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Supreme Court Rules City Doesn’t Have to Pay for Billboard Ban

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An East Lansing ordinance banning rooftop billboards does not qualify as a taking and the city does not owe compensation to the affected business, the Supreme Court ruled Wednesday.

The long-running case, Adams Outdoor Advertising v. City of East Lansing (docket No. 113674), has already appeared before the high court – where justices held that the city had the legal authority to prohibit freestanding and rooftop billboards and returned the case to the Ingham County Circuit Court to determine whether the law resulted in an uncompensated taking. Wednesday’s decision dealt solely with whether the law’s impact on rooftop billboards meant there should be compensation to the business.

In overturning the trial court and Court of Appeals, a unanimous Supreme Court held that the billboard leases, which predated the 1975 ordinance, did not include an absolute right to display signs on the rooftops. Justice Clifford Taylor, in an opinion joined by Justices Maura Corrigan, Stephen Markman and Robert Young Jr., wrote that the law is not a taking under a three-part test.

First, the court already has ruled that the ordinance is legal and part of reasonable police power regulation. Second and third, the economic effect of the law is minimal because the rooftop is only a small portion of the property.

In a separate concurring opinion, Justice Marilyn Kelly, joined by Justice Michael Cavanagh, said she agreed with the ruling but disagreed with the premise of basing it on the rights of the lessor, which she said is not before the court.

“I realize that the economic effect on the plaintiff in this case is substantial because defendant’s ordinance precludes plaintiff from using its leaseholds,” Ms. Kelly wrote. “I balance that fact against the absence of any investment-backed expectation and the recognized social benefit of improving safety and aesthetics.”

In another separate concurring, and somewhat reluctantly so, opinion, Chief Justice Elizabeth Weaver wrote that she is “concerned this court has failed to give due consideration to the private property interests related to billboard ownership and leases,” but that eliminating the billboards “would not change the nature of the underlying governmental action.”

Victory in ADAMS Advertising in Michigan

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From Environmental Policy Project,
Georgetown University Law Center

On Wednesday, July 26, 2000, the Michigan Supreme Court issued a decision in Adams Outdoor Advertising v. City of East Lansing, unanimously reversing a court of appeals ruling that a municipal ordinance requiring the removal of billboards effected a regulatory taking. The City of East Lansing had adopted an ordinance in 1975 requiring that billboards be removed at the end of a twelve year amortization period. The court of appeals, in a dramatic departure from the nearly universal rule followed across the country, had ruled that the use and value of the billboards during the amortization period was irrelevant in a takings analysis. See 591 NW 2d 404. The Supreme Court reversed the finding of taking and eliminated this adverse precedent.

In reaching this decision, however, the Supreme Court relied on somewhat strange and rather narrow reasoning. Four justices, in the majority opinion, relied on the bizarre and so far as we know unprecedented reasoning that the alleged taking of the plaintiff’s leasehold interests had to be analyzed by asking whether the ordinance effected a taking of the lessors’ property interests. Because the lessors’ owned entire buildings while the leasehold interests covered only the spot on the buildings where the billboards are located, this analysis led to the conclusion that there was no taking. These four justices and two others (who filed a concurring opinion) also reasoned, more convincingly, that there was no taking because the plaintiff purchased the billboards and entered into new leases after the ordinance was already in effect and, therefore, lacked a sufficient property interest or investment-backed expectation to claim a taking. The seventh justice filed a brief opinion concurring in the result of the majority opinion but seeming, in substance, to dissent from the conclusion that there was no taking.

While a valuable victory, the decision leaves open for debate in the Michigan Supreme Court in some future case the question whether a reasonable amortization period does preclude a finding of a taking. Whether the majority’s novel analysis of a lessee’s takings claim based on the property interest of the lessor has any long-term viability seems very much open to question.

John Bagg, of counsel with the Environmental Policy Project, drafted an amicus brief on behalf of Scenic Michigan and Scenic America in the case. The brief developed the lack of protected property interest/lack of investment-backed expectation argument relied upon by six of the justices. John Rohe served as local counsel and provided invaluable assistance on the brief.

A copy of the opinion is available at: http://www.lawyersweekly.com/misup/113674.htm