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Scenic America, Inc. v. United States Department of Transportation

United States Court of Appeals, District of Columbia Circuit

September 6, 2016

Scenic America, Inc., Appellant
v.
United States Department of Transportation, et al., Appellees

          Argued September 25, 2015

         Appeal from the United States District Court for the District of Columbia (No. 1:13-cv-00093)

          Daniel H. Lutz argued the cause for appellant. With him on the briefs was Hope M. Babcock. Thomas M. Gremillion entered an appearance.

          William D. Brinton was on the brief for amici curiae The American Planning Association, et al. in support of petitioner.

          Jeffrey E. Sandberg, Attorney, U.S. Department of Justice, argued the cause for federal appellees. With him on the brief were Ronald C. Machen Jr., U.S. Attorney at the time the brief was filed, and Mark R. Freeman, Attorney.

          Kannon K. Shanmugam argued the cause for intervenor-appellee Outdoor Advertising Association of America, Inc. With him on the brief was Allison B. Jones.

          Before: Pillard and Wilkins, Circuit Judges, and Ginsburg, Senior Circuit Judge.

          OPINION

          WILKINS, CIRCUIT JUDGE.

         The Highway Beautification Act ("HBA"), 23 U.S.C. § 131, requires the Federal Highway Administration ("FHWA") and each state to develop and implement individual federal-state agreements ("FSAs"), detailing, among other things, "size, lighting and spacing" standards for the billboards now found towering over many of our country's interstate highways. One of those adopted standards, included in most states' FSAs, prohibits those states from erecting any billboard with "flashing, intermittent or moving" lights (the "FSA lighting standards").

         Plaintiff-Appellant Scenic America is a non-profit organization which "seeks to preserve and improve the visual character of America's communities and countryside." Compl. ¶ 7, J.A. 10. It challenges a guidance memorandum issued by the FHWA in 2007, which interpreted that prohibition on "flashing, intermittent or moving" lights to permit state approval of those digital billboards that met certain timing and brightness requirements. Scenic argues that the guidance memorandum must be invalidated because it (1) was not promulgated using notice-and-comment procedures, and (2) violates the HBA, and was therefore promulgated "contrary to law" in violation of § 706 of the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 551 et seq.

         We hold that we lack jurisdiction to hear Scenic's notice-and-comment claim because Scenic has failed to demonstrate that it has standing to bring that challenge, and deny its § 706 claim on the merits.

         I.

         A.

         In 1965, Congress enacted the Highway Beautification Act to control "the erection and maintenance of outdoor advertising signs, displays, and devices in areas adjacent to the Interstate System . . . in order to protect the public investment in such highways, to promote the safety and recreational value of public travel, and to preserve natural beauty." 23 U.S.C. § 131(a). The HBA penalizes those states that fail to maintain "effective control" over their advertising signs by permitting the Secretary of Transportation to reduce their federal highway funds by ten percent. Id. § 131(b).

         To maintain effective control, each state is required to, among other things, negotiate an FSA with the Secretary that establishes standards for the "size, lighting and spacing" of billboards that come within 660 feet of the Interstate. Id. § 131(d). The HBA requires that those standards be "consistent with customary use." Id. All fifty states entered into such FSAs, most of which were written in the 1960s and 1970s. See Scenic Am., Inc. v. U.S. Dep't of Transp. (Scenic II), 49 F.Supp.3d 53, 57 (D.D.C. 2014). FHWA regulations, promulgated under the HBA, require that states "[d]evelop laws, regulations, and procedures" that implement the standards contained in each state's FSA. 23 C.F.R. § 750.705(h). States must submit these laws, regulations, and procedures to the FHWA's regional offices, known as Division Offices, for approval. Id. § 750.705(j). The FHWA has one Division Office located in each state.

         Although each of the FSAs was individually negotiated, most contain similar terms. Nearly all of the FSAs contain a prohibition against "flashing, " "intermittent, " and "moving" lights. See, e.g., J.A. 120 (New York FSA); J.A. 131 (Colorado FSA); J.A. 139 (North Carolina FSA).

