Lamar Advertising of South Dakota, Inc. v. City of Rapid City
Docket: No. CIV. 11-5068-JLV
Court: District Court, D. South Dakota; September 29, 2015; Federal District Court
Plaintiffs Lamar Advertising of South Dakota, Inc., Lamár, and TLC Properties, Inc. filed a complaint against the City of Rapid City, alleging that two citizen-initiated ordinances—The Citizens’ Billboard Control Initiative and The Citizens’ Reform Initiative for Billboard Sign Credits—contradict South Dakota Codified Law, resulting in an unconstitutional taking of private property without just compensation. They further claim violations of free speech and equal protection rights under both the U.S. and South Dakota Constitutions, seeking damages and attorney’s fees under 42 U.S.C. §§ 1983 and 1988.
Cross motions for summary judgment were filed, with the court granting and denying parts of both motions and reserving issues related to plaintiffs' attorney’s fees. Following the summary judgment order, the court identified that only the reasonableness of spacing requirements from the ordinances and the entitlement to damages remained for trial. A court trial was scheduled as neither party requested a jury trial, and it commenced on November 10, 2014, concluding on November 14, 2014.
During the trial, witnesses for the plaintiffs included the general manager of Lamar, a Rapid City code enforcement officer, and a commercial real estate appraiser. The City presented its own expert witness to critique the plaintiffs’ digital advertising plans. Following the trial, the court addressed various motions, including the plaintiffs' request to amend their complaint and the question of the ripeness of the regulatory takings claims, as well as issues of supplemental jurisdiction over state law claims.
Plaintiffs' motion to amend the complaint is denied. This motion arose following a court ruling granting the City's second motion in limine, which aimed to exclude evidence and arguments concerning damages related to six denied billboard applications submitted shortly before a crucial ordinance vote. The court concluded that the plaintiffs did not adequately plead a plausible claim for damages regarding these applications.
Following this, the plaintiffs sought to amend their complaint both orally before the trial and in post-trial submissions, relying on Federal Rules of Civil Procedure (Fed. R.Civ. P.) 15. However, amendments outside the court's scheduling order require a demonstration of good cause as per Fed. R.Civ. P. 16(b)(4). The court emphasized that the diligence of the moving party in adhering to the scheduling order is the primary measure of good cause.
The court noted that allowing amendments without adhering to these rules would undermine the scheduling orders. It retains discretion over whether to permit amendments, which should only be overridden in cases of undue delay, bad faith, repeated failure to address previous deficiencies, undue prejudice to the opposing party, or futility of the proposed amendment.
The plaintiffs filed their original complaint in August 2011, with a scheduling order issued in October 2011, allowing amendments until December 30, 2011. The court had already ruled that the plaintiffs failed to establish a plausible claim for damages related to the billboard applications, and they did not provide justification for their failure to include this theory of recovery in their original pleadings.
Plaintiffs claim the City was aware for over two years of their intention to seek damages concerning six billboard applications but did not amend their complaint despite knowing their theory of damages. They now seek $260,833 out of a total $770,758 in damages related to the City’s “de facto” application of Citizen Initiatives. The court refuses to revisit the complaint process, reopen discovery, or require further briefing on these issues, emphasizing that the plaintiffs had a well-developed complaint since 2011. Consequently, their request to amend the complaint is denied, and their regulatory takings claims are deemed not ripe for adjudication.
The Fifth Amendment's Takings Clause mandates just compensation for private property taken for public use. The Supreme Court has identified two types of regulatory actions that qualify as per se takings: (1) any permanent physical invasion of property, and (2) regulations that eliminate all economically beneficial use of property, barring exceptions rooted in nuisance and property law. Outside these categories, regulatory takings are assessed under the standards established in Penn Central Transportation Co. v. New York City.
Lower courts are instructed to conduct ad hoc factual inquiries when assessing regulatory takings claims, as established in the Penn Central case. The primary factors for evaluating such claims include the economic impact of the regulation on the property owner and the extent to which it interferes with reasonable investment-backed expectations. Additionally, the nature of the governmental action—whether it constitutes a physical invasion or merely adjusts property interests via public programs—also plays a significant role in determining if a taking has occurred.
The Lingle decision further clarified this framework by rejecting the "substantially advances" test from Agins v. City of Tiburon, asserting that it is not a valid test for takings claims and is better suited to due process inquiries.
Regarding ripeness standards, a regulatory taking claim can be brought under 42 U.S.C. § 1983, but it must be ripe for federal court consideration. Ripeness involves both Article III and prudential components of subject matter jurisdiction. The Supreme Court established a two-prong test for ripeness: (1) the government must have made a final decision on the regulation's application to the property, including any potential waivers or variances; and (2) if the state offers a procedure for seeking just compensation, the property owner must pursue that procedure and be denied compensation before claiming a violation of the Just Compensation Clause.
