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Clear Channel Outdoor, Inc. v. City of New York

March 31, 2009

CLEAR CHANNEL OUTDOOR, INC., PLAINTIFF,
v.
THE CITY OF NEW YORK AND PATRICIA J. LANCASTER, IN HER OFFICIAL CAPACITY AS COMMISSIONER OF THE NEW YORK CITY DEPARTMENT OF BUILDINGS, DEFENDANTS.
ATLANTIC OUTDOOR ADVERTISING, INC., SCENIC OUTDOOR, INC., TROYSTAR CITY OUTDOOR LLC, AND WILLOW MEDIA, LLC., PLAINTIFFS,
v.
THE CITY OF NEW YORK, PATRICIA J. LANCASTER, AND EDWARD FORTIER, DEFENDANTS.
METRO FUEL LLC, PLAINTIFF,
v.
CITY OF NEW YORK, DEFENDANT.



The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge

OPINION & ORDER

The pending cases are another chapter in New York City's seven-decade attempt to control where outdoor advertising companies locate certain commercial billboards and street signs. Since 1940, New York City's zoning regulations have banned outdoor advertising companies from placing commercial billboards, which do not advertise an on-premise business, within 200 feet and within view of the City's major parkways and roadways, also known as "arterial highways." The City's enforcement of its zoning regulations has been inconsistent and less than vigorous. The billboard industry has taken advantage of this lax enforcement and has consistently ignored the regulations on billboard sign location.

The first case is the consolidated action of Plaintiffs Clear Channel Outdoor, Inc., Atlantic Outdoor Advertising, Inc., Scenic Outdoor, Inc., Troystar City Outdoor, LLC, and Willow Media, LLC (together, the "Clear Channel Plaintiffs"). They own large billboards located near arterial highways in New York City. The second case involves Plaintiff Metro Fuel, LLC ("Metro Fuel"), an owner of significantly smaller "panel" advertising signs that are situated on building fronts and poles close to the street, but are illuminated in a manner contrary to the zoning rules.

The Plaintiffs challenge the City's updated restrictions that: (1) limit the location and illumination of these commercial billboards and smaller signs; and (2) create strict permitting and registration procedures for existing outdoor signs. The Plaintiffs claim that the restrictions infringe upon their commercial free speech rights under the First and Fourteenth Amendments to the United States Constitution, and under the New York State Constitution. The City asserts that the regulations further its interest in improving traffic safety and aesthetics. When put into effect the regulations will impact Plaintiffs' business revenue from the rental of outdoor advertising signs because many existing signs will not conform to the location limitations embodied in the zoning regulations.

The Clear Channel Plaintiffs and Metro Fuel argue that the City enforces its zoning regulations unevenly, and, in certain cases, in a manner that unconstitutionally favors the City in violation of First Amendment speech protections. Plaintiffs recognize, as they must, that the City is entitled to regulate outdoor advertising, but they argue that the City cannot regulate in the way that it intends. Plaintiffs claim that the City's regulatory scheme is riddled with exceptions that undermine its efficacy to the point of unconstitutionality. Notwithstanding their unlawful behavior, both sets of plaintiffs seek equitable relief in the form of a preliminary injunction against the City's enforcement of the zoning rules. The City also moves for summary judgment against both plaintiffs, and the Clear Channel Plaintiffs and Metro Fuel cross-move for summary judgment. For the reasons that follow, the Court holds that the Zoning Resolution's restriction on the Plaintiffs' commercial speech rights is not unconstitutional and the City may enforce the arterial highway advertising ban, the registration regulations, and the location restrictions on internally illuminated advertisements. Accordingly, the Defendants' motions for summary judgment are GRANTED in both cases and the Plaintiffs' motions for summary judgment and a preliminary injunction are DENIED.

BACKGROUND

The factual background applies to both the Clear Channel Plaintiffs and to Metro Fuel. The facts in this section are derived from Plaintiffs' Complaints, the parties' statements of fact submitted pursuant to Local Rule 56.1, the parties' stipulations of fact, and supporting affidavits and exhibits, unless otherwise specified.

