by James S. Azadian

Since joining the United States Supreme Court in 2005, Chief Justice John Roberts has worked to develop his Orange County has fewer billboards than neighboring areas because more of the county’s freeways are in residential areas. Cities regulate the placement of billboards on private or city-owned land near freeways, allowing more of them in commercial and industrial areas. The Highway Beautification Act of 1965 allows states receiving federal highway funding to regulate outdoor signs in proximity to federal highways. Under both state and federal law, no billboards are allowed on Caltrans property along freeways. Some view billboards as eyesores and object even more so to digital billboards that allow advertisers to change the images shown every few seconds and which have been on the rise in some parts of Orange County.

This past term, in City of Austin v. Reagan Nat’l Advert. of Austin, LLC, No. 20-1029, 142 S. Ct. 1464 (2022), the Supreme Court of the United States took up the issue of billboard regulation for the first time in forty years. The Court reviewed Austin’s regulation that prevents outdoor advertisers from digitizing their off-site billboards and considered a challenge that the regulation violated free speech rights. Austin officials believed that the off-site digital signs, which advertise goods or services not offered on the subject property, are eyesores and pose safety hazards by distracting drivers. The city does allow for the digitization of signs located on the property of the business that is advertising its own business.

On-premises signs are generally unregulated and may be updated and improved without limitation, including improvements or conversion to digital signage. The on-/off-site distinction is nothing new. It’s been the standard for outdoor-advertisement regulations in most states since the 1960s. Nearly every state has laws prohibiting off-site billboards to some degree, with many local governments employing the on-/off-site distinction to avoid a proliferation of outdoor advertising in their communities. The push for converting static billboards to digital billboards in cities like Austin is important for advertising companies because they are not allowed to erect new off-site signs. Almost all local governments prohibit the construction of new off-site signs, while off-site signs predating such bans are allowed to stay up under grandfathering rights.

City of Austin opened the door for the Supreme Court to again review the First Amendment limitations on restrictions for off-premises commercial speech. Forty years ago, in Metromedia v. City of San Diego, 453 U.S. 490 (1981), a splintered decision resulted in five separate opinions, with a plurality of the Burger Court appearing to rule that the City of San Diego’s ban on off-premises advertising would be constitutional, so long as it did not ban off-premises noncommercial speech. Since then, however, the high Court articulated a stricter standard for assessing content neutrality. In Reed v. Town of Gilbert, Arizona, 576 U.S. 155 (2015), for example, the Roberts Court raised the standard applicable to government actors who restrict commercial speech, imposing strict scrutiny to strike down an Arizona town’s sign code that treated some speech (“ideological” or “political” speech) more favorably than other speech (such as signs promoting church services or educational events). The high Court’s acceptance of the City of Austin case renewed the hope of outdoor advertisers that the Court had misgivings about Metromedia and whether such on-/off-site distinctions would survive proper First Amendment scrutiny as identified in Reed. After all, at least four of the nine justices saw fit to review the rules applicable to off-site advertising. If the Court were to strike down Austin’s billboard regulations as content-based restrictions, like in Reed, it would have a profound effect on regulation of outdoor advertising because such regulation would likely not survive strict scrutiny under the First Amendment. Local governments across the country hoped for a ruling in favor of Austin, which would affirm the status quo’s nearly universal method of billboard regulation.

Reagan National Advertising and Lamar Advertising Company have off-site billboards in Austin and, in 2017, applied for a city permit to convert their regular billboards into digital ones. After the city denied the applications, both companies brought suit in state court, challenging the city’s distinction between on- and off-site signs as an unconstitutional limitation on free speech. The companies argued that the city’s ban on converting the off-site static billboards to digital billboards was not justified under the First Amendment because the city allowed the digitization of on-site static signs. The city removed the case to federal court. Reasoning that the on-/off-site distinction was content neutral, the federal court reviewed the city’s regulations under intermediate scrutiny (based on Metromedia) rather than under Reed’s more-demanding strict scrutiny, which is reserved for content-based restrictions. The district court ruled in favor of the city, but the United States Court of Appeals for the Fifth Circuit reversed, holding that Reed’s strict scrutiny standard applied and that Austin’s sign code does not hold up under strict scrutiny (the most stringent constitutional test). The Fifth Circuit reasoned that the sign code is a content-based regulation because someone has to read the sign to determine the message it is conveying—whether it advertises activities or services located on or off the premises. The Fifth Circuit determined that the city’s stated interests in aesthetics and public safety were insufficient reasons to violate the First Amendment speech rights of the advertisers.

