Carole Media LLC v. New Jersey Transit Corp.

Citations: 550 F.3d 302; 2008 U.S. App. LEXIS 25818; 2008 WL 5303456Docket: 07-3966

Court: Court of Appeals for the Third Circuit; December 21, 2008; Federal Appellate Court

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Carole Media LLC, a New Jersey Limited Liability Company, appeals from a District Court ruling that dismissed its claims against New Jersey Transit Corporation and All Vision LLC regarding the alleged violation of the Takings Clause. This case stems from New Jersey's overhaul of its billboard licensing program following a scandal in 2004. CBS Outdoor Inc., a co-plaintiff with licenses for 240 billboards, initially filed the suit but later settled with the defendants. Carole Media, which holds licenses for three billboards, chose to proceed with its appeal without submitting a separate brief, relying instead on CBS Outdoor's arguments.

Carole Media asserts that the defendants unlawfully took its property rights associated with billboard operations on NJ Transit land without valid public purpose. NJ Transit, established to provide public transportation, is authorized to lease its property and has historically issued licenses for outdoor advertising. Carole Media obtained its licenses in 2001 and 2002, which are subject to annual renewal and can be terminated with thirty-days notice. However, Carole Media claims that industry practice generally prevents termination unless the land is needed for development or sale, and it has invested over $1 million in its billboard sites, with a prior value exceeding $4 million. The appeal focuses on the assertion that the termination of its licenses constituted a taking of property rights without adequate justification.

Carole Media asserts multiple property interests protected by the Takings Clause related to its billboard operations on NJ Transit land. It claims that the licenses from NJ Transit and the permits from the New Jersey Department of Transportation (NJ DOT) for its billboards are property rights. These permits are mandated by the New Jersey Roadside Sign Control and Outdoor Advertising Act, which requires operators to secure licenses and permits for outdoor advertising. Carole Media argues that its rights to operate billboards in Wayne and Bridgewater are valuable due to recent amendments to the Outdoor Advertising Act, which now require local approval for permits, effectively barring new billboard approvals in those municipalities.

The context of Carole Media’s claims includes a 2003 scandal, dubbed 'Billboardgate,' involving political maneuvering for lucrative billboard permits, prompting the creation of a Billboard Policy and Procedure Task Force by then-Governor James McGreevey. This Task Force recommended competitive bidding for billboard leases on public property. Following these recommendations, NJ Transit awarded a five-year contract to All Vision in 2004, prioritizing a proposal that aligned with maximizing income and innovative strategies.

In response to the Task Force, the New Jersey legislature enacted the 2004 Amendments to the Outdoor Advertising Act, mandating public bidding for state contracts involving billboard sites and new permitting requirements for the NJ DOT. These amendments also established a cap on outdoor advertising space on state property and allowed for the renewal of existing licenses without public bidding for five years. NJ Transit subsequently renewed Carole Media’s licenses in 2004 and 2005, consistent with these amendments.

In September 2005, NJ Transit, in collaboration with All Vision, initiated the 'Monetization Program' aimed at terminating existing billboard licenses and issuing new 20 to 22-year license agreements through competitive bidding. This program sought to monetize the licenses by requiring substantial up-front payments from bidders, reflecting a percentage of anticipated future revenues, alongside minimum guaranteed yearly rent payments. Carole Media alleges NJ Transit and All Vision pressured it to transfer its rights to three billboards and permits to facilitate the Program, threatening to remove its billboards unless it complied for a payment below fair market value. Although All Vision indicated in March 2006 that Carole Media's licenses would be terminated by August 31, 2006, these licenses continued on a month-to-month basis.

Carole Media filed suit in September 2006 under 42 U.S.C. § 1983, citing violations of the Takings and Due Process Clauses of the Fifth and Fourteenth Amendments, along with state law tort and breach of contract claims. The suit sought declaratory and injunctive relief against the termination of its licenses or, alternatively, just compensation for the alleged taking. Carole Media contends the Monetization Program constitutes a taking of its property interests without a valid public purpose, arguing that it merely replaces one private relationship with another and benefits All Vision at the expense of public interests. The suit also claims that the Program violates the public bidding requirements of the 2004 Amendments, designed to prevent state agencies from entering special arrangements that allow private parties to disproportionately benefit from public assets.

The District Court subsequently consolidated Carole Media's case with that of CBS Outdoor Inc. and granted the defendants' motion to dismiss, ruling that the takings claims were unripe under Williamson County Reg'l Planning Comm'n v. Hamilton Bank of Johnson City. The court also dismissed Carole Media's claim regarding the lack of public purpose for the taking, leading to the question of whether a plaintiff must seek state compensation before a federal court can address claims of unconstitutional taking lacking a valid public purpose.

The court has not previously addressed the ripeness of claims under the Public Use Clause of the Fifth Amendment. In the case of Williamson County, a land developer sued the county for applying new zoning laws to his property, claiming a taking without just compensation. The Supreme Court ruled that the claim was not ripe because the developer had not received a final decision on the zoning application nor utilized state procedures for just compensation. The Court emphasized that the determination of a taking could not be made until the relevant state actor finalized its position and that the Just Compensation Clause requires the property owner to seek state remedies before claiming a violation.

