Two Court of Appeals, one in the District of Columbia and the other in Texas, issued opinions regarding the federal Highway Beautification Act, 23 U.S.C. § 131 (HBA) and its state counterpart, the Texas Highway Beautification Act, respectively. The first decision illustrates how the courts will apply the principles of administrative law in a wide variety of cases. The plaintiffs had to demonstrate they had standing to prosecute their claims, and if so, whether the Department of Transportation’s (DOT) interpretation of the HBA was reasonable. In addition, the decision gives the agencies the elbow room to make room for emerging technologies.

On September 6, 2016, the DC Circuit decided the case of Scenic America, Inc. v U.S. Department of Transportation. The Court of Appeals considered the effect of a 2007 Guidance Memorandum issued by the DOT’s Federal Highway Administration (FHA) which interpreted the HBA’s size, lighting and spacing provisions (implemented through Federal State Agreements) that have prohibited the use of “flashy, intermittent or moving lights” in highway signage to permit states to authorize digital billboards that meet certain requirements. Scenic America, described by the Court of Appeals as “a non-profit organization that seeks to improve the visual character of America’s communities and countryside,” challenged the guidance memorandum as being essentially a rule promulgated without notice and comment, and that its content violated Section 706 of the Administrative Procedure Act (APA) because it was an administrative action that was arbitrary and capricious. The Court of Appeals held that Scenic America failed to demonstrate that it had standing to litigate its “notice and comment” claim, and that while it had standing to pursue its APA Section 706 claim, that claim was denied on the merits.

This controversy reflects the changes in billboard technology that resulted in the availability of digital billboards that can be displayed along the Interstate highway system. Some states were uncertain whether the HBA permitted such signage, which prompted the FHA to develop and issue the 2007 Guidance Memorandum which interpreted the Federal State Agreements to allow carefully controlled digital billboards signage. However, the Court of Appeals held that Scenic America failed to establish the evidentiary basis of its standing at each phase of the litigation, and in failing to do so, it lacked standing to challenge the issuance of the 2007 Guidance Memorandum as a violation of the APA’s on a notice and comment requirement. However, the Court of Appeals ruled that Scenic America did have standing to litigate the APA Section 706 claim. The Memorandum was a final agency action which alters the legal regime, but turning to the merits, the Court of Appeals held that the 2007 Guidance Memorandum reasonably interpreted the HBA and the Federal State Agreements’ lighting standards.

It should also be noted that this ruling was issued only days after the Third District Court of Appeals of Texas, sitting in Austin, struck down two provisions of the Texas Highway Beautification Act. The case is Auspro Enterprises ,LP v. Texas Department of Transportation, decided August 26, 2016. The Court of Appeals held that those provisions of the Texas Highway Beautification Act that regulated the content of outdoor advertising billboards and signage ran afoul of the U.S. Supreme Court’s 2015 First Amendment decision in Reed v. Town of Gilbert, Arizona, which struck down, on constitutional grounds, a local ordinance that had the effect of regulating the content of speech. The Texas Highway Beautification Act and the implementing Texas Department of Transportation rules which restrict speech based on the “communicative content” of the sign must be invalidated. It will be interesting to see if this decision is appealed to the Texas Supreme Court.