelling interest and is narrowly tailored to achieve that interest. Although the Town offered two governmental interests to support the various Sign Code distinctions, i.e., aesthetic appeal and traffic safety, the Court held that in regard to aesthetics, the Town’s position was undermined because the Code allows unlimited proliferation of larger ideological signs while strictly limiting the number, size and duration of smaller directional ones. And with regard to traffic safety, the Court ruled that the Town offered no reason to believe that directional signs pose a greater threat to safety than do ideological or political signs. Having decided that the Sign Code is underinclusive, the Court concluded it is not narrowly tailored to further a compelling government interest and thus fails strict scrutiny.

Learn more about Scenic America’s response here.

 

Reagan National Advertising of Austin, Inc., v. City of Austin, 972 F.3d 696 (5th Cir., 2020) (Cert. granted, June 28, 2021)

For a more detailed summary and FAQs about the case, click here.

Issues

  • On-premises signs v. off-premises signs
  • Digital v. non-digital signs
  • Commercial vs. non-commercial speech
  • Content-based restrictions subject to strict scrutiny under the First Amendment, applying Reed v. Gilbert

Summary

The City of Austin’s billboard regulation, in part, allows on-premises, non-digital signs to be digitized, but off-premises, non-digital signs cannot. Sign companies sued the City, claiming the distinction between on-premises and off-premises signs was an unconstitutional content-based speech restriction. The court held that the Sign Code “is a content-based regulation that is not subject to the commercial speech exception, strict scrutiny applies, and the City has not satisfied that standard.” 972 F.3d at 702. The court noted that to determine whether a sign is “off-premises” and therefore unable to be digitized, government officials must read it. According to the court, it followed that this is an obvious content-based inquiry, that does not evade strict scrutiny simply because a location is involved. The court observed that the regulation applies with equal force to both commercial and non-commercial messages, and for that reason, strict scrutiny applies. In conclusion, the court held that the Sign Code does not survive strict scrutiny. The stated purpose of the Sign Code—to protect the aesthetic value of the City and to protect public safety—fails to satisfy the test where the City has not provided any argument that the on-premises signs are a greater eyesore than the off-premises signs, and has provided no evidence that on-premises signs pose less of a risk to public safety than off-premises signs. Thus, the court ruled that the ordinance is underinclusive and thus not narrowly tailored to serve a compelling government interest.

NOTE: The City of Austin petitioned the United States Supreme Court for review. Austin’s Petition was granted on June 28, 2021. The case is now on appeal in the U.S. Supreme Court in City of Austin, Texas v. Reagan National Advertising of Texas, Inc., et al., No. 20-1029. In Austin’s Petition for a Writ of Certiorari in the Supreme Court, the City argued that the Fifth Circuit Decision (summarized immediately herein) took the concept of content-based regulation beyond the limits expressed in Reed v. Gilbert (summarized herein), and also, that the validation of on-premise/off-premise distinctions found in Metromedia (summarized herein) was not overturned by Reed. Thus, Austin’s code provisions should not have been subject to strict scrutiny but rather intermediate scrutiny, which, according to the City of Austin, the code would have survived.

Thomas v. Bright, 937 F.3d 721 (6th Cir. 2019), cert. denied, 141 S.Ct. 194 (2020)

Issues

  • On-premises signs v. off-premises signs
  • Commercial vs. non-commercial speech
  • Content-based restrictions subject to strict scrutiny under the First Amendment, applying Reed v. Gilbert

Summary

Tennessee’s Billboard Act requires anyone who would post a sign along a roadway to apply for a permit, unless the sign falls within an exception, such as the on-premises exception. Here, the billboard owner placed a billboard on a vacant lot that contained a poster supporting the 2012 U.S. Summer Olympics Team. The state denied the owner a permit because the property did not qualify for the on-premises exception in that the land was vacant. The owner was ordered to remove the sign and the owner sued. The court acknowledged that content-neutral regulations of noncommercial speech need only survive intermediate scrutiny. The court, however, concluded that the on-premises exception was content-based, because to determine whether the on-premises exception does or does not apply (i.e., whether the sign satisfies or violates the Act), the Tennessee official must read the message written on the sign and determine its meaning, function, or purpose. The court noted that the Supreme Court has made plain that a purpose component in a scheme such as this is content-based, citing Reed v. Gilbert. The court concluded that under Reed v. Gilbert, the Act was unconstitutional because the on-premises exception was content-based and thus subject to strict scrutiny which the Act failed to survive.

Adams Outdoor Advertising Ltd. P’ship v. Pennsylvania Dept. of Transportation, 930 F.3d 199 (3d Cir. 2019)

Issues

  • On-premises signs v. off-premises signs
  • Concludes that Reed v. Gilbert is inapposite to this case concerning exemption for on-premise sign

Summary

Pennsylvania’s Outdoor Advertising Control Act bars the installation of any billboard within 500 feet of an interchange unless the billboard is an “official” or “on premise” sign.  An on-premise sign could be a sign advertising either the sale or lease of the premises, or activities conducted on the premises. The billboard company applied for a permit, which the Pennsylvania Department of Transportation denied, where the billboard would be within 500 feet of a highway interchange. Billboard company sued, claiming that the “on-premise” exception to the interchange ban is a content-based regulation that on its face cannot survive the strict scrutiny required under the First Amendment. In reviewing the on-premise exception under the interchange ban, the court expressly declined to apply the Reed v. Gilbert (summarized herein) rationale to the facts of the case, reasoning that Reed did not address an exemption for on-premise signs. Instead, the court applied a prior 3d Circuit precedent, Rappa v. New Castle County, 18 F.3d 1043 (3d Cir. 1994), to conclude that the government had not carried its burden of showing the “sale or lease sign” exception met a certain type of scrutiny developed in Rappa. Regarding on-premise signs that concern activities on the property, the court further applied Rappa to conclude that the on-premise exemption is subject to intermediate scrutiny, but that the record on appeal failed to show that the government had carried its burden to justify that the exemption met the intermediate scrutiny test. The court remanded the case for further litigation regarding the justification for the exemptions to the interchange ban.