I. History of New York City's Regulation of Outdoor Advertising

The claims and issues presented here cannot be fully understood without a brief recitation of the seven-decade history of New York City's regulation of outdoor advertising. The outdoor advertising companies have long ignored or failed to comply with City regulation. They have adopted a variety of tactics, ranging from direct challenges to the City's enforcement efforts in court; waiting until the City's enforcement fever wanes and enforcement efforts again abate; or hoping for a new administration which may have other priorities. These defensive tactics are effective because of the City's sporadic and lackadaisical enforcement of its zoning regulations. Time has worked to the advantage of the commercial billboard companies and the City has, at times, chosen to ignore past transgressions and instead grandfather out-of-compliance signs.

a. Regulation from 1940 to 2001

In 1940, New York City restricted outdoor advertising signs in districts zoned for residential use and in all areas within 200 feet and in view of arterial highways*fn1 and City parks larger than one-half acre. (See Declaration of Sheryl Neufeld ("Neufeld Decl.") ¶ 5; Stipulations of Fact ("SOF") ¶ 6, located at Declaration of Eric Hecker ("Hecker Decl.") Ex. 1.) At that time the City Planning Commission ("CPC") determined that billboard regulation was needed because "[b]illboards and signs not only dominate our business streets . . . but they take advantage of every opportunity to crowd in upon public places, established and maintained by public funds, including civic centers, parks, and especially express highways and bridge approaches."

(Defendants' ("Def.") Ex. A at 90 (containing Major Reports of the City Planning Commission, 1940).)*fn2

The regulations, then and now, distinguish between "accessory use" signs, which are signs located on the premises to which the sign directs attention, and "advertising signs," which are signs that direct attention to a business or service conducted elsewhere. N.Y. City Zoning Resolution ("Z.R.") § 12-10.*fn3 A sign is not an advertising sign for purposes of the Zoning Resolution if it is an accessory use sign-that is, if it is promoting a business located on the premises. Id. Accessory signs are also referred to as "on-site" signs, while advertising signs are also referred to as "off-site" signs. The zoning rules enacted in 1940 distinguished between those two uses because on-site accessory use signs served the valuable economic purpose of identifying the business on the premises. (See Def. Ex. A at 90.) The Zoning Resolution permits advertising signs within the Times Square zoning district because signs in that area are "principal and traditional attractions." (Id.)

In 1961 the City adopted a comprehensive Zoning Resolution which carried on the general framework from the 1940 regulations. Of relevance to Metro Fuel's challenge, the 1961 Zoning Resolution also added certain sign location and illumination restrictions. Outdoor advertising companies, however, frequently ignored the City's ordinance and erected arterial advertising signs in violation of the zoning regulations. (See SOF ¶ 7.) In 1979-80, as the City's fiscal crisis was coming to an end, the City faced a loss of $25 million in federal highway aid, unless it complied with the Federal Highway Beautification Act and enforced provisions of its Zoning Resolution. In 1980, after determining that enforcement was economically impracticable, the City grandfathered the outdoor signs that did not comply with the Zoning Resolution but did comply with less restrictive federal and state standards. (Id. ¶ 8.) Thus, many signs existing on or before November 1, 1979 were granted "non-conforming use" status and remain exempt to this day from the ban on arterial advertising. See Z.R. §§ 42-55, 32-662.

Despite the exemption for pre-1980 signs and the prohibition on additional arterial advertising signs, outdoor advertising companies continued to build illegal signs. Sometimes the billboard companies would obtain accessory-use sign permits and then illegally convert the accessory copy to off-site advertising copy. (SOF ¶ 9; see also Affirmation of Mark Geraghty ("Geraghty Affirmation") ¶¶ 32-37.)*fn4 Other times, the billboard companies would not bother with subterfuge and simply erected signs with no permitting at all. (SOF ¶ 9.) From 1980 until the late 1990s the City minimally enforced the arterial advertising restrictions. (Id. ¶ 10.)

In 1998 the City amended the Zoning Resolution to clarify that non-commercial signs were permitted wherever any other types of signs were permitted.*fn5 The amendment was enacted in response to a New York State court decision in City of New York v. Allied Outdoor Advertising, Inc., 659 N.Y.S.2d 390 (Sup. Ct. Kings Co. 1997), which held that New York could not favor on-site accessory signs over non-commercial signs. Thus, as a result of the 1998 amendments, both on-site accessory-use signs and off-site non-commercial signs were-and currently are-permitted within 200 feet of an arterial highway. Off-site advertising signs are still prohibited in those areas.

b. Recent Regulations: Local Law 14, Local Law 31, and Rule 49

In February 2001, the New York City Council amended the Zoning Resolution to reduce and limit the size of all accessory signs near arterial highways and to establish size, height, and projection requirements for all signs in districts zoned as manufacturing. The purpose of the accessory-sign size limitation was to reduce the incentive for billboard companies to illegally convert accessory signs to off-site advertising signs. (See Def. Ex. F at 2-5.)