In a 6-3 judgment, the Supreme Court reversed. Writing for the majority, Justice Sonia Sotomayor observed that “American jurisdictions have regulated outdoor advertisements for well over a century,” with tens of thousands of municipalities having implemented similar distinctions between on- and off-site signs.

The case turned on whether the ordinance is considered content neutral or content based. A regulation is content based if it “applies to particular speech because of the topic discussed or the idea or message expressed,” Justice Sotomayor noted. A content-based restriction on speech is presumptively unconstitutional and subject to strict scrutiny, the highest form of constitutional review, whereas content-neutral laws generally must survive only intermediate scrutiny. The majority reasoned that the on-/off-site distinction posed by the Austin ordinance looks only at location—whether the sign has a connection to the site where it is located—not the message of the sign itself, thereby making it content neutral and not subject to strict scrutiny. Accordingly, Justice Sotomayor explained, this case involves a “very different regulatory scheme” from the one in Reed. Unlike the sign code in Reed, Austin takes the speech into account only to determine whether the sign is located on or off premises; the city does not “single out any topic or subject matter for differential treatment.” The majority characterized the Fifth Circuit’s decision as “too extreme an interpretation of this Court’s precedent.”

The Court remanded the case for the lower courts to consider whether the sign code survives under a less rigorous test. Austin and the tens of thousands of other municipalities employing similar on-/off-site distinctions see the decision as a major victory that will thwart similar challenges from outdoor advertisers. However, Justice Sotomayor stressed that the decision settled only the proper legal test that applies to Reagan’s and Lamar’s challenges in this case, explaining that even when the less stringent, intermediate scrutiny test is applied, the city must still show that its code is drawn narrowly enough to advance a significant government interest. The parties had not litigated the issue of whether there might be an impermissible purpose or justification behind an otherwise facially content-neutral restriction.

Chief Justice John Roberts and Justices Stephen Breyer, Elena Kagan, and Brett Kavanaugh joined Justice Sotomayor’s decision. Justice Breyer wrote a concurrence expressing his view that Reed’s application of strict scrutiny was wrong and that a far better solution would be to use common sense in deciding whether such regulations discriminate based on the content of the sign’s message. This was the same view expressed in his concurring opinion in Reed (“Consequently, the specific regulation at issue does not warrant ‘strict scrutiny.’ Nonetheless, . . . I believe that the Town of Gilbert’s regulatory rules violate the First Amendment. I consequently concur in the Court’s judgment only.”). Justice Samuel Alito concurred in the judgment, but he dissented from the rest of the majority’s decision because it will not always be apparent whether signs posted near or at a place of business are directly related to that business. He emphasized that, at least in some cases, strict scrutiny should apply because the provisions defining on-/off-site signs do discriminate based on the messages the signs convey.

Justice Clarence Thomas authored the principal dissenting opinion, which was joined by Justices Neil Gorsuch and Amy Coney Barrett. Justice Thomas, the author of the Court’s decision in Reed, viewed the majority’s decision as replacing the “clear rule” established in Reed “with an incoherent and malleable standard.” Justice Thomas criticized the majority’s emphasis on the length of time that similar sign regulations had been in place, explaining that there was no evidence that our nation’s Founders had considered such signage issues when they adopted the First Amendment. Justice Thomas further reasoned that the city’s sign code is content-based and is therefore presumed invalid because it “discriminates against certain signs based on the message they convey”—specifically, whether they promote business occurring on or off the property where the sign is located. Justice Thomas concluded by urging that it is better to adhere to the “clear and neutral rule” that Reed provided.

Will we see the Court entertain another free speech challenge to billboard regulations? If history is a teacher, then maybe not for another forty years. Then again, it takes only four justices to vote in favor of hearing a case. Those votes to take up City of Austin are presumed to still exist, even with the most recent personnel changes at the Court—the retirement of Justice Breyer and the addition of Justice Ketanji Brown Jackson. So some court watchers and advocates of free(r) speech are reasonably optimistic that the issue has a solid chance of returning to the Court in the nearer future, perhaps with Justices Thomas, Alito, Gorsuch, and Barrett’s providing the minimum four votes needed to take up such a case.

James S. Azadian is the co-leader of Dykema Gossett’s nationwide Appellate & Critical Motions Practice and the leader of the firm’s West Coast Appellate Team. He is the Chair of the Advisory Board for the United States Court of Appeals for the Ninth Circuit, an adjunct professor of appellate advocacy at Pepperdine Caruso School of Law, and a member of the American Bar Association’s Amicus Committee. He is a past chair of the Orange County Bar Association’s Appellate Law Section.