Michigan high court tells lower court to re-examine ban on home-business signs

Friday, May 7, 1999

A Rochester Hills, Mich., ban on home-business signs does not violate the First Amendment just because it allows other types of signs in residential areas, the state Supreme Court recently ruled.

The city allows the operation of home businesses in residential areas provided that the business “does not cause the erection or maintenance of any signs.” The ban on so-called “home occupation signs” is designed to further the city's interest in “protecting and maintaining the nature and character of residential neighborhoods.”

However, the ordinance allows 14 other types of signs in residential areas including garage sale signs, political signs, flags of any state or nation and real estate signs.

Edna Hannan, with assistance from the American Civil Liberties Union of Michigan, challenged the constitutionality of the law after being issued a ticket for her home-business sign in 1995. The sign read:

Nu Skin and Interior Design
Opportunities Available
Earn Extra $$$
Call (810) 852-5812

A state trial court dismissed the charges and the Michigan Court of Appeals affirmed that ruling in 1997. The court of appeals scrutinized the law under the U.S. Supreme Court's four-part test for regulations affecting commercial speech established in its 1980 decision Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y.

The Central Hudson test requires the speech in question to concern lawful activity and not be misleading. Then, a court asks whether the government has a substantial interest in the regulation. If the answer to these questions is yes, the court determines whether the regulation directly advances the government's substantial interest and whether the regulation is narrowly tailored or not more extensive than necessary.

The appeals court determined the regulation failed the Central Hudson test because the ban on home-business signs did not directly advance the asserted governmental interest and was more extensive than necessary to further that interest.

The court of appeals found that the law violated commercial free-speech rights because it allowed so many other types of signs.

However, on appeal the Supreme Court of Michigan reversed in City of Rochester Hills v. Hannan, finding that “the analysis of the Court of Appeals undervalues the relationship between the city's goals and the home occupation sign ban.”

The state high court wrote in its April 27 opinion that “the city is not required to remove all signs from residential areas in order to further its goal of preserving the character of residential neighborhoods.”

According to the court, the signs that are allowed are of a “different nature” — noncommercial, informational or temporary signs — than the commercial home- business signs.

“In short, we believe that the ban on home occupation signs may directly advance the city's interests in preserving the character of its residential neighborhoods,” the court wrote. For this reason, the court ordered the case remanded, or sent back down, to the trial court “so that the city may have the opportunity to establish the proper factual link between the purpose and effect of the ordinance.”

Michael Steinberg, legal director for the American Civil Liberties Union of Michigan, says the decision by the state Supreme Court conflicts with U.S. Supreme Court precedent.

“We don't believe that this complete ban on truthful, home-occupation signs directly advances the city's interests in maintaining the residential nature of neighborhoods, especially given the 14 other types of signs that are permissible under the Rochester Hills ordinance,” he said.

“The city still has to produce evidence to satisfy the 3rd and 4th prongs of the Central Hudson test,” he added. “The ban on home-occupation signs is far broader than necessary to achieve the purported interests of the city. We have no objection to reasonable time, place and manner restrictions on signs but not a complete ban.”

However, John D. Staran, city attorney for Rochester Hills, said the state's high court reached the correct result. “The decision by the Michigan Supreme Court stands for the correct legal proposition that municipalities do have the ability to take into consideration the integrity and character of residential neighborhoods in determining what types of commercial signs may be permitted,” he said.

Staran says the ordinance makes legitimate distinctions not based on the content of the messages on signs but on the nature and category of the signs. “The ordinance is not a speech regulation but a land-use regulation that incidentally affects speech,” he said.

Staran says the city will be able to show the trial court a direct link between the ordinance and the harm it seeks to prevent.

However, one commercial-speech expert questions whether the city will be able to meet its burden of proof. Richard Kaplar, editor of the Commercial Speech Digest, said: “It remains to be seen how the city can prove on remand that the sign restriction directly advances its interest in aesthetics, especially when the city allows so many other types of signs in residential areas.”