At the same time that it amended the Zoning Resolution, the City Council also amended the Administrative Code to provide for an enhanced enforcement and penalty scheme for sign regulation. Previous fines were so insubstantial that even when the City enforced the Zoning Resolution, the billboard companies absorbed the fines as a cost of doing business. Mayor Giuliani signed the amendment as Local Law 14/2001 ("Local Law 14") on March 19, 2001. Local Law 14 created a registration scheme requiring all outdoor advertising companies to register their arterial signs with the Department of Buildings ("DOB"). (See Def. Ex. N §§ 26-253 to 255, 26-260.) As part of the registration process, a company would have to include a certification from a registered architect or engineer, and an officer of the company, stating that all its arterial signs complied with the City's zoning regulations. (Id. § 26-261.)

Local Law 14 also created enhanced civil penalties of $15,000 for a first violation of the registration scheme and up to $25,000 per day for subsequent violations, plus criminal penalties and fines. (Id. §§ 26-256, 26-262.) The DOB was empowered to bring a special nuisance abatement action to compel removal of an illegal sign or structure, and the DOB was given the power to revoke a company's registration where the company made false statements in the registration application. (Id. § 26-260(d).)

None of the provisions of Local Law 14 went into effect until the DOB promulgated a rule. Over the next two years, the City claims it was unable to promulgate the rule due to delays from litigation over the rules, the events of September 11, 2001, and an internal determination that several provisions of Local Law 14 would be impossible to implement. Thus, in 2003, the City Council again amended the registration requirements. The amendments were relatively minor, but they clarified that outdoor advertising companies were required to provide the DOB with an inventory of all signs within 900 feet and within view of an arterial highway. The amendments were eventually signed into law by Mayor Bloomberg in 2005 as Local Law 31.

As before, Local Law 31 did not take effect until the DOB promulgated a rule, which it did by publishing the proposed rules in the City Record on August 15, 2005. The DOB eventually held public hearings and the regulations-now known as Rule 49-went into effect on August 25, 2006, establishing the registration scheme that the Clear Channel Plaintiffs now challenge.*fn6 The Court now turns to the precise regulations that the Plaintiffs challenge and the rationale for their claims.

II. The Challenged Regulations

a. The Clear Channel Plaintiffs

The Clear Channel Plaintiffs challenge Zoning Resolution Sections 42-55 and 32-662, the provisions of the Zoning Resolution that ban off-site advertising signs within 200 feet and within sight of arterial highways in manufacturing and commercial districts. The Clear Channel Plaintiffs also challenge the registration and enforcement procedures set forth in Department of Buildings Rule 49, which identifies how DOB will determine whether an advertising sign is a non-conforming use sign, making the sign eligible to carry off-site arterial advertising copy.

The Zoning Resolution provides that within 200 feet of an arterial highway, "(1) no permitted sign shall exceed 500 square feet of surface area; and (2) no advertising sign shall be allowed, nor shall an existing advertising sign be structurally altered, relocated or reconstructed." Z.R. § 42-55 (2001) (governing manufacturing districts); see also id. § 32-662 (2001) (governing commercial districts).*fn7 Plaintiffs estimate that the total number of arterial advertising signs on private property in the City is 634 signs, while the City estimates that the number is at least 692 signs and probably higher. (See Declaration of Victor Kovner ("Kovner Decl.") ¶ 7; Declaration of Edward Fortier ("Fortier Decl.") ¶ 24 n.7.) The Zoning Resolution also grants legal non-conforming use status to arterial signs existing on November 1, 1979.*fn8 Z.R. §§ 42-55, 32-662.

Rule 49 amends the Administrative Code to require that all outdoor advertising companies submit an inventory of their signs and sign structures located within 900 feet and within view of an arterial highway. See 1 Rules of the City of New York ("RCNY") § 49-15(a).*fn9

Advertising companies that submit an inventory which includes non-conforming signs-in other words signs exempted in 1980-must submit documentation establishing that the sign qualifies for non-conforming use status. Id. § 49-15(d)(15). As part of that requirement, companies must submit:

Evidence that the non-conforming sign existed and the size of the sign that existed as of the relevant date set forth in the Zoning Resolution to establish its lawful status [i.e. November 1, 1979]. Acceptable evidence may include permits, sign-offs of applications after completion, photographs and leases demonstrating that the non-conforming use existed prior to the relevant date.

