Court: District Court, D. Maryland; May 19, 2014; Federal District Court
A constitutional challenge has been brought by Clear Channel Outdoor, Inc. against the Mayor and City Council of Baltimore regarding a municipal charge on outdoor advertising displays. Clear Channel contends that the ordinance regulating this charge infringes on commercial speech rights protected by the First and Fourteenth Amendments. The City has filed a Motion to Dismiss based on lack of subject matter jurisdiction and failure to state a claim, while Clear Channel seeks permission to file a Surreply to this motion. Central to the case are two issues: (1) whether the charge is classified as a tax under the Tax Injunction Act (TIA), and (2) whether the charge supports government interests in traffic safety and aesthetics per First Amendment standards. The Court determined that a hearing was unnecessary. After reviewing the pleadings, it concluded that the ordinance is a fee rather than a tax under the TIA, and there remains a question as to its effectiveness in furthering traffic safety and aesthetics. The City did not present any new issues that warranted a Surreply from Clear Channel.
On June 17, 2013, the Baltimore City Council enacted Ordinance 13-139, which imposes charges on outdoor advertising displays to address public nuisance concerns linked to unregulated advertising. The ordinance, effective July 20, 2013, charges $15 per square foot for electronic displays that change images more than once daily and $5 per square foot for other displays. It defines outdoor advertising as promoting activities not occurring on the premises where the display is located and excludes government entities and onsite displays from these charges. The ordinance aims to mitigate public safety hazards and reduce visual clutter, supplementing existing zoning laws that restrict general advertising signs in non-commercial areas and impose regulations in commercial zones.
Clear Channel, a major operator of outdoor advertising in Baltimore, claims the ordinance will result in annual fees of $1.5 million for its displays, which constitute approximately 95% of the city's non-governmental outdoor advertising. Clear Channel contends that the ordinance violates the First Amendment rights, seeking a declaratory judgment of unconstitutionality and an injunction against its enforcement. The City has filed a motion to dismiss the lawsuit, which Clear Channel has responded to with a request to file a surreply. The court will consider both motions.
A motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) assesses the court's authority to hear the case, with the plaintiff responsible for proving jurisdiction exists by a preponderance of the evidence. In this instance, the City raises a facial challenge, arguing that the complaint's allegations do not sufficiently establish subject matter jurisdiction. In a facial challenge, all facts alleged in the complaint are accepted as true, and the motion must be denied if those facts are adequate to invoke jurisdiction.
On the other hand, a motion to dismiss for failure to state a claim under Rule 12(b)(6) requires the complaint to present enough facts to support a plausible claim for relief. A claim is considered plausible if it allows a reasonable inference of the defendant's liability based on the alleged facts. Legal conclusions or conclusory statements are insufficient and do not receive a presumption of truth. The court must determine whether the factual allegations raise a right to relief above the speculative level by examining the complaint as a whole, accepting the allegations as true, and interpreting them in the light most favorable to the plaintiff.
The Court's jurisdiction under the Tax Injunction Act (TIA) depends on whether Ordinance 13-139 imposes a tax or a fee. The TIA restricts federal district court involvement in state tax collection when there is an adequate remedy in state court (28 U.S.C. § 1341). To determine the classification, the Court evaluates whether the charge is primarily for revenue generation (tax) or for regulatory/punitive purposes (fee). This evaluation considers three factors: the entity imposing the charge, the population subject to the charge, and the purposes served by the collected funds.
In this case, the analysis of the first three factors is inconclusive. Specifically, the ordinance's charge is imposed by the City Council and collected by the Director of Finance, which leans towards classifying it as a tax. However, the second factor suggests it is a fee, as it targets a narrow class of taxpayers. Although the ordinance appears to apply broadly to all entities with large outdoor advertising displays, in practice, only four entities are affected, with one being primarily responsible. This situation parallels a previous ruling where a charge on a limited number of carbon dioxide emitters was deemed a regulatory fee. Thus, the facts indicate that Ordinance 13-139 imposes a fee rather than a tax under the TIA.
