New York City taxi cabs. Source: New York Post.

In a decision issued last week, the Second Circuit Court of Appeals ruled that New York City’s Taxi and Limousine Commission can restrict in-vehicle commercial advertising in for-hire vehicles, including yellow cabs, Uber, and Lyft.  The decision reverses an earlier ruling by a district court holding that the ban violated the First Amendment rights of advertisers.

New York City’s TLC regulates for-hire vehicles in the city.  For nearly 20 years, the TLC has prohibited commercial advertising in for-hire vehicles, except on screens installed in yellow cabs called “Taxi TV,” which otherwise allow patrons to use credit cards to pay their cab fares.  Noncommercial messages are permitted to be displayed in for-hire vehicles.  Vugo is a company that wished to sell a software platform for advertising in Uber and Lyft vehicles, which are not otherwise equipped with Taxi TV.  The TLC rules prohibited Vugo’s proposal, and Vugo sought relief in federal court. 

The district court entered summary judgment in favor of Vugo, but the appeals court reversed.  The appellate court analyzed the case under Central Hudson, the Supreme Court’s four-part test used to determine the constitutionality of commercial speech regulations.  Under Central Hudson, the court was required to determine whether the city had a significant governmental interest, whether the regulation directly advanced that interest, and whether the regulation went any further than necessary in furthering the interest.

The court determined that the city had a significant governmental interest in ensuring that patrons of for-hire vehicles avoid disruption and annoyance while riding in such vehicles, as survey data and complaints filed with the city indicated that many customers were annoyed by advertising.  The court further determined that the prohibition directly advanced that interest because it reduced customer annoyance and because the city’s exception for advertising on Taxi TV served another government interest:  helping to pay for the installation of screens in yellow cabs.  Finally, the court found that the city’s ban on all commercial advertising in for-hire vehicles was reasonable, and did not go too far in service of the city’s regulatory interests.

The Second Circuit’s opinion is significant in that it rejects the application of strict scrutiny to a commercial speech regulation, a position advocated by the plaintiff.  The opinion also reaffirms the rule, established by the Supreme Court thirty years ago, that the government should be given reasonable leeway to regulate commercial speech, and that commercial speech regulations need not be analyzed for whether they are the least restrictive means of accomplishing the government’s regulatory interests.

Vugo, Inc. v. City of New York, ___ F.3d ____, 2019 WL 3121891 (2d Cir. Jul. 16, 2019).

Photo of Brian J. Connolly Brian J. Connolly

Brian Connolly represents public- and private-sector clients in matters relating to zoning, planning, development entitlements and other complex regulatory issues.  Brian’s practice encompasses a broad range of land use matters including zoning compliance, rezonings and other regulatory amendments, planned-unit developments, development agreements, private covenants and restrictions, land use and zoning litigation, initiatives and referenda associated with land use approvals, and real estate transactions.  Brian additionally specializes in the First Amendment and land use issues associated with outdoor sign and advertising regulation, and fair housing matters in local planning and zoning.