Reagan Nat'l Adver. of Austin, Inc. v. City of Austin

972 F.3d 696

REAGAN NATIONAL ADVERTISING OF AUSTIN, INCORPORATED, Plaintiff—Appellant,

Lamar Advantage Outdoor Company, L.P., doing business as The Lamar Companies, Intervenor Plaintiff—Appellant,

v.CITY OF AUSTIN, Defendant—Appellee.

No. 19-50354

United States Court of Appeals, Fifth Circuit.

FILED August 25, 2020

Bryan Russell Horton, Julie Anne Ford, Trial Attorney, George Brothers Kincaid & Horton, L.L.P., Austin, TX, for Plaintiff - Appellant.

Daniel Tobin, Bradley Eugene McLain, SettlePou, Dallas, TX, for Intervenor Plaintiff - Appellant.

Henry Gray Laird, III, Esq., City of Austin, Law Department, Litigation Division, Austin, TX, for Defendant - Appellee.

Ilya Shapiro, Esq., Cato Institute, Washington, DC, for Amicus Curiae.

Before Elrod, Southwick, and Haynes, Circuit Judges.

Jennifer Walker Elrod, Circuit Judge:

Reagan National Advertising of Austin and Lamar Advantage Outdoor Company both filed applications to digitize existing billboards. The City of Austin denied the applications because its Sign Code does not allow the digitization of off-premises signs. Reagan and Lamar sued, arguing that the Sign Code's distinction between on-premises and off-premises signs violates the First Amendment. The Sign Code's on-premises/off-premises distinction is content based and therefore subject to strict scrutiny. Because the Sign Code cannot withstand this high bar, we REVERSE and REMAND.

I.

Plaintiffs-Appellants Reagan and Lamar are in the business of outdoor advertising. Reagan and Lamar own and operate "off-premise[s]" signs, including billboards that display both commercial and noncommercial messages.

In April and June 2017, Reagan submitted permit applications to digitize its existing "off-premises" sign structures. The City denied all the permit applications, stating that "[t]hese applications cannot be approved under Section 25-10-152 (Nonconforming Signs ) because they would change the existing technology used to convey off-premises commercial messages and increase the degree of nonconformity with current regulations relating to off-premises signs." In June 2017, Lamar submitted permit applications to digitize its existing "off-premises" sign structures. The City denied Lamar's applications for the same reasons it denied Reagan's.

The City of Austin regulates signs in Chapter 25-10 of the Austin City Code. The Sign Code defines an "off-premise[s] sign" as "a sign advertising a business, person, activity, goods, products, or services not located on the site where the sign is installed, or that directs persons to any location not on that site." The Sign Code does not expressly define "on-premise[s] sign," but it does use the term "on-premise[s] sign" in some of its provisions. The Sign Code allows new on-premises signs to be built, but it does not allow new off-premises signs to be built. A "nonconforming sign" is defined as "a sign that was lawfully installed at its current location but does not comply with the requirements of [the Sign Code.]" Preexisting off-premises signs are deemed "nonconforming signs."

Persons are permitted to "continue or maintain nonconforming signs at [their] existing location," and can even change the face of the nonconforming sign, as long as the change does not "increase the degree of the existing nonconformity." However, persons are not permitted to "change the method or technology used to convey a message" on a nonconforming sign. The Sign Code permits "on-premise[s] signs" to be "electronically controlled changeable copy signs" (i.e. , "digital signs"). Consequently, on-premises non-digital signs can be digitized, but off-premises non-digital signs cannot. The City's stated general purpose in adopting the Sign Code is to protect the aesthetic value of the city and to protect public safety.

In June 2017, Reagan sued the City in state court alleging the Sign Code was unconstitutional. Specifically, it alleged that the distinction between the digitalization of on-premises and off-premises signs was a violation of the First Amendment. In July 2017, the City removed the case to federal court.

In August 2017, the City amended the Sign Code. The amended Sign Code defines "off-premise[s] sign" as "a sign that displays any message directing attention to a business, product, service, profession, commodity, activity, event, person, institution, or other commercial message which is generally conducted, sold, manufactured, produced, offered, or occurs elsewhere than on the premises where the sign is located," and it expressly defines an "on-premise[s] sign" as "a sign that is not an off-premise[s] sign."

