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The high court’s decision was a defeat for Clear Channel Outdoor Inc.’s constitutional challenge to the billboard tax. (The Daily Record/Maximilian Franz)

Clear Channel lawsuit clears initial hurdle

A lawsuit that claims Baltimore’s charge on billboards is an unconstitutional restraint on commercial free speech has survived a challenge by the city, which wanted a federal judge to throw it out of court.

Judge George L. Russell III denied Mayor Stephanie Rawlings-Blake and the Baltimore City Council’s motion to dismiss the action by Clear Channel Outdoor Inc. in U.S. District Court in Baltimore.

Clear Channel filed suit after the City Council adopted the ordinance last June.

The law imposes an annual fee on the owners of the billboard signs, charging $15 per square foot for electronic outdoor displays that are 10 square feet or larger and change images more than once a day and $5 per square foot for all other billboards. Government entities and displays promoting local service opportunities and events are exempt.

Clear Channel, which owns 95 percent of non-governmental outdoor signs in the city, says it is the main target of the new law and would have to pay $1.5 million annually as a result. The city has estimated the charge will bring in $1 million annually.

The city, which has banned the construction of new billboards since 2000, says the charge was imposed to improve city aesthetics and protect public safety, since the billboards distract drivers. Clear Channel, however, claims there is no evidence the signs have caused accidents in the area.

Russell rejected the city’s claims that the court lacked jurisdiction over the subject matter and that Clear Channel Outdoor had failed to state a claim upon which relief could be granted.

“We are disappointed but understand that at this phase in the process the judge felt there was sufficiency in the pleading, enough that it should proceed,” said Caron Brace, spokeswoman for the mayor. “This only means it survives this initial test.”

Clear Channel declined to comment on the case. Its attorney, Benjamin Rosenberg of Rosenberg Martin Greenberg LLP in Baltimore, did not respond to requests for comment.

The city had claimed the federal court lacked subject-matter jurisdiction because it is not allowed to interfere with state taxes if there is a speedy remedy available in state court, under the Tax Injunction Act.

Russell, however, found that the charge qualified as a fee, not a tax, because the stated purpose of the charge is to reduce traffic and enhance aesthetics. That meant the suit could be heard in federal court.

“There is no mention of using the revenue generated by the ordnance to bolster City subsidies, balance the budget, or scale back taxes elsewhere,” Russell wrote in the memorandum opinion filed Monday.

As for the alleged constitutional violation, Russell found that while the government has a substantial interest in increasing traffic safety and aesthetics, it is unclear whether imposing a charge on the signs asserts that goal.

“Imposing a charge alone, with no affirmative step ensuring compliance, allows a harm to remain unchanged while the City profits,” Russell wrote.

The Texas-based media company filed its complaint in August 2013. Collections on the tax began in January.

Clear Channel had lobbied against the charge for years. A similar charge was proposed in 2010, but never went to a vote. The council rejected another measure when it came to a vote in 2012.

The case is Clear Channel Outdoor, Inc. v. Mayor and City Council of Baltimore, U.S. District Court 1:13-cv-02379-GLR (Baltimore).