Plaintiffs assert facial challenges to the Citizen Initiatives, specifically focusing on regulatory takings claims, without alleging a substantive due process claim. The City concurs that if a takings claim exists, it pertains to regulatory takings. Plaintiffs argue they are exempt from Williamson County's ripeness requirements due to their facial Takings Clause challenge. The Takings Clause mandates compensation for governmental interference with property rights but does not inherently prohibit such interference. The Lingle case clarifies that the inquiry into whether a regulation substantially advances a legitimate public purpose is distinct from determining if a taking has occurred, as the latter assumes the government is pursuing a valid public purpose.
The "substantially advances" theory, which allowed claims based on government actions exceeding permissible authority without regard to compensation, is now obsolete. If government action is impermissible—such as failing to meet public use criteria or being arbitrary—compensation cannot legitimize the action. The Lingle Court identified three primary regulatory takings tests (Loretto, Lucas, and Penn Central), which assess the severity of burdens on property rights, in contrast to the "substantially advances" inquiry that does not address the burden's magnitude or distribution. Consequently, a regulatory takings claim based solely on the invalidity of the regulation is no longer valid.
A plaintiff alleging a regulatory taking without just compensation must satisfy the Williamson County requirement by either demonstrating that a procedure for seeking compensation is unavailable or by first seeking compensation in state court. In this case, plaintiffs did not meet this requirement, as there was no evidence presented that compensation was unavailable. Specifically, Mr. Rumpca testified that Lamar did not apply for the necessary permits to convert signs to digital nor pursue a state court inverse condemnation action, which is a viable claim under the South Dakota Constitution. The Constitution ensures compensation for property taken or damaged for public use, and plaintiffs failed to seek compensation through the established legal procedures. According to South Dakota law, a plaintiff can recover consequential damages if they prove the injury is unique to their property, and the courts have affirmed that inverse condemnation claims are valid. The plaintiffs' claim that a regulatory taking occurred, based on the alleged invalidity of the municipal ordinance, is not sufficient to bypass the requirement of exhausting state remedies. Their choice to file in federal court instead of pursuing state remedies constitutes a jurisdictional barrier to their claim, reflecting the intertwined nature of takings claims and compensation issues as outlined by the Takings Clause.
The court expresses concern over prolonging piecemeal litigation regarding the plaintiffs’ claims against the City. Plaintiffs primarily base their argument on a South Dakota Supreme Court ruling, Lamar 2012, which stated that the City acted irregularly when it denied Lamar's six sign applications prior to the enactment of the Citizen Initiatives. The Lamar 2012 decision found that the City’s requirement for Lamar to obtain conditional use permits was incorrect, as Lamar's proposed changes would have complied with the sign code. Plaintiffs aim to leverage this ruling and assertions from Mr. Rumpca to argue that Lamar has a vested interest in converting eleven vinyl signs to digital. However, the court notes that Lamar did not apply for these eleven signs, making it uncertain whether the City would agree that the proposed changes would comply with the current sign code.
Furthermore, the complexity increases with the timing of Lamar's proposed digital sign rollout and the amendments to the City’s sign code in 2012, which impose stricter requirements than the previous code. The court cannot assume compliance based solely on Mr. Rumpca’s statements regarding unknown alterations.
Additionally, the plaintiffs' reference to San Remo Hotel, L.P. v. City, County of San Francisco is deemed inappropriate. The plaintiffs misinterpret a footnote from that case regarding the ripeness of facial challenges to argue that specific economic deprivation is not necessary for such claims. The court emphasizes that the validity of the "substantially advances" test has been abrogated, and therefore, the plaintiffs cannot utilize this argument in their case.
San Remo's assertion that facial challenges are exempt from ripeness requirements is no longer valid under the Takings Clause following the Lingle decision. The case of Yee v. City of Escondido involved a claim that a city ordinance did not "substantially advance a legitimate state interest," leading the Court to determine that this claim was ripe since it did not hinge on specific property deprivation or compensation. However, Yee's relevance post-Lingle is debated, with one court suggesting it only addresses the first prong of the Williamson County ripeness test, leaving the applicability of the second prong unresolved. Subsequent rulings have indicated that facial regulatory takings claims must satisfy both prongs of Williamson County, as supported by decisions from various courts. The appellants' argument that Williamson County does not apply to facial challenges oversimplifies the legal framework. While the first prong may not apply, the second prong—requiring plaintiffs to seek just compensation through state procedures—remains applicable. This was reiterated in Downing/Salt Pond Partners, L.P. v. Rhode Island, where the court found that the plaintiff could not bypass state remedies. Similarly, the Ninth Circuit emphasized that the second Williamson County requirement must be met for both as-applied and facial challenges. The Fourth Circuit ruled that a plaintiff failed to meet this requirement by not pursuing state court procedures for just compensation, highlighting that state courts are available for inverse condemnation claims related to regulatory takings. In CBS Outdoor Inc. v. New Jersey Transit Corp., plaintiffs challenged the termination of leases and the alleged deprivation of property value, illustrating ongoing issues regarding property rights under the Takings Clause.