Id. § 49-15(d)(15)(b). Further: Affidavits, Department cashier's receipts and permit applications, without other supporting documentation, are not sufficient to establish the non-conforming status of a sign. The submitted evidence must specifically establish the non-conforming aspect of the sign. For example, where evidence is submitted to establish that a sign is a non-conforming advertising sign, proof that the sign was erected, but that does not establish that it was advertising, will not be sufficient.

Id. (emphasis added). Along with the requirements listed above, outdoor companies must submit an "[a]ffidavit signed by the registered architect or professional engineer, that he or she reasonably believes the sign to be non-conforming based on the evidence submitted." Id. § 49-15(d)(15)(c). As part of this affidavit:

A responsible officer of the [advertising company] shall co-sign the affidavit, that he or she reasonably believes the sign to be non-conforming based on the evidence submitted, and that to the best of his or her knowledge there has not been any discontinuance of the non-conforming use for two or more years.

Id. § 49-15(d)(15)(c)(1).

The Clear Channel Plaintiffs challenge these documentary requirements as "draconian and punitive" and claim that many of the required documents will be impossible to produce decades after their creation. Further, the Clear Channel Plaintiffs divine that the City's purpose for the registration requirements is to "eliminate from New York City's arterial highways even the non-conforming signs that had been lawful for decades." (See Geraghty Affirmation ¶ 70.)

b. Metro Fuel

Metro Fuel's position is different from the Clear Channel Plaintiffs. It is generally not affected by the restriction on arterial advertising signs, as its signs are significantly smaller and not situated so as to attract the attention of drivers on arterial highways. Rather, Metro Fuel challenges the aspects of the Zoning Resolution that control where it may place its panel advertisements and how it may illuminate those ads.

While accessory signs can be placed anywhere in commercial and manufacturing districts, subject only to size, height, illumination, and projection limitations, advertising signs are more restricted; those signs may only be placed in large commercial districts, labeled C6-5, C6-7, and C7; and, subject to illumination restrictions, in large commercial and manufacturing districts, labeled C8, M1, M2, and M3. Z.R. § 32-63, 42-52. In the C8, M1, M2, and M3 districts (e.g. Garment District and waterfront areas) advertising signs may only be non-illuminated or indirectly illuminated. Id. § 32-645, 42-533. The result of these regulations is that Metro Fuel's advertisement panels, due to their illumination system, may only be placed in the C6-5, C6-7, and C7 large commercial districts. Metro Fuel challenges the provisions of the Zoning Resolution that exclude its illuminated panel advertisements from their current locations.

III. The Parties

a. The Clear Channel Plaintiffs

Clear Channel is one of the largest media companies in the world. Clear Channel operates 236 sign faces in New York City. (See Stauning Affidavit in Support of Motion for Preliminary Injunction ("Stauning Aff.") ¶ 34.)*fn10 Eighty-four of these sign faces are arterial sign faces,*fn11 and Clear Channel derives approximately $10 million in revenue yearly from these signs. (SOF ¶¶ 132, 140.) The arterial sign faces are all illuminated and affixed to buildings or pylons. (Id. ¶ 132.) The sign faces range in size from 11,258 square feet (a size equal to one-quarter acre) to 315 square feet, with the majority at either 1,200 square feet or 960 square feet. (Id.)

Clear Channel entered the New York market when its parent purchased Universal Outdoor Holdings, Inc., in April 1998, acquiring 34,000 outdoor advertising signs in 23 markets. (Id. ¶ 131.) Clear Channel acquired the vast majority of its arterial signs from Universal and the rest through smaller purchases. (See Stauning Aff. ¶ 36.) Clear Channel also built one arterial sign structure. (Id.) When Clear Channel purchased its signs in New York, it did not perform due diligence on a sign-by-sign basis to determine which signs complied with New York's zoning laws. Instead Clear Channel relied on representations from the sellers that they operated the signs within the law. (SOF ¶ 145.)