         As billboard technology changed, states began considering or passing laws that permitted digital billboards to be displayed along the Interstate. See, e.g., J.A. 422-23 (letter from Indiana Department of Transportation to Indiana FHWA Division Office informing the Division Office that Indiana had passed a law permitting certain digital billboards); J.A. 424 (letter from the Indiana FHWA Division Office to the Indiana Department of Transportation acknowledging the letter and agreeing that the digital billboards discussed in Indiana's previous letter "do[] not constitute flashing, intermittent or moving lights"); J.A. 437 (letter from Arkansas Highway Commission to Arkansas FHWA Division Office noting new regulations permitting digital billboards); J.A. 183 (United States Department of Transportation memorandum discussing digital billboard in Nebraska). These billboards, sometimes referred to as "commercial electronic variable message signs" ("CEVMS"), typically use LED lights to display a static advertisement that remains on the screen for a specified period of time before quickly transitioning to a different static advertisement. Advertisements typically remain visible for around ten seconds, and usually take approximately two seconds to transition to the next ad.

         The FHWA's Division Offices differed on whether digital billboards complied with the FSA lighting standards. Compare, e.g., J.A. 424 (Indiana Division Office agreeing that digital billboards "do[] not constitute flashing, intermittent or moving lights"), with, e.g., J.A. 263 (Texas Division Office stating that "[w]hile the technology for LED displays did not exist at the time of the [FSA], the wording in the [FSA] clearly prohibits such signs"). In 2007, the national FHWA office weighed in. It issued to its Division Offices a memorandum entitled "Guidance on Off-Premise Changeable Message Signs" (the "Guidance" or "2007 Guidance"), a portion of which stated as follows:

Proposed laws, regulations, and procedures that would allow permitting CEVMS subject to acceptable criteria (as described below) do not violate a prohibition against "intermittent" or "flashing" or "moving" lights as those terms are used in the various FSAs that have been entered into during the 1960s and 1970s.

J.A. 535. The FHWA went on to identify those "acceptable criteria" based on "certain ranges of acceptability that have been adopted in those States that do allow CEVMS." J.A. 534, 537 (recommending, among other things, that each display generally remain static for between four and ten seconds, and transition to a new display in one to four seconds).

         According to a survey the FHWA distributed to states shortly before issuing the 2007 Guidance, many states with FSAs that included a ban on intermittent, flashing, or moving lights permitted digital billboards before the FHWA issued the Guidance. J.A. 531-32. The Division Office for at least two states, Texas and Kentucky, did not permit digital billboards prior to the 2007 Guidance. See Scenic Am., Inc. v. U.S. Dep't of Transp. (Scenic I), 983 F.Supp.2d 170, 179-80 (D.D.C. 2013). After the Guidance, Texas began to permit the use of digital billboards. Lloyd Decl. ¶ 9, J.A. 41.

         B.

         Scenic brought this suit against the United States Department of Transportation, the federal executive department responsible for implementation of the HBA; the FHWA, which promulgated the 2007 Guidance; Ray LaHood, the Secretary of Transportation at the time; and Victor Mendez, the Administrator of FHWA at the time. Scenic did not include any of the FHWA's Division Offices in this suit. Outdoor Advertising Association of America, Inc. ("OAAA") intervened as a defendant shortly after Scenic brought suit.

         Scenic's suit alleges two claims relevant to this appeal: (1) the 2007 Guidance constitutes a legislative, not interpretive rule, thus violating § 553 of the APA, because it was not promulgated using notice-and-comment procedures; and (2) the Guidance violates § 706 of the APA because it creates a new lighting standard that is not "consistent with customary use, " as required by the HBA.[1] Compl. ¶¶ 48-53, 57-62, J.A. 17-19.

         The FHWA and the OAAA (collectively "Defendants") moved to dismiss, contending that Scenic lacked standing, and that the court lacked jurisdiction over the Guidance because it did not constitute final agency action under the APA. Scenic I, 983 F.Supp.2d at 172-73. The District Court denied Defendants' motion as to both claims. Id.

         Relevant to our decision here, the District Court held, at the motion to dismiss stage, that Scenic's requested relief would redress its harm because "vacating the Guidance would return the FHWA to agnosticism on the question [of permitting digital billboards], leaving Division Offices free to draw their own conclusions." Id. at 181. According to the District Court, this would prevent Scenic from "hav[ing] to police as intensively new digital-billboard construction around the country." Id.

         Defendants later moved for summary judgment, and the District Court granted the motions, finding that the Guidance was not subject to notice-and-comment requirements because it was an interpretive, not legislative rule, and that it did not violate the "consistent with customary use" provision of the HBA. Scenic II, 49 F.Supp.3d at 59-71. Defendants, in their summary judgment briefing below, did not again challenge Scenic's standing, and the District ...


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