What NJ Municipalities Need to Know About US Supreme Court’s Sign Ordinance Decision

In City of Austin, Texas v. Reagan National Advertising of Austin, LLC, the U.S. Supreme Court held that the City of Austin’s sign ordinance, which regulates “off-premises” signs more strictly than “on-premises” signs, was facially content-neutral. Accordingly, the Court remanded the case to the lower court to apply intermediate rather than strict scrutiny as the proper standard to apply to the legal challenge.

Challenge to Off-Premises Sign Ordinance

Like many municipalities across the United States, the City of Austin, Texas (City), specially regulates signs that advertise things that are not located on the same premises as the sign, as well as signs that direct people to offsite locations. These are known as off-premises signs. The City’s sign code at the time of this lawsuit prohibited construction of new off-premises signs. Grandfathered off-premises signs could remain in their existing locations as “nonconforming signs,” but could not be altered in ways that increased their nonconformity. On-premises signs were not similarly restricted. 

Respondents, Reagan National Advertising of Austin, LLC, and Lamar Advantage Outdoor Company, L.P., own billboards in Austin. When Reagan sought permits to digitize some of its billboards, the City denied its applications. Reagan filed suit in state court, alleging that the City’s prohibition against digitizing off-premises signs, but not on-premises signs, violated the First Amendment’s Free Speech Clause. The City removed the case to federal court, and Lamar intervened. 

The District Court held that the challenged sign code provisions were content-neutral under Reed v. Town of Gilbert, 576 U.S. 155 (2014), reviewed the City’s on-/off-premises distinction under intermediate scrutiny, and found that the distinction satisfied that standard. The Fifth Circuit Court of Appeals reversed, holding that the on-/off-premises distinction was facially content-based because a government official had to read a sign’s message to determine whether the sign was off-premises. The court then reviewed the City’s on-/off-premises distinction under strict scrutiny, and it held that the City failed to satisfy that onerous standard. 

Supreme Court’s Decision

By a vote of 6-3, the Supreme Court reversed the ruling by the Fifth Circuit Court of Appeals. The Supreme Court held that the distinction between on-premises signs and off-premises signs in the city’s sign code is facially content-neutral under the First Amendment and, therefore, subject to immediate scrutiny.

In reaching its decision, the Supreme Court found that the Court of Appeals’ interpretation of Reed—to mean that a regulation cannot be content-neutral if its application requires reading the sign at issue—is too extreme an interpretation of this Court’s precedent. “This rule, which holds that a regulation cannot be content-neutral if it requires reading the sign at issue, is too extreme an interpretation of this Court’s precedent. Unlike the regulations at issue in Reed, the City’s off-premises distinction requires an examination of speech only in service of drawing neutral, location-based lines. It is agnostic as to content,” Justice Sonia Sotomayor wrote. “Thus, absent a content-based purpose or justification, the City’s distinction is content-neutral and does not warrant the application of strict scrutiny.”

The Supreme Court further emphasized that unlike the sign code in Reed, the City’s sign ordinances do not single out any topic or subject matter for differential treatment. A sign’s message matters only to the extent that it informs the sign’s relative location. Thus, the City’s on-/off-premises distinction is more like ordinary time, place, or manner restrictions, which do not require the application of strict scrutiny. 

Justice Sotomayor further noted that the Court’s precedents and doctrines have consistently recognized that restrictions on speech may require some evaluation of the speech and nonetheless remain content neutral. “Most relevant here, the First Amendment allows for regulations of solicitation…To identify whether speech entails solicitation, one must read or hear it first,” she wrote.

The Court rejected Reagan’s argument that the City’s sign code defines off-premises signs on the basis of function or purpose and is therefore content-based and subject to strict scrutiny, concluding that this stretches Reed’s “function or purpose” language too far. “In other words, a regulation of speech cannot escape classification as facially content-based simply by swapping an obvious subject-matter distinction for a ‘function or purpose’ proxy that achieves the same result,” Justice Sotomayor wrote. “That does not mean that any classification that considers function or purpose is always content-based. Such a reading of ‘function or purpose’ would contravene numerous precedents.” 

Finally, the Court emphasized that the Supreme Court’s determination that the City’s ordinance is facially content-neutral does not end the First Amendment inquiry. “If there is evidence that an impermissible purpose or justification underpins a facially content-neutral restriction, for instance, that restriction may be content-based,” Justice Sotomayor explained. “Moreover, to survive intermediate scrutiny, a restriction on speech or expression must be ‘narrowly tailored to serve a significant governmental interest.’” The Court remanded the case to the lower court to review the ordinance under the proper standard.

Key Takeaway

The Supreme Court’s decision is good news for New Jersey municipalities. If the justices had determined that the ordinance was a content-based restriction, municipal sign ordinances making a distinction between on-/off-premises would be subject to strict scrutiny review and likely deemed unconstitutional under the First Amendment. Under intermediate scrutiny, municipalities must be prepared to demonstrate that a sign ordinance is drawn narrowly to advance a significant government interest.

If you have questions, please contact us

For more information about the Supreme Court’s decision or how your municipality may be impacted by the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group

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