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Does Reed Require New Restrictions on Retail Signs?

Brian W. Blaesser and Michele L. Maresca

Signage—or any visual representation that conveys information to customers—is an integral part of retailing. Signage tells a story about the retailer. In many cases, a sign will be the first impression that customers have of the store and a single glance at the sign will determine whether a customer decides to step into the store or not. Off-site billboards lead customers to stores by providing information and directions. On-site signs allow customers to know they have located the store. And signage gives a store the opportunity to promote its brand.

Because signage can make a significant difference to the success of a retailer’s business, it is important for retailers to understand the extent to which the government can control or restrict retail signage—a form of commercial speech. This is especially true because thanks to a recent U.S. Supreme Court case, local governments around the country are scrambling to undertake comprehensive rewrites of their sign regulations so as to avoid potential legal challenges. The case that has caused this flurry of new local sign regulations is Reed v. Town of Gilbert.[1]

The Supreme Court’s decision set a strict, uniform standard for the regulation of signs that has caused many local governments to take a one-size-fits-all approach to sign regulation, including commercial signs such as retail signs. But a careful reading of Reed and subsequent lower federal court decisions indicate that Reed did not change the rules for local government regulation of commercial speech such as retail signage. In communities considering Reed-based changes to their sign regulations that would greatly restrict commercial signs, retailers and their lawyers should act to protect retailers’ First Amendment interests by explaining to local officials that the Reed decision does not extend to commercial speech.

Key First Amendment Principles

The First Amendment, as applied to the States through the Fourteenth Amendment, protects free speech: “Congress shall make no law…abridging the freedom of speech.”[2] Despite the simplicity of this statement, the Supreme Court has relied on a complex categorical analysis to ensure that laws follow the dictates of the First Amendment.

A key distinction made by the Court when reviewing sign regulations for a First Amendment challenge is whether the subject regulation is content-based or content-neutral. As explained in Reed, a sign regulation is content-based if it “target[s] speech based on its communicative content.”[3] By contrast, content-neutral sign regulations—commonly referred to as “time, place and manner restrictions”—apply to all speech, regardless of its communicative content.[4]

Burden on Government When Sign Regulations Are Challenged

The Reed Court confirmed that when a sign regulation is challenged under the First Amendment, government has the burden in the case of a content-based regulation to show that the challenged provision is narrowly tailored to serve a compelling governmental interest.[5] This test is called strict scrutiny. By contrast, in the case of a content-neutral regulation, the government has a lesser standard. It must show that the challenged provision (1) serves a substantial governmental purpose unrelated to the suppression of speech, (2) is narrowly tailored to achieve that purpose and (3) leaves ample alternative avenues of communication.[6] This test is called intermediate scrutiny.

Content-Neutrality After Reed

Before the U.S. Supreme Court decided Reed, the federal courts used two approaches to determine whether a sign regulation is content-based: (1) the “discriminatory purpose” approach and (2) the “absolutist” approach. Under the discriminatory purpose test, also referred to as the “functional approach,” a sign code that differentiated among sign types based on broad categories or sign functions—e.g., political, real estate or retail—would be deemed content-based only if the local government’s intent was to control content. This approach allows governments to promulgate different sign regulations based, in the literal sense, on the content of a sign, and these regulations would be upheld in a First Amendment challenge unless the court found a discriminatory purpose in the distinction.[7]

Under the “absolutist” approach, a sign code that provided that the content of the message displayed on a sign determined whether or how the sign was regulated would be deemed content-based.[8] For this reason, the absolutist approach is often referred to as the “need to read” approach.

In Reed, the Supreme Court resolved these conflicting approaches by embracing the absolutist approach. Reed involved a small church’s challenge to the Town of Gilbert, Arizona’s sign regulations, which prohibit the display of outdoor signs anywhere within the town without a permit, but also provided certain content-based exemptions from that requirement.[9] Specifically, the regulations permitted Temporary Directional signs, Ideological Signs and Political Signs without a permit, and granted different permissions for each class of sign. Ideological Signs could be as large as 20 square feet and could be placed in all zoning districts without a time limitation. Political Signs were allowed to be up to 16 square feet on residential property and up to 32 square feet on nonresidential property and could only be displayed during the period from 60 days before a primary election to 15 days following a general election. Temporary Directional Signs were limited to six square feet, up to four signs could be placed on a single private property or public right-of-way. They could be displayed no more than 12 hours before a “qualifying event” and no more than 1 hour afterward.[10]

In holding that these sign regulations violated the First Amendment, the Supreme Court found that the regulations were content-based because they “target speech entirely on the communicative content.”[11] The Court held that such content-based regulations “are presumptively unconstitutional” and could be upheld only if they survived strict scrutiny. The Court found that Gilbert’s regulations were not narrowly tailored to meet the asserted governmental interests and the regulations were struck down.[12]

Commercial Speech After Reed

Historically, commercial speech has enjoyed lesser First Amendment protection than noncommercial speech. In cases involving commercial advertising, the Supreme Court has reasoned that commercial expression serves the audience as much as the speaker, and it is in everyone’s interest that people have as much information as possible when making commercial decisions.[13] For this reason, the courts have permitted greater latitude for laws that regulate commercial speech, including sign regulations, and applied a less demanding review of such laws than they have applied to laws regulating noncommercial speech.