The amended Sign Code also includes a new section, "§ 25-10-2 - Noncommercial Message Substitution," comprised of the following provisions:

(A) Signs containing noncommercial speech are permitted anywhere that signs regulated by this chapter are permitted, subject to the same regulations applicable to the type of sign used to display the noncommercial message. No provision of this chapter prohibits an ideological, political, or other noncommercial message on a sign otherwise allowed and lawfully displayed under this chapter.

(B) The owner of any sign allowed and lawfully displayed under this chapter may substitute noncommercial speech in lieu of any other commercial or noncommercial speech, with no permit or other approval required from the City solely for the substitution of copy.

(C) This section does not authorize the substitution of an off-premise[s] commercial message in place of a noncommercial or on-premise[s] commercial message.

The amendments do not change the prohibition on changing the method or technology used to convey messages (e.g. , digitalization) for nonconforming signs, Section 25-10-152, or the definition of "nonconforming sign."

In October 2017, Lamar joined the case as an intervenor plaintiff. In their amended complaints, Reagan and Lamar asserted nearly identical causes of action and requests for relief. They sought declaratory judgments that the Sign Code's distinction between on-premises and off-premises signs was an unconstitutional content-based speech restriction, that the Sign Code was invalid and unenforceable, and that Reagan and Lamar should be allowed to digitize their signs without permits. Reagan sought a declaratory judgment that the Sign Code was invalid as applied to Reagan, but Lamar did not seek this specific relief.

After a bench trial, the district court denied Reagan and Lamar's requests for declaratory judgment, held that the Sign Code was content neutral and satisfied intermediate scrutiny, and entered judgment for the City. Reagan and Lamar appeal.

II.

The first issue we must address is mootness. In August 2017, the City amended the Sign Code. The impact of the amendment was two-fold. First, it amended the definition of "off-premise[s] sign" and expressly defined "on-premise[s] sign." Second, it included a new section on "noncommercial message substitution." The amendment did not alter the prohibition on changing the method or technology used to convey messages for nonconforming signs (e.g. , digitalization) or the definition of a nonconforming sign.

The district court sua sponte addressed the question of mootness because the Sign Code amendments occurred after the denial of Reagan and Lamar's applications. The district court reasoned that amendments to a challenged law are not enough to moot an underlying claim unless the law has been sufficiently altered so as to present a substantially different controversy. See Ne. Fla. Chapter of Associated Gen. Contractors of Am. v. City of Jacksonville , 508 U.S. 656, 662 & n.3, 113 S.Ct. 2297, 124 L.Ed.2d 586 (1993).

The district court determined that the amendments to the Sign Code did not present a substantially different controversy because they: (1) did not alter the prohibition against new digital sign-faces for billboards; and (2) did not change Reagan and Lamar's claim that the application of the Sign Code required an enforcer to read the sign to determine whether it was "on-premises" or "off-premises," and thus, in Reagan and Lamar's view, the post-amendment Sign Code was still content based.

Reagan and Lamar agree with the district court that their case is not moot. However, they disagree on the why. Reagan and Lamar sought to update grandfathered signs, and they filed their applications to do so in April 2017 and June 2017. At that time, the prior version of the Sign Code was still in effect and Reagan and Lamar's applications were denied under the prior version of the Code. Therefore, they assert that under Texas law, they have the right to have their applications determined based on the regulations in effect at the time their applications were filed. Tex. Loc. Gov't Code Ann. § 245002(a)(1); see Reagan Nat. Advert. of Austin, Inc. v. City of Cedar Park , 387 F. Supp. 3d 703, 706 n.3 (W.D. Tex. 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.").

We agree with Reagan and Lamar; the case is not moot. As Reagan and Lamar applied for permits under the old ordinance, we evaluate the constitutionality of the previous version of the ordinance.¹

III.

There are two substantive issues we must address to determine what standard of scrutiny applies to Austin's Sign Code.

First, whether the Sign Code's distinction between on-premises and off-premises signs is content based and second, whether the Sign Code is a regulation of commercial speech and therefore subject to intermediate scrutiny under Central Hudson Gas & Electric Corp. v. Public Service Commission , 447 U.S. 557, 561, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). We hold that because 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. We walk through this analysis below.

A.

We turn first to whether the Sign Code's distinction between...