However, Carole Media's claim differs because it is based on the principle that property cannot be taken for private benefit without a public purpose, as established in prior Supreme Court decisions. Unlike just compensation claims, a Public Use Clause claim is ripe even before the plaintiff seeks compensation through state procedures, as such proceedings do not provide the appropriate remedy. A successful public use claim allows for an injunction against the taking, rather than merely compensation. Additionally, unlike Williamson County's scenario, Carole Media has received a final decision from NJ Transit due to the termination of its licenses. Therefore, the Williamson County ripeness requirements do not apply to Carole Media's claim, a conclusion supported by other Court of Appeals decisions.

The District Court recognized a significant body of case law indicating that the Williamson County standard does not apply to claims under the Public Use Clause. However, it ruled Carole Media's claim was unripe due to insufficient factual allegations demonstrating a violation of that Clause. The issue of ripeness was distinguished from whether Carole Media had adequately alleged facts to survive a motion to dismiss under Rule 12(b)(6). The court’s position aligns with other appellate decisions asserting that claims under the Public Use Clause are not subject to Williamson County's ripeness requirement.

Despite deeming Carole Media's claims unripe, the District Court found that NJ Transit’s actions were supported by valid public purposes, such as adherence to public bidding requirements and efforts to maximize revenue through innovative billboard management. Carole Media argued this conclusion was flawed, asserting that a state entity's intent to increase revenue cannot be a valid public purpose and claimed that the taking was primarily for the benefit of a private entity, All Vision. Citing Kelo v. City of New London, the text emphasizes that a taking cannot merely confer private benefits and must align with legitimate government purposes. The Supreme Court has defined 'public purpose' broadly, allowing for deference to legislative judgments, and stipulates that the public use requirement is satisfied if the exercise of eminent domain is rationally related to a conceivable public purpose. Courts are cautioned against substituting their judgment for that of the legislature in determining public use unless the purpose is clearly unreasonable.

The judiciary's role in assessing the public purpose of eminent domain takings is limited. Supreme Court precedents affirm that incidental benefits to private parties do not invalidate the public purpose of a taking. The government's aim to serve a public purpose can coincide with benefits to private entities, as established in cases such as *Midkiff* and *Kelo*, where economic revitalization and market corrections were recognized as valid public purposes, even involving transfers of property to private parties. The government can also take property from one private owner for maintenance and transfer it to another private party who will care for it.

In the context of NJ Transit, the court finds that the allegations against its taking do not undermine the validity of a public use. The focus on maximizing revenue does not alone satisfy the Public Use Clause, as there are additional public purposes involved. The New Jersey legislature mandated public bidding for billboard sites to combat corruption, which is deemed a legitimate public purpose. NJ Transit’s Monetization Program was developed to align with these public bidding requirements. Carole Media's claims regarding the Monetization Plan's compliance with the 2004 Amendments lack specific legal violations, despite concerns about potential disproportionate benefits to All Vision.

Carole Media acknowledges that the 2004 Amendments do not mandate a specific duration for contracts awarded through public bidding. The District Court determined, and it was agreed, that NJ Transit’s intention to enhance revenue and utilize innovative billboard management strategies serves a legitimate public purpose. The 2004 Amendments required NJ Transit to end existing licenses and publicly bid billboard locations, allowing NJ Transit to pursue a new licensing structure to increase revenue, supported by legislative authority to lease property for its objectives.

The Supreme Court has clarified that the legislature decides the means to achieve a public purpose once established. The incidental benefits received by All Vision, such as management fees from the new licensing, do not negate the public purposes identified. Although the Supreme Court has indicated that a taking could be invalid if a public purpose is merely a pretext for private benefit, Carole Media has not adequately alleged that NJ Transit’s actions solely benefited All Vision without a plausible claim of favoritism.

The decision affirms that when a taking is justified by recognized public uses, it aligns with the Midkiff standard, rejecting claims of pretext for private purposes. Carole Media does not claim that All Vision will obtain direct rights to operate billboards but rather management fees, indicating this is not a case of a straightforward private transfer for private gain. Additionally, since NJ Transit did not know the identity of the successful bidder when terminating Carole Media’s licenses, it counters the notion of improper private benefit. Claims of excessive payments to All Vision do not invalidate NJ Transit’s actions as being related to a legitimate public purpose. Ultimately, it was concluded that the taking aligns with the Public Use Clause, and Carole Media has not presented facts to support an assertion that NJ Transit’s public purposes lack reasonable foundation or are aimed solely at conferring private benefits.

The judgment of the District Court dismissing Carole Media's complaint is affirmed. Carole Media argued that the taking of property was invalid under the New Jersey Constitution, which parallels the Fifth Amendment's Takings Clause. The District Court had jurisdiction under 28 U.S.C. 1331, and the appellate court has jurisdiction over the final judgment under 28 U.S.C. 1291. The District Court dismissed claims of Substantive Due Process violations and a Contract Clause claim, and declined to exercise supplemental jurisdiction over state law claims, which Carole Media did not appeal. 

The court noted that if a plaintiff successfully alleges a Public Use Clause violation, all takings claims may be considered ripe, bypassing Williamson County's requirements. However, a plaintiff asserting both a Public Use Clause violation and a just compensation claim can pursue only the Public Use Clause claim initially. Carole Media's claims regarding private use are ripe for immediate litigation, while public use claims without just compensation require Williamson County's conditions to be met before proceeding. 

Carole Media's case was consolidated with CBS Outdoor Inc., and it adopted CBS Outdoor's briefs despite some differences in their claims. The dissenting opinion in Kelo acknowledged that the Public Use Clause is satisfied if the targeted property has caused societal harm. In response to “Billboardgate,” New Jersey mandated public bidding for billboard permits on public land to combat political corruption.