In Central Hudson, which is the principal case that identifies how the Courts evaluate regulations controlling commercial speech, the U.S. Supreme Court established a four-part test, commonly known as the “Central Hudson Test,” for determining whether a regulation of commercial speech complies with the First Amendment:

1. To be protected, the speech (a) must concern lawful activity and (b) must not be false or misleading. 

If the speech satisfies this first part and therefore is protected, then the regulation must:

2. Serve a substantial governmental interest;

3. Directly advance the asserted governmental interest; and

4. Be no more extensive than necessary to serve that interest.[14]

This test is a form of intermediate scrutiny.

Faced with the need to change their sign regulations to comply with Reed, many city attorneys are now wondering whether Reed overruled the Central Hudson test. However, the majority opinion in Reed neither discussed commercial speech nor mentioned Central Hudson. Given this fact, most courts and commentators have concluded that Reed did not overrule the Central Hudson test for review of commercial speech regulations.[15] The fundamental reason for this conclusion is the Supreme Court’s own doctrine that that prior Supreme Court decisions cannot be “overruled by implication.” It is the Supreme Court’s “prerogative” to overrule its own precedent,[16] and there is nothing in the Reed decision indicating that it intended to overrule Central Hudson.

Regulation of Retail Signs After Reed

Retail signage is a type of commercial speech because it promotes products or services and, as such, is “related solely to the economic interests of the speaker and its audience.”[17] Whether Reed reaches this form of commercial speech is important, because if regulations of retail signs are excepted from the harsher “need to read” test, this means governments may continue to reasonably regulate retail signs as a category of commercial signs even though retail signs necessarily are content-based.

Except for one case,[18] most lower federal and state courts that have reviewed challenges to regulations of commercial signs since Reed have found that the Reed rules are inapposite to commercial speech and have applied the less demanding Central Hudson (intermediate scrutiny) test. For example, in a California case involving a challenge to a city’s billboard ban a federal district court granted the City’s motion to dismiss, flatly stating that “Reed does not concern commercial speech.…The fact that Reed has no bearing on this case is abundantly clear from the fact that Reed does not cite Central Hudson, let alone apply it.”[19]

In a similar case brought by another outdoor advertising company, the California state court of appeals held that Reed did not apply to commercial speech and upheld a billboard ordinance that contained distinctions between commercial and noncommercial signs, and between on-site and off-site signs.[20] In another case, the Ninth Circuit Court of Appeals held that Reed did not alter the “longstanding intermediate scrutiny framework” for analyzing regulations of commercial speech and applied the less demanding standard of review set forth in Central Hudson to uphold the San Francisco ordinance banning billboards.[21] Courts in other federal circuits have reached similar conclusions.[22]

Based on these post-Reed cases, it can reasonably be concluded that Reed did not overrule or change the longstanding commercial speech doctrine and the intermediate scrutiny test set forth in Central Hudson.

Conclusion

Unless and until the U.S. Supreme Court holds that its decision in Reed was actually meant to apply to commercial speech as well as noncommercial speech, courts will continue, correctly, to review First Amendment challenges to commercial sign regulations under the less demanding intermediate scrutiny standard. It means that local governments need not totally rewrite their sign regulations in order to apply a uniform (“one size fits all”) standard for all categories of signs as a way to avoid strict scrutiny under the “need to read” absolutist approach announced in Reed. Local governments may continue to utilize regulations that recognize retail signs as a category of commercial signs, and retailers and their lawyers may explain to local governments that this type of distinction is still constitutionally permissible.

In light of this, retailers should familiarize themselves with local sign regulations in order to understand how local sign regulations currently treat retail signs as compared to other categories of signs. They should also take steps to learn whether the local government jurisdiction in which their retail properties are located is undertaking any comprehensive review and revision of its sign regulations in response to Reed. If a revision to the sign regulations is initiated, retailers should become involved in the process and, if required, advocate for appropriate standards for retail signs by explaining why the Reed decision does not require that commercial signs be treated the same as noncommercial signs.

_________________________

Brian W. Blaesser is a partner in the Boston, MA, office of Robinson & Cole LLP, where he is a member of the firm’s Real Estate + Development Practice Group. His practice areas include commercial real estate development, leasing, environmental law and litigation. He holds the Counselor of Real Estate (CREÒ) designation, is listed in The Best Lawyers in America in the area of Real Estate Law and is ranked in the 2017 Chambers USA: America’s Leading Lawyers for Business in Massachusetts in the area of Real Estate: Zoning/Land Use. Mr. Blaesser is an appointed member of ICSC’s National Environmental Subcommittee.