Baltimore's prohibition on new displays since 2000 limits the market for four entities, with no change in burden unless market share is sold. The revenue from the ordinance's implementation is uncertain; while the City claims it benefits the public, there is no clear evidence of its allocation. The recitals suggest revenue offsets public safety costs and lost economic revenue, but the Court notes that this is unproven. Comparing this case to Hedgepeth v. Tennessee, where a state charge was deemed a tax due to revenue allocation for public benefit, the necessity for discovery regarding subject matter jurisdiction becomes apparent. The ordinance is characterized as a fee rather than a tax, with its stated purposes—offsetting economic burdens from outdoor displays and reducing traffic and aesthetic harms—aligning with regulatory fees. The City’s claim that the ordinance was part of a broader fiscal strategy is undermined by the recitals, which do not support these fiscal goals, focusing instead on traffic safety and aesthetics. Therefore, the analysis concludes that the charge is a fee under the TIA, and the Court will not dismiss the action on jurisdictional grounds.
The Court has established subject matter jurisdiction and is now addressing the City's argument that Clear Channel’s Complaint does not state a valid claim under the First Amendment. The First Amendment protects commercial speech from excessive government regulation, as recognized in Central Hudson Gas & Electric Corp. v. Public Service Commission. This case outlines a four-part test to assess the constitutionality of commercial speech restrictions: (1) the speech must be lawful and non-misleading; (2) the government must have a substantial interest in the restriction; (3) the restriction must directly advance that interest; and (4) the restriction must not be overly broad.
Both parties acknowledge that Clear Channel engages in protected commercial speech, and the City claims substantial interests in aesthetics and traffic safety, which courts have previously validated. The primary contention lies in the third factor concerning whether the ordinance directly advances these interests. Clear Channel argues that the ordinance does not sufficiently prove that it reduces aesthetic and traffic safety harms, noting that federal courts recognize inherent risks posed by outdoor advertising.
Clear Channel differentiates between prohibiting displays and imposing a charge, arguing that the latter is less effective in directly addressing the cited harms. The Court agrees that while prohibiting displays offers a direct solution to the problems, imposing a charge does not guarantee a reduction in those harms. The ordinance's requirement for a charge lacks a clear mechanism to ensure compliance and may allow the City to benefit financially without resolving the underlying issues. Given these considerations, the Court is reluctant to dismiss Clear Channel’s Complaint at this stage, resulting in the denial of the City’s Motion to Dismiss.
Clear Channel seeks permission to file a surreply concerning subject matter jurisdiction. The court allows surreplies when a party cannot address new matters raised in the opposing party’s reply. However, surreplies are not warranted if the reply merely counters new arguments from the initial response. In this case, the City's new jurisdiction arguments in its reply directly respond to Clear Channel's prior arguments, without introducing any novel issues. Consequently, the court denies Clear Channel's motion for a surreply.
The Court will deny both the City’s Motion to Dismiss and Clear Channel’s Motion for Leave to File Surreply. The Baltimore Zoning Code defines a "general advertising sign" as any sign that promotes a business or activity not conducted on the premises where the sign is located. The terminology in Ordinance 13-139, which refers to the charge as a "tax," is deemed of little relevance to the Court's analysis. The Court will not consider a letter from the Chief of the Bureau of Budget Management as it was not included in the Complaint. In defending against Clear Channel’s First Amendment claim, the City cites aesthetics and traffic safety as significant reasons for enacting the ordinance, and it cannot argue its regulatory intent inconsistently. Courts have supported prohibitions on outdoor advertising for those same reasons. While it remains unclear whether regulations less than outright prohibitions are broadly permissible, the Ninth Circuit suggested that a program subjecting off-site displays to inspection could be constitutional. The distinction between onsite and offsite signs has been upheld in various cases. The inspections ensure compliance, whereas mere charges do not. As the Court declines to dismiss based on these points, it will not address the remaining arguments from the parties.
