Feb. 8, 2023 – A city’s ban on digital billboards meets the test established by the U.S. Supreme Court for First Amendment challenges to the regulation of commercial signs, the U.S. Court of Appeals for the Seventh Circuit has ruled.

In Adams Outdoor Advertising Ltd., v. City of Madison, No. 20-1670 (Jan. 4, 2023), a three-judge panel for the Seventh Circuit Court of Appeals also held that all of the claims, except ones related to an ordinance enacted in 2009, were precluded by a 1993 judgment that settled similar claims between the parties.

Long History of Regulation

Since the 1970s, City of Madison (City) ordinances have prescribed a variety of requirements for signs, including billboards. In 1989, the city enacted an ordinance that:

• prohibited the construction of any new billboards;

• specified that existing billboards could be modified only after obtaining a permit; and

• pecified that existing billboards must meet size, height, and setback requirements.

In 1990, Adams Outdoor Advertising Ltd. (Adams), sued the City in state court, making claims under the takings clause of the Fifth Amendment and the First Amendment’s Free Speech Clause.

In 1993, the City and Adams settled the suit by agreeing to a stipulated judgment in 1993.

Under the terms of the judgment, Adams agreed that “any and all claims or causes of action which have been brought or which could have been brought, founded upon the facts which are the subject of this action … may be dismissed upon the merits, with prejudice.”

In 2009, the City enacted an ordinance that prohibits digital billboards.

City Denies Permits

In 2016, Adams applied for a permit to replace an obstructed billboard with a new billboard. In 2017, the company filed 26 additional permit applications to modify or replace existing billboards.

The City denied all the applications except one. Adams filed suit in the U.S. District Court for the Western District of Wisconsin, alleging that the city’s sign ordinances violated the First Amendment.

The City argued that all of Adams’ claims, except the ones relating to the ban on digital billboards, were precluded by the 1993 judgment. The district court agreed and granted summary judgment for the city.

Adams appealed.

Prior Judgment Precludes Claims

Writing for the three-judge panel, Chief Judge Diane Sykes explained that under Wisconsin law, the doctrine of claim preclusion dictates that a final judgment on the merits of an action bars re-litigating any claim arising out of the same relevant facts, transactions, or occurrences.

Adams agreed that the parties in the 2016 action and the 1990 action were the same and the action had ended in final judgment. But Adams argued that the two causes of action were not identical.

Specifically, Adams argued that the 2016 action involved a broader First Amendment challenge to the relevant city ordinances. Chief Judge Sykes labeled that argument “a non-starter.”

“It doesn’t matter whether Adams Outdoors actually litigated a First Amendment or other constitutional challenge in the prior litigation,” Sykes wrote. “What matters is whether a constitutional challenge ‘might have been litigated.’”

No Exception for Unfairness

Adams also argued that applying claim preclusion to the 2016 action would be manifestly unfair, because First Amendment law had changed significantly since 1993.

But Chief Judge Sykes pointed out fairness is not a factor in the claim preclusion analysis required under Wisconsin Supreme Court precedent. She also noted that exceptions to the claim preclusion doctrine are rare, with good reason.

“Recognizing an exception to claim preclusion when the law has changed would open the floodgates to re-litigation of already decided cases, seriously undermining the main objectives of the doctrine,” Sykes wrote.

First Amendment Case Law

Adams based its argument over the City’s ban on digital billboards on an interpretation of the U.S. Supreme Court’s decision in Reed v. Town of Gilbert, 576 U.S. 155, 135 S.Ct. 2218, 192 L.E.2d 236 (2015), which involved a challenge to a municipality’s sign ordinance.

In support of that interpretation, Adams cited Reagan National Advertising v. City of Austin, 972 F.3d 696 (5^th Cir. 2020).

In that case, the U.S. Court of Appeals for the Fifth Circuit held that the ordinance’s distinction between on- and off-premises signs – a distinction present in the City’s ordinance – was a content-based regulation subject to strict scrutiny, because to determine whether to classify a sign was on- or off-premises, city officials had to read the sign.

Intermediate Scrutiny Applies

But Judge Sykes noted that the U.S. Supreme Court reversed the Fifth Circuit in City of Austin v. Reagan National Advertising of Texas, Inc., 596 U.S. ___ (2022), and held that the Fifth Circuit’s holding that a rule requiring officials to read a sign cannot be content-neutral was “too extreme.”

As a result, Judge Sykes explained, the city’s ban on digital billboards need only withstand intermediate scrutiny.

“As City of Austin explains, content-neutral ‘time, place, or manner’ restrictions – like the on-/off-premises sign regulations typical in most municipal sign codes – need only be ‘narrowly tailored to serve a significant governmental interest,’” Sykes wrote.

‘Too Obvious’

Judge Sykes concluded that the city’s ban on digital billboards met the intermediate scrutiny test.

“Prohibiting digital signs serves Madison’s stated interests in promoting traffic safety and preserving visual aesthetics,” Sykes wrote. “It’s well established that these are significant governmental interests.”

Adams argued that to meet the intermediate scrutiny test, the city must present empirical evidence showing that digital billboards caused aesthetic harm or posed a threat to traffic safety.

But that argument was a slender reed, Chief Judge Sykes reasoned.

“The connection between billboards and traffic safety is too obvious to require empirical proof,” Sykes wrote.