Michele L. Maresca is counsel in the Hartford, CT, office of Robinson & Cole LLP and is a member of the firm’s Real Estate + Development Practice Group. She handles a full range of commercial real estate transactions, including representation of borrowers and lenders in financings, dispositions, acquisitions and development agreements. Throughout her varied practice, she leverages her background and experience as a former land use planner. Ms. Maresca has been selected as a Rising Star to the Connecticut Super Lawyers list since 2013, is an appointed co-chair of ICSC’s Connecticut P3 Committee and is a member of the ICSC New England Conference and Deal Making Planning Committee.


[1] Reed v. Town of Gilbert, 135 S. Ct. 2218 (2015).

[2] U.S. Constitution, Amendment I.

[3] See Reed v. Town of Gilbert, 135 S. Ct. at 2226.

[4] See Metromedia, Inc. v. City of San Diego, 453 U.S. 490 (1981); Members of the City Council of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789 (1984).

[5] See Reed v. Town of Gilbert, 135 S. Ct. at 2226.

[6] See Metromedia, Inc., v. City of San Diego, 453 U.S. 490 (1981); Members of the City Council of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789 (1984).

[7] Brian J. Connolly & Alan C. Weinstein, “Sign Regulation After Reed: Suggestions for Coping With Legal Uncertainty,” 47 URB. LAW 569, 574-575 (Fall 2015) (hereinafter “Sign Regulation After Reed”).

[8] See Brian W. Blaesser and Alan C. Weinstein, Federal Land Use Law & Litigation § 5:7 at 423-424 (2017) (hereinafter “Federal Land Use Law”); see also ”Sign Regulation After Reed,” 47 URB. LAW at 574-575.

[9] Reed v. Town of Gilbert, 135 S. Ct at 2224.

[10] Reed v. Town of Gilbert, 135 S. Ct. at 2224-25.

[11] Reed v. Town of Gilbert, 135 S. Ct. 2227.

[12] Reed v. Town of Gilbert, 135 S. Ct. at 2226.

[13] Central Hudson Gas & Elec. v. Public Svc. Comm’n, 447 U.S. 557, 561-562 (1980) (citations omitted) (stating “Commercial expression not only serves the economic interest of the speaker, but also assists consumers and furthers the societal interest in the fullest possible dissemination of information…[P]eople will perceive their own best interests if only they are well enough informed, and...the best means to that end is to open the channels of communication, rather than to close them....”).

[14] See Central Hudson Gas & Elec. v. Public Svc. Comm’n, 447 U.S. at 566.

[15] See, e.g., Patrick J. Rohan, Zoning and Land Use Controls § 17.02[C] (“Although a plain reading of the language of the majority opinion in Reed would suggest that it applies to all types of speech, early decisions from lower courts construing Reed have refused to apply Reed to commercial speech.”); see also Brian W. Blaesser and Alan C. Weinstein, Federal Land Use Law & Litigation § 5:7 and 5:8 (2017) (hereinafter “Federal Land Use Law”); Sign Regulation After Reed, 47 Urb. Law at 595 (“Technically, Reed applies only to noncommercial speech.”).

[16] See Agostini v. Felton, 521 U.S. 203, 237 (1997).

[17] Central Hudson Gas & Elec. v. Public Svc. Comm’n, 447 U.S. at 562-563; see also Virginia Pharmacy Board v. Virginia Citizens Consumer Council, 425 U.S. 748, 762 (1976).

[18] Thomas v. Schroer, 248 F.Supp.3d 868, 871 (W.D. Tenn. Mar. 31, 2017). Of relevance to retail signs, in this case, a federal district court judge in Tennessee cited Reed when finding a local billboard law impermissibly banned certain commercial and non-commercial speech on the basis of content. The court applied strict scrutiny because the speech at issue in the case was non-commercial and struck down the law. In its decision, the Tennessee district court observed that there is “an undeniable trend in Supreme Court cases to guard against regulations that selectively ban speech on the basis of its subject matter,” including Reed.

[19] California Outdoor Equity Partners v. City of Corona, 2015 U.S. Dist. LEXIS 89454, 2015 WL 4163346 at *10.

[20] Lamar Cent. Outdoor, LLC, v. City of Los Angeles, 245 Cal. App. 4th 610, 625 (2016), reh’g denied, (Mar. 29, 2016), rev. denied (June 8, 2016).

[21] Contest Promotions v. City & County of San Francisco, No. 15-16682 (9th Cir. 2017). At issue was a San Francisco ordinance that banned businesses from using “off-site” general advertising signs (e.g., billboards), but permitted “on-site” business signs (e.g., signs advertising affixed to the facade of a building). The plaintiff argued that, under Reed, this distinction violated the First Amendment. See also Lone Star Sec. & Video v. City of Los Angeles, 827 F.3d 1192, 1198 n.3 (9th Cir. 2016) (distinguishing Reed to uphold Los Angeles’ mobile billboard ordinances, which permitted painted or permanently affixed signs provided they do not extend beyond the vehicle or make the vehicle unsafe but prohibited signs attached to non-motorized vehicles, such as trailers, from parking on city streets).

[22] See, e.g., Auspro Enterprises, L.P., v. Texas Department of Transportation, 506 S.W.3d 688, 692 n.10 (Tex. Ct. App. 2016) (citing Central Hudson).