The court ruled that the Williamson exhaustion requirement is applicable, resulting in the plaintiffs' takings claims being deemed unripe. The CBS Outdoor court emphasized that plaintiffs cannot circumvent the requirement by reframing their claims away from just compensation. The Takings Clause's primary focus is on ensuring just compensation, which cannot be considered violated until such compensation is denied. Although plaintiffs argued that their equal protection claims exempted them from state litigation requirements, the court found this assertion insufficient. Citing Esmail v. Macrane, the court noted that the case merely recognized a cognizable equal protection claim and did not serve as an exception to the Williamson County requirement. The court granted summary judgment to the City on the plaintiffs' equal protection claim, rendering it moot.
The plaintiffs further contended that claims disputing the public purpose of a taking obviate the need for state remedies under Williamson. However, the court found this argument imprecise, referencing Dahlen v. Shelter House, which established that plaintiffs must seek compensation through state inverse condemnation procedures before their claims can be ripe. The Eighth Circuit affirmed that without a ripe claim, the district court correctly dismissed the case for lack of jurisdiction. The court noted that, although many plaintiffs will litigate federal takings claims in state court, this is a necessary outcome of Congress's emphasis on finality and comity in legal proceedings.
The Supreme Court highlights a lack of precedent for federal district court claims regarding state agency property takings under the Fifth Amendment’s Takings Clause, noting that most relevant cases originated in state courts. Plaintiffs must seek compensation in state court before pursuing federal claims, which they failed to do, rendering their regulatory takings claims unripe and leading to dismissal for lack of subject matter jurisdiction. The court does not address the merits of these claims. Additionally, the court's prior summary judgment related to the City’s digital sign ban and sign credit sunset provisions is vacated. Jurisdiction over the plaintiffs' constitutional claims derives from 28 U.S.C. § 1331, while state law claims fall under 28 U.S.C. § 1367. Following the dismissal of all federal claims, the court no longer possesses supplemental jurisdiction over the state law claims, which are dismissed without prejudice. The plaintiffs' motion to amend their complaint is denied, and the City’s motion to reconsider certain rulings is partially granted, confirming the unripe status of the regulatory takings claims while vacating prior evaluations of the merits.
Plaintiffs’ claims regarding regulatory takings related to the City’s twenty-year sunset provision of sign credits and other state law claims have been dismissed without prejudice. The City’s renewed motion for summary judgment and directed verdict have been deemed moot. Plaintiffs’ request for attorney’s fees under 42 U.S.C. §§ 1983 and 1988 is denied since they did not prevail on any federal claims. The court notes a lone reference to Lamar’s six denied billboard applications, stemming from attempts in April 2011 to utilize off-premise sign credits for digital conversions, which were denied by the City. Ongoing litigation over various provisions of the City's sign code has occurred in both state and federal courts. The court expresses reluctance to allow the addition of unpled claims related to ongoing state court litigation. The court also references a 2011 voter-approved ban on off-premises digital billboards that did not apply to Lamar’s prior application. The analysis draws upon the Supreme Court’s decision in Lingle, emphasizing that regulatory actions may constitute a taking if they go too far, with Mahon being foundational in this context. Plaintiffs argue for a waiver of the Williamson County ripeness test, while Lamar disputes the need for administrative review regarding their claims. Ultimately, the court finds that plaintiffs’ regulatory takings claims rely on a theory negated by Lingle, and it remains unclear how the City could confirm compliance with its sign code without knowledge of proposed alterations. The court references trial exhibits for detailed context.
Plaintiffs’ expert, ML Wright, testified that converting the vinyl signs to digital would take approximately eight weeks, and there was no mention of a required 120-day good cause extension by Lamar for this conversion. Assuming a rollout date of May 1, 2013, for all conversions, the latest date for permit applications would have been January 1, 2013, following the amended sign code's enactment. The court noted that all sign building permits expire 120 days from issuance under the amended Rapid City sign code, thus negating the need to analyze Lamar’s alleged 2014 digital sign rollouts since the amended code was effective throughout 2013 and 2014. The court highlighted a distinction between the plaintiffs’ regulatory takings claims and those in Iowa Assur. Corp. v. City of Indianola, where the plaintiff initially filed in state court before removal to federal court. In contrast, the plaintiffs here filed their complaint directly in federal court. As the court dismissed the regulatory takings claims, it also dismissed the plaintiffs' claim under 23 U.S.C. 131 without prejudice, reinforcing that the Highway Beautification Act does not create federal rights for billboard owners or provide a private cause of action.