International Outdoor, Inc. v. City of Troy, Michigan, 974 F.3d 690 (6th Cir. 2020)

Issues

  • Commercial vs. non-commercial speech
  • Content-based restrictions subject to strict scrutiny under the First Amendment, applying Reed v. Gilbert

Summary

The City of Troy, Michigan denied the billboard company’s application for a permit for two billboards. The billboard company, in its appeal, argues that the Sign Ordinance imposes content-based restrictions without a compelling government interest. Specifically, the billboard company argues that the Sign Ordinance contained unconstitutional content-based restrictions as it exempted from permit requirements categories of signs such as flags; temporary signs such as real estate signs; garage, estate or yard signs; non-commercial signs; political signs; holiday or other seasonal signs; and construction signs. The Court concluded that the Sign Ordinance regulated both commercial and non-commercial speech but treated them differently, requiring the City of Troy to consider the content; and further, for content-based restrictions on speech, strict and not intermediate scrutiny applies pursuant to Reed v. Gilbert (summarized herein). The court remanded the case for consideration consistent with the holding in Reed.

Naser Jewelers v. City of Concord, New Hampshire, 513 F.3d 27 (1st Cir. 2008)

Issues

  • Electronic v. non-electronic billboards
  • Content-based v. content neutral regulation
  • Complete ban supported as being content-neutral

Summary

The City of Concord, New Hampshire, enacted an ordinance prohibiting all Electronic Message Centers (“EMC’s”) as detrimental to traffic safety and aesthetics. A Concord business sought and was denied a preliminary injunction against the ordinance.

On appeal, the court found that the ordinance is content-neutral as it contains no exceptions. Under the intermediate scrutiny test for content-neutral regulations, the court held that Concord’s ordinance is constitutional because it serves substantial government interests, it is narrowly tailored, and it leaves open reasonable alternative channels of communication. Regarding the part of the test concerning whether the ordinance serves substantial government interests, the court noted that traffic safety and community aesthetics have long been recognized to constitute significant governmental interests, citing Metromedia v. City of San Diego (summarized herein).

State of Texas v. Clear Channel Outdoor, Inc.,  463 S.W.3d 488 (Texas 2015)

Issues

  • Billboards found to be “fixtures” for purposes of compensation in eminent domain
  • Compensation for billboards is based on the structures themselves, rather than lost advertising profits

Summary

As part of a freeway widening project near Houston, the State of Texas condemned two parcels of land that had been leased to the billboard company for outdoor advertising. The billboard sign faces were each 48 feet by 14 feet, attached to wooden poles embedded deeply in the ground. Although Texas took the position that the taking did not include the billboards as they were removable personal property, the signs could not be removed as usable structures to place elsewhere, thus, the billboard company dismantled the sign faces, cut the poles in pieces and removed the materials with the State paying for the cost of removal. Further, because the signs could not be relocated somewhere else without a permit from the City of Houston, the billboard company took the position that there was no comparable location available, and in any case, a special permit that would be limited to a nonrenewable ten-year term was inferior to the indefinite lease arrangement that the billboard company enjoyed on the condemned parcels. As a result, the billboard company contended the signs could not be relocated.

On appeal to the trial court from commissioners’ awards that included no compensation for the billboard structures, the billboard company sued the State for inverse condemnation of the sign structures. The Company argued it was entitled to be compensated for the billboards based on the business revenue they generated, whereas the State argued that the compensation for the signs should be limited for the cost to build them.

The State settled with the landowners and the billboard company for the compensation due for the fee and leasehold interests. The State and the billboard company proceeded to trial, however, on the value of the billboard structures. At trial, the State’s expert valued the billboards at $25,000 each based on replacement cost less depreciation. The billboard company’s expert, Dr. Rodolfo Aguilar, testified as to an assortment of valuation approaches that ranged from $15,000 for each sign ($30,000 total) to $722,600 total. The jury returned a verdict for the value of the two billboards at $268,235.27. The State appealed.

The Texas Supreme Court concluded that the billboards were permanent fixtures intended to become a part of the real estate as opposed to removable personal property, and thus should have been included in the compensation for the land. The court, however, disagreed with the billboard company’s contention that capitalizing income from the use of the property, as its expert did, was an accepted way of valuing the property. The court held that the property the company’s expert valued, namely, the billboard advertising operations, was not the property taken; indeed, the State did not take the billboard company’s business, only the land and the billboards’ poles and signboards. The court noted that only the billboard structures themselves had been excluded from the settlement between the parties, and that the compensation due for the structures could only be based on their cost, that is, $25,000 in the State’s view, or $15,000 per sign in the billboard company’s view. The court concluded that evidence of the value of the income from the billboard company’s advertising operations was inadmissible, and remanded the case to the trial court for proceedings consistent with its opinion.