Kenjoh Outdoor, LLC v. Marchbanks

23 F.4th 686

KENJOH OUTDOOR, LLC, Plaintiff-Appellant,

v.Jack MARCHBANKS, Director, Ohio Department of Transportation; Nathan Fling, Supervisor, Ohio Department of Transportation, Defendants-Appellees.

No. 20-4026

United States Court of Appeals, Sixth Circuit.

Argued: October 19, 2021

Decided and Filed: January 11, 2022

ARGUED: A. Richard M. Blaiklock, LEWIS WAGNER, LLP, Indianapolis, Indiana, for Appellant. Mathura J. Sridharan, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Appellees. ON BRIEF: A. Richard M. Blaiklock, Charles R. Whybrew, LEWIS WAGNER, LLP, Indianapolis, Indiana, Thomas H. Fusonie, Kara M. Mundy, VORYS, SATER, SEYMOUR AND PEASE, LLP, Columbus, Ohio, for Appellant. Benjamin M. Flowers, William J. Cole, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Appellees.

Before: GILMAN, THAPAR, and NALBANDIAN, Circuit Judges.

NALBANDIAN, Circuit Judge.

This is a case about Ohio's billboard regulations. In Ohio, to place an advertising billboard on a highway, you must apply for a permit from the Ohio Department of Transportation (ODOT). But under one of its regulations, known as the compliance rule, ODOT will not process a permit application if the applicant has outstanding fees, changes his billboard without prior approval from ODOT, or maintains an illegal advertising billboard.

This controversy began when ODOT put Kenjoh's billboard permits on hold under the compliance rule, alleging that Kenjoh was maintaining an illegal billboard. In turn, Kenjoh sued ODOT, asserting that the compliance rule is an unconstitutional prior restraint. It asked for a permanent injunction and damages under 42 U.S.C. § 1983. The district court dismissed both claims, and Kenjoh appealed. But while the case was pending on appeal, the Ohio legislature amended a key definition in the relevant statute. This changes how the regulation applies. So we VACATE and REMAND the injunction claim to the district court to consider the constitutionality of the regulation given the amendment. But as to damages, we AFFIRM the grant of qualified immunity despite the amendment. That's because we look at the law as it existed at the time of the official action.

I.

We begin by laying out the background in three parts. First, we explain the relevant regulation. Then we briefly recount the facts that gave rise to this dispute. And finally, the procedural history.

A.

Ohio heavily regulates billboards. And ODOT enforces these regulations. See Ohio Rev. Code § 5516.03. Relevant here are a regulation and a definition that governs its scope.

The regulation. Generally, a person needs a permit from ODOT before placing an "advertising device" on the highway. Ohio Rev. Code § 5516.10. But ODOT will not process permit applications if the applicant falls into one of three categories.¹ See Ohio Admin. Code § 5501:2-2-05(D). First, if he has outstanding fees. Id. Second, if he modifies an advertising device without prior approval. Id. And third, if he maintains an illegal device. Id. We call this regulation the compliance rule.

Relevant here is the third category of the compliance rule. Again, this allows ODOT to refuse to process any application if the applicant maintains an illegal device. And ODOT defines "illegal sign"² as "an advertising device with advertising copy which was erected or is maintained in violation of federal, state, or local law or ordinance." Ohio Admin. Code § 5501:2-2-01(L) (emphasis added). So the definition of illegal device is rather intuitive—it is a device that violates a law or regulation. Usually, these signs are subject to a removal procedure. Ohio Admin. Code § 5501:2-2-07. But the failure to remove them also implicates the compliance rule. Importantly, the definition of "illegal sign" incorporates the definition of "advertising device." So if the applicant maintains an illegal adverting device and applies for a permit to put up another advertising device, ODOT will not process that permit.

The key definition, then, is that of "advertising device." Ohio Rev. Code § 5516.01(A) (2007). After all, the compliance rule incorporates it in two ways. First, the compliance rule has its force in authorizing ODOT to withhold permits, and these permits are generally required before a person can place an "advertising device" on the highway. And second, "illegal device" incorporates the definition of "advertising device." So before ODOT refuses to process a permit, it must determine that the illegal device is an advertising device.

