Clear Channel Outdoor, Inc. v. Director, Department of Finance of Baltimore City (Ct. of Special Appeals, Reported)

Filed: January 29, 2020

Opinion By:  Stuart R. Berger

Holding:  A Baltimore City ordinance that imposes an excise tax on outdoor advertising displays does not violate the right to freedom of speech guaranteed by the First Amendment of the Constitution or Article 40 of the Maryland Constitution.

Facts:  Clear Channel Outdoor, Inc. (“Clear Channel”) owns billboards in Baltimore City that it rents out to third parties.  The third parties pay Clear Channel fees to use the billboards to advertise.  In 2013, Baltimore City signed Ordinance 13-139 (the “Ordinance”) into law, which imposes an excise tax on advertising hosts who (1) own or control a billboard in Baltimore City and (2) charge fees for the billboard’s use as an outdoor advertising display.  The amount of tax (the “Tax”) levied on such advertising hosts depends on the size of the display and whether it is an electronic display.  Baltimore City enacted the Ordinance purely as a revenue-raising measure to lower property tax rates, increase infrastructure investment, and better manage Baltimore City’s pension and retiree healthcare liabilities. 

For the 2014 and 2015 fiscal years, Clear Channel paid the Tax for each year, but in February 2016, demanded a refund of its Tax payments.  When Baltimore City refused to issue a refund, Clear Channel appealed the denial in the Maryland Tax Court, alleging that outdoor advertising is a “constitutionally protected medium of speech under the First and Fourteenth Amendment and Article 40 of the Maryland Declaration of Rights” and that the Tax unconstitutionally restricts that speech.  Clear Channel also argued that heightened scrutiny applied to the Ordinance because the Tax “targeted a small group of speakers on the basis of their participation in such speech.”  Baltimore City argued that the Tax is an excise tax that does not implicate the First Amendment or Article 40 because it is “simply a tax on the privilege to charge fees.”  The Tax Court agreed with Baltimore City and affirmed Baltimore City’s denial of Clear Channel’s refund requests.  The Circuit Court for Baltimore City affirmed the Tax Court’s decision. 

Analysis:  The Court of Special Appeals of Maryland first determined that the Ordinance does not implicate the right to free speech because it is an excise tax that lacks sufficient communicative elements to invoke First Amendment protection.  Classified by the Baltimore City Council as an excise tax, the Tax is imposed on the billboard owners’ ability, or privilege, to charge third parties fees to use the billboards to display the third parties’ messages.  The Tax is only triggered when the billboard owner charges third parties a fee to host the advertisement; it is not triggered by the actual content of the advertisement. 

Because the First Amendment and Article 40 protect speech, including symbolic or expressive conduct, and not the privilege to receive financial compensation for displaying such symbolic or expressive conduct, the Court held that the Ordinance does not violate the First Amendment or Article 40.  Thus, the Court did not apply a heightened scrutiny to the Ordinance and instead analyzed it under a rational basis review.  The Court found that Baltimore City has a legitimate governmental interest in raising revenue, and the Ordinance is rationally related to such interest as the Ordinance does raise revenue for Baltimore City.  The Court accordingly affirmed the circuit court’s judgment and denied Clear Channel’s request for refunds.

The opinion is available in PDF.

Nefedro v. Montgomery County (Ct. of Appeals)

Filed: June 10, 2010

Opinion by Judge Clayton Green, Jr.

Held: Montgomery County's ordinance that prohibits the acceptance of payment for fortunetelling ("Fortunetelling Ordinance") violates the First Amendment of the U.S. Constitution because it is regulates noncommercial protected speech and it is not narrowly tailored to promote a compelling Government interest.

Facts: Nick Nefedro wanted to open a fortunetelling business in Montgomery County. Nefedro filed suit in Circuit Court for Montgomery County after he alleged he was denied a business license from the Montgomery County Licensing Department because of the Fortunetelling Ordinance. The Circuit Court granted the County summary judgment and concluded that the Fortunetelling Ordinance was constitutional. Nefedro appealed to the Court of Special Appeals and the Court of Appeals issued a writ of certiorari.

Analysis: As an initial matter, the Court concluded that Nefedro had standing to bring the constitutional challenge because he was adversely affected by the Fortunetelling Ordinance considering he intended to open a fortunetelling business and would be subject to penalties under the Fortunetelling Ordinance if he did so.

Next, the Court decided whether the Ordinance violated the First Amendment. The Court agreed with Nefedro that the Ordinance violates Nefedro's right to freedom of speech under the First Amendment because it regulates speech and that regulation violates the First Amendment. The Court disagreed with the County's analysis that the Ordinance only regulates conduct, not speech, because it prohibits the payment of money for fortunetelling services, not fortunetelling itself, and therefore does not implicate the First Amendment. Citing to the Supreme Court and various state courts, the Court found that this was not a meaningful distinction. The Court explained that the County imposes a burden on speech when protected speech is made punishable for the exchange of payment.

The Court also refused to accept the County's assertion that fortunetelling is "inherently fraudulent" and therefore should not receive First Amendment protection. While the Court agreed that the First Amendment does not protect fraudulent statements, the Court was not convinced that fortunetelling always involves fraud. The Court noted that fortunetelling provides benefits to recipients, in the form of entertainment or information.

Further, the Court did not accept the County's argument that the Ordinance regulates commercial speech, which receives less scrutiny than laws restricting noncommercial speech. Speech is not commercial simply because it has an economic motivation. Because the purpose of fortunetelling is to provide a benefit to the recipient in the form of entertainment or information, it is not solely related to the economic interests of the speaker.

Lastly, the statute does not pass muster under the First Amendment for being "narrowly tailored to promote a compelling Government interest" because a less restrictive alternative would serve the Government's purpose. The Government's stated interest in the Ordinance was to combat fraud that apparently ensues from fortunetelling. The Court reasoned that a less restrictive, effective means of combating fraud would be to make fraud illegal, and Montgomery County and the state of Maryland already have such laws.

The full opinion is available in pdf.