CA Appeals Court Dismisses Challenges to Ordinance Which Banned Off-Site Third-Party Advertising But Permitted On-Site Business Signs

Plaintiff, Contest Promotions, LLC., is a corporation that organizes and operates contests and raffles whereby individuals are invited to enter stores for the purpose of filling out an application to enter a contest. In 2007, Contest Promotions approached the City of San Francisco to discuss its business model in light of the City’s restriction on certain types of signage; the City banned the use of “off-site” signage, known as General Advertising Signs, but permitted “on-site” signage, known as Business Signs. The City cited all of Contest Promotions’ signs with Notices of Violation (“NOVs”), contending that they were General Advertising Signs in violation of the Planning Code. The parties reached a settlement in which: the City would construe plaintiff’s signs as Business Signs, as the Planning Code defined them at the time; Contest Promotions would re-permit its entire inventory of signs to ensure compliance with the Planning Code and the settlement agreement; Contest Promotions would dismiss its lawsuit against the City; and Contest Promotions would pay the City $375,000. The City amended its definition of “Business Signs” and then denied Contest Promotions’ resubmitted applications. Contest Promotions then brought suit against the City.

The court first noted that First Amendment protections apply to commercial speech only if the speech concerns a lawful activity and is not misleading. Here, the court found ordinances differentiating between on-site and off-site advertisements are directly related to the substantial governmental interests of safety and aesthetics. Furthermore, the distinction between onsite and offsite billboards was content-neutral, and the restriction reached no further than necessary to accomplish the given objective. Contest Promotions also argued that the ordinance’s vague standards, coupled with the City’s permitting requirement, constituted an unlawful prior restraint on speech. However, the definition of “primary” outlined in the ordinance provided objective criteria to cabin the discretion of City officials. Moreover, the City provided a process for administrative appeal and judicial review for reconsideration of NOVs or administrative penalties. The court therefore found that the ordinance did not grant officials unbridled authority. Accordingly, Plaintiff’s First Amendment claims were dismissed.

Plaintiff’s substantive due process claim was likewise dismissed, as its conclusory allegation that Section 602.3 is “wholly unrelated to any legitimate governmental interest” was insufficient to state a claim, and was belied by its allegation that the City “has a substantial government interest in regulating signage, for the purpose of promoting traffic safety and aesthetics.” Plaintiff next alleged that the City’s refusal to re-permit its signs deprived Plaintiff of substantially all of the value of its property, constituting a de facto taking, without payment or just compensation. Here, however, Contest Promotions failed to allege that it has availed itself of state procedures to receive just compensation; therefore, its Fifth Amendment claim was unripe. Lastly, Contest Promotions’ class-of-one Equal Protection claim was dismissed since it failed to allege that other businesses received permits to display similar signs; or that its signs were entitled to be permitted as on-site signage as defined by Section 602.3. Accordingly, the court declined to exercise supplemental jurisdiction over the state law claims, and granted the City’s motion to dismiss.

Contest Promotions, LLC v City and County of San Francisco, 100 F. Supp. 3d 835 (ND CA 4/22/2015)