California city with eight dispensaries is sued for banning billboards that create “negative perceptions” of the community
The tension between First Amendment rights and federal laws banning cannabis has been put squarely at issue in a new lawsuit filed in California federal court by a major outdoor advertising company.
Lamar Central Outdoor, one of the nation’s biggest billboard companies, just sued the City of Perris – a city of 80,000 residents in Riverside County, 70 miles east of Los Angeles – over ordinances that prohibit cannabis businesses from advertising on off-site signs along local highways. An “off-site” sign such as a billboard advertises goods or services that are not available where the display is situated – in contrast to “on-site” signage placed at a business location.
Perris has eight city-licensed cannabis dispensaries.
There has been surprisingly little litigation over outdoor cannabis advertising, most likely because challenges to local and state regulations face a steep climb. Courts throughout the country have generally been deferential to government limits on billboard advertising for tobacco and alcohol. The winning rationale: protection of minors.
Lamar’s suit against Perris may have legs, however, because Lamar contends in its complaint that Perris has banned owners of licensed cannabis businesses from advertising along any highway inside or within a one-mile radius of the city, because the advertising allegedly contributes to “negative perceptions of the City as being dominated by cannabis businesses, potentially affecting property values, economic development, and the City’s image.”
“By adopting these Ordinances,” Lamar asserts, “the City has taken inherently contradictory positions: on the one hand, encouraging cannabis commerce by licensing, taxing, and integrating dispensaries into its local economy, while on the other, suppressing the very advertising that enables those lawful businesses to reach consumers.”
A major freeway, Interstate 215, runs through Perris. A local news website reports that “Council members expressed the importance of maintaining a positive perception of Perris,” and the City Council’s decision “reflects ongoing efforts to balance economic development with community standards, ensuring that Perris remains an attractive place for residents and businesses alike.” Protecting minors does not appear to be the justification for the ban.
Lamar contends that the ban violates its free speech rights under the First Amendment, which gets us into a tricky analysis. The U.S. Supreme Court developed a First Amendment test for “commercial speech” 45 years ago, in Central Hudson Gas & Elec. Corp. v. Public Service Commission, 447 U.S. 557 (1980). Rather than “strict scrutiny,” which is fatal to government regulation of speech based on its content, laws that impact commercial speech are evaluated under the First Amendment with “intermediate scrutiny,” a far less exacting standard. Commercial speech involving lawful conduct can be regulated if it directly advances a substantial government interest and is no more restrictive than necessary. Put another way, commercial speech is protected if it doesn’t involve illegal activity, the government can prove that there is a good reason for the restriction, and there’s a good “fit” between the reason and the restriction.
The U.S. Court of Appeals for the Ninth Circuit (which includes California) has held that billboards can be restricted for aesthetics and safety. Perhaps Perris’s community reputation rationale will meet this standard. But a local government cannot impose regulations that are “so pierced by exceptions and inconsistencies that it cannot advance the government’s interest in the regulation.” That Perris has approved eight cannabis dispensaries might undermine its claim that avoiding negative perceptions as a cannabis haven is a substantial interest that justifies restrictions on advertising by legal cannabis businesses.
But wait. There’s another issue that might derail Lamar’s lawsuit and could quickly send this litigation into the federal appellate courts. The Central Hudson test was created for speech about lawful conduct, and it’s been assumed for many years that speech about illegal conduct can be regulated by government without any First Amendment concerns.
The federal Controlled Substances Act has prohibited the manufacture, distribution, sale and possession of marijuana since 1970, and psychoactive cannabis remains federally illegal – even though 24 states, two U.S. territories, and the District of Columbia have enacted laws allowing medical or recreational cannabis distribution and use. So does the First Amendment, including the Central Hudson test, apply to advertising for cannabis where cannabis is legal under state law? A Washington State appellate court concluded that it did. (Seattle Events v. Washington State Liquor & Cannabis Board, 512 P.3d 926 (Wash. App. 2022). The court went on, however, to hold that Washington State restrictions on cannabis advertising were constitutional under Central Hudson because they were designed to protect minors and passed muster for the same reasons as regulation of outdoor advertising for tobacco and alcohol.
The U.S. Fifth Circuit Court of Appeals came to the opposite conclusion in Cocroft v. Graham, 122 F.4th 176 (2024). Even though Mississippi had legalized medical marijuana, “federal law is the law of every United States jurisdiction,” so the State of Mississipi was free to impose a “near-total restriction” on advertising by state-approved cannabis dispensaries. The Fifth Circuit criticized Seattle Events and adopted the reasoning of the Montana Supreme Court in Montana Cannabis Indus. Assn. v. State, 368 P.3d 1131 (Mont. 2016). Under the First Amendment, the Fifth Circuit held, states can “ban commercial speech about activities that are not ‘lawful.’ And the Supremacy Clause defines what is ‘lawful’ where a valid federal law is involved. . . Because [marijuana] is not a ‘lawful activity’ in Mississippi, the First Amendment poses no obstacle to the state’s commercial-speech restrictions.”
This is a case to watch. Lamar has the resources to pursue this important case to a conclusion – there are few cannabis businesses and organizations with the motivation and finances to fully pursue a constitutional challenge to cannabis advertising restrictions. And the outcome could extend beyond outdoor advertising and eventually determine whether states can impose increasingly strict packaging and promotional regulations.