The definition . While this case was on appeal, the legislature amended the definition of "advertising device." See Act of Mar. 25, 2021, sec. 101.02, 2021 Ohio Laws 5 (H.B. 74). Before, the definition relied on the content of the sign. So, an "advertising device" was any outdoor sign, including billboards, "designed, intended, or used to advertise."³ Ohio Rev. Code § 5516.01(A) (2007). And this was the definition that the district court analyzed. Kenjoh Outdoor, LLC v. Marchbanks , 485 F. Supp. 3d 947, 952 (S.D. Ohio 2020). Now? The definition relies on the status of the person operating the sign. And so under the current statute, an "advertising device" is any sign "owned or operated by a person or entity that earns compensation for the placement of a message on it."⁴ Ohio Rev. Code § 5516.01(A). Thus in one sense, the definition is broader. It is not limited to advertisements. But in another sense, it is narrower. It only covers those who are paid for the billboard. This means that even an advertising billboard is not covered if the owner is not paid.

Taking the two together, we are left with this: Before the amendment, a person needed a permit from ODOT to erect a billboard that was "designed, intended, or used to advertise." But if he falls into one of the categories of the compliance rule, then ODOT would not process that application. If, for example, ODOT determined that the applicant has a billboard that violates the law, the compliance rule will apply only if that billboard was an advertising device. Now, a person needs a permit if he will be paid for placing a message on the billboard, regardless of the message. And again, the application will not be processed if he falls into one of the three categories. The legislature did not amend the compliance rule itself. But in amending "advertising device," it amended the compliance rule's scope.

B.

With that in mind, we turn to the facts of Kenjoh's case. In 2017, Kenjoh decided to put up a billboard in Sidney, Ohio. This billboard was to have two sides: one facing the highway, the other a state road. Mark Jones, an ODOT employee, told Kenjoh that it did not need a permit. So Kenjoh built the billboard without one and began renting it out.

But despite its earlier assurances, the state determined that this billboard violated an ODOT regulation prohibiting a billboard within 500 feet of an interchange. See Ohio Admin. Code § 5501:2-2-02(A)(3)(a)(ii). So because Kenjoh's billboard fell within this regulation, the state said that Kenjoh was maintaining an "illegal device."

Nathan Fling, an ODOT supervisor, sent Kenjoh a notice. The notice gave Kenjoh 30 days to remove the illegal billboard. And if it did not, ODOT would fine it up to $100 a day and put its other permit applications on hold. Despite the warning, Kenjoh did not remove the billboard. So ODOT, acting under the compliance rule, put Kenjoh's other applications on hold. This forced Kenjoh to reconsider and remove the offending billboard. But since it lost revenue when its applications were stalled, it sued.

C.

Kenjoh asked for an injunction and damages. For its injunctive claim, it asserted only one ground for relief—that the compliance rule is a prior restraint that violates the First Amendment. For its damages claim, Kenjoh sued Nathan Fling in his individual capacity under 42 U.S.C. § 1983. The Defendants moved to dismiss. They argued that the compliance rule was not an unconstitutional prior restraint, and that Fling is entitled to qualified immunity.

The district court agreed. It found that the compliance rule regulated only commercial speech. And it concluded that the prior restraint doctrine does not apply to commercial speech. But the court did not end its analysis there. It analyzed the regulation as commercial speech using intermediate scrutiny and held that the compliance rule was constitutional. Finally, the court granted Fling qualified immunity. So the district court dismissed the case. And Kenjoh appealed.

II.

We review the district court's dismissal for failure to state a claim de novo. See Boxill v. O'Grady , 935 F.3d 510, 517 (6th Cir. 2019). We allow claims to survive "only if they ‘contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’ " Id. (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). And a claim is facially plausible if it allows courts "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

III.

We begin with Kenjoh's claim for injunctive relief. Kenjoh's only theory is that the compliance rule is a prior restraint. But it doesn't make much sense to analyze the compliance rule as an alleged prior restraint in a vacuum. As we noted above, the compliance rule, on its face, incorporates two relevant definitions that are vital to this case—"advertising device" and "illegal sign." Indeed, it's the definition of "advertising device" that originally made this case about commercial speech. And, in any event, that's the way the parties have argued the matter. But Ohio changed the definition of "advertising device," making it about the speaker and not about the content of the speech. This change, in turn, altered the scope of the compliance rule.

So for Kenjoh's claim for injunctive relief, this presents us with two questions. First, do we still have a live controversy? And second, if we do, should we resolve the case or remand for the district court to...