The City's enforcement of the Zoning Resolution substantially affects Clear Channel. The vast majority of Clear Channel's arterial sign faces do not have permits to display advertising-Clear Channel estimates that "at least" 19 of its arterial sign faces should qualify for legal non-conforming use status. (Id. ¶ 134.) None of Clear Channel's arterial signs carried accessory advertising as of April 2008, and the signs carry only sporadic non-commercial advertising-for instance, eight sign faces carried non-commercial ads in 2005 and 13 carried non-commercial ads in 2006. (Id. ¶¶ 135-39.)

Atlantic Outdoor Advertising entered the New York City outdoor advertising market in 1997 and operates three arterial structures. Atlantic built two of those sign structures. The sign faces vary in size from 1,950 square feet to 1,200 square feet. (Id. ¶ 146.) Scenic Outdoor also entered the market in 1997 and operates five arterial sign faces on three structures. Scenic built two of the structures. The sign faces range from 1,200 square feet to 672 square feet. (Id. ¶ 147.) Troystar Corporation entered the New York City outdoor advertising business in 1995 and operates nine arterial signs on eight structures. Troystar built two of the structures, and the sign faces range from 5,760 square feet to 420 square feet. (Id. ¶ 148.) Willow Media entered the market in 1999 and operates seven arterial signs on four structures. Willow built all four structures. All the signs are 1,200 square feet, except one which is 960 square feet. (Id. ¶ 149.)

Atlantic, Scenic, Troystar, and Willow all display advertising copy without permits. The companies generally obtained only accessory-use permits for their sign faces. (Id. ¶ 151.) Atlantic, Scenic, Troystar, and Willow have rarely sold non-commercial advertisements on their arterial faces other than for a nominal fee. (Id. ¶ 153.)

As for the Individual Defendants, Patricia J. Lancaster was the Commissioner of the New York City DOB at the time the complaint was filed. Edward Fortier is the Director of the Padlock/Sign Enforcement Unit of DOB.

b. Metro Fuel

Metro Fuel operates approximately 440 panel signs in New York City. The panel signs are 69 inches tall by 48 inches wide, or approximately 23 square feet.*fn12 The panels are internally illuminated, meaning that they contain posters lit from behind by fluorescent bulbs. (See Declaration of Michael Freedman ("Freedman Decl.") ¶ 2.) Enforcement of the City's zoning regulations would severely affect Metro Fuel's advertising business because 93% of Metro Fuel's signs are located in districts where internally illuminated advertising signs are prohibited. (Id. ¶ 7.)

Metro Fuel places the majority of its panel signs (77%) in or near parking garages, either inside the door to the garage, above or near the door, or attached to the outside of the garage. The remaining panel signs are either attached to the outside of other mixed-use properties or located in parking lots, either mounted on a pole or affixed to an adjacent building. Metro Fuel rents space from the landlord in exchange for the right to erect these signs. (Id. ¶ 3.) It in turn leases that space for advertising at a higher rate than its rental payments. Metro Fuel entered the New York City market in 2006 through an acquisition of another panel sign company. (See Metro Fuel/City of New York Stipulations of Fact ("Metro SOF") ¶ 1, located in Declaration of Sheryl Neufeld ("Metro Fuel Neufeld Decl.") Ex. L.) Most of Metro Fuel's panel signs do not have permits to display advertising. (Id. ¶ 4.)

IV. The Exceptions to the City's Enforcement Scheme

Both the Clear Channel Plaintiffs and Metro Fuel contend that the City's regulatory and enforcement scheme is so riddled with exceptions and inconsistencies as to undermine the very point of the regulations, thus making the relevant aspects of the Zoning Resolution an unconstitutional restraint on speech.

The Court examines the exceptions that the Plaintiffs claim support their cases.

a. Billboards on Government Property

i. Signs on City Property

Despite its own zoning regulations and ban on arterial advertising signs, New York City has utilized arterial advertising on City property. Starting in 1998 the City licensed Clear Channel to display advertising on two 960-square-foot arterial billboards on City property within view of the Belt Parkway in Brooklyn. (SOF ¶ 13.) The City terminated the agreement as of January 1, 2008 and requested that Clear Channel remove the signs. (Id. ¶ 14.)

Another exception occurred in 2005 when New York City acquired the "High Line," an inactive rail structure on Manhattan's West Side which had several arterial billboards. The City negotiated with Clear Channel and with another media company to operate advertisements on those billboards. Following commencement of this litigation, the City declined to execute any agreements, but even so, both Clear Channel and the other media company ...


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